Cartels in Infrastructure Procurement — Evidence from Lebanon

This paper studies cartels in public infrastructure procurement and analyzes the conditions underwhich they succeed in generating rents. It first conceptualizes the interplay of the central actors of aprocurement project, notably the contractor, the procurement agency, as well as the supervision and design consultants.By focusing on consultants, the framework includes important yet understudied actors in cartels that design tenders,evaluate bids, and supervise the implementation of projects. The paper then explores an original data set ofinfrastructure procurement contracts in Lebanon and analyzes the conditions under which powerful political elites canbroker deals to overprice and/or over-spend contracts. To examine how cartels operate, the analysis identifies thepolitical connections of contractors and consultants and classifies them according to their “quality” in terms ofaccess to institutional functions of the implementing agency. The paper argues that design consultants serve asthe lynchpin of the cartel by reducing transaction costs for searching, bargaining, and enforcing of corrupt deals.