Sector News
Corruption in Rome linked to Public Procurement

Corruption in Rome, connected to public procurement and the award of contracts for a range of services, hit the headlines last week. The shocking news involved the police making a major round of arrests on charges of corruption, with a major connection to corruption around public procurement. Reuters reported the news:

The mayor of Rome ordered a review of city contracts on Thursday after a police investigation revealed a web of corrupt relationships between politicians and criminals in the Italian capital. Police arrested 37 people and placed dozens more under investigation on Tuesday in the latest scandal to hit Italy, ranked one of the most corrupt countries in Europe in Transparency International’s latest global corruption index.

Those accused include politicians, business people and public officials. The corruption appears to be linked to the award of contracts connected with handling, managing and housing refugees seeking asylum in Italy. The former mayor of Rome, Gianni Alemanno, is among those under investigation. He denies any wrongdoing but has resigned from his position in the right-wing Brothers of Italy-National Alliance party.

The reports talk about a relatively new “Roman mafia.” The alleged leader of the network is Massimo Carminati, the former member of the Armed Revolutionary Nuclei, a neofascist organisation active between 1977 and 1981. The NAR were close to the famous Rome criminal organisation “banda della Managlia,” which also counted Carminati as a member.

According to the Daily Beast, the rewards were huge.

“Do you have any idea how much I can make on these immigrants?” Carminati wingman Salvatore Buzzi was caught telling an associate, bragging about making a €40 million profit (about $49 million) on everything from migrant housing to fake contracts for liaison services between the Rom and Sinti shelters and city hall. “It’s a lot more profitable than drug-trafficking.”

Rome has relied on bail-outs from the national government for some years now. It seems likely that corruption is one of the reasons for that. As the Independent newspaper reported:

Earlier this year it emerged that a €20 billion hole had opened up in the city’s accounts after decades of incompetence and corruption. The city only avoided shutdown thanks to a last-minute cash injection from central government. But then Rome has been bailed out by central government every year since 2008.

There have been other scandals in Italy recently, connected with the 2015 Milan Expo and the Venice flood barrier corporation, and these arrests have emphasised how widespread corruption is in Italian city administrations. In May this year, a number of people were arrested connected with rigging bids and contract awards connected with the Milan project, including Angelo Paris, the Expo’s procurement manager; Primo Greganti, a former senior official in the now-defunct Communist party; and Antonio Rognoni, a former manager of an infrastructure company owned by the Lombardy regional government.

Gustavo Piga is the Professor of Economics at University of Rome Tor Vergata. He is also one of Europe’s leading experts on public sector procurement issues with a special interest in corruption. (See his excellent chapter for the International Handbook on the Economics of Corruption, Volume Two in 2011). He believes that cartels and corruption are often linked, not surprisingly, and that encouraging smaller firms (SMEs) to compete for public contracts is one protection against corruption.

But we suspect the Roman contracts for handling refugees were large, complex and not easy for SMEs to bid for or win. It is not an established market either, so that perhaps makes it easier for the contracts to be awarded to companies who have corrupt connections. If no-one has a strong and very specific track record, then it may be easier to justify awarding contracts to anybody!

In any case, we will follow the progress of this scandal with interest.

First Voice

  1. Max Claps says:

    Peter,
    as an Italian citizen and resident, I’ve observed these episodes for my entire life. I tried to figure out how much of this was entrenched in our political and civic culture… and I suspect a lot; it’s a common trait of other phenomena, like widespread tax evasion. In my humble opinion, politicians, the good ones, have realized these risks long ago and have reacted by imposing very strict controls on the “inputs” of bureaucracy, including procurement of goods and services. And finding a way around those strict rules on “inputs” has fostered a thriving industry (accountants, lawyers, politicians of all shapes and forms) for a long time.
    Instead, too little attention was placed on outputs and outcomes, because our bureaucratic culture does not prize accountability and risk taking. In this specific example, if anyone had paid attention to the outputs (timeliness of delivery, actual costs vs. budgeted costs) and outcomes (actual conditions of life of those Roma and refugees), instead of forgetting about them after awarding the contracts, the criminal acts would have emerged much earlier.
    Best regards,
    Max