DCN ARCHIVES

March 24, 2005

Corruption in construction

Report claims shady deals still common in industry

Bribery and corruption are still commonplace on construction projects around the world. That’s one of the findings in a Global Corruption Report released recently by Transparency International, a worldwide, non-governmental organization that is devoted to combating shadiness amongst various industries and sectors.

Among other things, the report found that corruption in construction can have a devastating economic impact on developing countries and lead to poor quality infrastructure.

It can also cause loss of life from building and planning regulations being ignored, and result in disastrous environmental consequences, the report says.

“Corrupt contracting processes leave developing countries saddled with sub-standard infrastructure and excessive debt,” said Peter Eigen, chairman of Transparency International. “Corruption raises the cost and lowers the quality of infrastructure.”

Peter Eigen

“But,” he noted, “the cost of corruption is also felt in lost lives. The damage caused by natural disasters such as earthquakes is magnified in places where inspectors have been bribed to ignore building and planning regulations.”

Eigen said corruption in construction steers money away from health and education programs and towards large capital-intensive infrastructure projects.

“Corruption in large-scale public projects is a daunting obstacle to sustainable development. Corruption in procurement plagues both developed and developing countries. When the size of a bribe takes precedence over value for money the results are shoddy construction and poor infrastructure management. Corruption wastes money, bankrupts countries, and costs lives.”

Eigen said funds being poured into rebuilding countries such as Iraq must be safeguarded against corruption.

“Transparency must also be the watchword as donors pledge massive sums for reconstruction in the countries affected by the Asian tsunami,” he added.

The Global Corruption Report highlights the urgent need for governments to ensure transparency in public spending and for multi-national companies to stop bribing at home and abroad.

The report says the unfolding scandal surrounding the United Nations sponsored oil-for-food program in Iraq highlights the urgent need for strict conflict-of-interest rules and a transparent and open bidding processes.

The report notes that much of the anticipated expenditure on building and procurement in Iraq has not yet been spent.

“If urgent steps are not taken,” the report says, Iraq “will become the biggest corruption scandal in history.”

The report says the scale of corruption is magnified by the size and scope of the construction sector, estimated globally at some $3.2 trillion (U.S.) per year.

The report presents detailed case studies of large-scale infrastructure projects that have been plagued by corruption —including international bribes paid to secure contracts for the Lesotho Dam, and the implication of politicians in corruption concerning the purchase of a waste incinerator in Cologne, Germany.

To mark the release of the report, Transparency International also launched a blueprint for transparent public procurement.

The blueprint calls on public contracting authorities to ensure that contracts are subject to open, competitive bidding. Other measures include maintaining a blacklist of companies caught bribing; providing public disclosure of the entire process; and ensuring monitoring by independent oversight agencies and civil society.

The blueprint also advocates the use of an integrity pack, which commits the authority and bidding companies to refrain from bribery.

Transparency International is also urging the private sector to do more to curb bribery.

“Companies from OECD countries must fulfill their obligations under the OECD Anti-Bribery Convention and stop paying bribes at home and abroad,” said Eigen. “With the spread of anti-bribery legislation, corporate governance and anti-corruption compliance codes, managers have no excuse for paying bribes.”

Neill Stansbury, project director for construction and engineering at Transparency International in the United Kingdom, said: “Corruption in construction projects can be avoided if all parties put into place the necessary preventive measures.

“This requires co-ordinated international action by governments, banks, export credit agencies, project owners, contractors and other relevant parties.”

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