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When corruption undermines emergency relief efforts: how to combine transparency, accountability and flexibility in governments emergency management
Thais Helena Semionato Bernardes - Masters student in Public Management and Policy
at the Swiss Graduate School of Public Administration (IDHEAP) Switzerland

1. Introduction Public Administrations worldwide have enjoyed a resurgence of values such as integrity, transparency and accountability within the past few decades. Today, more than ever, sound public administration is synonymous with public trust. Society expects public servants to act in accordance with public interests, and to manage public resources properly. Good governance in all levels of public administrations is more and more related to the promotion of integrity, transparency and accountability. On the other hand, corruption and maladministration is regarded as an indication of weak governance1. Scandals involving corruption and administrative failure cases have had a major negative impact in public decision-making, especially when related to governments emergency management. Emergency situations are a challenge for governments throughout the world. Public administrations are then expected to act swiftly and efficiently in order to save human lives and provide aid to victims, under the particularly difficult circumstances of a catastrophe, when time is of the essence. The need to be flexible and make rapid purchases facilitates corruption and opportunistic behavior in many countries struck by tragedy. The present work aims to investigate potential means of reducing such malfeasance, by introducing measures that provide more transparency and accountability in governments emergency management.

2. Defining corruption In order to better precise the object of the present analysis, it is important to define the term corruption. To do so, we shall use the definition given by the World Bank2, by which corruption is the use of public office for private gain. Transparency international, on the other hand, understands corruption as the abuse of entrusted power for private gains. It is important to stress that in both definitions corruption may include gain that is not limited to financial abuse, but can include the abuse of power to enhance personal or organizational reputation or for political purposes and nepotism. Clearly, there are various forms of

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Armstrong, E. (2005), pp.2-3. Huther, J. & Shah, A. (2000).

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abuse that go well beyond financial fraud, although prevention and detection of fraud usually gets first priority in corruption mitigation3. In this paper, we shall restrict our analysis to emergency management conducted by governments rather than ONGs and other private entities. Thus, the World Bank definition will serve as a guide for the present investigation, which basically consists of a study of public sector corruption in emergency relief activities.

3. Corruption vs. Inefficiency Corruption and inefficiency are different things. As authors Schultz & Sreide (2008) put it, corruption should be clearly distinguished from unintended waste. A simple example given by the authors helps clarify the distinction: inefficiency can arise when procurement officers, unfamiliar with the local market, ignorantly accept unjustifiably high offers; they may then purposefully fail to investigate prices sufficiently. They are not, however, motivated by a desire to capitalize personally from undue benefits. With corruption, on the other hand, someone has acted intentionally, often creatively, in order to profit personally from the situation. Bribery and favoritism are indicated by the authors as probably the most common forms of corruption in the procurement process4. Corruption occurs, for instance, when a contract is directed to a firm with connections to the procurement officers family, or when the officer selects a suboptimal bid in return for a bribe. As we can perceive, the idea of obtaining some sort of private gain is embedded in the concept of corruption. Nevertheless, there is a sense in which both corruption and ineffectiveness produce the same net result, since both ultimately reduce the levels of aid that reach the people who need it5, making both practices highly detrimental to a governments response to an emergency. Undoubtedly, both corruption and inefficiency need to be eradicated, but since the latter is part of a wider issue, we shall restrict our analysis to the first.

4. The effects of corruption on emergency relief What is corruptions impact on emergency management? According to Armstrong (2005), the devastating effects of the lack of integrity, transparency and accountability leading to corruption and misconduct cannot be underestimated. The author indicates that unethical practices, such as bribery and fraud, have a very real human cost. This cost in translated into the lives and health of people who are robbed of quality health care and medicines, for instance.

Schultz & Sreide (2008) Schultz & Sreide (2008) 5 Walker et al. (2008)
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But not only the material costs of corruption can be astounding: corruption can also be particularly negative in terms of social capital, and more specifically to the trust of citizens towards governments. As the author puts it, a lack of political trust undermines and even destroys political stability6.

5. Corruptive behavior in emergency relief As a rule, an emergency response requires the purchase and delivery of a vast range of goods and services, such as medical supplies and equipment, drinking water, food, sanitation equipment, transportation, power, shelter and housing, non-food items, communication equipment, and more7. Since governments do not usually produce such goods or services, they often resort to contracting out, through procurement processes8. Governments must then purchase large quantities of various items, while also considering the timesensitive nature of emergencies. Thus, in order to provide a timely response to a calamity, governments must often forfeit competitive procedures that are conducted under normal circumstances. It is quite unfortunate, though, that the need to be flexible and make rapid purchases facilitates corruption, in the sense that it can be easier to steer a purchase to one specific supplier without attracting suspicion. Furthermore, when bribery is involved, the contract is not necessarily awarded to the firm offering the best price/quality combination, resulting in bad outcomes, such as poorly maintained vehicles, expired medicine, or diluted cement9. Another common problem is the distortion of prices. As the urgency of an emergency increases, bargaining power is lost. Rapid procurement is thus particularly prone to inflated prices and expenditures. This can be aggravated if a bribe is calculated as a percentage of the total contract then, the corrupt official is likely to exaggerate investments in certain products or services, while real priorities lay elsewhere10. Likewise, procurement officials can exaggerate an emergency, by emphasizing the continued threat to human life, and then abuse fast-track emergency procedures as a cover for corruption. Finally, some cases of corruption may take place when apparently no violation of procurement rules has happened. These are often referred to as hidden violations, and they include: limited invitation; fake competitors; matching of the evaluation criteria with unique qualities of the bribing firm; misusing confidential information about other candidates bid, and many others.

6. The risk of corruption

Armstrong, E. (2005). Schultz & Sreide (2008). 8 Procurement can be defined as the purchase by governments and state-owned firms of goods, services and works. It is also referred to as bidding, or tender procedures. 9 Schultz & Sreide (2008). 10 Schultz & Sreide (2008).
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The risk of corruption in emergency relief depends on a number of factors, such as the opportunity to influence decisions; the existence of obtainable benefits; and the possibility of getting away with the offense11. The table below illustrates factors that affect opportunities for corruption in emergency relief:

Table 1 - Factors that affect opportunities for corruption in emergency relief Contracts that are managed at the regional level Size and location of the contract (municipalities, for instance) have a greater risk of corruption in comparison to contracts managed by a centralized administration. The more technology involved in goods/services to be Complexity provided, the easier it is to cover corruption. The more discretion a procurement officer has to determine demand and preferences, the easier it is to cover improper Discretion influence over his or her decision. In emergencies, procurement officers normally exercise high levels of discretion in terms of identifying beneficiary needs. Normal financial control procedures are often fast-tracked in Reduced financial controls emergencies, to enable staff to respond flexibly and quickly to needs as they arise. Media and civil society tend to put a lot of pressure on government to respond to emergencies. The greater the Pressure to spend pressure to spend, the more likely procedures are to be rushed and the less scrutiny from control officers, opening opportunities for corruptive behavior. Levels of corruption differ greatly between countries, meaning Country of emergency that opportunities for corruption are contingent to a cultural and institutional setting. Source: based on Schultz & Sreide (2008)

7. Case analysis: Katrina The aftermath of Hurricane Katrina, which struck the American Gulf Coast in 2005, provides us with an interesting case study. Considered by many to be the worst disaster on American soil, Katrina is also recalled as a crisis ripe with opportunity for the well-placed corporation12. As it is usually the case in emergency situations, there was no time to solicit and weigh bids. Adding to this, there was an immense pressure from society and media for the government to act quickly, and a considerable amount of money
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Schultz & Sreide (2008). King (2006).

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was allocated for that purpose: US$ 85 billion in hurricane relief and US$100 million from donations of foreign governments. In a nutshell, the lack of a competitive bidding system made it nearly impossible to impose any meaningful accountability on companies staking claim to the billions in federal recovery dollars. But in the particular case of Katrina, three major problems could be identified, and shall be further explored in the following subsections.

7.1 No accountability for outcomes One of the most distressing images recorded by the media in the weeks following hurricane Katrina, was that of the floating bodies in the flooded streets of New Orleans. In order to give proper treatment to this problem, the American Federal Emergency Management Agency (FEMA) contracted Kenyon International Services to collect more than one thousand bodies floating in public streets right after the hurricane. Eight weeks later, the company had collected a little over five hundred bodies, and charged no less than US$ 6 million for that service, amounting to almost US$ 12,000 per body recovered. Besides that, TV crews seemed to discover new bodies faster than Kenyon, raising criticism and anger in public opinion after all, what had they paid millions of dollars for? Moreover, a year after the tragedy, bodies continued to be found. Later on, an investigation found that Kenyons CEO was a close friend of the Bush family, and a major donor of George W. Bushs presidential campaign, triggering what was then called the FuneralGate13.

7.2 Inflated prices The next situation is a revolting example of how prices can be inflated in face of an emergency. A company (Emergency Disaster Services) was awarded a 30-day no-bid contract to provide three meals per day for 200 to 400 emergency personnel, at a cost of US$ 3.6 million. This meant that the meals cost between US$ 100 and US$ 270 each. The contract was later extended for another 30 days, although the price had dropped to US$ 2.6 million for the same number of people and the same timeframe. By the time the contract was extended for a third time, the price had dropped to US$ 1.6 million for the exact same service14. As we can see, as the urgency diminished, the price went down accordingly. In the Katrina catastrophe, it is estimated that contractors inflated their actual costs from 40 percent to 1,700 percent when billing the government15.

King (2006). King (2006). 15 King (2006).

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7.3 Layers of subcontractors In the Katrina disaster, there was an enormous political influence in awarding the contracts. A study has shown that companies making campaign donations were approximately four times as likely to receive a Katrina contract16. For the execution of the works, however, several companies were often subcontracted. In fact, one can observe a truly labyrinthian layer of subcontractors on nearly every project. For example, AshBritt, a Florida-based firm with close ties with Florida governor and presidential brother Jeb Bush and major donor to state and federal government candidates, was awarded a US$ 500 million contract for debris removal. According to the contracts terms, AshBritt would be paid US$ 23 for every cubic yard (0.75 m3) of debris removed. Ashbritt in turn hired C&B Enterprises, which was paid US$ 9 per cubic yard. That company hired Amlee Transportation, which was paid US$ 8 per cubic yard. Amlee hired Chris Hessler Inc., for US$ 7 per cubic yard. Hessler, in turn, hired Les Nirdlinger, a debris hauler from New Jersey, who was paid US$ 3 per cubic yard. In this setting, accountability becomes next to impossible to enforce17. Moreover, if a service can be performed for US$ 3 per cubic yard and not for US$ 23 per cubic yard in the first place, it makes one wonder what the extra US$ 20 per cubic yard are for. These and many other scandals triggered a series of investigations by the American government, especially in regards with FEMA, the federal agency responsible for most of the contracts and purchases for Katrinas emergency relief18, and many charges of political corruption ensued.

8. Measures to improve accountability and transparency in emergency management The rationale behind government contracting is based on the notion that free markets create competition that can promote the distribution of services more efficiently and effectively than the state19. However, several problems can arise in the contracting system. For instance, as Maskin and Tirole (2008) clearly suggest, political corruption is likely to occur in a contract system. As a result, strict rules about competitive procurement have been designed to eliminate or prevent some of these abuses. In the case of natural disasters, however, such rules are not likely to be effective, since the government must act quickly and it does not have time to solicit proposals. As we have shown, in the case of Hurricane Katrina, the government issued a substantial number of no-bid contracts. These no-bid processes allowed contracts to be awarded without full and open competition under several conditions, including unusual and compelling urgency, national security and the public interest20.

Hogan et al. (2010). King (2006). 18 King (2006). 19 Hogan et al. (2010). 20 Hogan et al. (2010).
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This is also the case in most emergency situations all over the world, when governments overthrow formal competitive procedures in order to gain speed in purchasing goods and services. This, nonetheless, opens the door to many possibilities of corruption. In view of that, the following question arises: how are we then to determine the balance between flexibility, accountability and transparency, in order to reduce the risk of corruption in emergency-related procurement? Authors Schultz & Sreide (2008) point to possible solutions. For instance, incentives for corruptive behavior can be dampened when the risk of sanctions is high. These sanctions may be social, administrative, or judicial, and are altogether related to accountability mechanisms. Another manner to prevent corruption lies on planning. Purchases which would be required in times of turmoil could be anticipated. They can follow on from long-term agreements with specific firms, based on sound pre-emergency tender procedures describing the cooperation to take place once an emergency occurs. However, it is clear that many requirements cannot be anticipated, or organized in advance, and rapid acquisitions will often be necessary. The solution is then to render emergency procedures more accountable and transparent, allowing better ex post control. Of course, since recovering resources can be quite difficult, it is also very important to prevent corruptive behavior from happening in the first place. In order to do so, the necessary first step is to gain an understanding of the underlying causes, loopholes and incentives which feed corrupt practices at any level21. It is only then that public administrations will be able to provide measures for mitigating risks of corruption. The table below lists four different categories of measures of that kind namely coordination/internal procedures, beneficiary participation, monitoring and evaluation and sanctions.

Table 2 Measures for reducing corruption

Ex ante measures
Understand the risks: assess and address risks in existing procedures. Plan and foresee: organize advance procurement of commonly used supplies and services the more relief procurement can be organized before a disaster occurs, the less likely purchases will be affected by the particular corruption risks inherent in emergency contexts. To do so, organizations should establish frame agreements that cover the most frequently purchased relief items. Coordination/ internal procedures Standardize: use standard products when possible; technical references for quality and price can serve as a shield against

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Walker et al. (2008).

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corruption where procuring personnel or their supervisors are unfamiliar with the local context or under pressure from manipulative suppliers. Create institutional memory: use simple software solutions to track suppliers and payments, compare bids and prices, and keep records of suppliers, in order to mitigate risks from staff turnover. New technologies include e-bidding, in particular with the mandatory publication of procurement opportunities and documentation on-line, allowing more transparency. Re-enforce professional integrity: employees must be reminded of what is ethically expected of them, through administrative codes, complaints procedures and sanctions. Clear reporting channels, defined sanctions, and an established procedure for responding to complaints are necessary to support the implementation of codes of conduct. Improve the overall transparency of information: resource flows, assessments, program elements, targeting criteria, aid recipient lists, entitlements, etc are important in order to document processes and to clarify procedures. Strengthen downward accountability practices: to clearly define responsible officials at every level as a way of preventing and detecting corruption. Establish specific guidelines on emergency exemptions to normal policies: this can be done by requiring two quotes for procurement, rather than the normal three, for instance, and by giving shorter response deadlines. Further, allow hiring on conditional contracts provided normal procedures, including background checks, are carried out within three months. Facilitate beneficiary participation: beneficiaries should be Beneficiary participation involved in the selection and monitoring of goods and services. As far as is feasible, beneficiaries should be informed about procurement processes and provide input to procurement decisions.

Ex post measures
Strengthen internal procurement expertise: while nothing can replace practical experience, building up a pool of trained procurement staff can be an important tool for corruption

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control. Focus on outcome, not process, in audits and evaluations: Monitoring & Evaluation auditing units can ask beneficiaries directly whether they felt value for money was achieved. Ensure adequate budgeting for Monitoring & Evaluation and facilitate effective monitoring by media and NGOs. Deepen the scope of audits: they should go beyond the paper trail to include forensic objectives and practices. Increase the use of independent external evaluation. Increase the costs to dishonest procurement officers and suppliers with sanctions: firms that offer bribes should lose Sanctions their eligibility to participate in future tenders for a defined period of time. The best systems in the world are likely to be subverted is there is little possibility of being caught, and if there are few penalties if you are. Reinforce whistleblower policies: offer confidentiality and protection to members of staff reporting corruption on the part of anyone else in the agency. Source: based on Schultz & Sreide (2008) and Walker et al. (2008).

Another option for reducing procurement-related corruption risks is to transfer those risks to beneficiaries themselves by providing vouchers and cash. Beneficiaries have an obvious interest in securing the best value for money when their own food or shelter is at stake (of course in some situations government purchase is clearly preferable better exploit economies of scale the benefits and risks of cash transfer should therefore be carefully considered on a case-by-case basis)22. Finally, Russel & Leeson (2006) seem to have more liberal ideas in mind when it comes to solutions for emergency management. The authors, referring to the scandals involved in New Orleans after hurricane Katrina, propose a set of reforms that depoliticize the process of disaster relief, as a means to mitigate the public choice problems associated with government-directed disaster relief that were identified in their study. Ultimately, this would mean putting more responsibility for these activities in the hands of the private sector, which according to the authors, is a lot more efficient and does not suffer from the public choice problems of government-provided disaster relief23. This view, of course, is far from undisputed.

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Schultz & Sreide (2008). Leeson, P. T. & Sobel, R. S. (2008), p.69.

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After all, the ultimate loyalty of the private sector is to shareholders, while government was designed as a servant of the greater good24. Lastly, it is impossible not to notice the pervasive influence of New Public Management theories in most of these measures. For instance, NPM has certainly shifted the emphasis to explicit standards and measures of performance, as well as on output controls, both of which are present among the proposed solutions to emergency management.

9. A need to adapt measures according to circumstances Naturally, not every measure can be applied to anywhere. It is important to consider the idiosyncrasies of every country, since measures will be quite different depending on the quality of governance and other factors25. What works in Switzerland is not necessarily useful for Brazilians. The strategy to increase accountability and transparency in emergency management should take into consideration factors such as bureaucratic culture and institutional environment. A study conducted by Huther & Shah (2000) has presented empirical evidence relating corruption to factors such as media independence, judicial independence and citizen participation. All of those are negatively correlated to the level of corruption observed. The same study showed, nevertheless, a positive correlation between command and control type of civil service and corruption. As can be seen in the table below, priorities of anti-corruption efforts can change depending on the quality of governance.

Table 3 - Effective Anti-Corruption Programs Based on Governance Quality Incidence of Corruption High Governance Quality Poor Priorities of Anti-Corruption Efforts (Based on Drivers of Corruption) Establish rule of law, strengthen institutions of participation and accountability; limit government intervention to focus on core mandate. Medium Fair Decentralization and economic policy reforms; results-oriented management and evaluation; introduction of incentives for competitive public service delivery. Low Good Explicit anti-corruption programs such as anti-corruption agencies; strengthen financial management; raising public and officials awareness; no bribery pledges, fry big fish, etc. Source: Huther, J. & Shah, A. (2000).p.12

A closer look to most of these propositions shows again a great familiarity between the proposed efforts and New Public Management theories.
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Words of David Walker, Controller-general of the USA, in: King (2006). Huther, J. & Shah, A. (2000).

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10. Final considerations There are perverse effects related to corruption in emergency management. Corruption reduces the resources available for life-saving operations, lowers the quality of products and services provided, and diverts aid from those who need it most26. The purchase of goods and services, which comprises the biggest line item in most emergency budgets, is certainly one of the most vulnerable processes in this matter. Special difficulties arise from emergency procurement, including shifts in bargaining powers stemming from the sudden rise in demand, as well as time pressures. In these situations, there must be a balance between cost efficiency and flexible, speedy purchase. In spite of the recent surge of interest in the matter of accountability and transparency in emergency relief, crisis situations have always provided ripe ground for corruption. In these situations, financial controls are reduced, funding levels can soar, and staff changes frequently27. Pressure to act and to be seen to be acting by the media militates against accountable and cost-effective purchases. As a result, as was the case in Katrinas emergency management, many of the purchases occur in an uncoordinated, hurried manner that only amplifies the potential for fraud. Not all, however, is lost. Several studies indicate that better accountability, transparency and quality of programming can mitigate the risk of corruption. It is important, though, when designing policies to reduce these risks, to identify the individual incentives, opportunities and mechanisms through which corruption transactions take place. Only then will the public administration be able to efficiently implement ex ante and ex post measures to prevent and fight corruption and render procedures more transparent and officials more accountable.

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Schultz & Sreide (2008).

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BIBLIOGRAPHICAL REFERENCES

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