Addressing Corruption in our Engineering/Construction Industry

1
Addressing Corruption in our Engineering/Construct
ion Industry

• William P. Henry, P.E., D.WRE
• President Emeritus, ASCE
• Past Chair, AAES
• Institution of Engineers and Shipbuilders in
  Scotland
• March 20, 2012

2
Addressing Corruption in our Engineering/Construct
ion Industry

• Magnitude of the Problem
• What Is Corruption?
• Ongoing Actions
• New Actions
• Current Status

3
Addressing Corruption in our Engineering/Construc
tion 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?

4
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!

5
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?

6
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 !

7
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

8
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

9
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

10
What is Corruption?

• Construction Participants
• Owner
• Engineer
• Constructor
• Material supplier
• Equipment supplier
• Lender
• Regulatory/permitting agency

11
What is Corruption?

• Kickbacks / Bribery
• Front Companies
• Bid Rigging / Collusion
• Conflicts of Interest

12
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

13
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

14
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

15
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

16
What is Corruption?

• Red Flags Indicating Corruption
• 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

17
Ongoing Actions

• Thats the way the world is
• Woe is me
• Were 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

18
Ongoing Actions

• Fighting corruption means improving the openness
  and transparency of the decision-making 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

19
Ongoing Actions

• Fighting corruption means improving the openness
  and transparency of the decision-making 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

20
Ongoing Actions

• Fighting corruption means putting ANTI-CORRUPTION
  MANAGEMENT SYSTEMS, POLICIES AND PRACTICES in
  place in your organization and implementing them
  vigorously at ALL LEVELS !

21
Ongoing Actions

• Who are the key players?
• What are they doing?

22
Ongoing Actions

• Key Players
• Governments
• FIDIC consulting engineers
• World Economic Forum constructors
• Lenders World Bank, ADB
• Evaluators Transparency International, Global
  Infrastructure Anti-corruption Centre

23
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.

24
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

25
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

26
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

27
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

28
Ongoing Actions

• Lenders
• World Bank
• Department of Institutional Integrity
• Voluntary Disclosure Program

29
Ongoing Actions

• Evaluators
• Transparency International
• Corruption Perception Index
• Business Principles for Countering Bribery

30
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

31
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
• .

32
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

33
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

34
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

35
Ongoing Actions

• World Federation of Engineering Organizations
  (WFEO)
• Anti-Corruption Committee
• Chaired by a Past President of WFEO
• Members from each continent

36
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

37
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

38
New Actions

• ASCE Metrics Program
• 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

39
New Actions

• UK INFORMATION
• Year Construction TI CPI Ranking
• (US Billion)
• 2000 223.7 10
• 2001 242.5 13
• 2002 264.1 10
• 2003 287.1 11 (T)
• 2004 311.9 11

40
New Actions

• UK INFORMATION (cont.)
• Year Construction TI CPI Ranking
• (US Billion)
• 2005 327.1 11 (T)
• 2006 344.5 11
• 2007 378.5 12
• 2008 367.8 16
• 2009 326.9 17

41
New Actions

• British Standards Institute - BS 10500
• Specification for an Anti-Bribery Management
  System
• Adopted 1/1/12
• BSI standards often become ISO standards

42
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

43
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

44
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

45
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.

46
Current Status

• Research to determine the effectiveness of
  existing anti-corruption programs
• Development of new standards of practice to
  address corruption

47
Current Status

• PLEASE DO YOUR PART TO ELIMINATE CORRUPTION IN
  THE ENGINEERING / CONSTRUCTION INDUSTRY

48
Addressing Corruption in our Engineering/Construct
ion Industry

• Questions?