Feature Corruption survey
Do gifts and corporate hospitality constitute bribery?
Don’t know 6%
No 27% Yes 67%
Which stage is most susceptible to corruption?
Other 1% Don’t know 3% Pre-
All of the above are equally susceptible 43%
Operation and maintenance phase 1%
Have been offered a bribe or incentive to engage in corrupt practices?
Rather not comment 5%
No
Yes, once 14%
60%
Yes, on more than one occasion 21%
qualification and tendering phase 35%
Project execution phase 13%
How important do you
believe it is to tackle the issue of corruption?
Neither important or not important 3%
Not very important 1%
Fairly
important 18%
Very
important 77%
Don’t know 1%
Don’t know 54%
Project planning and design phase 4%
How much does fraud or corruption cost your organisation a year?
£0-£1,000 8%
£1,001- £20,000 6%
£20,001- £100,000 13%
£100,001- £1m 10%
More than £9m 3%
£1m-£9m 6%
Corruption case studies
In an industry as big and as broad as construction where billions are spent on services and goods every year, subcontracting is the norm and supply chains are long, there is certainly ample opportunity for fraud. Here are some recent activities that have been exposed.
low-value materials that can be harder to keep track of. He recently did an audit for a large organisation buying £40m worth of high-volume goods, to find they were losing 11% of the value. Jason Farnell, a director of CR Management, has been involved with investigating fraud cases in construction firms over the years and like Gee points to the high-volume, low-value work where it’s easy for managers to drop their guard. In a recent case he was involved in, a surveyor signed off work to a higher value than it was worth. “When I used to work for a large
construction company, they were paranoid about this sort of thing,” says Farnell. “Those who placed the order weren’t allowed to administer it. Now it’s often the same person, who might be a young surveyor who might be intimidated by a more experienced subcontractor.” Companies, however, often have triggers in place that alert management if invoices are more than originally agreed. Farnell says that in his experience
fraud tends to be more widespread on residential sites, where valuable white goods go missing, or another common scam is the same truck either taking or delivering muck to site getting signed off several times and the subcontractor being paid for more than they are entitled to. However, he says he is surprised by the
perception of the high levels of corruption that the survey has thrown up. His view
18 | OCTOBER 2013 | CONSTRUCTION MANAGER
Methodology and who took part in the survey
The survey was conducted using an internet-based questionnaire, which respondents could access through the CIOB website (
www.ciob.org). An email was sent
to 23,478 UK-based CIOB members informing them that the survey was online. The survey was also opened up to wider participation through the use of social media. The sample
consists of 701 construction professionals, the majority of whom describe themselves as working at a senior management level within contracting, project management and construction management. A total of 42%
of respondents work for organisations employing more than 501 staff, while 46% work for organisations that employ fewer than 200 staff. The majority of respondents are based in London and south-east England.
is shared by Taylor Wessing partners David Quinlan and David De Ferrars. Both say that blue chip firms take their obligations under the Bribery Act 2010 very seriously and the law firm has been involved putting in new auditing and whistleblowing procedures in place across a number of them. They say that when it comes to procuring contracts, the public sector appears to be more aware of the pitfalls concerning bribery and corruption than the private sector. “One observation I would make, though,
is that many of the standard contract forms like JCT and NEC3 have yet to expressly embrace the act in a meaningful way,” says Quinlan. The Bribery Act formally came into
force on 1 July 2011 and there has only been one prosecution so far. That said, De Ferrars, who heads up fraud at Taylor Wessing, says it is early days. However, the distinct lack of prosecutions under the Act has raised questions from some industry figures about how it is enforced by the Serious Fraud Office (SFO). However, De Ferrars says it is unlikely to be changed just yet. Respondents acknowledged that the
UK construction industry (50%) and the UK government (55%) are not doing enough to prevent corruption and the CIOB has made several recommendations in the report to push the agenda forward. One of its recommendation is more
investment in CoST — the newly launched Construction Sector Transparency Initiative, a framework for driving transparency and efficiency. It also wants a more coordinated approach from the government to tackling corruption and more investment for training. But one thing is certain: how can the
industry change its image in the eyes of the public — one of the key planks of the new industrial strategy — if it has such a low opinion of itself? CM
The ghost worker’s wages Balfour Beatty operations manager Sean Sullivan was jailed for three years in October 2012 after he and two other managers defrauded the company out of £165,000 by authorising payments to two bogus workers who were not employed by the company. The fraud ran over five years from November 2005 to March 2011 and involved creating “ghost” employees and putting their personal details put on the payroll. Time sheets were then created and signed off by the managers.
False identity CITB has been working with the London Metropolitan Police to investigate suspected fraudulent CSCS card offences. In July 2012 a man was found guilty of impersonating candidates at 48 Health Safety & Environment tests, and in March 2013 a man was arrested for using a fraudulent HS&E pass report to obtain CSCS and Construction Plant Competence Scheme cards.
Public sector procurement Falsifying payments is reckoned to be one of the most common types of construction fraud and can include everything from inflating the cost of work done to billing for unperformed work. An investigation by Department for Communities and Local Government auditors, released to the BBC under the Freedom of Information Act and reported in August this year, criticised three building projects run by Stoke-on-Trent City Council, which were funded by more than £16m of taxpayers’ money. It was found that “fraudulent activity” was probable. The investigation came after an
allegation made to Staffordshire Police in 2010 over the tendering processes at the council. The DCLG report added that “procurement documents were falsified” to increase the cost of the work. A false invoice was also produced for demolition work.
Rail contracts British Transport Police are carrying out a fraud inquiry over alleged corruption in the procurement of rail construction contracts in London. Network Rail confirmed to Building in July that the inquiry is centred on its £250m upgrade of Farringdon station for Thameslink, with the investigation leading to the arrest of three senior figures at Alandale Rail. A fourth person arrested is connected to the Laing O’Rourke and Costain JV. British Transport Police said the individuals had been rebailed until October, adding that no charges have been brought and the investigation continues.
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