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.
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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.
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
