Theories of corruption incidence hold that sectors with a high degree of complexity are particularly prone to corruption because it is difficult for outsiders to effectively monitor service delivery (Klitgaard, 1988; Rose-Ackerman 1999). The construction sector, characterized by hundreds of technical contracts, significant cash transfers, and extensive approval and bidding processes, is considered extremely vulnerable to corruption at all phases in the value chain (Stansbury, 2005; Kenny, 2006; Kenny and Soreide, 2008).  Estimates suggest that of the $2 to$3 trillion spent globally on construction projects, direct and indirect “losses” from corruption amount to 15% to 30% per year (Poortman, 2009).

International development institutions have recently turned towards a multi-stakeholder approach to address this endemic problem. The Construction Sector Transparency Initiative (CoST), a new pilot initiative (2008-2010) conducted under the auspices of the UK’s Department for International Development (DFID) with support from the World Bank, requires representatives from government, the private sector, and civil society organizations to work together in a multi-stakeholder group (MSG) to promote accountability in the construction process. The core goal of CoST is to encourage the disclosure of project information on a selection of public construction projects, and to independently assess whether those projects delivered “value for money.”  The program operates on the principle that transparency can foster accountability and ultimately reduce corruption, and the MSG serves as a force for clean governance in environments where other accountability mechanisms may be comprised. CoST is currently being piloted in the UK, Ethiopia, Zambia, Malawi, Vietnam, Tanzania, and the Philippines, with Guatemala participating as an associate country.

From a theoretical perspective, the MSG ideal is quite appealing.  Each stakeholder is perceived to have an interest in promoting the initiative and brings its unique capacities to the challenge. Government officials, usually from the procurement and finance agencies, have an interest in getting “value for money” out of construction contracts, and they contribute political legitimacy and knowledge of the procurement process. Construction contractors have an interest in achieving fair competition, and they contribute an understanding of the industry and technical knowledge to interpret contract information. Civil society organizations have an interest in reducing government malfeasance, and they contribute broader societal legitimacy and an institutionalized link between citizens and the state. The collective interest and capacity of the group is supposed to surpass that of the individual stakeholders themselves. In the words of one World Bank expert, “Each stakeholder is like a stick. By itself, it is brittle. Bundled together, they can be quite strong.”

In practice, many MSGs have fallen short of donor expectations. In the Extractive Industries Transparency Initiative (EITI), which also employs the MSG approach, only three of 32 countries have achieved compliance. There are similar concerns about whether the CoST MSGs will be able to meet the initiative’s deadlines. The players’ incentives are not necessarily in line with the expected stakeholder interests and contributions described above, and this may influence the MSG’s ability to function as an autonomous unit in a reform process. Given the present salience of the multi-stakeholder approach, as well as its apparent limitations, a detailed inquiry into the efficacy of MSGs is long overdue. This chapter considers two separate but related questions. What are the unique barriers to implementation faced by multi-stakeholder groups? What policy measures can be taken to improve the likelihood that MSGs will succeed?

We approach these questions on two fronts. First, we develop an analytical framework that outlines MSG barriers drawing from existing approaches in political science and economics. The framework accounts for the “nested nature” of MSGs and separately considers issues at four levels: the personal motivations of individual MSG members, the organizational dynamics for the MSG as a whole, the country context and institutional constraints, and international pressures from the donor community. Second, we investigate how these problems arise in practice, drawing on a series of interviews and primary documents from CoST MSGs in the seven pilot countries.

We argue that the barriers facing MSGs are substantial but vary from context to context. The laundry list of potential challenges includes: weak participation among members due to time constraints or conflicts of interest; problems reaching consensus on key decisions; imbalances of power and capacity across stakeholder groups; a lack of broader social and political legitimacy; difficulties obtaining needed inputs; and insufficient time as a result of external deadlines. Although different MSGs face different issues, our framework shows the value of considering the problem generally and systematically. Each MSG can and should be treated separately, with its particular difficulties diagnosed and addressed accordingly. More broadly, our research suggests that donors must think critically about when the multi-stakeholder approach will prove effective and how to design initiatives that will utilize the advantages of MSGs while mitigating their weaknesses. MSGs may be best used as a means of promoting dialogue and building consensus, not as the locus of policy implementation and oversight.

The chapter is structured as follows. Section 2 outlines the scope of the argument and provides additional background information on CoST. In Section 3 we detail a multi-level framework that shows the primary barriers facing MSGs, drawing on experiences from the CoST pilot countries. Section 4 answers our second research question, offering some potential measures to make MSGs more effective. Section 5 concludes with a note on balancing expectations for MSGs moving forward.

## Appears in:

International handbook on the economics of corruption, volume two
Rose-Ackerman, Susan Rose-Ackerman