Corruption is like a virus that continues to spread throughout the developed and developing nations of the world. Corrupt practices in the construction industry include bribery and fraud throughout all phases of a project.
In an industry as important as construction, with a local and increasingly global reach, the impact of corruption is significant.
Corruption is bad for the economies of developed and developing countries. It can result in projects that are unnecessary, unsuitable and defective. Commonly important development work is over-priced, severely delayed and are bad for the reputation of their owners/clients, sponsors, contractors, consultants, suppliers and sub-contractors.
Corruption disadvantages those that finance and insure projects such as commercial banks, surety companies, guarantors etc. Corruption results in losses, false claims and reputational risk.
For the construction supply chain, corruption results in wasted tender expenses, increased project costs, economic damage, blackmail, criminal proceedings etc.
Individual directors, partners and managers within the project supply chain businesses, may face criminal prosecutions and loss of professional status.
Construction businesses gain a bad reputation which will affect their ability to develop marketing relationships.
Much of construction success comes from the ability to create a "trusting" business environment between all parties.
Corruption has to be a major reason why the construction industry has a very poor reputation with its stakeholders.
A big driver for change to this "culture of corruption" has to be the owner/client.
Transparency International (2005) identify a number of initiatives the customers of construction should institute to combat this pandemic.They should;
1) implement an internal anti-corruption code of conduct and management programme.
2) include contractual safeguards including corruption warranties and termination rights in the event of corruption.
3) act with due diligence to try and ensure there is no corruption on their projects.
4) ensure their is transparency in pre-qualification, tendering and that project management is fair and reasonable.
5) report allegations of corrupt practices to the authorities.
6) Public sector owners should take note of "Minimum standards for public contracting"
The corruption pandemic must be tackled by all parties to the project. Yes, Governments have to be serious about enforcing anti-corruption legislation. But all construction business leaders, project managers and professionals in particular, should be concerned to live up to their personal and professional ethics.
References and resources
http://www.transparency.org/global_priorities/public_contracting/tools_public_contracting/minimum_standards
http://www.anticorruptionforum.org.uk/
http://econ.worldbank.org/external/default/main?pagePK=64165259&piPK=64165421&theSitePK=469372&menuPK=64166093&entityID=000016406_20070626142601
http://www.buildingtalk.com/news/tch/tch193.html
http://www.transparency.org.uk/ti-uk-programmes/preventing-corruption-on-construction-projects
http://www.transparency.org/tools/contracting/construction_projects/anti_corruption_reports_and_tools
Profile
Professor Dr Chris Preece is based at the International Campus, Universiti Teknologi Malaysia (UTM), Kuala Lumpur. He was for 14 years at the University of Leeds, UK. His specialist research field is in the area of business and project management in the construction and engineering sectors. He is a recognized authority in international business development and marketing.
2 comments:
One way of looking at the issue of corruption is to consider the costs and benefits of corruption to the various parties involved.
In some ways you can consider the active costs of corruption (the money in the envelope) to be marketing costs and thus calculate the ROI.
One of your other posts talked about Malaysian QS websites being pretty poor. Using a "corruption as a form of marketing" hypothesis there may be some causality between marketing skills and corruptness. Getting the data to prove it may be interesting though :)
The other thing that crossed my mind was an Economist article (or it might have been Tipping POint by Norman Gladwell)which I read a few years ago which suggested, inter alia, that societies exist in corupt or un-corupt states. Once a corruption increases or decreases past a certain point it then moves very fast to reach a new stable state. You can't have 50% corrupt societies. They tend to be 80% corrupt or 20% corrupt
Two interesting posts.
I have not done any direct research in Malaysia but have had students look at ethics. Two students have looked at ethics in Malaysia. Although the projects cannot be generalised there was a very interesting idea emerging - governance and its role in reducing corruption.
If we improve governance can we improve performance. Do we need governance structures and rules for the public sector?
An interesting scenario is emerging where all civil servants and politicians are going to have to open up their financial details and business affairs. I think the premise is that you can have outside business interests but these should not benefit from your position or sphere of influence. I think the regulation will extend to family and relatives.
Corruption is something we have to deal with in construction. One of the most interesting arguments presented is that kickbacks are part of the culture of the country or environment. Another challenge to ethic and corruption is that it is a Eurocentric concept. Do we need to consider other value systems.
Is there a regulatory route to coping with corruption - improved governance
Is there a cultural route to dealing with corruption? - do we need to look at other value systems.
I hope this does not muddy the picture further
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