Taming technical corruption is much more than politics

by Dr. Chandana Jayalath

Well planned, properly maintained, safe roads are critical for economic growth. The roads sector was the major target for development financing over the latter part of the previous regime. While road projects have had consistently positive results, fraud, corruption and collusion plagued the entire sector chaotically.

From high ranking officials diverting funds, a known fact is that corruption can take place in contracting firms offering bribes and technical officers approving bills on a commission.

On one side, this is extortion where some ministers were heard of taking 10 to 15 percent of the awarded contract price as bribes.

Though the devastating impact includes increased project costs and technically poor products, we find no blackmail, criminal prosecution, fines, or blacklisting so far in the pursuit of good governance.

Coupled with the deliberate failure to act on corruption charges against the ministers and State officials of the previous regime and their cronies, a question arises as to why the public should shoulder these pains any longer.

Bribery

While corruption is very difficult to trace mainly because the involved parties only deal with hard cash, it has become a 'technical' cancer when it is connected with the supply and demand side of construction means, processes and procedures.

In project identification, corruption can occur where decision makers seek to choose a project primarily for their own illicit profit.

This may occur, for example, where an airport project is commissioned when it is not necessarily a national priority. Also, a power project could be approved which will impose tariffs far in excess of the population's ability to pay back.

In project financing, corruption can occur where the project owner or funding agency corruptly secures a financing arrangement for the project, by way of bribery or fraud or both.

For example, a bank may pay a bribe to a senior official of the project owner, possibly through an agent, in return for the bank being awarded the contract to finance the construction of a project at enhanced interest rates.

A representative of the funder may be entitled to a performance bonus if a funding transaction is completed. To ensure that he receives the bonus, he may conceal adverse project data which would have prevented the funder's board from approving the contract.

False advice

The project owner may pay a bribe to the funder's consulting engineer to issue an engineering report which conceals adverse site, social or environmental data in relation to the project. The funder may then make a decision on the viability of the project on the basis of false advice.

In planning and design, the project owner may bribe a local authority official to obtain planning permission for the project, or to obtain approval for a design which does not meet relevant building regulations.

A government official may extort bribes as a condition for his approval of the project.

For example, he may need cash payment, shares in the project ownership, or the use of his own company to provide construction services or supplies to the project owner. On the other hand, a bidder may bribe the consulting engineer to specify a design which improperly favours that bidder over the others.

For example, a certain technology which is only possessed by one of the bidders may be specified, even though other technology may be preferable or cheaper.

This would normally result in those bidders who do not possess the specified technology being kept off the pre-qualification list, or being rejected as non-compliant at tender stage.

A tenderer may make a donation to the ruling political party, in return for which a party official ensures that the tenderer wins a contract, or obtains preferential treatment.

Suitability

A well-known source of corruption beyond politics is in technical evaluation. Technical evaluations are processes that make it possible to evaluate the technical performance of any type of material, equipment or product and determine if they are suitable for their intended use.

The idea behind the technical evaluation is to make sure the item under scrutiny has a level of technical suitability that meets basic standards and thus ensures that the item will perform within the expectations of the user.

Quite often, there remains a broad overarching interpretation when it comes to technical matters that only a similar professional can argue against, which is indeed rare.

During the execution, a bidder may have bribed the project owner's representative to persuade him to award the contract to the bidder. These two parties may also have agreed that the cost of the bribe would not be included in the tender price, but would be fraudulently included in the cost claimed for a large variation during execution of the project.

Deferring recovery of the cost of a bribe until after the appointment of the contractor can be an effective means of concealment, since there is normally no competitive tender for variations and post-contract award variations attract much less scrutiny and publicity.

A contractor may bribe the project owner's representative to persuade him to issue an unnecessary variation which materially increases the contractor's scope of work and which has an inflated price. A contractor may bribe the engineer to persuade him to issue an extension of time to the contractor, which is not properly due.

Concealed

A contractor may bribe the project owner's quantity surveyor to persuade him to approve the interim bills. A contractor may bribe the project owner's works inspector to persuade him to approve defective or non-existent work. Conversely, contractors may agree with contract administrators to account for off-site materials which are not properly designated and set aside for the project in question.

They may also offer bribes to facilitate approval of claims for additional money, or time where such claims are not properly justified.

At the end, corruption is concealed to try to avoid detection and prosecution. For example, a bribe paid to have an inflated contract claim approved must remain secret otherwise the contract claim will be rejected.

A bribe paid to secure planning permission must remain secret otherwise the planning approval will be set aside. The payment of a bribe may be made direct by the payer to the ultimate recipient who executed the dishonest act.

However, it is common for a bribe to be paid through intermediaries, so as to make it more difficult to detect that a bribe has been paid. A company bidding for a contract which wishes to hide the payment of a bribe may appoint an agent who has contacts with a representative of the project owner or with the Government of the country concerned.

The company will enter into an agency agreement with the agent which purports to be an agreement for legitimate services. However, the scope of those services will often be false or exaggerated and the size of the payment due under the agreement will often be significantly in excess of the value of the legitimate services specified in the agreement.

The payment may sometimes be expressed as a percentage of the contract price and the agent will normally receive the payment when the company is awarded the contract.

The agent may then pass the whole or part of the payment to the representative of the project owner or government who has dishonestly ensured that the company would win the contract. The payment is often made in foreign currency into an offshore bank account.

Rule of law

Under the circumstances, how corruption has been tamed in cross frontiers in recent times offers us a few lessons. Oman brought in tougher powers to clamp down on corruption after it signed the UN Convention against Corruption.

The Sultanate has seen a number of high-profile corruption trials in recent years – including one which saw the founder of the country’s biggest publicly-listed construction company, Galfar, sentenced to three years in jail.

The first and foremost is, therefore, the establishment of rule of law. 'Justice should be seen to be done' is a term in law which should not be taken lightly.

What it means quite simply is that, the public needs to see justice done or they will feel that the system is failing them.

The whole validity of the justice system is based on the public’s consent to justice served. The second approach is the establishment of good governance.

Uganda adopted a system of democratic decentralisation to improve the systems of governance. Nigerian engineers are currently preoccupied with finding ways to curb the growing corruption and excessive involvement of politicians in infrastructure projects.

The third approach is fostering an ethical culture. The engineers believe that the corruption often witnessed in the award of the various contracts became possible because there is an engineer who compromised. They are, therefore, convinced that they have a role to play to check corruption to allow the populace enjoy more and better socio-economic amenities.

Involvement of engineers, equally with other allied professionals, in corruption with politicians was causing more harm than the monetary values revealed in media. It could not be possible for politicians to steal government funds via projects without an engineer’s signature, which must always appear on such projects.

If practitioners uphold, at all times, the dignity, standing and reputation of the profession, then it may well be difficult for the politicians to play dirty tricks with public money.

Right direction

In a nutshell, professionals, therefore, carry moral responsibilities to the population in general and society because professionals are supposed to make and act on informed decisions in situations that the public cannot. They are trained to produce certain outcomes which take moral precedence over other functions of society.

Professionals are a community that must take the rod and drive politicians in the right strategic direction. Professional institutes, therefore, have a key role in regulating the conduct of members on the basis of peer judgment.

Consultants must institute due diligence in the supervision and execution of their projects including monitoring costs and instituting clear sanctions for non-compliance and most importantly, effective enforcement procedures.

Transparency International (TI) believes that corruption on construction projects can only be eliminated if all project participants co-operate in the implementation of effective anti-corruption actions which address the supply and demand sides of corruption.

These participants include governments, funders, project owners, contractors, consultants and suppliers and more importantly, professional associations. Considering the number of project participants, it is important that broad reform approaches are taken to reduce the extent and impact of corruption.

These include transparency, participation and competition, reduced discretionary powers, improved financial management, post project review and extended auditing. Greater transparency can make a significant contribution to reducing corruption.

Promoting greater transparency around the actions of officials creates disincentives for them to engage in corrupt transactions and also raises citizens’ awareness on the quality levels of the goods and services they should receive.

Increasing the amount of information such as public accounts, budgets, contractual arrangements and annual reports available to the public can also reduce corruption in the sector.