Corruption in the construction industry.

[edit] What’s it going to take to stop corruption in the construction industry?

Corruption includes bribery, extortion, cartels, abuse of power, embezzlement, and money laundering, it is important to remember that it’s fellow human beings who suffer the consequences of corruption. It can result in poorly built homes, schools, hospitals and infrastructure, as well as shoddy or non-existent maintenance that has been paid for as part of construction projects.

In addition, projects subjected to corruption are always more expensive than they should be and often employ modern-day slaves. I first came across corruption in construction in Pakistan in the mid-1970s and in Hong Kong in the early 1980s, but only started to take action in the late 1990s.

The more I learned about it, the more frustrated I became, because there didn’t appear to be anything that I, as an individual, could do about it. Furthermore, there appeared to be a lack of worldwide success in outlawing the practice.

The turning point for me was when I discovered that a subsidiary of a UK company in India had bribed a policeman to write a report stating that the company in question was clean.

[edit] The origin of the UK Anti-Corruption Forum

Many of those I spoke to said they wanted out of corruption. However, they feared that if they stopped offering payments to win overseas work, they would simply lose out to competitors in other countries. If corruption is to be outlawed, it must be tackled globally.

In October 2002, at the end of my address as president of the Institution of Structural Engineers (IStructE), I introduced the audience to my views on corruption by stating: “I consider that the council of this institution should get together with the councils of the other major institutions to pledge our support for trying to rid the world of corruption. Maybe we need to declare an amnesty and start afresh at the end of it. Maybe we need to brainstorm the whole issue, but I firmly believe that we need to start and we need to start now.”

With help from a small group of like-minded people, these comments led to the launch of the UK Anti-Corruption Forum in October 2004.

In the beginning the participants didn’t want their names or companies mentioned. This changed in around 2010 when people realised that being against corruption was seen as an advantage and the correct thing to do. Members of the forum helped to produce the UK Bribery Act 2010 as well as BS10500 and ISO 37001, which are anti-bribery management systems.

[edit] What is corruption?

There is no international legal definition of corruption. Corruption includes bribery, extortion, cartels, abuse of power, embezzlement, and money laundering.

These activities will normally constitute criminal offences in most jurisdictions, although the precise definition of the offences may differ.

Corruption usually occurs because some individuals are willing to use illicit means to maximise personal or corporate gain. In other words, it’s driven by greed.

However, for these individuals to become involved in corrupt activities, circumstances must exist which do not prevent or discourage them from doing so.

[edit] Corruption in the construction industry

It’s been shown that the highest levels of corruption worldwide are seen in the construction of public works, and in the defence industry.

On infrastructure projects, corruption can occur at the following stages:

• Project identification,
• Financing of the project,
• Planning and design,
• Pre-qualification and tendering, and
• Project execution.

It can involve any one or more of the following parties:

• Government,
• Project owner,
• Funders,
• Contractors,
• Consulting engineers,
• Sub-contractors,
• Suppliers,
• Joint venture partners,
• Agents, and
• Associated and subsidiary companies of these parties.

[edit] Why is corruption dangerous?

There are several reasons why corruption should be avoided:

1. There’s a real risk of criminal prosecution for individuals and organisations involved in corruption. The consequences of prosecution are severe, involving imprisonment, fines and debarment. In some countries those found guilty are executed, but all this does is drive corruption even further underground.
2. There’s a real risk of significant financial loss for individuals and organisations who are involved in corruption.
3. Corruption can cause death, injury, and financial loss to innocent parties. It results in, for example, fewer or defective schools, hospitals, roads and other public services.

Therefore, it’s morally wrong.

[edit] Cost of corruption

Trying to estimate the cost of corruption is extremely difficult.

The UN estimated in December 2018 that the yearly value of bribery and corruption worldwide was US$ 3.6 trillion, which is about UK£2.7 trillion.

Remember that a trillion is 1 with 12 zeros after it.

To put this into perspective, that sum is between 10 to15 times as much as the UK has spent fighting Covid-19 in each of the last two years.

[edit] Real cases of corruption

Under Section 7 of the UK Bribery Act 2010, a company registered in the UK can commit an offence by failing to prevent an employee, subsidiary, agent or service provider known as "associated persons" from bribing another person anywhere in the world to obtain or retain business or a business advantage.

There are many cases of corruption in the construction and infrastructure industry. The details of these cases are in the public domain and include well-known names such as Rolls Royce, Alstom, the Sweett Group PLC and Mabey & Johnson.

I won’t go into any details about these cases, but many employees, both junior and very senior, were imprisoned for up to four years and six months. Some companies were fined up to £671 million and directors were disqualified from being a director for up to five years.

In one particular case, an employee was jailed for 18 months for taking about £2,000 in a scam. Sadly, the individual was a gambling addict who’d lost £40,000 of family savings.

[edit] What to do if you suspect corrupt activities

If you suspect that corruption is happening in your business you need to report it to your manager, but be prepared to escalate it right up to the CEO.

In an extreme situation you can, in the UK, consult the whistleblowing charity Protect.

Some of the information in this article is from the Global Infrastructure Anti-Corruption Centre (GIACC) website, which is owned and run by Neill Stansbury, an international construction lawyer.

Visit the website for more information

--ICE

[edit] Learn more about the author

Bob McKittrick retired in April 2007 having spent 39 of 40 working years with Scott Wilson (now AECOM).

At the time of his retirement, he’d been a main board director and chief operating officer (COO), Europe.

During his career he worked on projects around the world. He lived in Hong Kong for seven years, as well as in Pakistan, Saudi Arabia, Turkey, South Africa, Kuwait and Thailand for shorter periods.

[edit] Related article on Designing Buildings:

• Bid rigging / collusive tendering.
• Blacklisting.
• Bribery.
• Bribery Act 2010.
• Cartels.
• Collusion.
• Conspiracy.
• Corruption.
• Ethics.
• Fraud.
• Embezzlement.
• Gifts, bribes and kickbacks.
• Inducement.