H2bid Blog

Public Corruption and its Effects on the Water Industry

When people talk about the major issues impeding progress in bringing clean water
and sanitation to the developing world, themes like “limited resources,” “lack of infrastructure,” and “war” are common. All are certainly very real barriers, yet one
issue that stands in the way of millions having access to water rarely gets attention: corruption.

Huguette Labelle of Transparency International issued a recent report titled Global
Corruption Report 2008: Corruption in the Water Sector. In the report, Labelle’s
group asserts that corruption in the water industry is one of the root causes and
a catalyst for the global water crisis that threatens billions of lives and exacerbates environmental degradation. The report goes on to identify specific examples,
including petty bribery in water delivery, procurement-related looting of irrigation
and hydropower funds, covering up industrial pollution, and manipulation of water
management and allocation policies.

In the developed world, corruption typically takes the form of rigged contract
awards or payments for work that was never performed. Major US cities like
Atlanta, New Orleans and Chicago have all seen water scandals in recent years.
Even Sweden has seen bid-rigging and price fixing plague it’s water infrastructure development. The motivation in these cases is all too clear; the US, European
and Japanese water industries have a combined annual budget of over 200 billion USD.
Even a small piece of the pie is a tasty morsel for an unethical contractor or official.

Though the corruption certainly exists, graft in the developed world rarely results
in the denial of basic sanitation and clean water to the residents of those nations.
Instead, the outcome is higher prices for water and sewer services; it’s estimated
that corruption increases the cost of sanitary services by as much as 30%. That
said, those in the developed world might consider themselves lucky that the impact
of corruption is not greater.

In the developing world, the effect of corruption is often the denial of services to
many and outrageous fees to those lucky enough to have water service. In
Zimbabwe, urban residents have to bribe officials to ensure they can get access
to basic services. “As residents we are faced with the twin evil of a continuously deteriorating service delivery system and corrupt officials – some of them in
decision-making positions – who take advantage of the sorry state of affairs to
fleece us when we ask for the situation to be rectified,” Edmore Mbirimi, a resident
of Chitungwiza, told IRIN, a humanitarian news agency. Mr. Mbirimi was told if he
wanted his broken sewer pipe repaired, he should “drop a feather” (offer a bribe) to the employees of the public works department.

In China, bribery to avoid the enforcement of environmental regulations has
reportedly contributed to a situation in which the aquifers in 90 percent of Chinese
cities are polluted and more than 75 percent of river water flowing through urban
areas is considered unsuitable for fishing and drinking.

To combat these problems, Transparency International offers several key
recommendations, including establishing transparency and participation as guiding
principles for all aspects of water governance, strengthening regulatory oversight,
and ensuring fair competition and accountable implementation of water projects.

Along those lines, one of the key goals of H2bid.cominternational bid clearinghouse
is to increase transparency in the bidding process for water utility contracts. By
opening water utility contracts to all qualified contractors and firms, worldwide,
H2bid.com facilitates finding the contractor that will bring the most value to the job,
not just the handful of contractors who may know how to “work the system.”
By increasing competition and transparency, H2bid.com aims to answer Labelle’s
call for a reduction in the corruption and graft that prevents millions of people
from having affordable access to clean drinking water.