THE CAUSE OF CORRUPTION IN CONSTRUCTION, by Ahmed Stifi - Germany

The construction industry is perhaps one of the oldest industry of the world. The ancient monuments like the egyptian pyramids, the temples of Greeks and Romans like Parthenon and Pantheon, the robust bridges, old Roman theatres, the citadels and many more are the best testament to that.

The industry also has a symbiotic relationship with other. Some of the heavy engineering industry provide construction machineries, chemical industry develop innovative construction materials, finance sector provides fund solutions for complex construction projects and many more. Construction Industry is not only mammoth but also very complex in nature. Because of the complexity, construction industry is prone to various tribulations which may have the propensity to hamper its growth. The comparitive study of this industry with other depicts that it is associated with a state of tardiness and delay especially when we focus on the managerial aspects and the study of triple constraint (time, cost and quality).

This articl introduces corruption as a factor for such tardiness and delays.To support this many international reports and studies are available depicting that construction industry is one of the most corrupt sectors worldwide (Stifi, 2014), and the corruption can take place throught the project cycle comprising project selection, planning, design, funding, pre-qualification, tendering, execution, operation and maintenance, and even through the reconstrction phase. Corruption also happens in many forms such as bribe, fraud, extortion, collusion and embezzlement.

The vital question here, what are the reasons behind corruption in construction?.  

Lambsdorff (1999) reviewed a large variety of studies on the causes and consequences of corruption. He found that the research on the causes of corruption is focused on political systems, public salaries, and cultural dimensions. However, Stansbury (2005), and Transparency International (2006) argue that the reason for corruption in construction is the nature of the construction project itself which facilities corruption. On the other hand Kenny (2007) argues that the knowledge about the causes of high corruption in the construction sector is extremely limited. They identify the features of a construction project which facilitate corruption as follows:

• Contractual structure: Construction projects normally have a large number of participants linked together. Each link has its own contractual form where every item of work, acceptance of lower quality work  extension of time or approval of additional payments provide an opportunity for corruption, indeed every contractual link provides the opportunity for someone to be engaged in corrupt practices.
• Diversity of skills and integrity standards: the construction industry is a very diverse industry in terms of:
  • Profession: such as architect, structural engineer, civil engineer, mechanical engineer, electrical engineer, electronics engineer, banker, lawyer, e.g. each of these professions may have a different national professional association with different codes of conduct, differing levels of enforcement of these codes and different culture
  • Trades: such as machine operator, concrete pourer, steel fixer, formworker, scaffolder, erector, pipe fitter, cladder, brick layer, plasterer, e.g. also each of these trades may have a different national trade association and different culture
  • Specialist contractors: such as excavation, foundation, civil, building, erection, insulation, cladding, roofing, turbine, generator, boiler, pipework, pumps, cooling systems, controls and instrumentation

This diversity leads to varied standards of qualification, integrity, and oversight.  

• Project phases: Projects normally have several different phases, each involving different management teams and each requiring handovers of the completed phase to the contractors undertaking the next phase. Even if one main contractor undertakes all the phases, he will normally sub-contract the different phases to different sub-contractors. This leads to difficulties in control and oversight.
• Size of the projects: Some projects can be very large in scale like nuclear power plants, airport projects, and major infrastructure projects which cost significant amounts of money. It is easier to hide large bribes and inflated claims in large projects than in smaller projects.  
• Uniqueness of projects: Many construction projects, especially the larger one, are unique, subsequently the costs are often difficult to compare and this make it easier to inflate costs and hide corruption.   
• Complexity of projects: Large construction projects are complex where people working in the project appear not to know, or to disagree on, the reason why something has gone wrong, or why costs have been overrun. This makes it easier to blame others for a problem, and to claim payment for this problem, even if such claims are unjustified. It also creates a reason to pay a bribe, as decisions on cause and effect and their cost consequences can have enormous impact.
• Concealed work: Most components in a construction project end up being concealed by other components. For example, structural steel may be concealed by concrete. As a result, enormous dependence is placed by the industry on individuals certifying the correctness of the work before it is concealed. This provides opportunities for fraudulent claims, and the payment of bribes to these individuals to certify too much work, or to approve defective or non-existent work. 
• Lack of transparency: There is little transparency in the construction industry and without such transparency it is more difficult to detect corruption. The greater the transparency, the more difficult it will be to concealed corruption (TI, Stansbury, 2008).
• The extent of government involvement: The extent of government involvement in construction projects is significant. Many major international construction projects are government owned. Even private sector projects normally require government approvals, such as planning permission, or agreements to pay for the use of the end product of the development. The power wielded by government officials in this regard, when combined with the structural and financial complexity of the industry as referred to above, makes it relatively easy for uncontrolled government officials to extract large bribes from construction projects.

References:

• Graf Lambsdorff, J. (1999). “Corruption in Empirical Research - A Review.” Transparency International, Working Paper.
• Kenny, C. (2007). “Construction, Corruption, and Developing Countries.” World Bank, Policy Research Working Paper 4271.
• Stansbury, N. (2008). “Anti-Corruption Training Manual: Infrastructure, Construction and Engineering Sectors.” Global Infrastructure Anti-Corruption Centre. Chesham, Buckinghamshire, UK.
• Stifi, A.; Gehbauer, F. and Gentes, S. (2014). “The Picture of Integrity from Lean Management’s Point Of View: The Relationship between Integrity Management System and Last Planner System”; Proceedings of 22th International Group of Lean Construction, Oslo, Norway.
• Transparency International, (2006). “Preventing Corruption on Construction Projects: Risk Assessment and Proposed Actions for Funders.” UK Anti-corruption Forum.