Corruption risk indicators in public procurement: Definition and evaluation with organised crime data

This paper leverages open data from Italy's Central Anti-Corruption Authority (Autorità Nazionale Anticorruzione, ANAC) and relevant literature to propose a multi-layered system of risk indicators for detecting potential corruptive conducts in public procurement. The development and use of such indicators are widespread among national and international organisations as public procurement is particularly vulnerable to corruption. This vulnerability is particularly critical in Italy, where corruption is reportedly connected to criminal infiltration. Moreover, the European institutions are currently disbursing to Italy's government an unprecedented amount of funds for infrastructures and structural reforms, which makes Italian procurement all the more attractive to criminals. The relevant literature suggests a wide array of indicators and red flags, each tackling a specific vulnerability in procurement procedures liable to be exploited for illicit ends. This paper offers a system of auction-specific individual indicators offering a wide-ranging view on all such vulnerabilities, and at the same time taking into account the actual availability of data. Due focus is drawn on missing information, held as an indicator of opaqueness in itself. Based on these indicators, we compute a composite risk measure at the auction level and, by further aggregation, develop an indicator at the level of contracting authorities. A significant contribution of this work is the use of confidential data from Italy's Financial Intelligence Unit (Unità di Informazione Finanziaria per l’Italia, UIF) on firms potentially linked to organised crime to validate these indicators, providing evidence of their effectiveness. The potential applications of these indicators include monitoring public tenders, risk-ranking of awarding authorities and contractors, prioritising investigative and anti-money laundering activities.