A Global Challenge for the Engineering/Construction Industry

It is difficult to address any topic today without reflecting on the unprecedented financial crisis that exists in the United States and around the world. As I write this article, just after the 2008 presidential election but before the inauguration, many political leaders are proposing investments in infrastructure as one strategy to rejuvenate the struggling economy.

For example, last November China announced a $586 billion economic stimulus package designed to offset the effects of falling exports and to boost investment and consumption at home. And the Obama administration seems poised to tee-up infrastructure investment here in the United States.

This focus on infrastructure provides an opportunity for civil engineers to help create an economic rebound in the United States and elsewhere. In the process, however, all of those involved in the engineering and construction industry need to understand the challenge presented to us by an age-old issue—which is as rampant today as it ever has been—bribery and corruption.

The size and scope of the challenge cannot be disputed: corruption is massive in scale. The World Bank estimates the total volume of bribes paid annually at over $1 trillion—more than 5 percent of global gross domestic product (GDP) and nearly twice Africa’s GDP. Globally, it adds up to 10 percent of the total cost of doing business and up to 25 percent of the cost of procurement contracts in developing countries. Moving a business from a country with a low level of corruption to a country with medium or high levels of corruption can be equivalent to a 20 percent tax on foreign business.

Corruption in the engineering and construction industry is most often evident on the front end of a project. A 2007 survey of global chief executives by PricewaterhouseCoopers International found that 45 percent of the respondents had not entered a specific market or pursued a particular opportunity because of corruption risks. Almost four in 10 reported that their company had lost a bid because of corrupt officials, and a similar number said that their competitors pay bribes. More than 70 percent believe that a better understanding of corruption will help them compete more effectively.

Given this daunting problem, I applaud the American Society of Civil Engineers for bringing the challenge of global corruption to the forefront of its activities and efforts. Without question, the society has become a mainstream player in the effort to eradicate corruption. One major contribution involves the worldwide team of educators, engineering professionals, and communicators that is developing the Global Anti-Corruption Education and Training project, a much needed resource. The centerpiece of this training is Ethicana, a dramatic film and education program that promotes ethical decision making among engineers and other professionals, portrays ways to avoid falling prey to corruption, and encourages those in our industry to have the moral courage to expose it. It’s a “must see” piece of work.

It is not enough merely to be against corruption. Fundamentally, we must ask ourselves as professional engineers what we can do to minimize or eradicate this scourge. We know that laws in the United States and abroad address bribery. These include the U.S. Foreign Corrupt Practices Act, passed in 1977; the adoption by 36 developed countries of the OECD Convention Against Bribery; and the comprehensive United Nations Convention Against Corruption, signed by more than 100 nations, which established the first universal commitment to tough anti-bribery standards.

But for the most part, these laws address the demand side. Most of us work on the supply side. What can we do?

Throughout my engineering career, I’ve seen many examples of corrupt and inappropriate behavior. I also made a commitment to myself: if I ever was fortunate enough to become chief executive officer (CEO) of a company like Fluor, I would make fighting corruption a flagship issue. Opportunity presented itself shortly after I became CEO in 2001. When invited in 2002 to chair the Engineering and Construction sector of the World Economic Forum (WEF), I considered it ideal timing to take on the anticorruption challenge. Under the auspices of the WEF, we formed what has become the Partnering Against Corruption Initiative (PACI) and in January 2004 formally launched the effort in concert with CEOs from the energy, mining, minerals, as well as engineering and construction industries.

What distinguishes PACI is its status as a business-driven global initiative with commitment from the top. Today, more than 140 companies have joined the fight to counter corruption and bribery, through PACI, and their CEOs have committed to two fundamental actions: (1) establishing a zero-tolerance policy towards bribery, and (2) developing or enhancing a practical and effective implementation program.

Today, PACI has grown into a multi-industry initiative, with signatories beyond the three originating sectors and it is open to any company regardless of size, country of origin, or affiliation with the World Economic Forum. Signatory companies will either implement antibribery and anticorruption practices based on PACI principles or use those principles to benchmark and improve their existing program to achieve the same objectives.

This is an excellent example of what can be accomplished when individual companies join together in common purpose. The process is also working in ways we did not originally anticipate. Increasingly, we find that companies seeking to redress specific situations in which they’ve become involved are approaching PACI to use the benchmarking process and the PACI principles to shape their programs.

There’s an unfortunate perception out there that bribery is simply a way of life in many developing countries (and even here at home) and that engineering and construction firms that refuse to do business “as usual” will be heavily penalized in the marketplace. In my work with the WEF and PACI, however, I am witnessing just the opposite result. First, as exemplified by a large, well-known European firm that acknowledged spending up to 1.3 billion euros on bribes to win foreign contracts, companies are increasingly being called to account for such behavior. And second, company officials increasingly report that creating and implementing a strong policy against corruption has had no downside effect on their business.

The PACI approach is a very workable strategy for participants in our industry to address the problem of corruption. As we look to future investments in infrastructure taking shape in America and elsewhere, we need to recognize this not only as an opportunity to support the economic rebound our nations desperately seek but also to address—and make real progress in eradicating—the challenging and damaging issue of corruption.