Road Construction in Thailand Paved With Graft and Corruption by Phairath Khampha 24 December 2001 Collusion in state highway projects inflates contract prices by up to 35% Every government of Thailand that comes to power has always promised to get rid of corruption. But most have never even succeeded in ruffling a few feathers because the problem is too deeply rooted. And nowhere is this more the case than with road construction projects. Sources in the construction industry said that bids tendered by firms vying for state contracts were often inflated, sometimes up to 35% higher than the actual estimated construction costs. Between 15-20% of the inflated price wound up as profit and another 15% to offset expenses in the collusion process--money paid to corrupt government officials, politicians and other members of Thailand's economic and political elite. Groups of firms do engage in fierce competition for state contracts at the preliminary stage. But those with political connections always have the last laugh. Road construction concessions in the provinces are hard to escape the hands of syndicates of well connected firms, normally controlled by relatives or close aides of national figures or local politicians and other members of Thailand's economic and political elite. Outsiders were threatened, often forcibly, to pull out or, in some cases, obstructed from submitting their bids in time. Others ar eoutright killed if they put up too much of a fight. The source said detecting and monitoring collusion was no easy task. The process is made complicated by the presence of a go-between who co-ordinates among colluding firms at an "informal negotiation" to choose the company "earmarked" by the elite to win the bid. Colluding firms fix their prices higher than their earmarked member to ascertain its winning chance. They get a small fee for being part of the process. The go-between normally charges anything from 3-10% of the winning bid. But his fee also depends on the number of colluding partners. Some firms are hired just to facilitate in the collusion. Although legally registered, these companies actually have little or no experience in construction jobs. They just crowd out other companies which could effectively oust the earmarked company. Their job is to buy the bid-entry forms and pretend to contest for the project. They are paid twice the value of the entry fee by the colluding firms to "drop" out of the race. The firms, however, demand a higher price if they are asked to go as far as the pre-bidding process, which also requires the placing of a bank guarantee. The source said this manipulative tactic allowed the colluding syndicates to take turns in "winning" the bidding contest. The expenses of the go-between and the front companies were added to the construction costs, which explained why some projects carried an unusually bloated price tag. The source said the malpractice had been around for a long time and serious steps would soon be taken to stamp it out. Jaruek Anupong, the new Highways Department chief, promised his tenure would be corruption-free. Mr Jaruek was appointed director-general on October 1. Every step of the bidding would be made accountable and details divulged on any contracts and concessions already granted, he said. He set up a special panel to check the road construction standards. A major road project would from now on be handed to a single contractor and not divided into small routes for sub-constractors. Mega-projects, valued at 800 million baht or more, were right now being sliced up and sub-contracted. Firms ended up constructing only small stretches of the route, which was not conducive to development of their building skills nor to the quality of the work. The contractors would also be blacklisted and drastic legal action taken against firms abandoning their projects. Mr Jaruek denied firms had "reserved" road projects in advance. Construction plans were prepared three years before the launch and "no tampering was possible". Responding to criticism that his department was frequently targetted for corruption in censure debates, Mr Jaruek said he was ready for scrutiny. Sources said it would take a lot more than censure debates to get rid of price collusion.