About CoST

Public sector infrastructure projects make a major contribution to economic growth and poverty reduction but mismanagement and corruption during the planning, implementation and monitoring of construction projects can undermine the expected social and economic benefits.

Recent studies show that corruption in public construction contracts is widespread, with bribes often accounting for ten percent or more of the contract price. Corruption allows unnecessary, unsuitable, defective and dangerous construction projects - buildings that collapse and roads that break up. Corruption also undermines the rule of law and hinders the development of strong and accountable institutions that are essential for economic growth and social justice.

The effects of mismanagement and corruption are especially hard on the poor, who are most reliant on the provision of public services.

CoST’s aim is to enhance the accountability of procuring bodies and construction companies, focusing on the cost and quality of public-sector construction projects. The core concept is to ‘get what you pay for’. The ‘you’ being national governments, affected stakeholders and to the wider public. The main emphasis of CoST is on the period between contract award and the final build.

CoST provides for the disclosure of material project information on a selection of construction projects. ‘Material’ in this context is intended to indicate that sufficient information be provided to enable stakeholders to make informed judgments about the cost and quality of the infrastructure concerned. The disclosures include, for example, a description of the project; its purpose and location and, at the implementation stage, summary details of the original and final: project specification, project cost, contractor and completion dates.

The disclosures also include justification for any significant differences between the original and final information, as well as project evaluation and completion reports. Disclosure of raw information on its own is unlikely to be sufficient to achieve greater accountability due to its complexity. The disclosures need to be reviewed and analyzed to ensure that they are comprehensible to all stakeholders. CoST introduces a structure to meet this need.

The principles which underpin CoST reflect a shared stakeholder commitment to transparency and accountability.

• We share a belief that public sector infrastructure projects should support sustainable economic growth that contributes to sustainable development and poverty reduction, but that mismanagement during construction can undermine their potential social and economic benefits and value for money
• We believe in accountability by government to all citizens for public expenditure on construction projects, and are committed to encouraging high standards of transparency and accountability in all parts of the construction sector, both public and private
• We consider that disclosure of basic project information throughout the project cycle could be an effective and efficient way to improve value for money of construction projects over time, and that greater transparency during project implementation should be supported by open and transparent tendering processes
• We recognize the enhanced environment for domestic and foreign direct investment that transparency may bring
• In seeking solutions, we believe that a collaborative multi-stakeholder group can play an important oversight and interpretative role in ensuring greater transparency and public understanding of information disclosed on projects.

Overall

• Enhanced accountability of procuring entities and contractors for the cost and quality of public sector construction projects through strengthened accountability mechanisms.
• Improved management of public finance and strengthened governance of public construction projects.
• Greater efficiency of public procurement of infrastructure projects, leading to higher quality infrastructure at lower cost.

Benefits to Government

• Greater public confidence in government and the procurement process.
• Governments learn what they should get using public funds and can compare this with what they are getting. Empowered with this information they can reform procedures and improve delivery.
• Tackling corruption will encourage more contractors to bid and lead to fairer prices and higher quality projects with higher economic and social returns.
• Financial transparency will develop improved business confidence and trust, and increased prospects for investment, both domestic and foreign.
• As CoST gains international recognition, it is expected to provide a seal of approval that will open the door to increased flows of funding for construction projects.

Benefits to Industry

• Increased transparency and fewer opportunities for corruption will engender confidence in the industry that a ‘level playing field’ exists and contract award and administration will be fair.
• Reduced levels of corruption and greater accountability mechanisms will improve the chances of local companies winning contracts.
• Companies involved in the sector will benefit from increased understanding of the social and economic development contribution made by the construction industry.
• Companies will enjoy reduced risk to their reputation from association with projects or enterprises where corrupt practices are suspected.
• Improved financial risk management will lead to better access to credit and loans on more favorable terms.
• CoST should lead to improved professional standards.

Benefits to Civil Society

• Civil society groups will enjoy increased access to information, the chance to participate in the governance of the construction sector.
• Increasing access to information and actively involving stakeholders in the gathering, dissemination and analysis of the disclosed data will enable civil society (including parliamentarians, the media) to hold procuring entities and construction companies accountable for the cost and quality of public construction projects; and demand better project selection and oversight in the future.
• Civil society groups will also benefit from capacity building to enable them to realize the potential benefits of CoST.

Benefits to Ordinary Citizens

• The prospect of being able to compare what they are getting with what they should be getting, leading to better value construction, and construction that meets their real needs.

Greater transparency in the sector should also contribute to the implementation of environmental and social safeguards – ensuring that hazardous materials are not used and health and safety laws are observed.

The CoST criteria have an operational focus and represent the proposed implementation requirements of CoST. The CoST criteria are:

1. For public-sector construction projects above an agreed threshold, there is regular disclosure of material project information to a wide audience in a publicly accessible, comprehensive and comprehensible manner.

2. Procuring bodies are subject to a credible audit process and, as far as possible, projects are subject to credible, independent financial and technical audits.

3. The adequacy of material project disclosures and audits are assessed by an independent, objective and technically competent Assurance Team, and reports published. The membership, terms of reference and activities of this team must be publicly disclosed.

4. The application of this approach is extended to the main procuring bodies responsible for public-sector procurement, and related contractors.

5. A Multi-Stakeholder Group (MSG) representing the interests of stakeholders has oversight of the implementation of CoST. The membership, terms of reference and activities of the MSG must be publicly disclosed.

6. Civil society is actively engaged as a participant in the design, monitoring and evaluation of this process.

7. A public, financially sustainable work plan for all the above is developed by the host government, including measurable targets, a timetable for implementation, and an assessment of potential capacity constraints.

These criteria will be reviewed during the Pilot Phase, and will be amended, if necessary, before the design of CoST is finalized.