The cost of corruption, mismanagement and inefficiency in public infrastructure
Corruption in public procurement comes at a huge price to government, industry and citizens and leads to large untold costs on the environment, jobs and lives. The infrastructure sector is no exception to this – corruption, alongside mismanagement and inefficiency have unprecedented ramifications on the sector’s progress.
Huge investment is needed in the infrastructure sector around the world to ensure quality structures can be built and serve communities. These structures – such as roads, bridges, ports, schools and hospitals – allow citizens to carry out their daily routine and access essential services.
The value of global infrastructure output is expected to reach US$ 17.5 trillion per annum by 2030, but there is a gap in national budgets, particularly in low and middle income countries, to meet this. Recent research from the Global Infrastructure Hub estimates that there is a $97.5 trillion investment needed to meet the Sustainable Development Goals by 2030, but investments are likely to fall short of this amount by as much as $18 trillion.
In terms of mismanagement and inefficiency the CoST experience shows that a further 10 – 30% could be lost. The International Monetary Fund corroborates this, specifying an efficiency gap of approximately 30% between the money that is spent and the coverage and quality of the resulting infrastructure. This means that by 2030, unless measures are introduced that effectively improve this situation, a staggering $US$6 trillion could be lost annually to corruption, mismanagement and inefficiency.
The added value of CoST
CoST helps to prevent corruption and create an effective and robust infrastructure sector. It promotes better value from public infrastructure, delivering better quality infrastructure at lower cost, with increased predictability of outcomes.
CoST is better value for governments because it demonstrates how public money is spent, building trust between citizens and the government. It identifies potential efficiency savings and promotes reforms in the management of public finances and the procurement of infrastructure. In addition to promoting transparency, CoST helps increase the flow of direct overseas investment into a country’s infrastructure sector.
CoST is better value for the private sector because it ensures a level playing field and reduces the costs and risks of doing business. This means that companies bidding for contracts can be confident that the process is taking place in a fair, open and competitive environment.
CoST is better value for communities because it ensures cost-effective delivery of improved infrastructure that improves lives. Communities can access work and markets through better roads, drink safe water from quality structures, be educated in well-built schools and receive medical treatment in safe hospitals.
How CoST helps: Our theory of change
CoST supports governments to put systems in place that allow the public to access reliable, detailed and easy-to-understand infrastructure project information.
CoST helps multi-stakeholder groups to oversee the validation and interpretation of infrastructure data so that civil society, the media and citizens can understand this information.
Empowered with information and understanding, CoST allows civil society and the media to put issues in the public domain and raise challenges such over poor performance, perceived mismanagement and corruption. These stakeholders can then demand better project outcomes, savings, and more effective and efficient governance systems for delivery.
Government responds to the concerns raised – they can commission audits into specific projects, wider reviews into the performance of an agency, or reviews into the sector as a whole. Equipped with information, governments can investigate alleged mismanagement and corruption and where necessary, sanction staff or prosecute offenders.