Corrupt or fraudulent business practices are a common feature of life in the construction industry, according to 48% of the individuals who responded to a CIOB online survey.
And more than one in three (35%) said that they had been offered a bribe or incentive on at least one occasion.
Over a third of respondents said they had encountered cartel activity in construction: of this group, 33% said it had been more than six years ago but 29% said it was in the last 12 months.
And nearly 10% of the 700 construction professionals polled said that their organisations had suffered losses totalling £1m or more as a result of fraud and corruption
Overall, the survey’s shocking results show that there has been little progress in tackling corruption since the CIOB last undertook similar research in 2006 – before the OFT’s investigation into cover pricing in 2009 and the introduction of the Bribery Act 2010.
“This valuable report shows that despite the introduction of the tough new Bribery Act in 2010, corruption is still common in the construction business in this country. That is unacceptable.”
Graham Hand, UK Anti-Corruption Forum
The CIOB believes that the harsh economic conditions of the past five years have allowed corrupt practices to thrive, as squeezed tender margins and reduced workloads have pressurised some firms and individuals into grey or downright illegal areas.
Michael Brown, deputy chief executive of the CIOB, said: “What we have found is that cultural practices and the consequences of the recession have placed a greater strain on companies to sometimes engage in adverse practices as a survival mechanism.”
Asked how levels of fraud and corruption had changed in the past five years, 21% thought they had increased, 30% said they had stayed the same, 25% thought it had decreased and 24% didn’t know.
Susceptible to corruption
But 50% thought that the UK construction industry wasn’t doing enough to tackle the issue, and 55% thought that the government should do more to prevent corrupt business practices.
Almost half of respondents thought the whole construction process was susceptible to corruption (43%), although the pre-qualification and tendering phase is particularly at risk, according to 35%.
The CIOB is to present the findings of its research to the UK Anti-Corruption Forum, an informal pressure group set up to reduce the culture of corrupt practices in the construction and engineering sectors in the UK and overseas.
Graham Hand, coordinator of the Forum, said: “This valuable report shows that despite the introduction of the tough new Bribery Act in 2010, corruption is still common in the construction business in this country. That is unacceptable. The law enforcement agencies need to work with the professional and business organisations to educate companies about their responsibilities, and they must act against companies that break the law.”
The survey does not attempt to define corruption, but the CIOB’s accompanying report covers a variety of issues, from cartel activity to bid rigging and falsifying invoices by inflating the cost of work done or billing for unperformed work.
Illegal labour
Other corrupt practices include the theft of material from sites, and the employment of illegal labour – allowing contractors to undercut competitors’ prices while still charging full labour rates.
The CIOB’s report on the issue warns that a lack of data on the scale of the issue, and lack of an industry-wide approach on measuring it, could have led to a sense of complacency. But a large majority, 77% of the respondents, agreed that it was important to do more to tackle it.
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The CIOB is to press government and agencies to deliver a more coordinated response to the problem, and urge the industry to put better anti-corruption training in place.
Other recommendations made by the institute include bolstering industry support for the international CoST scheme (Construction Sector Transparency Initiative) to allow it to extend its operations in the UK, and raising awareness through more coordinated data collection.
The CIOB also believes that corruption and fraud have been wrongly labelled as a problem for the industry overseas rather than in its home market. But, whether in the UK or abroad, corruption threatens the integrity of the market and hampers economic growth.
“If the UK is going to live up to its rhetoric of being tough on corruption, the government and industry must do more to show proof of progress,” said Brown.
The October issue of CM includes further analysis and comment on the survey, and the full results can be found at www.ciob.org/research
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With the amount of eastern european labour flooding in, I see everyday individuals on small sites and conversions, wearing no safety gear whatsoever, which is obviously an add-on cost for the “ Legitimate Companies “ competing against them. I have complained on many occasions to Local Authorities and to the Health & Safety Executive, but neither are interested. The work in a lot of cases is awful, and how they pass Building Control is beyond me. Bribes are offered to increase the valuation figure. Although I must admit, you would have to be stupid to accept a bribe, not only would you lose your qualifications, but your integrity as well, which is priceless to me.
Corruption is a big issue and we need some strong leadership from the industry and strong enforcement.
The report makes very interesting reading especially extending the involvement to other professionals. However, it is important to review the methodology and add some analysis. The responses were all provided voluntarily from an email to members plus contacts through “social networks”. Of the total membership approximately 3% contributed. It may be the case that the numbers were statistically significant but the CIOB should make this clear or place a statement alongside its headline.
Corruption is an even bigger problem in the part of the world where I am. This combined with contract mismanagement from procurement to completion is a huge drain on the limited resources available for infrastructure development. One way to tackle both corruption and mismanagement is the introduction of performance and technical audits covering the whole construction process. Botswana has realized the benefits of this and has introduced auditing in road works starting at a very early stage and running through out the life of a project and thereafter. Building can borrow from this.
There is corruption in award of contracts in almost every country .This is making it difficult for new entrants.