Combating Corruption in the Construction and Engineering Sector: The Role of Transparency International

Transparency International’s 2008 Bribe Payers Index revealed that public works and construction were perceived to be the most corrupt industry sectors in the world. This is not surprising. Construction impacts on all aspects of our life, including houses, schools, offices, hospitals, shops, roads, railway lines, ports, airports, stations, the supply of water and power, and communications and sewage facilities. Large construction projects are complex and usually involve numerous players. The scale of financing is often huge. For corrupt politicians and officials, construction projects are the perfect vehicle to dispense patronage and amass illegal private wealth.

It is difficult to put a precise figure on the financial cost of corruption in the construction/engineering sector; however, it is likely to be very high considering that this is a US$3 trillion industry. The costs are not only financial. Corruption in the industry has many terrible impacts: lives are lost when corruptly constructed houses and schools collapse in earthquakes; unnecessary infrastructure projects are built, diverting scarce resources from other pressing needs such as health, water, and education; and shoddy infrastructure is produced and the environment is destroyed because regulations and standards are circumvented.

The toll exacted by corruption in the construction/engineering sector is high across the world (Transparency International 2005):

Corruption, defined as the abuse of entrusted power for private gain, can occur during all phases of a construction project—planning and design, tender, execution, and operation and maintenance, as illustrated by the following examples (Stansbury 2005):

In 2003, after initial consultations with the key players in the international construction/engineering industry, Transparency International (TI) came to the conclusion that corruption on construction projects could only be eliminated if all participants in projects cooperated in the development and implementation of effective anticorruption actions, which addressed both the supply (bribe giver) and demand (briber taker) sides of corruption. These participants include governments, funders, project owners, contractors, consultants, and suppliers as well as the business and professional associations which represent these parties.

The U.K. national chapter of Transparency International, which leads TI’s work in the sector, decided that it was important to increase awareness of the impact of corruption in the sector and promote practical, industry-led initiatives to reduce corruption. A major step was taken in October 2004 with the launch of the U.K. Anticorruption Forum (ACF) for infrastructure, construction, and engineering. In addition to Transparency International (U.K.), which coordinates the ACF, the other members include the Association for Consultancy and Engineering, British Expertise, the Institution of Civil Engineers, the Institution of Structural Engineers, the Institution of Mechanical Engineers, the Chartered Institute of Building, the Royal Institution of Chartered Surveyors, the Chartered Institute of Purchasing and Supply, Engineers Against Poverty, and numerous construction companies and consulting engineering firms. Collectively, the ACF represents over 1,000 companies and 350,000 industry professionals. All members are committed to implementing the Anticorruption Action Statement they adopted jointly in 2005. This identified various actions participants in the industry could take to put an end to corrupt practices both in the UK and abroad (see article by N. Stansbury, this issue).

In order to give practical assistance to the construction/engineering sector, TI produced a suite of anticorruption tools and reports in 2005, and in 2007 published a Project Anticorruption System (PACS) for the construction sector. PACS, which targets both bribery and fraud, sets out a variety of anticorruption standards and templates to assist project participants to implement standards that include independent monitoring, due diligence, contractual commitments, procurement requirements, government commitments, corporate programs, rules for individuals, training, transparency, reporting, and enforcement. PACS has been disseminated to all TI national chapters, governments, banks, construction and engineering associations, and MDBs. The feedback has been very positive. PACS is now being developed and promoted by the Global Infrastructure Anticorruption Centre in alliance with TI (U.K.) (see article by C. Stansbury, this issue).

Transparency International has participated from the beginning in the World Economic Forum Partnering against Corruption Initiative (PACI). In this initiative, over 100 major international construction and engineering companies have signed an anticorruption commitment based on TI’s “Business Principles for Countering Bribery.” Furthermore, TI (UK) was part of the design team to help develop the structure of the Department for International Development’s Construction Sector Transparency initiative (CoST) to promote increased transparency in international construction projects, and is now a member of the UK multi-stakeholder group for U.K. pilot projects under CoST.

Transparency International worked with Tsing Hua University and the Chinese Supervision Institute to promote the implementation of anticorruption measures on construction projects in China. Also, in order to increase awareness of the need to prevent corruption in the construction/engineering sector, TI has made numerous presentations and conducted several training workshops on anticorruption measures, both in the United Kingdom and overseas.

Transparency International has tried to promote the development of infrastructure anticorruption forums at international, regional, and national levels. These forums are intended to be informal anticorruption alliances between business associations, professional institutions, organizations, and companies with interests in the infrastructure, construction, and engineering sectors. Work continues with numerous national, regional, and international construction and engineering professional institutions and business associations, which are increasingly taking a major lead in promoting anticorruption measures.

Looking back to the period when TI began its work in this area, the pace of change in the industry has been surprising. In 2003, there was considerable scepticism about anticorruption initiatives in a sector that was seen to be resistant to reforms. Now, however, the need for change is widely accepted.

Three factors have been responsible for driving change in the industry. First, the international regulatory environment has been characterized by increasing exposure and prosecutions of foreign bribery by companies based in member countries of the Organization for Economic Cooperation and Development. The United States has been particularly aggressive in tackling foreign bribery under its Foreign Corrupt Practices Act. Second, major companies in the industry are increasingly recognizing that there is a strong business case for shunning bribery and other unethical business practices. Many companies have adopted strong antibribery programs and are strengthening their compliance systems. Finally, companies are seeing the advantages of collective action, recognizing that if a critical mass of companies can take a strong, united stance against corruption in the industry, this will help to level the playing field and marginalize corrupt companies over time.

Transparency International does not underestimate the challenges of preventing corruption in the construction/engineering sector; however, progress has been made during the past few years and there is a genuine desire among key players to root out corruption. Transparency International looks forward to continuing to work with them and other partners in this vital enterprise.