Tanya Ilina (TI-R) Ivan Aymaliev (UCL)

1. Did Institutional Change Bring More Social Welfare? Determinants of Economic Efficiency of Public Procurement in Vladimirskaya Region Tanya Ilina (TI-R) Ivan Aymaliev (UCL)

2. Why Corruption in Procurement is Bad? One sad story about one happy couple…

3. Consequences of Public Procurement Corruption Transparency International lists the following impact of corruption on public procurement: • Financial Impact • Economic Impact • Environmental Impact • Impact on Health and Human Safety • Impact on Innovation • Erosion of Values • Erosion of Trust in Government • Damage to Honest Competitors • Serious Danger to Economic Development

4. Statistical Indicators for Russia

5. So, what did the Russian government do to mitigate this problem? • Federal law №94-ФЗ introduced in 2005 was set to regulate the procurement of goods and services for state and municipal needs. • Transparency • Accountability • Competition • Federal law №131-ФЗ was introducedin 2003 inordertochangeorganizationof local power. • Decentralization in municipalities/centralization on regional, federal levels • Autonomy of local governments, division ofpowers/lack of resources, shift of responsibilities • Law № 273-ФЗ “On the prevention of corruption” • Presidential Decree of July 1, 2010 N 821«On commissions on compliance by federal civil servants with requirements for official conduct and the regulation of conflicts of interest»

6. So did the implementation of these new laws actually work in enhancing social welfare? Research aim: Empirically investigate whether the government’s efforts to improve the regulatory environment, and in particular its efforts in enhancing public officials’ accountability, resulted in awarding more economically efficient contracts in public tenders. And if not, propose solutions, and give policy recommendations for further reform.

7. Map of Vladimirskaya region

8. Media review • September 2012: Council of People's Deputies of Alexandrov violated the law and abolished the election of deputies of the city council and mayor Alexandrov. • March 2012: Former Mayor of Alexandrov Gennady Simin is accused of bribing, land fraud. • December 2011: AccordingtoinvestigatorstheheadofViaznikovskyregionEvgenyVinogradovreceivedmoneyfromoneofthelocalbusinessmenforpatronageof his business. Theshadowrevenueoftheofficialisestimatedas 2 millionsofrubles. • October 2011: AndrewCashin, aformercitycouncilmemberofGus-Crystalnyis found onthedock. Deputywasamemberofacriminalgroup "GroupofEight", thatattackedthelocalbusinessmenformanyyears. • August 2011:Thenumberofcourtcasesstartedinconnectionwiththereceiptofbribesincreasedin 50%. 12 criminalcaseswereinitiatedagainstpersonsofaspeciallegalstatus, includingthreemembersoflocalauthoritiesonthefactsofextortionandfraud, andfourheadsofmunicipalitiesfortheabuseofpower, takingbribes. • May 2011: TheformerheadofKameshkovskyrayonVladimirSomovisunderprosecutionforgivingpromisetoalocalbusinessnamtosimplifyprocessingoflandownershipfortheappropriateremuneration.

9. Conflict of interests in road construction in Vladimirskaya oblast. Example. • Head of StateBudget Institution “Governance of Highway Administration of the Vladimir region”. SBI "Vladuprador” performances the functions of thestate customer for construction, repair and maintenance works in Vladimirskaya oblast. • Director of State Unitary Enterprise “Special road repair and construction administration”. SUE “SRRCA” gets 27% of its orders from SBI "Vladuprador” . Klimov M.F.

10. Vladimisrkaya region • General: Population: - 1431,9 thousandspeopleby 1 jan. 2012 , 77,6% - urban, 22,4% - rural, GDP per person 149,5 thousand rubles in 2010, 37 place by socio-economic development in 2010. • Corruption: 14%of respondents came across civil servants that forced them to informal payments, services for their efforts. max 35%16% of respondents do not disapprove those who take bribes. max 40%52% of respondents in case they come across a situation where corruption is possible are ready to bribe. max 70%, (2010 FOM) • Political and administrative system of local bodies: Vladimirskayaoblast id divided into 16 municipal districts, 5 urban districts. 16 municipal districts are divided into 26 urban settlements and 80 ruralsettlements. 1, 2 Head of local body is the head of administration or the chairman of Council of People's Deputies. 3,4 The head of administration is hired.

11. Sample: Thesampleconsists of 16 municipal districts, 4 urban districts, 54 settlements and 91 public bodies placing orders: 1934 observations. Orders placed from 01.01.2011 to 01.01.2012 • Procurement: • Service under survey: Construction and repairment works: mending of roofs, floors; work with electricity, repair of heating, laying of water and sewerage, design of master plan of the rural settlement, control over repairment works.

12. Research methods & data collection

13. Research hypothesis

14. Empirical findingsRatio of prices distribution

15. Number of bidders per auction

16. Cross-sectional correlations… Notes: P-values in parenthesis, ** p<0.01, * p<0.05