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Monday, January 26, 2009


(as of January 23, 2009)
1. Why were these firms investigated and debarred?
These firms were investigated for possible wrongdoing in connection with the bidding processes
for two road contracts under phase one of the National Roads Improvement and Management
Program (NRIMP-I) financed by the World Bank with the Government of the Philippines.
The National Roads Improvement and Management Program was a $150 million project,
approved by the World Bank Board in February 2000. It financed the first phase of a program that supported the Philippines Government's reforms in the road sector. Between 2003 and 2006, the World Bank team identified excessive pricing and other signs of possible collusion by several construction companies on three successive rounds of bidding for two road rehabilitation
contracts. As a result, the World Bank team refused to give its “no objection” to the award of
these contracts. It also reported its observations to the Department of Institutional Integrity1 (INT) of the World Bank.
During a thorough investigation, INT gathered evidence that several firms and individuals may
have engaged in collusion in connection with the bidding for these two contracts. The World
Bank Sanctions Board, which is comprised of external legal experts and senior World Bank staff,
has now reviewed the case and sanctioned seven firms and one individual on grounds of
NRIMP-I set out to help establish management and financing systems which would ensure the
sustainable upgrading and preservation of the country’s national roads network. As a result of the now completed project, some 1,400 kilometers of roads were built or resurfaced and the
management of money for roads within the Department of Public Works and Highways was
improved. The program overall has led to a significant improvement in the lives of the
beneficiary communities by facilitating their access to markets, schools and health centers and
has created a more modern and transparent roads management system around the country.

2. Now that the Sanctions Process is complete, will the World Bank recover its money and
how much will it recover?
The World Bank has no money to recover from this case of collusion as it did not finance the
contracts. Under the National Roads Improvement and Management Program (NRIMP-I), the World Bank rejected the proposed contract awards for two large road contracts in three successive rounds of bidding between 2003 and 2006 because the Bank team noticed excessive pricing and other signs of possible collusion. As a result, the World Bank refused to give its “no objection” to award of these contracts worth an estimated $33 million and reported the case to the Department of Institutional Integrity (INT) of the World Bank.

3. How common is it for the World Bank to debar firms?
Public sanction is viewed by experts as a significant deterrent to fraud and corruption. Over the
past decade, the World Bank Group has recognized corruption as one of the greatest obstacles to
economic and social development and we have applied sanctions to firms from many countries
where they have been determined to have engaged in these wrongdoing.
Since 1999, more than 350 firms and individuals from more than 22 countries – including the US, Sweden, the Netherlands, and the United Kingdom – have been banned from bidding for Bankfinanced projects, either indefinitely or for a specific period of time. All of their names are
published on the World Bank’s website at for the term of the
A number of other international financial institutions also debar firms for fraud and corruption.
The World Bank Group needs to assure its shareholder governments, developing world partners, and other stakeholders that we will exercise the utmost fiduciary responsibility to safeguard the funds entrusted to us. We owe this responsibility to the people we are seeking to assist.
Fraud and corruption, if unchecked, can erode confidence among donors and beneficiaries,
leading to skepticism about the effectiveness of international development and, ultimately,
jeopardizing our very mission: overcoming poverty and building inclusive and sustainable growth and opportunity.

4. How does the World Bank define fraud and corruption?
Per the World Bank Sanctions Procedures, the following are the current definitions3 used by the
World Bank for practices constituting “fraud and corruption”:
• A “corrupt practice” is the offering, giving, receiving or soliciting, directly or indirectly,
of anything of value to influence improperly the actions of another party;4
• A “fraudulent practice” is any act or omission, including a misrepresentation, that
knowingly or recklessly misleads, or attempts to mislead, a party to obtain a financial or
other benefit or to avoid an obligation;5
• A “coercive practice” is impairing or harming, or threatening to impair or harm, directly
or indirectly, any party or the property of the party to influence improperly the actions of
a party;6
• A “collusive practice” is an arrangement between two or more parties designed to
achieve an improper purpose, including to influence improperly the actions of another
• An “obstructive practice” is (i) deliberately destroying, falsifying, altering or concealing
of evidence material to the investigation or making false statements to investigators in
order to materially impede a Bank investigation into allegations of a corrupt, fraudulent,
coercive or collusive practice; and/or threatening, harassing or intimidating any party to
prevent it from disclosing its knowledge of matters relevant to the investigation or from
pursuing the investigation, or (ii) acts intended to materially impede the exercise of the
Bank’s contractual rights of audit or access to information.

5. Given that the Sanctions Board found that these firms have colluded, shouldn’t each of
the governments involved be launching criminal proceedings?
Our internal process determines whether there is sufficient evidence of sanctionable offenses
under the World Bank's policies and procedures for us to pursue sanctions. The Bank’s sanctions
regime is an administrative process, not a criminal one, which relies on specific definitions of the
sanctionable offenses (see question 4) and involves different evidentiary and burden of proof
INT has shared its investigative reports with the countries of firms involved in this case and we
trust that the national authorities will look closely at these reports and take the necessary steps
from here. It is dependent on the national legal framework in each country to judge whether legal proceedings in the country are warranted.

6. Now that the sanctions are made public, how do we get the report of INT that was the
basis of this decision?
Submissions in sanctions cases are confidential in nature and are not available for public
dissemination – in part to avoid putting at risk some of the sources. However, if an INT
investigation finds evidence that a country’s national laws may have been violated, INT shares a
copy of its report with affected countries. In this case, a copy of the INT report was shared with
the Philippines Department of Finance and the Office of the Ombudsman in early 2008. The
report was also shared with the authorities of the other countries whose firms were involved. A
report summarizing the Bank’s investigative findings will be posted on the INT page of the
World Bank website following the Bank’s redaction and review protocol.

7. How does this case fit with the World Bank's global fight against fraud and corruption
and its anti-corruption work in East Asia & Pacific?
In 2007, the World Bank Group endorsed a new strategy entitled “Strengthening World Bank
Group Engagement on Governance and Anticorruption.” The strategy’s three pillars are to:
• build capable, transparent, and accountable institutions through assistance to countries;
• minimize corruption in Bank-funded projects by assessing corruption risk in projects
upstream, actively investigating allegations of fraud and corruption, and strengthening
project oversight and supervision; and,
• expand partnerships with multilateral and bilateral development institutions, civil society,
the private sector, and other actors to address corruption.
The NRIMP-1 case is a good example of the Bank’s anti-corruption processes working at their
best. We detected the possibility of collusion very early, we took action to investigate, we worked
with the Government in the Philippines to strengthen anti-corruption controls in the follow-on
project, we undertook an extensive and fair due process to allow the companies to respond to the
allegations, and at the end of this process we took action to sanction companies determined to
have engaged in wrongdoing.
In addition, in developing the second phase of the NRIMP project which was approved by the
World Bank’s Board in May 2008, we took into account the lessons learned through the
investigation. A battery of stringent anti-corruption measures was incorporated into the project’s
design, including:
• Use of an independent procurement evaluator (IPE) to improve the transparency and
integrity of procurement processes;
• Further enhanced procurement controls to ensure the reliability of contract cost
estimates, detect over-pricing through bid analysis, enhance supervision control over
contract variations and disseminate complaints mechanism in bid documents;
• Strengthening internal controls and internal audit capacity in the Department of
Public Works & Highways;
• Adoption of enhanced business processes – with increased use of computerized
business systems and enhanced processes for procurement and financial
management, the efficiency of transaction processing will be improved and
opportunities for interference reduced; and,
• Independent oversight by civil society – a coalition of citizen and road user groups
has been established, named “RoadWatch” (“Bantay Lansangan”), to strengthen the
voice and influence of citizens in ensuring transparency and proper use of public
funds for roads, and to counter corruption at high levels of government and society.

8. Why does the World Bank debar firms?
Misuse of public money is a problem for everyone, everywhere, from the least developed to the
most developed nations. The Bank has a responsibility to ensure that the money it is entrusted
with is used for its intended purposes.
When we receive allegations of fraud and corruption in our projects we take action to get to the
bottom of what happened and, where necessary, apply sanctions to individuals or firms found to
have acted improperly, in order to hold them accountable.
The fight against corruption is vital for a fair and just society, but no country is absolutely free
from the problem. That is why the World Bank supports governments that want to improve their governance standards and fight corruption. These partnerships are in part about ensuring that national and World Bank money is used properly. But it is also about putting in place standards that will apply to other projects and sectors so that the funds the World Bank makes available for development to improve the lives of poor people are used for that purpose.
In the Philippines roads case, we acted quickly when concerns were raised that bids for contracts
were coming in – in successive rounds of bidding – with excessively high prices and showing
signs of collusion between firms.

9. Some of the debarred firms have claimed that they did not have due process and that
they “did not have their day in court.”
The Bank’s sanctions process ensures that any and all evidence is evaluated carefully and that
individuals and firms alleged to have committed wrongdoing are granted a meaningful
opportunity to dispute the allegations against them.
All of the respondents in this case received the Bank’s Notice of Sanctions Proceedings in May
2008 and were given 90 days to submit a response in their defense and contest the allegations
against them. The firms were also offered the opportunity as part of their response to request a
hearing before the Bank’s Sanctions Board. The Sanctions Board took all of their submissions
into account in making their decision.
This is a summary of the Sanctions process:
• INT investigates allegations that a firm or individual has engaged in a sanctionable
offense in connection with a World Bank-financed project;
• If INT believes that there is sufficient evidence that a sanctionable practice has occurred,
it prepares a proposed Notice of Sanctions Proceedings and submits it to the World
Bank’s Evaluation and Suspension Officer (EO);
• The EO reviews the evidence submitted by INT and determines if the evidence is
sufficient to support a finding that the alleged sanctionable practice has occurred. If so,
the EO issues a Notice of Sanctions Proceedings to the firm or individual alleged to have
engaged in the sanctionable offense, recommends a sanction, and may temporarily
suspend the firm or individual pending the final outcome of the proceedings;
• If the firm or individual does not contest the allegations and/or the recommended
sanction, the recommended sanction is imposed;
• If the firm or individual does contest the allegations and/or the recommended sanction,
the case is referred to the World Bank’s Sanctions Board, and any temporary suspension
stays in force until a final determination is made;
• The Bank’s Sanctions Board reviews the submissions from all parties and if requested by
a Respondent or INT, will hold a hearing on the matter, during which parties may present
arguments and evidence, before any sanction is imposed;
• If the Sanctions Board finds that the evidence supports the conclusion that it is more
likely than not that the alleged sanctionable offense occurred, it will impose an
appropriate sanction.

In 2006, the Bank reformed its sanctions process to ensure that outside legal experts would play
the deciding role in corruption cases. No World Bank staff – either from the investigation office,
INT, or from the project team are involved in the sanctions decision-making process. This ensures the independence of all Sanctions Board decisions.
1 This Department has since become the Integrity Vice-Presidency (INT).
2 Another firm was separately debarred in August 2008 in connection with the same NRIMP-1 case. That proceeding
was not contested by the firm and accordingly, under the applicable procedures, did not require Sanctions Board

3 It should be noted that the applicable definitions of fraud and corruption in the NRIMP-1 case were thosefound in the World Bank’s Guidelines: Procurement Under IBRD Loans and IDA Credits (Jan. 1995, rev.Jan. and Aug. 1996, Sept. 1997, and Jan. 1999) (Procurement Guidelines). In that version of theProcurement Guidelines, collusive practices were considered a form of fraudulent practice, in turn definedto mean “a misrepresentation of facts in order to influence a procurement process or the execution of acontract to the detriment of the Borrower, and includes collusive practices among bidders (prior to or afterbid submission) designed to establish bid prices at artificial, non-competitive levels and to deprive theBorrower of the benefits of free and open competition.”
4 For the purpose of the Bank’s Procurement and Consultant Guidelines, the term “another party” refers toa public official acting in relation to the procurement or selection process or contract execution. In thiscontext, “public official” includes World Bank staff and employees of other organizations taking orreviewing procurement decisions.
5 For the purpose of the Bank’s Procurement and Consultant Guidelines, the terms “party” refers to a publicofficial and “benefit” and “obligation” relate to the procurement or selection process or contract execution;and the “act or omission” is intended to influence the procurement or selection process or contractexecution.
6 For the purpose of the Bank’s Procurement and Consultant Guidelines, the term “party” refers to aparticipant in the procurement or selection process or contract execution.7 For the purpose of the Bank’s Procurement and Consultant Guidelines, the term “parties” refer toparticipants in the procurement or selection process (including public officials) attempting to establish bidprices at artificial, non competitive levels.

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