Construction Corruption; at the Threshold of Human Misery
Posted on November 22nd, 2017

Dr. Chandana Jayalath

An e-book will soon be on the internet; titled Construction Corruption; at the Threshold of Human Misery. It is a self-publication since no publisher came forward to take the challenge of getting it to the public eye. Contents are rough simply because truth is bitter. We all know, and indeed experience, that the construction industry continues to receive notoriety for corruption. Undeniably, the public works have been identified as the most corrupt in the world. Law enforcement has been blotchy and not effective at all.  As a result, corruption has long been pervaded the entire construction industry.

As I see in Sri Lanka, the topicality of corruption accentuated by two main facts; a number of large scale projects were reported to have been procured in unsolicited manner and almost every project ended up with high costs than envisaged at the time of tender. Also, it is very much pathetic to see that ‘non-technical’ politicians ‘murmuring’ about construction costs overrun as well as fraud and corruption wildly in media with no scientific reasoning. Cost overrun is inter-alia because of corruption. This is bitter truth. People do abuse and misuse public funds and resources. Our story has a history of almost four decades. Therefore, this book is a discourse in a great length why corruption matters for development, conditions that facilitate corruption, means of combating corruption and the role of whistle blowing, all with regard to public funded construction projects.

Corruption results in projects that are built to unsafe designs or that use dangerous construction methods, equipment, or materials. Quite simply, corruption kills. Corruption kills not only because money intended for the poor ends up in the pockets of corrupt officials. It kills because the bribes set in motion a chain of harmful events—the selection of unqualified contractors; the gross inflation of costs; the failure to complete work; the delivery of substandard goods, or too often, of nothing at all—that hamper development and add to unproductive debt. In fact, corruption and its progeny of fraud, waste, abuse, neglect, errors and omissions are now widely acknowledged to be the single greatest impediment to the development process. This is why Frank Vogl, Author, Waging War on Corruption: Inside the Movement Fighting the Abuse of Power, says that Corruption needs to be seen in terms of the full scale of the human misery that it creates.

Particularly the public clients are desperate to see the end facility leaving no adequate breathing space for planning and appraisal. This ‘political impatience’ leads to substantial changes in the scope of work. These changes inter-alia result from new requirements that the owners introduce and fix for functions that don’t work as specified. If the additional or varied work were so dissimilar from what any person reckoned to such an extent that it is not contemplated by the contract, it would constitute a separate contract, which means cost and time overrun. The ‘authority’ of fixing rates for new works is pivotal for some less scrupulous officials to engage in corruption. In fixing rates for varied works, public sector clients and their representatives tend to take upper hand, apply economic duress, discretion and coercion. It is a form of blackmail in some instances and a source of corruption too. When a large number of changes are instructed though they individually fall within the ambit of the variation clause, they can collectively have the effect of completely changing the scope of the works. Technically speaking, project changes are the biggest contributor to projects going over budget, next to corruption.

While legal reforms may be one way to address corruption, such an endeavor has proven time-consuming and costly. Therefore, we should look to more practical solutions to remedying corruption. E-procurement technologies may provide just such a solution as they facilitate a more transparent and uniform acquisition process. Integrity of actors in the procurement process can significantly reduce corruption risks. Integrity refers to upholding ethical standards and moral values of honesty, professionalism and righteousness. It is a cornerstone for ensuring fairness, non-discrimination and compliance in the public procurement process. Therefore, safeguarding integrity is at the basis of any effort to curb corruption in the public procurement.

A sadly neglected skill is the proper tender and contract documentation that millions of money being blindly wasted. The trend is that claims specialists are reported mobilize on international contracts even before construction commences, locate loopholes in the documentation and look for lapses in the process of contract administration that will altogether facilitate ‘spicy’ claims. Many claims within this context end up as a horse deal but the consultants have no authority to horse trade. While corruption is very difficult to trace mainly because the parties only deal with hard cash, it becomes a ‘technical’ cancer not easily detectable when it is connected with the supply and demand side of the construction as an un-detachable segment of the economy. There is also political patronage to cover up inefficiencies and corruption. Unwillingness to disclose facts and lack of interim reviews make the final post review difficult if not impossible. And moreover, the fast track procurement basis of many construction projects cause rapid shift of project gangs from one project to another whose concern is time rather than scrutiny.

Overstating a claim with the idea that it will settle for less is a false claim actionable under civil lawsuit, however, parties indulge in coffee shop deals and red carpet negotiations with the blessings of dirty politics of the country.  It should be noted in the meantime that an act of whistle blowing helps fostering a corrupt free working environment, to a greater extent. Believing in the concept of informed society where people, the general masses, know how and when to stand by their own rights and obligations, this may be effective very much. In the meantime, professionals owe a moral duty to support and contribute this grim way towards an informed society where corruption is minimal. Cost overrun essentially warrants some kind of whistle-blowing by disclosing correct information to the appropriate regulators, police or the media about malpractices. Whistle-blowing is a selfless act any citizen can subscribe in good faith.

Corruption is so pervasive in the construction sector, and in particular, the volume of funds flowing through these projects makes it easier to inflate prices. For example, the construction of a port can cost upwards of billions of dollars and thus it becomes easier to add extra money to the total funds, for bribes and kick-backs, without it being immediately obvious. Furthermore, it is often difficult to accurately assess the quality of the final project until long after the contract has been paid out. This is especially visible in the road sector, where sub-standard construction can lead to the appearance of potholes and other damages only after the road has been completed.

A further reason for the presence of corruption in this sector may be the result of the bureaucracy involved almost in all the stages of a project. Due to the volume of investment required for infrastructure projects, it is usually the public sector which contracts out jobs to the private sector. In this respect, governments play the role of both clients and regulators. In some instances, both the engineer and contractor come from the same organization. While regulation of the sector is indispensable, it is often quite a nebulous, poorly enforced process we come across owing to politicization.

Indeed, corruption occurs where politicians choose a project primarily for their own illicit profit or benefit. This may occur, for example, where a road project is selected because it will pass by the first citizen of the country. Another example is where an airport project is commissioned, which is far in excess of the country’s requirements and ability to fund, because the government minister responsible for approving the project has been bribed by the intended contractor. Also, a power project is approved which will impose tariffs far in excess of the population’s ability to pay because the government minister responsible for approving the project and those responsible for operating the finished power station will gain individual benefit from the arrangement.

Corruption is global concern that single-source bidding is spiraling in both developed and developing nations, heightening the risk of corruption in an already clouded procurement industry. Conscientious governments have introduced legislation to handle all aspects of procurement, including unsolicited proposals. In a couple of press conferences the newly elected government emphasized the fact that they do not entertain unsolicited proposals any longer. During the last few years it was observed that the approval of unsolicited project proposals by the Cabinet of Ministers have increased and it has been subject to criticism.

In nutshell, there is no financial discipline in this event, apart from utilizing the funds for the lavish expenditure. Tendency is to loosely deal with it. In a corrupted society, personal enrichment takes prominence over the establishment of rights for the common good. This is where politicos and officials tend to take biased decisions. Corruption is negatively correlated with prosperity not because corruption deters prosperity but because potential prosperity makes corruption too costly to ignore. Cost of corruption is not just money pilfered via illegal means. There is opportunity cost latent and unascertainable in exact monetary terms. The opportunity cost of anything is the highest valued alternative that must be forgone when a choice is made. It is actually a cost, like a loss. The ‘loss’ here means the loss of benefits derivable from the alternative missing or not chosen. Today, highways are being planned as if there is no alternative. Possible alternatives or economic viability is not studied. The award of contracts without competitive bids is nothing less than a calculated theft of public funds, a mortgaging of the country’s future.

Corruption takes many forms with differing effects. Zero tolerance is only a popular myth. Its relentless force comes from its symbiotic relationship with the government and public officials; the amount of funds involved; the complexity of the projects; the lack of controls; and a culture that is ingrained in the way the people get misled and accustomed to. 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 both the supply and demand sides of the corruption. These participants include governments, funders, project owners, contractors, consultants, and suppliers, and without forgetting, the professional bodies.

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 external auditing. Governments need greater tools to audit and monitor public spending and better manage public resources connected with the construction supply chain. In my own experience and estimation, the context rather the culture as against the process is more forceful in galvanizing the concept of whistleblowing across the board. Yet, the function of technical auditing remains primeval.

Lack of proper interim review is what has been mattered in almost every unsuccessful project. Some do pre preview but no post review. A post project review helps determine whether the project delivered the desired benefits met the customer requirements and remained within scope and budget. It also helps gauge the user’s comments about performance, reliability, suitability and ease of use. It is important to have a practice of post project review so that a mistake may not be repeated in the next project. A project retrospective is more than just having a big group-hug. A reflection is also about examining the numbers, i.e. the facts and figures, and using that information to feed future projects.

Court backlogs too encourage corruption. Delays which go on for years aggravate this factor. Within modern development projects, the possibilities of corruption are extraordinarily large and if the matters of dispute go through court processes, such corruption would be exposed. At the same time it needs to be stressed it is possible to create justification for corruption when quick results are possible as against the possibilities of justice accompanied only with extraordinary delays. Justice delayed is justice denied. Law should not only be seen but meticulously seen to be done. On the other hand, it is tempting, however, to concede also that, beyond a few high-profile cases where professionals have stepped out of line to warn of impending issues. The professional institutions too have taken conveniently a passive role in relation to the public interests duty owed by their members. To do more, without a clear and pressing need, it will entail further bureaucracy and public expense.

Corruption often goes unchallenged when people do not speak out about it. Witness accounts offer invaluable insight into corruption, and are powerful tools in the fight against it. From exposing multi-million dollar financial scams to dangerous medical practices, whistleblowers play a crucial role in saving resources and even lives. This is equally important in public projects where supply, installation and maintenance are fundamental. Public education is also essential to de-stigmatize whistleblowing, so that citizens understand how disclosing wrongdoing benefits the public good. When witnesses of corruption are confident about their ability to report it, corrupt individuals cannot hide behind the wall of silence. Undeniably, the prospect of civil liability might deter people from carrying out this social service. Hence, a perfect legislative coverage is of timely importance.

Controls on information, libel and defamation laws, and inadequate investigation of whistleblowers’ claims can all deter people from speaking out. And in some settings, whistleblowing carries connotations of betrayal rather than being seen as a benefit to the public. Ultimately, societies, institutions and citizens lose out when there is no one willing to cry foul in the face of corruption.  Social audits play a crucial role on taming corruption, not only gauging the pulse of the masses, but also monitoring the devolution of the public service deliveries.

Corruption presents unique challenges to accountability institutions. As such, functional overlap may be the best mechanism to ensure that corruption, whether entrenched or opportunistic, is ultimately exposed and sanctioned. Institutional multiplicity could reduce the risk of failures in each step of the corruption accountability process, increase the resources available and enhance institutional performance.

2 Responses to “Construction Corruption; at the Threshold of Human Misery”

  1. Nimal Says:

    Since the colonials left, they left the country in a very fine state, just as in Zimbabwe and other corrupt third world countries we in SL has bee going down the pan, over burden the tax payers with debt that is deliberately created by the utterly corrupt leaders and this malpractice is now down to the lowest level in our society.
    Any goodness in the country is thinly held by the very hard working private sector who seem to have the educational background of the colonial types which is the accepted standards that is required to move ahead.

  2. Christie Says:

    There is corruption in every sphere. What is the cause ? In our country the Economy is in the hands of the Indian Oligarchy. The only business the Sinhalese are involved Is corruption. Look at the complaints lodged with all these corruption institutions.

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