preventing corruption in construction/projects_public_contracting/public contracting/global priorities

Preventing Corruption on Construction Projects

This web-page contains resources to help governments, funders and project participants prevent corruption on construction projects. There are three sections below:

- Section A: Project Anti-Corruption System (PACS)

- Section B: Anti-Corruption Reports and Tools

- Section C: Anti-Corruption Action Statement.

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Section A

Project Anti-Corruption System (PACS) (Construction Projects)

Transparency International has developed a Project Anti-Corruption System (PACS) specifically for construction projects.

The continuing prevalence of corruption in construction projects requires governments, funders and project owners to take preventive measures to limit corruption on a project-by-project basis. PACS is designed for this purpose. Implementation of PACS may be required by governments as a pre-requisite for project approval, by funders as part of the funding package, or by public or private sector project owners as a condition of participation in a project. The use of PACS will not only help governments, funders and project owners to ensure that projects are properly identified and executed, and that funds are properly spent. It will also demonstrate their commitment to the prevention of corruption.

Contractors, consultants and suppliers are frequently the victims of corruption on a project. Their competitors may win the project through bribery. They may be subject to extortion and fraud during tender and execution. The implementation of PACS on a project will materially reduce this risk.

PACS is a modular system which applies a variety of anti-corruption measures to all major project participants throughout their involvement in the project. These measures include independent monitoring, due diligence, contractual commitments, procurement requirements, government commitments, a corporate programme, rules for individuals, training, transparency, reporting and enforcement. PACS targets both bribery and fraud.

Although PACS has been designed as a project system, some Modules (such as disclosure, training, and rules for individuals) may also be used by companies as general anti-corruption tools.

The 19 PACS Modules can be accessed through the index below. The Executive Summary (Module 1) provides a detailed explanation of how PACS works, and a summary of each Module.

PACS is currently published by TI as a “Consultative Edition”. The consultation period ends on 30th April 2007. The First Edition of PACS will be published in mid-2007. Both this Consultative Edition and subsequent editions will be freely available from TI’s website for use on specific projects.

Questions on PACS and comments on how PACS could be improved would be welcomed and should be sent to:

Catherine Stansbury
Project Director, Anti-Corruption Systems
Transparency International (UK)
catherine.stansbury@transparency.org.uk.

INDEX OF PACS MODULES

(Click on title to access Module)

Module 1	Executive Summary
Module 2	Independent Assessor Agreement
Module 3	Disclosure Form
Module 4	Disclosure Assessment Guide
Module 5	Anti-Corruption Agreement
Module 6	Notice of Breach
Module 7	Anti-Corruption Procurement Requirements
Module 8	Anti-Corruption Notice to Government
Module 9	Anti-Corruption Government Commitment
Module 10	Anti-Corruption Programme
Module 11	Anti-Corruption Rules for Individuals
Module 12	Anti-Corruption Training Manual
Module 13	Project Transparency Policy
Module 14	Benefits Register
Module 15	Instructions to Project Owner for the operation of PACS
Module 16	Instructions to Project Owner Joint Venture Members
Module 17	Instructions to Funders
Module 18	Instructions to Applicants
Module 19	Definitions

Section B

Anti-Corruption Reports and Tools

The following reports and tools are intended to assist in the prevention of corruption on construction projects. They explain how corruption takes place and the risks corruption imposes on the various project participants, and recommend actions to prevent corruption.

The reports and tools can be accessed through the index below.

Questions and comments on how these reports and tools could be improved would be welcomed and should be sent to:

Neill Stansbury
Project Director, Construction & Engineering
Transparency International (UK)
neill.stansbury@transparency.org.uk.

1. "Risk assessment and proposed actions for project owners".

This document:

gives examples of different types of corrupt practices which can take place during the various phases of a construction project;
shows how the cumulative cost effect of corrupt practices can make the project uneconomic, with resultant damage to all those affected;
assesses the risk to project owners as a result of corruption;
proposes actions which could be taken by project owners to reduce the risk of corruption on construction projects.

2. "Risk Assessment and Proposed Actions for Funders".

This document was prepared by Transparency International on commission for DFID. It has been endorsed by the UK Anti-Corruption Forum which is an alliance between UK business associations, professional institutions and organisations with interests in the infrastructure, construction and engineering sectors.

This document examines the following issues:

How corruption can take place in the financing and execution of domestic and international construction projects.
The risks this imposes on those providing various types of finance for projects (funders).
The actions which funders can take to mitigate these risks."

3. "Risk assessment and proposed actions for construction and engineering companies and consulting engineering firms".

This document:

examines how the corrupt actions of employees, subsidiary and associated companies, agents, joint venture and consortium partners, sub-contractors, consultants, suppliers, competitors, project owners and government officials can adversely impact on the company during a construction project;
assesses the losses and civil and criminal liability which a company can incur as a result of corrupt actions by these parties;
proposes actions which could be taken by construction and engineering companies and consulting engineering firms to reduce the risk of corruption on construction projects.

4. "Examples of corruption".

This document:

examines the inter-relationship between bribery and fraud, and comments on some methods by which bribes are concealed;
examines the complex, diverse and fragmented nature of a construction project, which contributes to the prevalence of corruption on projects;
summarises some of the more common corrupt practices which can take place during the different phases of a construction project;
provides detailed examples of corrupt practices, together with an analysis of these examples;
shows the destructively cumulative effect which bribery and fraud of the type described in this report can have on the cost of a construction project.

5. "Independent assessment".

This document:

comments that corrupt practices on construction projects are concealed, with the result that it is very difficult for anyone not actively involved in the project to prevent or uncover these practices;
gives examples of different types of corrupt practices which can take place during the various phases of a construction project;
proposes that these types of corrupt practices could be materially reduced if the participants in a construction project appointed an independent expert assessor, who had open access to the records and employees of the participants, and whose role was to prevent corrupt practices, and to uncover and report corrupt practices;
suggests the scope of work, appointment mechanism and fee structure of the assessor.

6. "Construction integrity pacts".

This document:

gives examples of different types of corrupt practices which can take place during the various phases of a construction project;
assesses the risks which the participants in a construction project face as a result of these corrupt practices;
proposes the use of independently monitored and enforceable integrity pacts to help reduce these risks;
analyses the different types of integrity pact which can be used.

7. "Model construction integrity pact - sector".
This document is a model agreement between companies working in the same sector to act with integrity when they compete against each other in tendering for any construction project anywhere in the world.

8. "Model construction integrity pact - project - prequalification and tender".

This document is a model agreement between the project owner, designer and all bidding contractors to act with integrity in relation to the pre-qualification and tender process for a specific construction project.

9. "Model construction integrity pact - project - execution".

This document is a model agreement between the project owner, certifier and the selected contractor to act with integrity in relation to the execution of a specific construction project.

10. "Model claims management code".

This document is a model code of conduct which can be incorporated into construction contracts, and which commits the signatories to deal with contract claims and disputes with absolute integrity.

Section C

Anti-Corruption Action Statement

The UK Anti-Corruption Forum is an alliance of UK business associations, professional institutions, organisations and businesses with interests in the infrastructure, construction and engineering sectors. Over 1,000 UK companies and 200,000 engineers and construction managers are represented on the Forum. For more information on the Forum and its activities, see www.anticorruptionforum.org.uk

The Forum has published an “Anti-Corruption Action Statement” .

The Action Statement calls on all participants in these sectors to take effective and coordinated action to prevent corruption, and specifies the actions which those participants need to take.