Beyond the tender: Politics, public projects and state capture

When there is a scandal involving a government project in Bangladesh, we usually see the final scene.

We see who got the job, at what price, why the cost increased, or why the same company got the job repeatedly.

Then we say there was a problem with the tender.

But what if the tender process is not the real problem?

What if the project is designed in such a way that only certain companies can compete in the end? What if a project is first designed keeping in mind the interests of a particular technology, foreign principal, local business or influential group, and then the 'need' for that project is explained?

Then there may be no need to separately rig the tender. Because the process of choosing the winner has gone quite far before the tender is even published.

Just saying 'tender corruption' captures part of the problem. Not the whole.

The problem is bigger. The main danger is the politics of project creation.

A country's development project should ideally start with a problem.

The government identifies the problem, compares solutions, and determines which one will provide more benefit at a reasonable cost. Then the project is created and contractors or suppliers compete for the work.

But in a political economy like ours, the process can sometimes go the other way.

First comes the business proposal. A foreign company has a technology. A business group is looking for a new market. An influential political or administrative actor becomes interested.

Then the work of creating a place for it within the state begins. The project idea is created. The language of need is written. A feasibility study is done. Technical conditions are created. Approval comes. Then the tender.

From the outside, the government has bought a solution to a problem. But if the story inside is the opposite, then the government has actually found a problem for a business solution.

A 2024 Transparency International Bangladesh study of Roads and Highways Department projects found that project prioritisation could be influenced by pressure from ministers, MPs and senior officials. One Planning Commission official interviewed for the research said projects with the strongest lobbying received priority. The study also reported 'customised' feasibility studies and hurried project proposals.

Corruption does not necessarily begin when somebody opens a tender document. It can begin when the state is still deciding what it wants to build.

E-GP has certainly changed the old tender system. At least the tender submission process has become more rule-based than before.

But digital tenders cannot change one thing: who is writing the tender terms.

Let's say a project asks for previous experience that only a couple of companies actually have. Or technical specifications so specific that they closely resemble a particular brand or manufacturer.

The tender is open. But even if the door is open, not everyone can enter.

TIB's analysis of more than 666,000 procurement activities between 2012 and 2024 found that, in the ten highest-spending ministries and divisions, the top five per cent of contractors received more than 61% of the total contract value. TIB described public procurement as institutionally captured by a nexus of contractors, bureaucrats and political forces.

This is where corruption begins to look like something else. There is a term that perfectly describes this phenomenon in political economy: that term is 'state capture'.

Ordinary corruption is usually about manipulating the application of existing rules. State capture goes further. It is about powerful interests gaining enough influence to shape the rules, institutions, policies or decisions themselves.

Ordinary corruption asks, 'How do I get around the rules?' State capture asks, 'How do I make the rules work for me?'

Sometimes it is the competition that is captured. Sometimes it is the process through which projects are selected. And sometimes the rules themselves are changed.

Consider Dhaka South City Corporation during the tenure of former mayor Sheikh Fazle Noor Taposh.

A Prothom Alo investigation found 174 tenders in which only one company submitted a bid, involving projects worth around Tk 204 crore. It also reported, citing city corporation officials, other contracts where two bids were formally submitted but the intended winner had allegedly already been determined.

The e-GP system existed. Yet if potential competitors believe a contract has effectively been reserved for someone else, they may simply decide not to compete.

The technology can digitise the tender. It cannot digitise away political influence.

Bangladesh was facing a genuine electricity crisis when the Quick Enhancement of Electricity and Energy Supply (Special Provision) Act was introduced in 2010.

But the law remained in place for years and allowed power and energy deals to bypass normal competitive tendering procedures, including through unsolicited proposals.

We are no longer talking about manipulating a tender. There may be no tender to manipulate.

The 2017 agreement to buy electricity from Adani's Godda power plant in India was awarded without a public tender during Sheikh Hasina's government. A subsequent government review raised serious questions about the pricing and process. Adani has maintained that it complied with its contractual obligations.

The point is not that every project awarded under the special law was corrupt. The more important question is what happens when an emergency exception becomes a routine way of allocating huge public obligations.

Once the exception becomes the system, the rules themselves begin creating opportunities for particular interests. And that is much closer to state capture.

The biggest loss from such a system may not even be the extra money paid.

If a project worth Tk 1,000 crore ends up costing Tk 1,200 crore, we can say the country has lost Tk 200 crore. But the bigger question is: was the Tk 1,000 crore project even the right project?

Maybe that money could have improved the electricity distribution system. Maybe hospitals could have been equipped. Maybe agricultural storage could have been developed.

We can audit the extra Tk 200 crore. But how do we audit the hospital or cold chain that was never built because some other project had a stronger coalition behind it?

Corruption does not merely inflate the price of what the state buys. It can distort the menu from which the state chooses.

If success in the government market depends on political connections and access to ministries, businesses will invest in those capabilities.

A business will make a realistic calculation. Will I become 10% more competitive by spending five years improving efficiency? Or will I get government work many times larger by making a few right connections?

If the second path is more profitable, political access itself starts becoming a company's competitive advantage.

Government work creates wealth. From wealth, influence. From influence, more government work.

Of course, state support for business is not automatically a problem. The real question is: what did the country get in exchange?

Did exports increase? Did technology come? Did productivity improve? Or did the company simply become richer through government work and then use that wealth to obtain more government work?

The question is no longer only how much money we are spending. It is where the money is going, why it is going there, and what capability it is creating.

That is why reform has to begin before the tender.

E-GP is needed. Open tenders are needed. Beneficial ownership disclosure and independent audits are needed. But we also need to ask:

Where did this project idea come from?

What alternatives were considered?

Who wrote the feasibility study and technical specifications?

And what more could Bangladesh have achieved with the same money?

For a long time, we have asked how much money was stolen from government projects. We need to continue asking that.

But now we also need to ask a more political question.

Who gets to decide what the state needs?

The previous Awami League government's long period in power provides the clearest recent examples because prolonged political dominance allowed networks of politicians, officials and businesses to become deeply entrenched.

But state capture is not an Awami League-specific disease. Changing the people at the top does not necessarily change the mechanism underneath.

New politicians can replace old politicians. New businessmen can replace old businessmen. New networks can replace old networks.

The state can remain captured.

Capture is a process.

It begins when influence moves upstream, from winning a government decision to influencing which decisions the government gets to make in the first place.

The tender is often just the last scene.

The real game begins much earlier: when a problem is defined, when a project is conceived, when a feasibility study is written, and when the rules of competition are determined.

If political and commercial interests become stronger than the public interest at those stages, the loss is not just in thousands of crores of taka.

It is a question of who is setting the direction of development.

And that is the real question behind whether Bangladesh has become a captured state.

Apon Zahir is a research fellow at the Centre for Governance Studies

Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the views and opinions of The Business Standard.