David-Barrett, L and Fazekas, M (2016). Corrupt Contracting: Partisan Favouritism in Public Procurement. GTI-WP/2016:02, Budapest: Government Transparency Institute.
For politicians seeking to use a clientelist approach to achieve political and private gain, i.e., to prolong their hold on power and maximize personal profit, control of government contracting is a key tool. We theorise that politicians wishing to exploit government contracting for such ends will seek to increase their influence over three stages of public procurement – policy formation, implementation and monitoring – but that their efforts can be constrained by institutional controls and checks. We examine these influence strategies and institutional constraints by comparing one young democracy and one mature democracy, Hungary and the United Kingdom. Developing new procedural and outcome indicators of corruption risk in contracting, we use a change of government as a natural experiment to analyse partisan favouritism in procurement. We find that, in Hungary, where political influence is systematic and far-reaching, 50-60% of the market is dominated by favoured companies, compared to only 10% of the UK market.