In order to determine how best to tackle corruption on road projects, it is necessary to understand why such corruption occurs. The reasons for such corruption fall into three categories: those at international level, those at national level and those at project level. All such matters must be addressed if corruption is to be curbed in the road sector.
Reasons at international level
(1) Lack of inter-governmental co-operation
There is insufficient co-operation between governments as to the requirement for anti-corruption mechanisms on projects, the investigation and prosecution of corruption, the enforcement of anti-money-laundering provisions, and the control of government aid. Although many countries have signed or ratified a number of anti-corruption conventions, few are taking significant steps in implementing the requirements of such conventions. Countries may be reluctant to do so because they fear that, if others do not do the same, their own businesses will be put at a disadvantage. As a result, there is a general inaction which is encouraged by certain business and individual interests who do not want to see their activities curtailed by anti-corruption measures. In addition, in some countries, the persons responsible for making and enforcing laws are themselves corrupt, and will therefore have no interest in corruption prevention.
(2) Lack of pro-active steps by donors and funders to limit corruption on projects
As the providers of finance, donors and funders are in a strong position to require, as a condition of funding, the implementation of anti-corruption measures on projects. It is not politically incorrect to impose such conditions. It is an ethical necessity. The desire to allow countries to "own" aid provided to them ignores the fact that such ownership is not in the hands of the ordinary citizens but in the hands of politicians who may be corrupt. At present, funds are provided without sufficient due diligence being carried out, without sufficient requirements for anti-corruption measures to be taken on projects, and with little subsequent monitoring by the funders to determine whether or not there is corruption on a project. Often, funders turn a blind eye to such corruption. As a result, action is rarely taken to terminate lending arrangements as a result of corruption. If there was seen to be more of a real threat of the termination of funding, the perpetrators of corruption - particularly at government level - would be less willing to practise corruption, or at least would do so to a lesser degree, and contractors would be more keen to ensure that their projects were kept relatively free of corruption.
(3) Lack of co-ordinated action between international contractors and professional associations
There is insufficient communication and cooperation between international contractors, consultants and professional associations with regard to tackling corruption. Without such cooperation, there will never be a level playing field in which all contractors and consultants adopt equivalent ethical standards. As a result, ethical contractors and consultants will continue to be prejudiced by the willingness and ability of their more unscrupulous competitors to participate in corruption. Such communication and cooperation will be brought about only if there is sufficient incentive to do so. Such incentive will be provided, in a negative sense, only by an increased threat of prosecution and, in a positive sense, only when it is seen to be a commercial advantage to have strong anti-corruption policies.
(4) Lack of sufficient debarment of corrupt companies
Governments, lenders and project owners should operate a system of debarment whereby companies which have been convicted of corruption are debarred from projects for a specified period. At present, there is some inconsistency in the operation of debarment so that some companies are more under threat of debarment than others. Co-ordinated action is required to ensure that this penalty is transparently, fairly and evenly applied.
Reasons at national level
(5) Corruption in government
Corruption in the governments of both developing and developed countries contributes to corruption in road projects. Developing countries are normally cited for such corruption, largely because it is committed on a grand scale, and tends to be more overt. Such corruption may occur, for example, where ministers or other political figures extort bribes or require projects to be carried out for corrupt reasons. However, corruption in the governments of developed countries, although more subtle, is also significant and contributes to corruption both at home and abroad. Such corruption may occur, for example, where government figures ensure, in exchange for political funding or personal benefits, that favoured contractors are awarded government contracts or government funded contracts, and that they are protected from prosecution for corruption committed at home and abroad. Such protection will foster the continuation of corruption by these companies in developing countries because they have little fear of prosecution at home or in the country where the project is located. The curbing of such political corruption will depend largely on the ability and willingness of the particular country to prosecute, convict and imprison corrupt political figures. Until this is done, politicians and those in government will continue to behave as though they are above the law.
(6) Lack of consistent anti-corruption policy on the part of governments
Even where governments may not be corrupt in their support of corrupt companies, the lack of a consistent anti-corruption policy within a government will erode attempts by any part of that government to curb corruption. For example, a department responsible for international development, whose interests will be primarily ethical, may endeavour to encourage companies to adopt ethical policies, to have laws against bribery strengthened, and to press for prosecution of those companies who have committed bribery or fraud. However, the department for trade, in the same government, whose interests will be primarily concerned with business profitability, will be working to protect business interests, to make laws regarding corruption more lenient, to reduce requirements for disclosure and accountability in applications for export credit, and to block prosecution for corruption. There is, therefore, a conscious duplicity on the part of such governments. On the one hand, they purport to be tackling corruption. On the other hand, they are deliberately undermining such efforts. Corruption will not be reduced unless this is made an unquestioned priority by all government departments.
(7) Insufficient prosecution of corruption
There is inadequate prosecution of corruption, both in developing and developed countries in respect of corruption committed at home and abroad. Unless there is clear evidence that corruption will be prosecuted, unscrupulous individuals and companies will continue to commit corruption at the expense of those ethical individuals and companies who do not do so. The lack of prosecution is due to a combination of duplicity and corruption within governments of both developing and developed countries, as explained above. It is also due to the lack of coordinated action at international level by governments, donors and industry practitioners. If there is increased prosecution, it must not be the case that only low level employees and officials are prosecuted, thereby being used as the scapegoats in order to enable their seniors to escape penalty. It is only by prosecuting at higher levels that corruption will be significantly reduced.
(8) Insufficient reporting of corruption
There is inadequate reporting of corruption. This fuels further corruption as the perpetrators do not fear detection. The reasons for inadequate reporting of corruption are as follows:
(a) Lack of knowledge: There is a lack of awareness within the industry and also amongst the public as to the nature of the different types of corruption and that they constitute criminal offences. Thus, corruption often goes undetected, even by those against whom it is perpetrated, and therefore goes unreported.
(b) Fear of whistle-blowing: People will often be afraid to report corruption either because they fear retaliation by the perpetrators or because they fear that they will be implicated.
(c) Inadequate or non-existent reporting structures: Both on projects and generally in society there are no adequate means by which individuals can safely report corruption and be confident that such reports will be properly acted upon.
(9) Lack of publicly available data on corruption convictions
In carrying out due diligence in relation to a prospective project, potential lenders, donors and project participants should enquire as to the extent to which the potential major project participants, their employees, joint venture partners and group companies have been investigated, prosecuted and convicted for corruption. However, it may be impossible for the party carrying out the due diligence to determine whether it has been provided with a truthful response. If countries maintained public national registers with information as to convictions and possibly prosecutions, then this would significantly assist this aspect of due diligence. The prospect of such public declaration of corruption conviction would itself serve to deter corruption by companies who are concerned about their reputation.
(10) The vulnerability of project owner officials to corruption
Road projects are usually public sector projects where the project owner is a government department. The individual employees of such a department who are responsible for the selection and management of road projects may be vulnerable to corruption for a number of reasons:
(a) They may have little incentive to maximise profit for the department;
(b) They may have little accountability and therefore will not be concerned to minimise loss or ensure good quality work;
(c) They may have unchecked control over the selection and management of projects;
(d) In developing countries, such individuals may be poorly paid because of the general lack of resources or because of corruption.
These factors either or both encourage such individuals to extort bribes in relation to the road projects that they are overseeing or make such individuals obvious targets for such bribery. Even if contractors do not bribe the employee, they will be aware that the quality of their work and the claims they submit may not be subject to as much scrutiny as would be the case in private sector projects. This, therefore, encourages contractors to submit highly inflated claims and deliberately to carry out sub-quality work.
(11) The vulnerability of other government employees to corruption
Other government departments will be involved in road projects in terms of issuing visas, import permits, customs clearances, planning permissions, land clearance permits and other matters. Such employees in developing countries may have little incentive to act ethically, particularly where they are underpaid and are aware of large scale corruption higher up in government. They will therefore resort to extortion to supplement their incomes. Contractors are often placed in the predicament of having to comply with extortion demands, or suffering losses and delays on projects, or having to withdraw altogether from countries where extortion is common.
(12) Lack of sufficient data regarding national road networks
A common form of corruption on road projects is the selection or routing of new roads for corrupt purposes. Some such purposes may be easy to detect. Others may be better disguised. Lack of comprehensive and up-to-date data regarding the state of national road networks makes it difficult for lenders, donors, project monitors, and domestic planning departments to determine whether a particular proposed road project, which may have been approved by a corrupt planning officer or minister, is genuinely in the interests of the community and not simply being carried out for a corrupt purpose.
(13) Lack of sufficient data regarding comparative costing of road projects, materials, and methods
The lack of such data means that there may be no means of assessing a tender price other than against other tender prices submitted for the same project. Where contractors are colluding to fix bid prices, then the respective tender prices will in any case be inflated so that these will not be a reliable measure. In addition, lack of such data makes it more difficult to assess the cost claimed for variations, and therefore to detect those claims which may be fraudulently inflated.
Reasons at project level
(14) Lack of requirement for transparency in publication of project details and project participants
There is little or no requirement for a project owner or project participants to make public details of a project and of the identity of the project participants, including the identity of the contractor, joint venture partners, sub-contractors, consultants and agents. Without such transparency, it is more difficult to detect, for example, suspicious relationships between the participants which may facilitate corruption, projects which may have a corrupt purpose, projects which have been granted planning permission corruptly, fraudulent pricing, or suspicious lending terms.
(15) The complexity of road projects
A road project may be a complex undertaking involving various contracts, sub-contracts and sub-sub-contracts, and a number of organisations and individuals. The following factors create a large number of opportunities for corruption on road projects:
(a) the complexity of the contractual structure;
(b) the various stages of the project;
(c) the number of project participants;
(d) the number of personnel, particularly in developing countries, where work may be labour intensive;
(e) the quantity of materials delivered to and from the site;
(f) the amount of equipment and machinery required;
(g) the various activities going on at any one time on the site;
(h) the nature of the site, being spread across a large area rather than contained in a relatively small area;
(i) the number of decisions, certificates, approvals and payments that are required;
(j) the reliance on written or computer records;
(k) the complexity of the contract claims.
Opportunities for corruption will arise at every point of a project which requires selection of a contractor, a consent, a decision, execution of works, delivery of materials, an approval, a payment, or a claim. (Road Projects: How does corruption occur?) The larger and more complex the road project, the greater the number of opportunities for corruption.
(16) Easy concealment of corruption
The various types of corruption that might occur on a road project are easy to conceal and difficult to detect. (Road Projects: How does corruption occur?) In addition, few projects have any adequate systems for detecting corruption. The low probability of detection encourages corruption on road projects.
(17) Knock-on corruption
Corruption on a project will often result in more corruption. If a party has to pay a bribe to win a contract or to pay extorted payments, that party may then commit fraud to recover the cost of the bribe or extorted payment. If a contractor anticipates that a project owner will fraudulently attempt to levy liquidated damages or off-set false defects claims, then the contractor may submit an inflated claim in order to absorb the project owner's anticipated fraud.
(18) Insufficient anti-corruption systems implemented on projects
Many projects have no or few means by which corruption during any phase may be prevented, deterred or detected. Some methods are used, but these may focus on one or two aspects of corruption, such as monitoring of the tender process, and leave the rest of the project without sufficient safeguards. Proper anti-corruption systems imposed on domestic projects by government departments and required as conditions of funding by lenders and donors are critical to the reduction of corruption. If these were introduced and properly operated then they would serve to reduce corruption on individual projects even where a large number of the other causes of corruption listed above remained outstanding. (Road Projects: Preventing Corruption)
Catherine Stansbury, Global Infrastructure Anti-Corruption Centre