INTERVIEW: Anti-corruption initiative

By Chris Sleight11 April 2011

Graham Hand chairs the CoST Secretariat

Graham Hand chairs the CoST Secretariat

Bribery is an undeniable problem for the construction sector. Surveys by the likes of anti-corruption non-governmental organisations (NGOs) like Transparency International often find it to be the worst sector when it comes to paying bribes - worse even than the notoriously shadowy arms industry.

It is certainly a recurring problem for the industry. Regular readers of iC will have seen news stories over the last year relating to bribery cases from as far a field as Bulgaria, China, Hong Kong, Nigeria, the UK and US.

This highlights the fact that corruption is a global issue, and is not just confined to the developing world, although Transparency International's annual Corruption Perceptions Index shows a clear link with poverty and corruption.

Having said that, a survey in 2008 by iC's sister magazine, Construction Europe found that 21% of respondents - all of which were based in Europe - had some sort of direct personal experience of corruption, and 4% admitted they had paid a bribe themselves. What's more, a massive 95% of respondents said they thought bribery existed in the industry to some extent.

But as widespread as corruption may be in construction, it is not a situation that anyone is happy with. As Michel Démarre, president of European International Contractors to iC in 2008 interview, "Corruption is bad for business - not only because of sanctions, but because it doesn't make you progress or innovate or compete on a sound basis. It's insane."

The sheer size of the construction sector, not to mention the fragmentation of the industry make corruption a difficult problem to tackle, and although many individual companies in the sector have strong ethical policies, bribery remains a problem. The international nature of the industry adds further complexity.

However, the Construction Sector Transparency Initiative (CoST) launched two years ago by the UK government's Department for International Development (DFID) is gaining momentum and recognition worldwide, and its adoption could help reduce corruption in the industry.

As the name suggests, CoST is designed to bring greater transparency to construction projects, the idea being that if the way money is spent can be scrutinised, it will deter bribery in the first instance as well as highlight areas where it has taken place.

Graham Hand, chairman of the CoST secretariat explained how the system works. "The key data in construction projects - tender prices, variations, final price, rationale for the project - will be made public and typically posted on a website. It is not easy for an ordinary person to understand what all that information means, so we are setting up a structure to make sure that information released to the public is accurate and is meaningful.

"CoST is not a prosecuting or investigative authority - it merely exists to shine the light of transparency. So if details are published and there's something very odd about them, and it can't be explained, then it is for the Government of that country to take a look and send in its national auditing authority.

"In the countries we have set up multi-stakeholder groups which bring together public sector, private sector and civil society, including the media. That is moving at various rates in different countries - they have to decide what projects they're going to look at, they have to get experts on board to interpret the information, and all that sort of thing.

"That's the basic theory. It is meant to deter any sort of corrupt behaviour that can occur on a construction project as well as raise the standards of procurement agencies in the countries concerned. Even in the UK, procurement entities are not always well enough trained or intelligent enough about how they do things, and in many developing countries the position can be far worse," he said.

The scheme is currently in its pilot phase, with the governments of Ethiopia, Malawi, the Philippines, Tanzania, the UK, Vietnam and Zambia signing up to take part. Once this is complete in September there will be an evaluation process, as Mr Hand explained.

"Naturally a lot of what we've achieved so far has been about process. To be able to say reliably that we reduced corruption and increased the quality of corruption in a country would I think be a 10-year job," he said.

It is a pragmatic view of the scale of the problem, but Mr Hand is confident the evaluation show progress has been made. "I believe it will ultimately prove worthwhile and there will be a positive effect. I think we all believe that, and the trick is to prove the effect is there," he said

But this also raises the question of how to measure progress. By its nature, corruption is difficult to evaluate because it is illegal, but according to Mr Hand there are some indicators that can be helpful.

"We're doing a baseline study in each of the pilot countries, covering legislation, the degree of transparency that is normal around construction projects, who is involved, what does the market look like and so on. All change will be measured against that baseline," he said.

Mr Hand continued, "What CoST is really about is tackling the problem of inflated costs on a project that do not match up to what was specified and required, or any quality increases. It's well known that the profits in a construction job are always in the variations and claims. If those are handled rigorously and correctly that's fine - no construction project ever costs what was forecast and budgeted at the beginning. That's not new.

"But it's one thing to have cost overruns, but it is another step to say what the reason was - the geology wasn't what was expected, there were problems with sourcing materials, the client changed it's mind, and by the way here's the letter saying how and what to do differently - all these things are legitimate. What is not legitimate is the contractor ripping off the authority concerned, or the authority soliciting bribes from the contractor and inflating the variation."


Mr Hand is optimistic that the project will continue once the pilot stage comes to an end in September, with other countries - Guatemala and Uganda included - showing an interest in participation.

As well as participation from various national governments, CoST has the support of several important NGOs and trade associations in the sector. Perhaps most importantly, the secretariat is now working with an international advisory group formed under the auspices of Transparency International.

In addition to that support, there is involvement from the Institution of Civil Engineers, Engineers Against Poverty, Tiri - an NGO focussed on issues of integrity in society. In addition, the EIC is making positive noises about getting involved as part of its work on ethics.

All of this support should help the initiative gain momentum, but ultimately, it is national governments that will have to adopt it and make it work. This is one of the reasons why it may be a slow process, as Mr Hand explained.

"Governments are not easy to persuade - they have their own views on how things should be done - what we have to do is show them that there are real benefits to be had from this. But it's not going to solve all corruption problems everywhere overnight. That's too much to ask," he said.

Having said that, Mr Hand is optimistic that the initiative will make a difference. "CoST can be a driver for changing peoples' perception of corruption in developing countries. The fact is that nobody likes corruption - citizens and private sector companies alike hate corruption," he concluded.

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