negative outcomes of corruption by emphasizing the quality of provision. Output-Based Aid (OBA) is a strategy for using explicit performance-based subsidies to support the delivery of basic services. It involves delegating service delivery to a contractor, under contracts that tie disbursements to the services or outputs actually delivered. OBA interventions ensure explicit recognition of _why_ subsidies are being provided, _who_ is receiving the subsidy and who is providing it, and _what_ is being subsidized—both the activity and the financial sums involved (Kenny and Mumssen, 2007). Two of these features are attractive from the point of view of reducing corruption:

- The outputs defined are ‘technology neutral’ (delivery of electricity services of a given quality to a given community) rather than technology specified (suggesting use of particular equipment, for example).  As such, the OBA process is less susceptible to corrupt agents designing project specifications in such a way as to favor a particular bidder.<sup>28</sup> The process is also likely to limit cases where unnecessary or unsustainable projects (uneconomic power plants such as Dabhol, for example) are undertaken because they provide greater opportunities for corruption.

- The outputs of OBA projects are easily monitored.  Unlike the efficient operation of a power plant, for example, the presence or absence of a working electricity connection is directly experienced by householders and easily monitored by civil society, donors or other interested parties.  As a result, even if corruption does occur in OBA projects, the risk that it significantly reduces the development impact of the financing is reduced.  In the case of a water project, for example, the winning bidder, even if selected as part of a corrupt deal, nonetheless has to deliver quality infrastructure at a given cost that carries a considerable consumer surplus.

Community-driven approaches can also provide incentives that should act to reduce the development impact of corruption. CDD involves giving communities or locally elected bodies control over the decision making, management and use of development funds. As such, CDD approaches have a number of attractive features:

- Projects selected will tend to reflect local priorities rather than those with the maximum potential for generating rents.  In Indonesia, for example, a 1997 survey of 48 villages found that less than 3 percent of village development requests proposed through the government’s development planning system received funding.  The Kecamatan Development Program (KDP), begun in 1998, encompassed about 40 percent of the country’s villages and emphasized participatory appraisals for project selection with funding provided by a combination of village and local funding and direct central government support. These features help to ensure that local priorities were the key to setting project prioritization.

- Project implementation and oversight involves a strong role for beneficiary communities.  In the KDP, project budgets, financing and procurement decisions are discussed publicly and displayed on village information boards, each village has an independent committee to oversee contracts and implementation, and

28 A survey of Scandinavian firms found that 41 percent of firms had experienced bidding on tenders which had clearly been designed with one company in mind --Soreide (2006).

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