Economic interests often lie behind the funding of political parties. In the United States, private donations are said to represent a privileged channel through which companies seek favours from the federal government in obtaining public contracts. This is the hypothesis of a team of economic researchers who have looked into the risk of favouritism associated with campaign donations.
In electoral democracies, campaign donations refer to the financing of electoral campaigns in the form of monetary transfers or support in kind. Private donations can influence decision-making and lead to preferential treatment from politicians.
Campaign financing and influence peddling: how do you measure the risk of favouritism?
At the beginning of the 20th century, the United States was one of the first countries to introduce legislation governing the financing of election campaigns. Yet this hasn't prevented scandals1 Today, while direct financial participation by companies is prohibited, individual donations by employees of these same companies are perfectly legal and even constitute the bulk of the funding for candidates in the American presidential election.
In the scientific article "Agency Independence, Campaign Contributions, and Favoritism in US Federal Government Contracting" published in 2023 in the Journal of Public Administration Research and Theory, researchers Mihály Fazekas, Romain Ferrali and Johannes Wachs show that there is a direct link between campaign donations and the direction of US public spending2. The scientists shed light on some of the financial mechanisms through which American political leaders can interfere in the awarding of federal contracts to major donors.
- 1For example, before its bankruptcy, the Enron group, which helped finance the Bush family's election campaigns, had approached the White House: https://www.lesechos.fr/2002/01/avant-sa-faillite-le-groupe-enron-avait-sollicite-ladministration-bush-682423
- 2This scientific article won the 2024 Beryl Radin Award recognizing this work as the best published by the Journal of Public Administration Research and Theory
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Subjectivity, retroactive action, distorted regularity... Favouritism is a concept that is hard to measure. To demonstrate that an American company increases its chances of obtaining more federal contracts by donating to a political party, and more specifically to the majority in power, the team of researchers compiled more than two million federal contracts signed between 2004 and 2015. They set out to measure the potential risk of favouritism in the award of each contract. Single bidding, no official publication, non-competitive procedure, direct negotiation with a supplier, contract modifications, supplier registered in a tax haven or debarred.... Each contract was screened against a series of seven criteria to determine whether it had been awarded under dubious circumstances.
All these criteria set off alarm bells. However, the researchers' analysis reveals that certain indicators of favouritism carry more weight, in particular the fact that an invitation to tender has only one bidder (nearly 50% of contracts) and that it uses a non-competitive procedure (nearly 40% of contracts).
Interests that rise as the amount increases
The researchers cross-referenced their measure of the risk of favouritism with the sum of political donations from the companies that obtained the contract over the same period. They compared the risk of favouritism associated with contracts obtained by companies that were mostly similar - specifically, two companies operating in the same American state, supplying the same type of goods and services to the same administration and during the same term of Congress. The only difference is the volume of political donations they each made.
They show that donations increase the risk of favouritism. Donor companies win more contracts than non-donor companies, and these contracts show more signs of favouritism (only one bidder, non-competitive procedure, etc.). Finally, the higher the donations and the more they are directed towards the presidential party, the more the contracts show signs of favouritism.
These results support the researchers' interpretation that the results and practices of invitations to tender may be subject to favouritism in return for campaign donations.
Picture by Samantha Sophia on Unsplash
How does favouritism work?
In Western democracies, public procurement is a major economic issue. As a result, increasingly strict monitoring procedures are put in place as the value of the contracts at stake increases, to ensure transparency in the awarding of the contract. In the United States, procurement procedures worth more than $12.5m are subject to an additional review by a political appointee, a senior official appointed directly by the President. A monitoring procedure that could well prove counterproductive if the political appointee uses his influence to subject favoured companies to less control. With that in mind, the most generous companies would be well advised to inflate the amount of their proposals above the $12.5 million threshold in order to be subject to the control of the political appointee. The researchers show that this is indeed the case: among donor companies, contracts for amounts slightly above the threshold are over-represented and present a significantly higher risk of favouritism than those for amounts slightly below the threshold.
It is therefore the authority exercised by political power over the central administration that makes it possible to circumvent the control mechanisms provided for by the regulations and to favour corporate donors. The authors also show that the more administrations are independent of political power, the less likely they are to reward corporate donors: the same donation has an impact 2.5 times greater in the administrations that are most subordinated to the executive.
Making political life more transparent
While there will always be some doubt, given that the concept of favouritism is inherently subjective, this study sheds new light on the risk of favouritism in the award of contracts in return for political donations. Compared with previous studies, this stands out by offering very detailed comparisons over a long period and by revealing a general trend across the whole of the United States over 15 years.
Despite the mechanisms for controlling and monitoring public procurement, contracts awarded by the US federal government appear to be subject to profound political influence and pressure. Strengthening bureaucratic insulation from politicians should significantly improve the fight against corruption in politics.
