Addressing Corruption in our
Engineering/Construction Industry
William P. Henry, P.E., D.WRE
President Emeritus, ASCE
Past Chair, AAES
Institution of Engineers and Shipbuilders in Scotland
March 20, 2012
Addressing Corruption in our
Engineering/Construction Industry
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Magnitude of the Problem
What Is Corruption?
Ongoing Actions
New Actions
Current Status
Addressing Corruption in our
Engineering/Construction Industry
• Corruption isn't a 20th or 21st century invention
– Hammurabi's Code of Law 1750 BC -– standards for
commercial transactions
– Moses and the 10 Commandments – 1200 BC – Thou shall
not steal
• Corruption has been around as long as
people have!
• So, why work on it now?
Magnitude of the Problem
• World construction spending for 2011 = $5.8
trillion (USD)
• 10 percent +/- is lost to bribery and corruption
– more than $580 billion (USD) annually!
• The economic magnitude of the problem is
ENORMOUS!
Magnitude of the Problem
FORECASTS
• 2015 - 80% of infrastructure $ spent in
developing countries
• 2020 – 2/3 of major cities in the world will be
in developing countries
• What does this mean for you?
Magnitude of the Problem
• Insufficient number of local engineers and constructors
to do that quantity of work means:
– More global practices than ever before in history
– More teaming arrangements with new partners
• New relationships mean learning new ways of doing
business – good or bad!
• The developing countries rate lowest in openness and
transparency in decision making
• THE POTENTIAL FOR CORRUPTION IS HIGH !
Magnitude of the Problem
CORRUPTION KILLS!
– Poorer quality structures and equipment
put people at risk
– Needed projects go unbuilt
– People die due to lack of potable water
and health care
Magnitude of the Problem
Corruption Undermines Sustainable
Development
– Project quality decreases
– Required maintenance increases
– Project useful life is shortened
– Unnecessary use of resources
– People are not served well
What is Corruption?
• The impairment of integrity, virtue or moral
principle
• An inducement to do wrong by improper or
unlawful means
• 2 people making 1 bad decision
What is Corruption?
Construction Participants
– Owner
– Engineer
– Constructor
– Material supplier
– Equipment supplier
– Lender
– Regulatory/permitting agency
What is Corruption?
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Kickbacks / Bribery
Front Companies
Bid Rigging / Collusion
Conflicts of Interest
What is Corruption?
Kickbacks / Bribery – 2 Sides of the Same
Coin
– $ payments or wire transfers disguised – no
trail
– Lots of middlemen
– Forged documents
– Appears to be legitimate relationship – hard to
decipher illegitimate relations from legitimate
ones
– Conspiracy of silence
What is Corruption?
Front Company
– Company with no history
– Often offers diverse, disconnected services
– Few ownership records – hidden owners
(Government officials?)
– Great interest in company by Project officials
– May be subcontractor hired as local agent
What is Corruption?
Bid Rigging / Collusion
– Excluding unfavored bidders
– Tipping off favored bidders
– Profits come in change orders
– Short bid period
– Bidders agree who will get the work
– May be a component of a larger corruption
scheme
What is Corruption?
Conflicts of Interest
– Per se conflict – having a personal stake
– Project officials, friends, relatives, family
members involved
– Corruption may be a co-existing element
– Disclosures not made up front
What is Corruption?
Red Flags Indicating Corruption
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Recurring use of 1 company on widely varied projects
Close personal relationships among project parties
Vague, incomplete or non-existent terms of reference
Firms use false qualifications and “ghost” employees
Shared addresses / phone numbers among firms
A firm does business under lots of different names
One firm does diverse tasks
Ongoing Actions
• That’s the way the world is
• Woe is me
• We’re helpless
OR
• Act now & act together to eliminate corruption by
improving the openness and transparency of
the decision-making processes in all phases
of our projects
Ongoing Actions
Fighting corruption means improving the
openness and transparency of the decisionmaking processes in all phases of a project:
PROCUREMENT of the work of / by:
–the owner
–the project design/construct team
–subcontractors
–materials and equipment suppliers
Ongoing Actions
Fighting corruption means improving the
openness and transparency of the decisionmaking processes in all phases of a project:
PERFORMANCE of the work by:
–the owner
–the project design team
–the constructor
–subcontractors
–materials and equipment suppliers
Ongoing Actions
Fighting corruption means putting ANTICORRUPTION MANAGEMENT SYSTEMS,
POLICIES AND PRACTICES in place in your
organization and implementing them vigorously at
ALL LEVELS !
Ongoing Actions
• Who are the key players?
• What are they doing?
Ongoing Actions
Key Players
– Governments
– FIDIC – consulting engineers
– World Economic Forum – constructors
– Lenders – World Bank, ADB
– Evaluators – Transparency International,
Global Infrastructure Anti-corruption Centre
Ongoing Actions
• Key Players
–Professional Organizations: WFEO, UPADI,
Pan American Academy of Engineers, ACECC
–Societies in over 30 locales:
Argentina, Australia, Austria, Bahamas, Belgium,
Bolivia, Brazil, Canada, China, Colombia, Costa Rica,
Egypt, Finland, France, Hungary, India, Iraq, Ireland,
Italy, Korea, Mexico, Nigeria, Panama, Poland,
Portugal, Puerto Rico, Romania, South Africa, Spain,
Sri Lanka, Thailand, Taiwan, UK, USA, and Zimbabwe.
Ongoing Actions
What Governments are doing
– U.N. Convention against Corruption
– OECD Convention on Combating Bribery
– Inter-American Convention against Corruption
– 2 Council of Europe Conventions on
Corruption
– 2 EU Conventions
– African Union Convention on Preventing &
Combating Corruption
Ongoing Actions
What Governments are doing (cont.)
– ADB OECD Anti-Corruption Action Plan for
Asia & the Pacific
– G8 Communique to reduce bribery
– OECD prosecutions
– Anti-bribery laws
– Anti-money laundering regulations
– Disbarments
Ongoing Actions
FIDIC
Guidelines for Business Integrity Management
in the Consulting Engineering Industry
• How to develop and use a business
integrity management system in your firm
• Uniform, transparent and accountable
practices
Ongoing Actions
World Economic Forum (WEF)
– Major engineering/construction, oil & gas, and
mining & minerals companies
– Partnering Against Corruption Initiative (PACI)
• No bribery by firms
• Effective anti-corruption management
programs in firms
Ongoing Actions
Lenders
World Bank
• Department of Institutional Integrity
• Voluntary Disclosure Program
Ongoing Actions
Evaluators
Transparency International
• Corruption Perception Index
• Business Principles for Countering Bribery
Ongoing Actions
Evaluators
Global Infrastructure Anti-corruption Centre
• Model Anti-corruption Policies, Procedures
and Management Programs
• Alliances with National Engineering
Societies
• On-line anti-corruption training module
• www.giaccentre.org
Ongoing Actions
Professional Organizations
ASCE
New Canon 6 of our Code of Ethics (7/23/06)
Engineers shall act in such a manner as to
uphold and enhance the honor, integrity, and
dignity of the engineering profession and shall
act with zero-tolerance for bribery, fraud, and
corruption.
Engineers shall:
» Not knowingly engage in business or
professional practices of a fraudulent,
dishonest or unethical nature;
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Ongoing Actions
Canon 6 (continued) :
» Act with zero-tolerance for bribery, fraud
and corruption in all engineering or
construction activities in which they are
engaged;
» Be especially vigilant in maintaining
appropriate ethical behavior where
payments of gratuities or bribes are
institutionalized practices;
Ongoing Actions
Canon 6 (continued) :
» Strive for transparency in the procurement
and execution of projects, including
disclosure of names, addresses, purposes
and fees or commissions paid for all agents
facilitating projects; and
» Encourage the use of certifications
specifying zero-tolerance for bribery, fraud
and corruption in all contracts
Ongoing Actions
ANTI-CORRUPTION EDUCATON &
TRAINING (ACET) PROGRAM
–Ethicana – by FIDIC, WFEO, Societies
–Education for practitioners & students
–WHY corruption must be overcome
–DVD, PP, class & teacher training materials
–Professionally prepared
–Sent FREE OF CHARGE to 3,000 firms,
agencies and universities around the world
Ongoing Actions
World Federation of Engineering
Organizations (WFEO)
Anti-Corruption Committee
• Chaired by a Past President of WFEO
• Members from each continent
Ongoing Actions
Pan-American Union of Engineering
Associations (UPADI)
Societies from countries in North, Central, and
South America
Anti-Corruption Committee
- Co-chaired by 2 US members
- 1 year old
- Looking for 1member from each country
- Activities at annual meetings – Cuba 4/12
Ongoing Actions
Asian Civil Engineering Coordinating
Council (ACECC)
Asian countries plus Australia & the US
Anti-Corruption Committee
- Chaired by a US member
- 1 year old
- Looking for 1member from each country
- Activities at their conferences
New Actions
ASCE Metrics Program
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Research program to identify trends in
corruption activities globally – started 9/31.
Are all the ongoing activities producing
the results we need?
Will show us what is working and where we
need stronger or different actions
Results expected in 12 – 15 months
New Actions
• UK INFORMATION
Year
Construction
(US $ Billion)
TI CPI Ranking
2000
223.7
10
2001
2002
2003
2004
242.5
264.1
287.1
311.9
13
10
11 (T)
11
New Actions
• UK INFORMATION (cont.)
Year
Construction
(US $ Billion)
TI CPI Ranking
2005
327.1
11 (T)
2006
2007
2008
2009
344.5
378.5
367.8
326.9
11
12
16
17
New Actions
British Standards Institute - BS 10500
Specification for an Anti-Bribery
Management System
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Adopted 1/1/12
• BSI standards often become ISO standards
New Actions
Contents
Foreword - 3
1 Scope - 4
2 Terms and definitions - 5
3 Planning - 6
4 Adopting an anti-bribery policy and implementing the
ABMS - 7
5 Monitoring and reviewing the ABMS - 13
6 Continual improvement of the ABMS - 14
New Actions
Contents
Annexes
Annex A (informative) Guidance - 15
Annex B (informative) - 19
The Plan-Do-Check-Act (PDCA) cycle - 19
Bibliography - 20
List of figures
Figure B.1 – PDCA cycle applied to the anti-bribery
management system - 19
Current Status
• Act - Ignoring corruption is the same as
condoning it
• Join our 4-Part Program
– Educate all in the industry on true cost of corruption
– Shine a bright spotlight on corrupt activities wherever
you see them
– Make it socially unacceptable to be involved in
corruption
– Educate next generation on the true cost of corruption
Current Status
• Ongoing work by all construction
participants to achieve a level playing field
where business can be done in an
honest, transparent and fair manner and
where adequate management programs
and systems are in place.
• Continuing efforts to ensure that, in our
engineering / construction industry,
corruption does not kill.
Current Status
• Research to determine the effectiveness
of existing anti-corruption programs
• Development of new standards of practice
to address corruption
Current Status
PLEASE DO YOUR PART TO ELIMINATE
CORRUPTION IN THE ENGINEERING /
CONSTRUCTION INDUSTRY
Addressing Corruption in our
Engineering/Construction Industry
Questions?