This month’s contract clinic question comes from a project manager who has been offered a ‘facilitation payment’ by a subcontractor in exchange for guaranteeing regular work. Tom Bushnell replies.
The question
The company I work for is building a series of apartments in Dorset. The heating contractor has offered me an opportunity to ensure we get their best people and a faster delivery of the projects, if we can guarantee him the next six contracts. In return, the contractor is willing to provide me with what he’s referred to as a facilitation payment, once the contracts are secured. Is that ok legally, and what are the risks, if any, of accepting the payment?
The answer
Bribery has been much in the construction news this year.
In April three Keltbray managers were convicted for receiving more than £600,000 in bribes from a demolition company. Then in May, individuals at infrastructure provider Blu-3 were arrested on suspicion of bribing associates of Mace Group.
In the reader’s scenario, a potential subcontractor’s promise of high-quality service and speedy delivery may be appropriate factors for the contractor to consider when awarding a subcontract.
The proposed ‘facilitation payment’ is much more problematic, however. It seems to be a personal payment to an individual, far outside the normal contracting process.
This would almost certainly be bribery. Since 2011, UK bribery laws have been contained within the Bribery Act 2010, a deliberately broad piece of legislation designed to cover corrupt practices in the UK and overseas.
Four main offences
The Bribery Act 2010 creates four sets of offences:
- Bribing another person.
- Being bribed.
- Bribing foreign public officials.
- Failing – as a commercial organisation – to prevent bribery by a person associated with you.
The essence of bribing and being bribed lies in the offering, giving or receiving of a financial or other advantage, in return for the “improper performance” of a “relevant function or activity”.
A relevant function or activity includes any activity connected with a business, so long as there is an expectation that it will be performed in good faith or impartially, or the person performing it is in a position of trust. Effectively, it is “performed improperly” if that expectation is breached.
For the person being bribed, it doesn’t matter whether the bribe is received before the improper performance, or as a reward afterwards. Nor does it matter if the person receiving the bribe is the same person who improperly performs the relevant function.
In many circumstances, it isn’t even necessary to prove that there was any improper performance.
In the proposed scenario, law enforcement agencies and the courts would quickly conclude that a person awarding contracts on behalf of their employer does so in a position of trust, or that there is an expectation they will do so impartially. As such, it is difficult to see a payment to that person after the award of contracts as anything other than a bribe or a kickback.
In some parts of the world, ‘facilitation payments’ are legal. However, these are usually defined as unofficial payments to public officials to obtain or speed up a routine or necessary action.
In the UK, however, facilitation payments are not permitted in any circumstance or to any person, and the term is not used in the Bribery Act. In short, it doesn’t matter what the subcontractor calls the payment if it is a bribe.
The penalties
The penalties for bribery are severe. The maximum penalty is 10 years’ imprisonment, and the starting point when sentencing all but the least serious examples is custody.
Two of the Keltbray managers received three and half years’ imprisonment each, as did the individual paying the bribes. They will also face draconian ‘confiscation’ proceedings, which strip offenders of the benefit of their crimes.
So what is permitted?
The Bribery Act was not intended to stifle tendering processes and competition between rival subcontractors. Indeed, the government’s guidance to commercial entities on how to prevent bribery specifically argues that the act “creates clarity and a level playing field”.
So it might be perfectly appropriate for a subcontractor to offer the contractor discounts or other incentives for higher volumes of work. Each case will turn on its own facts, and often on the assessment of what improper performance means.
And reasonable business development and hospitality remain legal. Joint guidance from the Crown Prosecution Service and Serious Fraud Office puts it this way: “Hospitality or promotional expenditure which is reasonable, proportionate and made in good faith is an established and important part of doing business.”
As always, there is a judgment call to be made as to where the line is. Nevertheless, companies and individuals working within construction will want to be alive to the risks of breaching UK bribery laws, especially given recent action by those tasked with enforcing them.
Tom Bushnell is a senior associate and barrister at Hickman & Rose, specialising in business crime and regulation.
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