Ahead of International Anti-Corruption Day on 9 December, Alex Minett discusses the importance of having adequate procedures in place to prevent bribery and corruption in construction supply chains.
Transparency International, the global coalition against corruption, defines corruption as the abuse of entrusted power for private gain. It can be grand, petty, bureaucratic, commercial or political. Meanwhile bribery, which is a form of corruption, takes many different forms, including money, gifts, donations and favours.
On a national level bribery and corruption stifle economic growth, hamper equality and erode trust. On a corporate level, businesses caught in a corruption scandal can incur fines, suffer business losses and experience long-lasting reputational damage. Meanwhile employees, shareholders and investors are likely to rapidly lose faith in an organisation embroiled in bribery.
Several factors make the construction industry vulnerable to bribery: the scale of projects provides opportunities to inflate costs and hide bribes while complex networks of sub-contractors perpetuate this risk.
The primary legislation governing bribery and corruption in the UK is The Bribery Act 2010, which came into force on 1 July 2011. A breach of the act can result in criminal charges, hefty fines and a potential prison sentence of up to 10 years.
The Bribery Act 2010 applies to all operations of a company with a business in the UK, even if offences are committed outside the UK or by a separate third party ‘associated person’.
Also of note is that The Bribery Act introduced the strict liability corporate offence of failing to prevent bribery. This requires companies to have ‘adequate procedures’ in place to prevent bribery which will come under scrutiny if they are faced with prosecution.
This was put to the test in June 2016 when construction and professional services company Sweett Group underwent a two-year investigation by the Serious Fraud Office. The investigation found that a subsidiary had made corrupt payments to guarantee the award of a contract to build a hotel in the UAE. The company pleaded guilty to the charge of failing to prevent an act of bribery, contrary to Section 7(1)(b) of the Bribery Act 2010 and was fined £2.25m.
“Several factors make the construction industry vulnerable to bribery: the scale of projects provides opportunities to inflate costs and hide bribes while complex networks of sub-contractors perpetuate this risk.”
Principles of prevention
Clearly failure to have adequate procedures in place to prevent bribery and corruption can be extremely costly. In its guidance on The Bribery Act 2010 the Ministry of Justice (MoJ) sets out six principles of bribery prevention: proportionality; top level commitment; risk assessment; due diligence; communication; and monitoring and review. These principles should be a key focus for any organisation reviewing the prevention of bribery and corruption in their businesses.
Preventing bribery and corruption in the supply chain
Demonstrating that adequate procedures are in place to prevent bribery and corruption throughout supply chains can be a particular challenge which is where third-party accreditation can help. For example, bribery and corruption compliance is just one of the areas monitored through CHAS’s supply chain management service that clients can use free of charge to find and monitor contractors compliant with a range of requirements.
Bribery and corruption is also a key focus of the new Common Assessment Standard, the construction industry’s new gold standard for pre-qualification which assesses compliance across several areas. To be awarded the Common Assessment Standard, contractors must provide evidence of adequate procedures to prevent persons within or associated with their organisation from receiving bribes or bribing others.
International Anti-Corruption Day takes place on Thursday 9 December 2021. Support the campaign using the hashtags #NoToCorruption #IACD2021
Alex Minett is head of products and markets at CHAS.