Investigation corruption in the construction industry golaram y by Golaram Yashveer

Faculty of Arts & Technology Dissertation: Investigating Corruption in the Construction Industry â&#x20AC;&#x201C; A Case Study

Student ID: 77139224 GOLARAM YASHVEER | BSc (Hons) Quantity Surveying & Commercial Management | 29th April 2016

TABLE OF CONTENTS: CHAPTER 1 1.0 Introduction

1.1 Corruption

1.2 Construction Industry

1.3 Corruption vs Construction

1.4 Problem Specification

1.5 Aim

1.6 Hypothesis

1.7 Objective

CHAPTER 2 2.1 Corruption

2.2 History of corruption

2.3 Background Information of corruption in the construction Industry

2.4 Occurrence of corruption

2.4.1 Motivational factors of Corruption

2.4.1.1 Voluntary

2.4.1.2 Levelling the playfield

2.4.1.3 Extortion

2.4.1.4 Normal business practice

2.4.2. Factors which facilitate corruption at project level

2.4.2.1 The absence of anti-corruption systems in projects

2.4.2.2 Infrastructures projects its nature

2.4.2.2.1 Contractual structure

2.5 Vulnerability of construction industry to corruption

2.5.1 The projectâ&#x20AC;&#x2122;s scope

2.5.2 Individuality of construction projects

2.5.3 Government contribution

2.5.3 Contractual links

2.5.4 Phases in projects

2.5.6 Projectâ&#x20AC;&#x2122;s complexity

2.5.7 Irregularity of projects

2.5.8 Hidden works

2.5.9 Embedded national welfares

2.5.10 Privacy a culture

2.5.11 Construction industry is not governed by a single society

2.5.12 Deficiency in due diligence

2.5.13 Cost of reliability

2.6 The cost of corruption

2.7 The economic cost of corruption in construction

2.7.1 - Understanding cost and construction

2.7.2 Types of activities that causes loss and damage

2.7.3 Types of loss and damage that an individual stake holder will suffer

2.7.4 Loss and damages to the project holder

2.7.4.1 Theft of project funds

2.7.4.2 Wastage of project funds

2.7.4.3 Increase in price

2.7.4.4 Increase cost of maintenance, repair and replacement

2.7.4.5 Supplement financing cost

2.7.4.6 Cost of bribes paid by private sector project owner

2.7.4.6 Reducing operating profits

2.7.4.7 Loss of business opportunity and investment

2.7.4.8 Fines for engaging in criminal liability

2.7.4.9 Legal fees

2.7.5 Loss and damage incurred by construction companies, consulting and engineering firms and suppliers

2.7.5.1 Bribery by successful tenderers during tender stage

2.7.5.2 Bribes paid by abortive tenderers

2.7.5.3 Wasted tender cost

2.7.5.4 Inflation of contract operating cost

2.7.5.5 Loss of payment or and profit

2.7.5.6 Termination of contracts

2.7.5.7 Loss of work

2.7.5.8 Losing business opportunity and investment due to loss of status

2.7.5.8 Prohibition a loss of business opportunity

2.7.5.10 Damages of public obligations

2.7.5.11 Fines to be borne for criminal liability

2.7.5.12 Legal fees

2.8 Quantifying the cost of corruption in construction

2.8.1 Deficiency of primary data in proving corrupt activities

2.8.2 The struggle to quantify the identified loss and damage

2.8.3 Cost of Corruption in construction projects an estimation

2.9 Type of Corruption in construction

2.9.1 Bribery

2.9.2 Nepotism

2.9.3 Facilitation Payment

2.9.4 Conflict of Interest

2.9.5 Money Laundering (Layering)

2.9.6 Political Contribution

2.9.7 Procurement

2.9.8 Tax Evasion

2.9.9 Cartels

2.9.9.1 Bidding Cartels

2.9.9.2 Fee of Loserâ&#x20AC;&#x2122;s

2.9.9.3 Fixing of price

2.9.9.4 Price covering

2.10 The mechanism of corruption in construction

2.10.1 Corrupt activities during planning and design

2.10.2 Corrupt during award of contracts

2.10.2.1 Bribery

2.10.2.2 Agents

2.10.2.3 Joint Ventures & Subsidiaries

2.10.2.4 Sub-Contractors

2.10.3 Corruption activities during construction phases

2.10.3.1 Bribery

2.10.4 Corrupt events during operational and maintenance services

2.11 Dealing with corruption 2.11.1

The eight-step program developed by Ernst and Young

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1. Conducting risk assessment program

2. Developing corporate anti-corruption policy

3. Implementation of anti-corruption policies and controls

4. Implementation of anti-corruption financial controls

5. Provide anti-corruption trainings

6. Program monitoring

7. Anti-corruption procedures in mergers and in acquisitions

8. Re-assessments and modification of program

2.11.2

Austria, Vienna in September, 2009

2.12 Reporting corruption

2.12.1 WORLD BANK GROUP â&#x20AC;&#x201C; INTEGRITY

2.12.2 UNESCO

2.13 Project Anti-Corruption System (PACS)

2.13.1 Necessity of PACS

2.13.2 Practising PACS

2.13.3 PACS Standards

2.14 Anti-corruption reforms in construction

2.15 Corruption Perception Index

2.16 Bribe Payers Index

2.17 Facts and Figures of corruption in construction

2.18 Corruption and The Rent-Seeking Theory

2.19 Pareto Analysis

CHAPTER 3 3.0 Methodology

3.1 Research Design

3.3 Primary Data

3.4 Secondary Data

CHAPTER 4 4.0 Data Collection

4.1 Sampling Design

4.2 Data Collection

4.3 Questionnaire Design

4.4 Structured Interviews

CHAPTER 5 5.0 Analysis & Findings

5.1 Gender of Respondents

5.2 Level of Education

5.3 Nature of company currently working

5.4 Age Group

5.5 Years of Working Experience

5.6 Sector Involved

5.7 Level of Employment

5.8 Presence of Corruption in the Construction Industry

5.9 Level of Corruption in Construction Stages

5.9.2 Graphical Representation on the Level of Corruption Stages in Construction

5.9.3 Pareto Analysis - Level of Corruption Perception in Stages of Construction

5.10 Most Corrupt Activity in Construction Industry

5.11 Responsiveness of the Presence of Corruption in Construction Industry

5.12 Involvement in Corrupt Activities

5.13 Reporting Corrupt Event, If Discovered

5.14 Level of Corruption in Construction Industry over Last 5 Years

5.15 Contribution of Professional, Government and Anti-Corruption Bodies against Corruption

5.16 Reasons of Corruption

CHAPTER 6 6.0 Case Study

CHAPTER 7 7.1 Raising of Awareness

7.2 Strengthening of Professional Institutions

7.3 Provision for Multiple Site Supervision and Audits

7.4 Reliability of Agreements

7.5 In order to curtail and annihilate corruption the succeeding approaches are meant to be embrace and developed further

7.5.1 Implementation of ethical construction culture and honest development

7.5.2 Random selection of institution for random checks

7.5.3 Process of construction must be supervised over the project life cycle

7.6 Key Areas of High Corruption Risk

CHAPTER 8 8.0 Conclusion

CHAPTER 9 9.0 Limitation & Challenges of this Study

1.1 Limitation To This Report

1.2 Challenges Confronted

ANNEX 1 – Online Reporting Forms

ANNEX 2 – Foreign Corrupt Practice Act (1977)

103

ANNEX 3 – Pilot & Final Questionnaire Sample

110

ANNEX 4 – Code of Ethics

122

4.1 Quantity Surveyor

123

4.2 Contractor

128

4.3 Engineer

132

4.4 Architect

135

ANNEX 5 – Operation Car Wash / Lava Jato

140

Referencing

144

Bibliography

158

LIST OF TABLE & FIGURES:

Table 1 - Source: CoST International

Table 2 - Source: GIACC, Global Infrastructure Anti-Corruption Centre

Table 3 - Source: GIACC â&#x20AC;&#x201C; Global Infrastructures Anti-Corruption Centre

Table 4 - Flow Chart of Methodology

Table 5: Categories of respondents and valid questionnaires

Table 6 - Cumulative Count & Cumulative Percentage

Table 7 â&#x20AC;&#x201C; Case Study

Figure 1 Gender of respondents

Figure 2 Educational Level

Figure 3 Nature of company

Figure 4 Age group

Figure 5 Years of working experience

Figure 6 Sector of involvement

Figure 7 Employment level

Figure 8 Presence of corruption

Figure 9 Design & Planning Stage

Figure 10 Tender Stage

Figure 11 Awarding of contracts

Figure 12 Construction process

Figure 13 Variation

Figure 14 Sales of Tender Documents

Figure 15 Claims

Figure 16 Final Account

Figure 17 Operation and Maintenance

Figure 18 Offering Bribes to Obtain Planning Permission

Figure 19 Employment of Illicit Workers

Figure 20 Offering Bribes to Obtain Tender/Contracts

Figure 21 Leaking Information to a Preferred Contractor/Bidder

Figure 22 Certifying Defective Works

Figure 23 Certifying Larger Variations

Figure 24 Producing fraudulent timesheets

Figure 25 Producing fraudulent invoices

Figure 26 Graphical Representation

Figure 27 Pareto Analysis

Figure 28 Corrupt Stages

Figure 29 Awareness of the presence corruption in corruption industry

Figure 30 Involvement in corrupt activities

Figure 31 Reporting disclosed corrupt activities

Figure 32 Level of corruption in construction industry over last 5 years

Figure 33 Contribution of professional, government and anti-corruption bodies against corruption

Figure 34 Reasons of corruption activities

LIST OF ABBREVIATIONS: 1. ABAC - Anti-Bribery and Anti-Corruption Policy 2. ASCE - American Society of Civil Engineers 3. BPI – Bribe Payers Index 4. CIOB – Chartered Institute of Building 5. CM – Construction Magazine 6. CoST – Construction Sector Transperancy 7. CPI – Corruption Perception Index 8. EU – European 9. FCPA - Foreign Corrupt Practices Act 10. FIFA – International Federation of Association Football 11. GCC – Gulf Countries Council 12. GCR – Global Competition Review 13. GDP – Gross Domestic Product 14. GIACC – Global Infrastructure Anti-Corruption Centre 15. GTIL - Grant Thornton International Ltd 16. IACC - International Anti-Corruption Conference 17. IIA - Institute of Internal Auditors 18. LHWP - Lesotho Highlands Water Project 19. OCED – Organisation of Economic Cooperation and Development 20. OFT - Office of Fair Trading 21. PACS - Project Anti-Corruption System 22. RICS – Royal Institute of Chartered Surveyors 23. SFO – Serious Fraud Office 24. TI – Transperancy International 25. US $ - United State Dollar

KEY WORDS:

1. Bribery - Bribery is an incentive given for an illegal action. 2. Nepotism - Nepotism is whereby a key personnel of a company or organization exploits his power or authority to favour a family or friend, even he is not competent. 3. Facilitation Payment- A slight amount of bribe give to speed up of grease the process. 4. Conflict of Interest - Conflict of Interest refers to the dilemma in choosing between demand of the given status and duties for personal interest. 5. Money Laundering (Layering) - Money Laundering is the practice of obscuring of illegal or fraudulently gained money. 6. Political Contribution - A support given by government, made by cash of gift by a second or third party in order to secure jobs or contract. 7. Procurement - Procurement is a techniques set out in order to gain goods and services by any individual 8. Tax Evasion - Tax Evasion is an illicit practice by non-payment or under payment of taxes, this is made by declaring less income or gains of the amount earned to tax authorities. 9. Cartels - Cartel is an illegal offence, and this act occurs when more than two societies. 10. Bidding Cartels - Who will win the tender is already agrees and the winner can on his behalf submit a higher price, moreover these is no such candid race in tendering. 11. Fee of Loser’s - Bidders tenders on project honourably in order to win tender 12. Fixing of price - There is genuine competition but the competitors’ agreed not go beyond a certain agreed price per unit. 13. Price covering - To be stay in client’s or customer tender list for contractor who are demanding, they obtain the price of their competitors which they inflate in order to lose.

Acknowledgement First and foremost I would like to thank my mum, dad, sister and fiancĂŠe, who supported be morally through this report and financially in undertaking this course for a brighter future. Am beholden to my lecturer Mr. Sanjay Jagessur for his the continuous help and assistance throughout the preparation of this project report. Mr Besjon B. Zenelaj from Epoka University Albania, who aided me in gathering some research, anti-corruption bodiesâ&#x20AC;&#x2122; officers who contribute in making the survey conducted a success.

Abstract This paper is based on corruption in the construction industry. As this is the burning topic since decades, a deep investigation has been carried out during research methodology, where the motivational factor and occurrences of corruption were deeply investigated. An analysis of literature on how construction is susceptible to corruption and how this influence the economic sector was also conducted. This report states how corruption is tarnishing the construction industry and are the measures to be undertaken by professional institution, government and anti-corruption bodies. This report assesses specific stages in construction where construction are more favourable to flourish, whereby a survey was conducted and was later on analysed in order to recommend encouraging strategies to reduce risks of or even eradicated corruption from the booming industry of construction. Facts and figure on corruption in construction have been taken in consideration in order to justify the recommendation proposed. However, the ethical consideration of professional such as consultants, architects, engineers, quantity surveyors and contractor have not be set aside, where Code of ethics have also been included in this report. This survey also justifies that corruption is present in construction for personal gain of individuals who on their behalf are engaged or claim favours.

INVESTIGATING CORRUPTION IN CONSTRUCTION INDUSTRY

1 INTRODUCTION Perhaps corruption is a ubiquitous feature in undertaking business, and further to this there is an emergent concern for the high corrupt event between business societies. Culture, Beliefs and organisation are values that holds people and these are key factors that closely links the nature and feature of corruption and fraud to those values. Moreover, the path on which the construction industry uses makes corruption suitable, for example lengthy supply chains and the complexity of contractual arrangements are the culture of most construction societies. Additionally, negotiating for a more profitable resources is considered to be a typical practice in infrastructural and construction sectors. Consequently, these creates opportunities for consultants, clients, contractors, and suppliers who influences payments and increase chances for supplementary benefits for personal achievement. (Ernst and Young, 2012) Corruption in business perceptive takes place at micro level, however if it is not taken into control at this stage it starts to spread its tentacles and further develops thus triggering alarming problems. Comprehensively there is no distinct definition for Corruption, as it takes place in ample forms thus making it challenging to reinforce the word. Corruption does not only target white collar entities and elites but also ordinary people where it deprives them from the basic need to survive. In other words corruption is devastating. Transperancy International (TI) claims that, corruption is distinguished as the â&#x20AC;&#x153;misuse of delegated authority for personal achievementsâ&#x20AC;?. But Corruption can be categorised depending on which sector it takes place and on the amount of capital lost. On the other side Serious Fraud Office (SFO) of United Kingdom rendered Corruption through its background, where stated that it normally comprises of two individuals or more binds themselves into a contract. And further to this contract, a financial incentive is paid by the first entity to the indorsed individual for favouritism. Stated as a gangrene in the construction industry, it is alarming as corruption has conquer the construction industry. With the help of Anti-Corruption bodies like Transperancy International and Serious Fraud Office and with the number of proof around the world it clearly states that a significant

role is being played by corruption to the detriment of economic developments, provoking a decrease

in social services, alteration of funds in infrastructures and influences the poor (Khramkin, 2007).

This unethical practice diverts public assets into capital projects where this produces and economic

distortion in the public sector. A far-reaching corruption within a budgeted venture will have a major

impact not only on the profit of the new project but also on the profit of existing buildings in the

country.

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Conspiracy and construction both produces adverse influence on the glowing industry and on the aptitude of building requirements. (Chiocha, 2009 and Sangwei & Balia, 1999). According to a report by Goldstock (1999), corruption disrupts the quality of construction when health and safety is taken into account, explicitly due to fraud during construction these buildings fails to acquire specification and safety requirements. On the other hand Robb (1996) stated that corruption is predomination since at early stage i.e. procurement planning and during process of final account which are both prone to fraudulent deals and managements. With reference to the above facts the construction industry remains the superlative industry for corruption to flourish, with the colossal sum being feasted by building developments.

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1.1 CORRUPTION Defining corruption is tough due to its complexity and multiple form that is generates. Chartered Institute of Building (CIOB 2013, p.3) where a research was conducted and states that “around 25% of their research participants felt that accepting or concealing bribes was either not very corrupt or not corrupt at all”. Corruption can be characterize with an ample of statement, though the Institute of Internal Auditors (IIA, 2012) rendered corruption as an acts which takes place in form of soliciting or giving benefits; which is consequently tough to distinguish. Office of Fair Trading (OFT, 2009) states that “the company’s culture outside the shore of the UK fell below expectations”, where £2.25 Million is the sum alleged to be involved in “payment misdeeds” erection period of Great Library of Alexandria in Egypt. Furthermore, corruption is a sweet poison for this contemporary world, which contributes largely in eradicating economic developments alongside its constitutions and the society structure of emerging nations. In this modern world corruption is amount to the prevalent defies faced. Further to this elements that motivates and the consequences associated with corruption has a widespread range. For instance, providing a low level of responsibility towards duties can lead to disastrous situations; mismanagement of policy can cause turbulence in multiple sector. Corruption has conquer almost each and every business sector, where it begins from bribe payments of social servants for the personal service, moving futher to politicians in power and official’s for their use of public influence for their personal benefits. Ethics of justice of the social are disturbed by the condemnation of corruption. "So far as our society is concerned, there’s is nothing more important than the issue of corruption. At the core of the incidence of poverty is the issue of equity, and the core of the issues of equity is the issue of corruption.”- (James D.wolfenohn, President of the World Bank October 1999)

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1.2 CONSTRUCTION INDUSTRY The construction industry consists of two comprehensive cultures; the societies’ culture and projects culture. - Zuo and Zillante (2005). On the other hand Gareis and Huemann (2000) claims projects culture is reinforced by the ambition set for projects. Moreover construction industry has an international status and play a sine-qua-non role in the economic development, and the activities associated with is also vibrant in order to achieve a notional socio economic developments targets to be able to provide accommodation, infrastructures and to increase the level of employment. The value of the worldwide construction market is evaluated around US $ 3,200 Billion per year, and this currently represents 5 to 7 % of GDP in developing countries and 2 to 3 % in developing countries with a lower-income. - (Rodriguez, Waite & Wolf, 2005) US $ 8 Trillion to US $ 17.5 Trillion per year by 2030 is the forecasted global construction output expected. (Petter Matthews, Executive Director, CoST International Secretariat – 4th Feb 2016) It is also the pillar mechanism that creates job opportunities and work to millions of unexperienced, unskilled and experienced labour and the construction sectors likewise contributes largely in generating revenue, moreover it enhances the foreign exchange incomes that comes from trade of construction equipment’s, materials and other engineering services. Taking into account the effectiveness and productivity of economic aspect the construction industry plays a major role, moreover in order to be able to deliver building infrastructures in a cost effective and pioneering approach, a contemporary and efficient infrastructure is fundamental for productivity. In order to indorse a sustainable growth and development, the construction industry has a dominant part in the drive, from end to end as it has a crucial impact on the built environment. (Russel Lawson, 2011) “Any competitive advantage gained through corruption is a mirage.” - Robert S. Khuzami, Director of Enforcement, US Securities and Exchange Commission

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1.3 CORRUPTION V/S CONSTRUCTION Multiple definition have been devised regarding corruption in the construction perspective, yet these definition do not have the capacity to assess or quantify the role of societies and influences of projects culture on corrupt events. $340 Billion is the amount that account for corruption each year stated by the American Society of Civil Engineers (2004) Efforts made by Anderson (2003), to be able to measure influential factors of project’s cultures on project’s overall performances with suitable assessments of cultures both at projects and societies levels. The results collected, illustrated that opting for a culture which is task-oriented is the most acceptable culture for project developments, which has a direct influence on the performance factors for instance the members and functionality satisfactions. With reference to researches made by OECD (2013), CIOB (2013) and TI (2006), rendered corruption and its associated links to be more predominant at pre-stages, mainly tender stage. “the function of procurement procedures is a major source of corruption in the construction industry; with 42% of company executive officers claiming that they have reason to believe that competitors had been influencing tender procedures unduly” - Soreide (2006, p.17) The construction is prone to corruption, perpetual turnover of staff, and suppleness of labour and the transitory nature of projects are elements that creates the suitable environment for both petty crooks and planned delinquency in the construction industry and this varies, moreover the whereabouts of the projects has a vital role. Corruption within construction is a time-honoured dispute and this industry is consistently being classified among the supreme corrupt industries in the world. The influence of this issue goes beyond the bribe depletions which produces jerrybuild buildings and further to this it is ruining the flourishing industry. “…crooked politicians betray the working man, pocketing the profits, treating us like sheep, and we’re tired of hearing promises that we know they’ll never keep” – Ray Davies Quebec & British Columbians Liberals – a study directed by the Ministry of Public Safety into Corruption revealed that there was limited discussion on the construction corruption matter and medium to high risk corruption was identified in the overall of this industry. Investigators also diagnosed that the procurement process and project management is more susceptible in commercial construction process, which includes public projects, this is reinforced as executives who are

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managing procurement process are not being well-versed of the real cost of projects and there is more a more deficiency in accountability and transperancy in bidding process. Gigantic project, like dams, highways, power plants are developments which are indulged with huge amount of money and this make the environment suitable to conceal bribe and exaggerated claims. Determining precisely the value of loss incurred in corruption is quite a tough task, but it can surely be estimated and tends to vary from 10% to 30%. CoST states that through its experience encountered a comparative amount could be lost through mismanagement and lack of efficiency. This conclude that US $ 6 Trillion is the amount anticipated to be lost in corruption unless effective improvement is made. Forfeiture at this level is a hard matter to be borne, but losing accountable investment in infrastructures have a specific implication, this is so as this sectors tends to contributes in almost on every aspect of the economic growth and development. From side to side with the elimination of poverty, the reconstruction of the global economy and the famous effect of the climate change, corruption is no escape and form parts of the utmost global challenge. This era might fail to achieve the success in achieving this dream that is the eradication of corruption, unless infrastructural investments are swiftly improved. (Petter Matthews, Executive Director, CoST International Secretariat â&#x20AC;&#x201C; 4th Feb 2016)

Table 1 â&#x20AC;&#x201C; Source: CoST International; Cost and time overruns in 8 different countries

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“an estimation of US$860 billion is set for fraud and corruption for construction industry, with tendency to rise up to US$ 1.5 trillion by 2030” - The Grant Thornton International Ltd (GTIL, 2013, p.3), moreover “The budget was set to US$12 billion, which speeded consequently to US$ 51 billion and the outcome is the allegation of corruption acts, larceny and inducement in construction contracts” - (Masters, 2014). A proper culture will help societies to be honest morally, to establish respectable business ethics and on the top to achieve flourishing productivity (Schein 1990). Thus allegation and proofs obtained from the construction industry involving in corrupt activities, there is great need for a systematic assessment whether the culture of associates influences corrupt practices.

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1.4 PROBLEM SPECIFICATION The Construction Industry possesses a worldwide reputation, though it is no exception for corruption. For decades Corruption has been an omnipresent parasite in many countries around the world. “Dirty games in Construction Industry” (M. Vasanth Kumar | 26 May 2014). With recent studies made by Global Perspective and Oxford Economics in The Global Construction 2025 where it have been specified that an increase of more than 70% in the output of the global construction; that is US $ 15 Trillion per year worldwide by 2025. China, India and United States are the leading cause for this growth. Among others this sector is the most challenging and sensitive where corruption comes in all forms. Corruption is always an issue; there is always room for suspected case of corruption. Prominent for its extra remuneration in a short period, but it’s an ultimate delinquent practice. Contemporary issues of corruption in the construction industry are: Russia, the Sochi Winter Olympics when half of the budgeted amount was contented in corrupt building contract 120 days before the main event. The primary amount of US $12Bn (£7.5bn) had a critical rise of five time of its initial value that is US $51bn. To a further repost on May opposition figures Leonid Martynyuk and Boris Nemtsov drew attention on that more than $30bn of the financed project was mislaid in "kickbacks and embezzlement" to Valdimir Putin’s acquaintances, and the game tuned to be a "monstrous scam". (Guardian 9th Oct. 2013) Qatar is no favourable on this side despite being the full-bodied country among the Gulf Countries Council (GCC), five years since they we awarded to by FIFA to host the 2022 FIFA World Cup, first time but we alleged for corruption in bribing officials in obtaining hosting rights. Numerous FIFA officials were arrested in May, when Swiss officials enquired deeply into Russia’s 2018 bid and Qatar’s 2022 bids. Moreover, according to a new report by Walker L. (2014) “Corrupt process of recruiting workers to Qatar” where employing semi-skilled and unskilled worker in Doha, Qatar pierced with “endemic Corruption” which is considered as an unscrupulous practices is the main switch that ignites in trafficking, debt bondage and forced labour. (Doha News, July 2014) The Arab News attested that with reference to a study conducted by the International Federation of Consulting Engineers proclaimed that ruling against 60,000 people for corruption charges are issued by Arab Countries.

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EU Countries are not to be ignored, with the help of a survey directed by European Commission were the result was dumbfounded, half of the investigation made declared the problem of corruption is alarming in construction sector. (The EU Anti â&#x20AC;&#x201C;Corruption Report, 3 Feb. 2014) The overwhelming earthquake of January 2010 killed above 300,000 people in Haiti, from collapsed structures. Measure 7.0 on standard scale which was powerful, the world 14th most powerful since 2000. Nicholas Ambraseys and Roger Bilham, with support of the research made stated that with the presence of the magnitude of corruption, expresses further than poverty about the consequences of earthquakes. It was also concluded that where corruption is powerful, that the magnitude given to a particular earthquake is exclusively devastating. The major reason of this wreckage is that bribes make it happens for building to be built without taking into consideration the codes and regulations, and it occurs in extremely corrupt societies. The cost of corruption is much more intense, its harsh effects do not bring down only buildings, but major pillars which contributes in the economic sector within a country. It clearly speculates that corruption destroys mutually physical capital and social capital. (The Globalist - By Bernard Wasow, March 10, 2011)

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1.5 AIM The aim of conducting this study is to identify present index of corruption and to find out the how the level or parameter of Corruption Perception in the Construction Industry can be determined with suitable methodology and how this can be implemented in construction projects.

1.6 HYPOTHESIS Hypothesis.1: Corruption is tarnishing the Construction Industry Hypothesis 2: Projects go wrong with the presence of corruption in the Construction Industry

1.7 OBJECTIVES In light to meet the objectivesâ&#x20AC;&#x2122; of this case study the successive outline shall be achieved: 1. To give a detailed explanation of various types of corruption in construction.

2. Recent scandals of corruption in the construction industry and their consequences.

3. Influence of illegal practices in construction industry.

4. The life of the construction industry in the coming years.

5. To examine on the ethics and code of conduct of professionals that binds corruption in the Construction Industry.

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2 LITERATURE REVIEW 2.0 The Literature Review will entails of the subsequent parts: 1. Corruption 2. History of corruption 3. Background Information of corruption in the construction Industry 4. Occurrence of corruption 5. Vulnerability of construction industry to corruption 6. The cost of corruption 7. The economic cost of corruption in construction 8. Quantifying the cost of corruption in construction 9. Type of Corruption in construction 10. The mechanism of corruption in construction 11. Dealing with corruption 12. Reporting corruption 13. Project Anti-Corruption System (PACS) 14. Anti-corruption reforms in construction 15. Corruption Perception Index 16. Bribe Payers Index 17. Facts and Figures of corruption in construction 18. Corruption and The Rent-Seeking Theory

19. Pareto Analysis

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2.1 CORRUPTION Corruption, is a word which has no globally accepted definitions, and is can be rendered in multiple way and exits in many form. Corruption is the exploitation of power achieved for personal interest – Transperancy International. Though corruption can further be illustrated by ‘the intention to corrupt’ or ‘necessary corruption’ and this is defines as true intent corrupt is the intention in receiving bribery of committing any action for personal profit, and necessary corrupt takes place to make things work out. Nevertheless, corruption is rendered as the abusing of position by public official in traditional system, but does not apply in private sectors. – Business Anti-Corruption Portal Corruption is an unscrupulous system used by an individual in order to acquire achievements over others. In this contemporary world, the corruption has an extreme influence which is impeding developments and in realising the democracy. Corruption has a significant influence on the development of a nation. Which consequently reduces that economic growth and decreases the government’s revenues, moreover builds an unequal society in the circulation of incomes and prosperity. A negative environment is generated with the presence of corruption, and it goes as stated by Shakespeare – “The best things corrupted become the worst”

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2.2 - HISTORY OF CORRUPTION According to Transparency International (TI) a non-governmental organization, corruption was observed as a taboo topic since early 1900’s, where it was first esteemed to be a business expense for tax filling and was moreover a spontaneous fund raising for multiple project. Corruption made an exceptional appearance in 1994 and where it started emerging on the world agenda. In 1995, Transparency International inaugurate for the first time the Corruption Perception Index (CPI), where it ranked 45 countries upon their corruption level which is present the public sector. This innovation of theirs triggered a tight competition among countries in lowering their results of the presence of being corrupt. This also made a boom between media and the public, where the awareness of corruption was raised. During the same period of 1995, the Secretariat of Transperancy International had started in being involved in organising the major event the International Anti-Corruption Conference (IACC), which gathered over 1,500 anti-corruption activists and professionals. Until 1996, an open debate was launched by Transperancy International where corruption was altered to rising matter of concern. The change in approach toward corruption prove to be positive where the new World Bank President had spoken of “cancer of corruption”. Denying the tax deductibility of foreign bribes, implemented with the assistance of Organization of Economic Cooperation and Development (OECD) which was firmly recommended by Transparency international. Following the publication of the Transparency International (TI) Source Book, reinforced the system in opposing corruption. By 1997, the anti-corruption movement had attained its utmost aim, where 34 members of Organization of Economic Cooperation and Development (OECD) moved forward on contending Bribery of foreign officials in International Business. These members came to a firm point to create compulsory law that discourage to conceal bribery by authorities. Long name but with simple concept. In the same year, the Corruption Perception Index (CPI) raised 85 countries mainly, Bulgaria, Canada, Finland, Germany, Hungary, Iceland, Japan, Norway, the United Kingdom and the United States were former states that indorsed the OECD Convention on Combating Bribery of Foreign Officials. The year 1999, came up with an innovative index the Bribe Payers Index (BPI) from Transperancy International and also with the implementation of the OECD – Anti Bribery Convection.

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Transperancy International moved even further in the year 2000 with numerous anti-corruption improvements. With the help and contribution of 11 major international banks, the establishment of the “Wolfsburg Anti-Money Laundering Principles”. In 2001, the first Global Corruption Report was launched, where the level of corruption around the world was evaluated. Intersection of corruption, transparency were targeted topics for the coming editions. The first edition of the Corruption Fighters Tool Kit showcasing 27 tools of anti-corruption was also hurled in 2001. In the Annual Membership Meeting in Prague, Transperancy International made a new declaration “vision, values and guiding principles”. 2002, the Council of Europe Criminal Law Convention on Corruption start delivering legal frameworks against bribery and money laundering, Global Organization of Parliamentarians against Corruption (GOPAC) was also formed in this year. In year the 2003, the Global Corruption Barometer, based on the public opinion on corruption where 10,000 people in 48 different countries responded on the impact of corruption. 2005 was a crucial year when 2,200 companies was involved in the scandal of Iraq Oil-for-food, which was the main headline, and where the United Nation Convention against Corruption (UNAC) was call upon, had necessitates 140 of its participants to reinforce criminal sanctions against a widespread assortments of corruption acts moreover to be able to collect illegal assets and to decrease the level of corruption. Identified by Transperancy international in 2006 that the poor was dreadfully affected by corruption, discontinuing corruption in water sector was its prime objectives, as over 1 Billion people was deprived from drinking water and almost 3 Billion has to undergo poor sanitation situations. 2010, Arabs call for help and cries for a transparent society due to excessive corruption issues. Climate change and corruption intersects in year 2011, billions of dollars were spent to help countries in need, and issues of corruption that weaken the determination in helping developing countries we highlighted. 2013, a taboo topic in early 90’s made the world crumble in nearly 20 year. – Transperancy International, 2013

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2.3 BACKGROUND INFORMATION OF CORRUPTION IN THE CONSTRUCTION INDUSTRY “In the developing world, trust in the construction industry has been hampered as a result of a broken regulatory system. Transperancy remains one of the key drivers for restoring faith to the industry and improving the image of construction as a whole” Rockson Dogbegah, CIOB Ambassador

The Construction industry is among the leading industry that contributes in the economic and financial behaviour in a country/state. (Abdullah et al, 2004). This major industry is under threat of corruption. (Jong et al, 2009). The practice of corruption in the construction industry, can be established at any phase of the project, any the consequences of its presence can proved to be overwhelming on economic factors, the built environment, on delivery of the particular project and the performance of companies. (Sohail & Cavill, 2006; Muray & Meghji, 2009). The behaviour of corruption in construction can turn multiple process into waste such as, tender expenses, inflation in project costs, economical aspects, blacklisting, risk of reputation, and uncertainty in tendering, fines (Stansbury, 2005). The practice of corruption in the construction industry is prospective, the reasons and factors of this situation are that government are impervious or distorted, the society encourages in a rise because lack of contribution of anti-corruption bodies. Likewise, corruption brings down the ethical values of professional and tarnishes the industry. “Corruption threatens the integrity of markets, undermines fair competition, distorts resource allocation, destroys public trust and undermines the rule of law.”- (G20 Anti-Corruption Action Plan)

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2.4 OCCURANCE OF CORRUPTION Corruption takes place because of entities who opt for unlawful practice in order to best exploit personal gains or business profits. Nevertheless, for those entities to be engaged in such activities, the must be encouraging situation that exists, and not conditions that discourage them in entering such delinquent acts. This parts brings on and assess factors that creates the willingness in being corrupt.

2.4.1 Motivational factors of Corruption 2.4.1.1 Voluntary There are cases, where the corrupt act is accepted voluntarily with a thoughtful intention in order to obtain or win contracts, claim unjustified payments or compensation. - (Taylor, 1994)

2.4.1.2 Levelling the playfield For instance a contractor may offer bribe in order to obtain a particular project, if he considers that his competitors may be doing so, otherwise he may also inflate theatrically the contract price or claim by stipulating that the project funder will reduce the claim or contract price and this issue is known as the â&#x20AC;&#x153;level of playing fieldâ&#x20AC;? - (Zhou and Tan, 2012)

2.4.1.3 Extortion There are also situations where bribe can be extracted massively from the funder. For illustration, a contractor can be obliged to offer bribe in order to be paid for the work done otherwise an architect also engineer may also claim for bribe to produce premium design in design and built projects.

2.4.1.4 Normal business practice Some corrupt activities are considered as normal practice and do not form parts of illegal offences, for examples inflating claim or contract price, offer bribery in obtaining tenders or permits and

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2.4.2. Factors which facilitate corruption at project level 2.4.2.1 The absence of anti-corruption systems in projects Almost all projects have very few or do not have a proper resource which would enable to detect, discourage or even prevent any corruption act, the are some method which are used but are only able to be a watchdogs during tender stage and they are not convenient to focus on every aspect of corruption during projects phases. There are proper anti-corruption systems which are imposed by governments to be effected by project funders, owners and they are critical conditions, and if these systems is applied the rick of corruption in a project would certainly decrease will all its associated links.

2.4.2.2 Infrastructures projects its nature The complexity, structure, number of phases, size, assortments of skills required, individuality of projects, concealed works by other materials or items, poor transperancy, scope of government contribution, fraudulent act and extortion form part of the nature of a project and these are challenging to avoid or to distinguish issues and they are particularised as follows:

2.4.2.2.1 Contractual structure The structure of projects are quite complex which consists of multiple links, where each of them has their own contractual documentation with precise risks and attached complications. The project financier is linked to the project consultants and contractor, the contractors is linked to sub-contractors to whom it may sub-contract the main phase or parts of the projects, the sub-contract tor may sub-sub contract his works, and the sub-sub-contractor may on his behalf also sub-sub-sub contract the works in order to procure materials or equipment and this chain can straightforwardly has an excess of 100 contractual links each of the own responsibility of works. This links can eventually create a suitable opportunity to offer or pay bribes in obtaining permits, tender, contracts, certifying extension of time or fraudulent claims, inflation or claims, collusion and fixing of prices.

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The diagram illustrates the multifaceted structure in relation to the construction of projects:

Table 2 - Source: GIACC, Global Infrastructure Anti-Corruption Centre

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2.5 VULNERABILITY OF CONSTRUCTION INDUSTRY TO CORRUPTION Projects in the construction comprises typically of an enormous quantity if contestants in the compound of developments. For instance, the construction of a gigantic development, in particular the client will either be the government or from a private investor. It begins from the planning stage, where feasibility reports, including environmental impact assessments and other related resources are conducted by consultants and engineers which are contracted by the client. Furthermore, funds are raised by negotiations of agreements with banks and international financial institutions. The key development contract is the awarded by the client to the main contactor after proper tender procedures all in accordance with the tender regulations. The main contractor is often a private sector, who may hereafter subcontract the delegated work according to his instruction and further to this the sub-contractor may also sub-contract his part of work to an another sub-contractor. Equipment’s and materials are then procured by the sub-contractor or the latter may also award the contract to a potential sub-contractor in providing these services. (Global Corruption Report, 2005) The following are the key structures that makes construction susceptible to corruption: (Niell Stansbury, Global Infrastructure Anti-Corruption Centre; February 2016) 2.5.1 The project’s scope Projects in construction have a wide range and cost billions, thus it is much more at ease to hide bulky kickbacks and claims which are inflated in huge projects than that of smaller projects.

2.5.2 Individuality of construction projects Key projects in the construction industry are one-off and this fact makes the cost of the project’s to be compared with other, thus hiding bribes and cost inflation are easier.

2.5.3 Government contribution Almost all infrastructure development are apprehended by governments. Moreover, private projects as well requires the approval by the government for planning and agreement for final product usage. This is where several licence are required, and this is control by both national and by local government. These control are often inadequate by local government, and further to this government official take advantage of the commercial complexity and the structural development in extracting bribes with help of their own position and power.

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2.5.3 Contractual links As outlined above there are multiple differences in the structural factor of projects, and the contractual links can without any trouble have above 1,000 links, and each of these links depends particularly on other link in this chain. Further to this each and every link creates an opportunity to pay or receive bribes in the process of contract award. In addition each item in work and each payment makes it a suitable opportunity to pay bribes in return of the following: certification of work excessively, certification of works with defects, certification of extension of time of certification of paying before agreed period.

2.5.4 Phases in projects Construction projects usually have multiple phases, each and every phase during construction requires the involvement of diverse managementâ&#x20AC;&#x2122;s teams for the handing over of accomplished developments in order for the contractor to start the upcoming phases. Though the contract is awarded to a single contractor, in normal practice he will sub-contract the works, which will further generates complication in managing the projects. 2.5.6 Projectâ&#x20AC;&#x2122;s complexity The correlation enclosed by the contractor and the proceedings is normally ambiguous, due to the complexity of projects. Cost overruns and mismanagement are the main reasons where people working on projects disagree upon negotiations and meetings, thus this make a firm excuse to claim payments, though the claimed payments is not justified and this also relies on poor design from architect and mismanagement of professionals. Complexity in projects creates a suitable environment to pay bribes as decisions taken, the effect and consequences on cost will have enormous impact on the developments.

2.5.7

Irregularity of projects

Due to shortage of project, winning tenders are prime objectives of contractors thus giving kickbacks will be for their own benefit and increase profitability and also the survival in the construction industry and this encourages contractors to bribe.

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2.5.8 Hidden works Almost every works turns out to be concealed with another components, for instance brickwork by plastering, structural steel are concealed by the casting of concrete, roof by cladding and so on. The construction industry depends on professional to verify these work and certify before these types of works is covered, but when it concealed it will cost a huge amount and be tough to audit if the work was done with the proper requirement and standards. And this cost encourages to provide works with defects or to provide low-graded materials, and to certify that the work was in accordance and as specified by official by paying bribes.

2.5.9 Embedded national welfares Both local and national companies have embedded in the specific market, and the position of these company have been glued by bribery. And in order for international company to enter and work with the have to pay bribes to these companies.

2.5.10 Privacy as ethics In construction culture it is quite hard to locate the culture of transperancy. When public fund is spent the sum contracted for a specific project is concealed. The secrecy of commercial development have a superiority over public welfare. Inspection of records or paperback barely expose mismanagement. . 2.5.11 Construction industry is not governed by a single society Professional, trades and specialist contractors in an inclusive assortment that construction industry combines together and this may lead to fluctuating standard skills, misunderstanding and reliability. Architects, Engineers, Surveyors, Accountants are the professionals, machines operators, scaffolders, masons, mechanical and electrical specialist are the trades. The skills of the contractors varies from excavation to installation of insulation systems. Each and every professional comprises of a specific professional association and code of conducts with also includes the level of implementation if these codes of conducts.

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2.5.12 Deficiency in due diligence Whether a project will go forward or not is determined by the financing society and this these society have and influential impact on the amount of funds involved in major developments. These funds are normally provided by commercial banks and global or regional societies, whilst the government on his behalf sponsored exports credited agencies who have the capacity in financing international uncertain projects. Lack of meticulousness in the contestants support the ground for corruption in taking place.

2.5.13 Cost of reliability The number of people which is employed by the construction industry is prominent, either accept the state of affairs or make no challenge in altering it. Misleading and kickbacks are deep-seated that they are taken to be a culture. And further to this taking bribery as a normal routine, many companies have the intention in including it in the contract price. It is a fact that business associated with the construction industry pay bribes recurrently or they are involved in deceptions that makes the contract costly for any company to take action with truthfulness as the company might lose the contract to a less competitive contractor. And as the outcome, these companies are found in rancorous circle of corruption. - (Sasol/Qatar award us$675m construction contract, 2003) ‘Germany was classed as an “active” enforcer of foreign bribery by Transparency International’s 2012 Progress Report on the OECD Anti-Bribery Convention, on the basis of 176 settled cases of foreign bribery and 43 investigations in progress. This has made Germany the most active enforcer within Europe.’ – CIOB Report ‘Managing bribery and corruption in the construction and infrastructure industry’

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2.6 THE COST OF CORRUPTION In order for us to build a world free from corruption, initiatives are essentials to be undertake. US $ 4 Trillion is the amount of money spent by the government annually on procurement starting form erection of dam and schools, moving forward in establishing services of waste disposal, government developments and construction chosen one after the other by surveys’ as this sector is susceptible to corruption, and this includes both developed and developing countries. This cost will continue to climb unless overwhelmed and corruption is stopped. The most terrifying aspect of this cost will at the end cost lives. 150,000 is the number of people who were killed in earthquakes and that in 15 years only. “Earthquakes don’t kill people; collapsing building do” – (James Lewis) Building collapse, this is so as buildings and planning regulations are not in accordance and these regulation are easily bypassed because of bribes paid to officials, where Turkey and Italy are great examples. Long-term growth rates is reduced and the development is also slowed down with the presence of corruption. In other works, corruption is so powerful that it has a devastating approach in emerging countries. The economic sector is not only spoilt but is furthermore shaped. Fertile ground for corruption is plough, by means of huge capital investment in projects for the social and economic developments and these are piloted by corrupt government officials, in doing so these officials disregard the health and education programmes which are more important. The poor endures the hardest impact, where these corrupt money could have been invested appropriately on the wellbeing and schooling platform to build a better tomorrow and sustainable future. In addition corruption also controls public funds towards ecological damaging developments. “Monuments of Corruption” – (Peter Bosshard); points out successful projects where environmental standards where not in accordance and were bypassed by means of bribes, Argentina the Yancyreta Dam (US $ 15 Billion), Philippines the Butaan Nuclear Power Plant (US $ 500 Million), Uganda the Bujagali Dam (US $ 1052 Million) are examples of projects which has been alleged of corruption i.e. money has been altered inappropriately. Corruption results in repetitive frameworks ventures with conceivably grievous ecological outcome.

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2.7 FINANCIAL CHARGE OF CORRUPTION In order to evaluate the economic impact of corruption, it is imperative to comprehend why the construction sector is being continuously graded the most corrupt sector. There are two features that make construction prone to corruption and there are the unique capital that is capital intended for a development and the network which is the governmentâ&#x20AC;&#x2122;s regulation requirement. - Paul Collier Professor of economics at Oxford University & Anke Hoeffler research officer in the economics Department, 2009 2.7.1 - Understanding cost and construction Taking cost and construction in account, this may result to complete loss and dreadful destruction of projects which is caused by corruption and all associated or activity in connection with the proposed project. While such loss and damages are assessed, the following factors are to be taken in consideration: a. Corrupt activities in relation or which has taken place with the project b. Stakeholders has gone through an massive loss c. Type of loss and damages that the stakeholders has gone through d. Assess the amount of loss or damage that the stakeholder has suffered in relation which each corrupt activity The amount of sum loss or damage lost by the stakeholder is implausible to be identifiable or assessable, and this is the cost in relation with that project, therefore taking that cost in consideration and calculation the cost is a potentially impossible process. â&#x20AC;&#x201C; (GIACC, updated 6th November 2014, published 1st May 2008)

2.7.2 Types of activities that causes loss and damage. A rage of corrupt events may causes loss and damage which can take place or in relation with a project. And these actions includes: misuse of funds, bribes, money laundering, and nepotism, abuse of power, collusion, larceny, frauds, alliances and extortion. And the one who carries these unethical activities are mainly official form the governments, employees of projects, projects funders, contractors, tenders, consultants, and suppliers, who may act on their own responsibility or on the behalf or any organisation associated with the project. Corrupt activities takes place right from the beginning of a project throughout its life span that is until the project is completed

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2.7.3 Types of loss and damage that an individual stake holder will suffer. Stakeholder will go through intensive loss or damage whether they are guilty or victim of corrupt activities, there are cases where the stake holder is the unique to bear all the loss incured and or in other cases the stakeholder may lose only part of the money invested. There are some instances where stakeholder may pass the loss and damage to other stakeholder, and this must be taken into account that the loss incurred is not counted as double for which they have incurred but to contemplate the ultimate decrease.

2.7.4 Loss and damages to the project holder 2.7.4.1 Theft of project funds The sum intended for funding of the project may be detoured by frauds, and types of situation arises where there is lack of control that ensures the proper usage of that funds.

2.7.4.2 Wastage of project funds Wastage of project funds arises when there is fraud in selecting projects or when proposed design is not viable for the intended use of the project. Otherwise, this also happens when the project is overdesigned and requires sophisticated schemes. A project which collapse is when corruption takes place when the project was being structured or executed.

2.7.4.3 Increase in price Corruption may cause the project holder to pay overstated price for the project. For instance is when designing projects, extreme design may be produce in order to minimise the list of suppliers or to give preferences to some supplier. During tender stage where there is on or more projects contract contractors may offer bribes on obtaining contract, where the contractor may include the cost of bribe paid in contract sum thus inflating the price and there is no such genuine completion amongst and during project construction there is an extravagant contract price.

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2.7.4.4 Increase cost of maintenance, repair and replacement Due to corruption defective work is produced and handed over, which have been concealed by officials who have been bribe in certifying such works. Further to this these defect works will necessitate and inflation in the cost for maintenance, repairing or replacement,

2.7.4.5 Supplement financing cost Financing cost is increased when the financing fees and the interest charges rate is higher than the market rate.

2.7.4.6 Bribes paid by private sector to project owner This situation arises when the owners is bound to pay bribes in obtaining certification such as planning permit, environmental and health and safety conditions, to escape from tax, or the purchasing of product and in order to proceed with the intended project. And is bribe paid are borne by the clients or consumers of the end product.

2.7.4.6 Reducing operating profits A project with defect will result in prevent it from operating or to operate to its maximum.

2.7.4.7 Harm caused to business opportunities and investments Reputation of the project funder may be tarnished, and this occurs when the owner has failed to comply with anti-corruption measure or to work the project with transperancy and this result to loss of confidence with partners and investors.

2.7.4.8 Fines for engaging in criminal liability The project holder may be sued for not implementing proper anti-corruption measures, or he himself has been engaged in corrupt activities.

2.7.4.9 Legal fees When a project has incurred loss due to over design, inflated claims, fraudulent financing or fraudulent approval of tender or claim the project owner may wish to undergo legal actions in order to recover losses made, and such proceeding consume colossal amount of money which might not be recovered.

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2.7.5 Loss and damage incurred by construction companies, consulting and engineering firms and suppliers 2.7.5.1 Bribery by successful tenderers during tender stage During tender stage procurement executives, claim for bribes or even contractors offer incentives in order to obtain tenders, thus contractor who wins will include the bribe paid in the contract sum and will consequently be paid by the project holder.

2.7.5.2 Bribes paid by abortive tenderers If a contractor pays bribe and consequently he is unable to win the contract then he will have ultimately bear the price paid as bribe and this is the cost of corruption.

2.7.5.3 Wasted tender cost On the ground that tenders are corrupt and contractors who are buying such tender have almost possible chances in winning the tenders and such tender cost are wasted money borne by the contractor.

2.7.5.4 Inflation of contract operating cost Operating cost may climb if a contractors chose on his own responsibility or is bound to pay bribe in order to obtain permits, receive contract payment, claims are fraudulently approved or having environmental and health and safety regulation removed and to conceal defective works, the cost of bribes are recovered by fraudulent inflation of contracts claims borne by the project holder.

2.7.5.5 Loss of payment or and profit A contractor may lose profit or payment, if for instance he refuses offer bribes in order to obtain permissions, this will consequently result in interruption of project from which the client may claim for liquidated damages, or he may also undervalue works done by the contractor which reduces his profit and loss in payment.

2.7.5.6 Termination of contracts Contract may be terminated by the project holder without any prior notice or compensation if a contractor is attested in having won the contract through corruption process and this will have a repercussion in the future as a loss of confidence.

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2.7.5.7 Loss of work Some ethical contractors undertake decision not to participate in corrupt projects, and this decision may withdraw the contractor wholly form the sector, and this results to loss profit which could have been made by the contractor., and thus this should be off-set from other works or projects.

2.7.5.8 Losing business opportunity and investment due to loss of status Loss or reputation is a great risk as for contractors who take part in corrupt projects and this takes place when the latter have failed to comply with the anti-corruption measure within his own company and consequently it will be challenging in obtaining other fruitful projects due to loss of assurance and integrity of the contractor.

2.7.5.9 Prohibition a loss of business opportunity If a contractor and any staff within his organisation is implied in corruption offence, then the contractor may be liable to be prohibited temporarily or permanently from participating in any government project.

2.7.5.10 Damages of public obligations If a contractor is responsible for the loss or damage incurred by the stakeholder or project holder on a corruption activity, the he may sue the contractor and claim for damages. The amount payable will be the cost of corruption made by the contractor be it is either he has claim for bribery paid by inflating cost or produce defective works.

2.7.5.11 Fines to be borne for criminal liability A contractor can experience criminal liability for multiple reasons, he may have on his own committed any act that results to corrupt activities, or instructed his staff to enter in fraudulent act, or failed to comply with anti-corruption regulations.

2.7.5.12 Legal fees The contractor may sue the project owner if he has deliberately approved defective works to the contractor and if any officials refuses to certify claims with receiving bribe the contractor may take legal actions and recover loss incurred. If whatsoever the contractor fail to imply anti-corruption measure, then he himself may borne legal fees while discussing legal actions and such amount is not recoverable and is payable by the contractor himself. â&#x20AC;&#x201C; (GIACC, 6th November 2014)

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2.8 QUANTIFYING THE COST OF CORRUPTION IN CONSTRUCTION It is a challenging task to provide an exact data of the cost of corruption in projects be at national or international level, and this is of the following reasons: 2.8.1 Deficiency of primary data in proving corrupt activities To quantify the cost of corruption, the following task shall be accomplished recognise and prove corrupt activities and to amount the extent of loss and damage that was caused by those activities. But primary data of proven corrupt events is difficult to obtain in most cases, thus these activities is concealed by nature which under any circumstance may never be disposed. Moreover no investigation or prosecution is conducted in most corruption cases, and even if these cases are prosecuted no sentence is pronounced. Further to this, these are example of corruption that may arises in construction projects: 1. Project funds larceny of 20% 2. Interest rates rises due to corrupt financing terms 3. Major projects contracts are over-designed 4. Major contract and sub-contracts in tendering process are obtained by bribery 5. Fraudulent Claims 6. Facilitations payments 7. Defective works are certified and approved by officials To be able to produce a consistent figure in to quantify the cost of corruption in any construction project, identification, investigation and prosecution and proof are key factor. But doing so is a tough task and need an enormous fund. 2.8.2 The struggle to quantify the identified loss and damage It is essential to determine the significance of loss, for each loss proved, which is quasi impossible. Taking for instance the amount of tender which have been unsuccessful in winning contracts for a reason that an opponent has offer bribe, the loss of a project holder has incurred because of bribery that has been offered by a contractor, over design of power station resulting in public lost should the cost of electricity be lower by 5 % or 10%?, approval defective road works causing damage by floods, resulting in financial loss of a public funds. The difficulties stated are normally clarified at project level and further to this in order to be able to quantify the losses an accurate data would be required on all projects either national or international level scale. Thus, the results obtained from any attempt made which quantifies the cost of corruption will be a rough assumption or postulation.

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2.8.3 Cost of Corruption in construction projects an estimation Attempts are made in order to estimate the losses made in relation with the difficulties in calculating the loss in corruption. Thus this estimate on the average percentage of the projectâ&#x20AC;&#x2122;s value is hereinafter assumed as bribe paid to win contract. For instance, in Country X, bribe can be normally 5% of main contract price, this estimate is then carried forward in order to provide a global figure of loss of corruption with the use of an alike percentage of the total expenditure in infrastructures, which is an estimated value obtained. Though this does not illustrate the full cost of corruption, but is a part of the equation. The bribe of 5% paid is included in the contract price, and form part in the contractual chain, and this 5% is carried forward by the sub-contractors who also includes bribes on their contract price. Thus the loss of money to bribes on awarding contracts is higher than 5%. The following diagram illustrates the apparent bribe paid on main contract was 5%, an overall loss of US $ 16 Million is being lost due to bribery, which could have been 16% of the contract price

Contractual Links in Construction

Sub-sub-sub-sub-contractor

Contract price including bribe (i.e. other Contract price excluding sub-contract price + own price + bribe) bribe ($) ($)

0m + 20m + 5% bribe = 21m

20m

Sub-sub-sub-contractor

21m + 20m + 5% bribe = 43.05m

40m

Sub-sub-contractor

43.05 + 20m + 5% bribe = 66.2m

60m

Sub-contractor

66.2m + 20m + 5% bribe = 90.5m

80m

Main contractor

90.5m + 20m + 5% bribe = 116m

100m

Table 3, Source: GIACC â&#x20AC;&#x201C; Global Infrastructures Anti-Corruption Centre The example show above shows that each sub-contractor is appreciative in paying a 5% bribe, which is hereinafter carried forward in the contract price, which is borne by the project owner be it is in private or public sector. Nevertheless, if ever this step is not viable then the sub-contractor he himself will endure the cost of bribe. This examples caters only for bribes paid during award of contracts, and not for other type of corruption such as approval of defective works, obtaining permits by bribery, corrupt over designing, ECTâ&#x20AC;Ś

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2.9 TYPES OF CORRUPTON WITHIN THE CONSTRUCTION INDUSTRY 2.9.1 Bribery Bribery is an incentive given for an illegal action, unscrupulous otherwise rupture of trust by offering, promising, giving, accepting or soliciting of an advantage. These incentives can be in multiple forms; mainly gifts, loans, fees or others advantages. - (Transperancy International) According to a report by Chartered Institute of Building (CIOB), with a ration above 1:3 professionals have been given or accepted incentives. The survey was made with 700 Construction Professionals, where the key purpose of this was to determine whether corruption is still apparent in the UK construction industry, furthermore which practices are believed to be corrupt and which fragments of it is prone to corruption. 50% of respondents concluded that corruption is still present in the construction industry, more surprisingly 35% stated that on at least one occasion they have been offered a bribe or inducement. “This valuable report shows that despite the introduction of a tough new Bribery Act in 2010, corruption is still common in the construction business in this country. That is unacceptable.” “The law enforcement agencies need to work with the professional and business organisations to educate companies about their responsibilities, and they must act against companies that break the law.” Graham Hand, coordinator of the UK anti-corruption forum

2.9.2 Nepotism Nepotism is whereby a key personnel of a company or organization exploits his power or authority to favour a family or friend, even he is not competent. The tolerance level for nepotism is a social construction that needs to fit rather than clash with dominant cultural values - (Osland & Bird, 2000; Weick, 1995)

2.9.3 Facilitation Payment A slight amount of bribe give to speed up of grease the process, in order to secure routine act where the financer has legal entitlement. – (Transperancy International) For example a contractor paying bribe for claiming works executed which is under his contract.

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2.9.4 Conflict of Interest Conflict of Interest refers to the dilemma in choosing between demand of the given status and duties for personal interest. RICS on his behalf views conflict of interest as an obstruction of an individual or a firm in order to act independently in finest for the client’s interest or otherwise conflict of interest takes place when any individual from a firm are:

1. In a substituting role with the intention in being in competition at the same time for instance advising client and contractor at same time. 2. Challenged with conflict obligations which is owed to different clients taking for examples acting for more than two parties at the same time in having personal benefits 3. Lessen or disturbance of obligation and duties toward client in relation with burden or commitments (RICS – 15 Jul. 2015)

2.9.5 Money Laundering (Layering) Money Laundering is referred as the practice of obscuring of illegal or fraudulently gained money by implementing it into genuine financial activities and thus give them the impression to be legal. (Transperancy International) SOUTH AFRICA – Johannesburg, corruption charges was set out on Tuesday 4th August 2015 by a judge in contradiction of South African opposition demagogue Julius Malema, where he has been accused of money laundering and frauds in line with government contracts. swissinfo.ch BAZIL - “Brazilian construction giant in money laundering probe” - (swissinfo.ch). April 2014 an ongoing investigation begins nicknamed “Operation Car Wash”; Swiss Federal Prosecutor attached Odebrecht SA the Latin America’s largest construction company, in money laundering investigation vis-à-vis Petrobras Brazilian Oil Giant. Swiss Federal Prosecutor’s Office in Bern has been working in parallel with Brazilian authorities since March 2014 in order to investigate the allegation made of bribery and money laundering with implicates 300 Swiss Bank accounts owners. $400 Million in resources is frozen by Switzerland throughout 30 banks, 30% of the amount that is $120 Million is on exile to Brazil. Odebrecht have offered bribes to Petrobras official, which were paid through Swiss Bank accounts, and in exchange Odebrecht obtained inflated prices for contracts. – One of the Brazilian largest corruption in history. – SwissInfo CHINA – United Stated Federal Reserve blows China Construction Bank. The U.S Fed instruct China Construction Bank Corp to report on the shortage of how they are dealing with money laundering by setting out an appropriate agreement framework. A period of 60 days has been given by the U.S Fed.

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In order for China Construction Bank Corp. to acquiesce a platform in dealing with money laundering, for outstanding amount of customers and to set up a program to identify apprehensive transactions which shall be then reported to U.S. law enforcement authorities – (CNBC -Report by Douwe Miedema; Editing by Susan Heavey)

2.9.6 Political Contribution A support given by government, made by cash of gift by a second or third party in order to secure jobs or contract. The President of United States Mr B. Obama “is committed to improving our federal contracting system, making it more transparent and more accountable,” noted on 20th April 2011 by the White House press secretary Jay Carney. It also states that the President is enlisting an exclusive order to recruit companies who are seeking government contracts in order to disclose assistance given during political campaign. Contractors who are currently involved in projects with the government of United States shall move forward to disclose all political contributions. Wade Bass – Baker Donelson, ConstructionRisk.com Report, Vol. 13, No. 4 (April 2011).

2.9.7 Procurement Procurement is a techniques set out to achieve goods and services by any individual, company or organisation at an early stage to the awarded contract. - (Transperancy International) Taxpayers’ money are spent annually by government on properties and amenities. From roads to skyscrapers these projects are of high contract value, intricate and of high importance. The procurement of materials and services by bodies’ amounts to 15% - 30% of the gross domestic product. With this amount of money being feasted, creates a suitable environment for corruption opportunities. Taking public contract’s value in consideration, 10% to 25% on average might dissolve in the pocket of corrupt. It has been estimated by the European Commission that €120 billion (about US$163 billion) is the amount of money mislaid by the presence of corruption – This sum is practically the annually budgeted amount of the European Union. This method of corruption results in damaging the environment a finally costs lives. This is so as the publics’ basics are not taken into consideration when these buildings are being built and implemented in the society.

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2.9.8 Tax Evasion Tax Evasion is an illicit practice by non-payment or under payment of taxes, this is made by declaring less income or gains of the amount earned to tax authorities. This leads to criminals or civil legal process/penalties. According to an Asian private banking experts, Singapore should not take major steps in taking out the industry out of glooms, since they have taken the layer of the world’s firmest growing wealth from Switzerland. “Singapore has already taken its first steps towards tax transparency, but it needs to do more,” Marcovici told swissinfo.ch

2.9.9 Cartels In most jurisdiction cartel is an illegal offence, and this act occurs when more than two societies have unlawful collusion during bidding process or while pricing of materials or equipment’s. Prevention of higher price level collusion shall be avoided if there’s presence of sincere completion and this is the fundamental principle of these offences that organisations shall abide. Joint venture is an example of cartels, where an association between two parties is indorsed and unveiled to customers. Taking the context of construction projects in account cartels includes:

2.9.9.1 Bidding Cartels Who will win the tender is already agrees and the winner can on his behalf submit a higher price, moreover these is no such candid race in tendering. 2.9.9.2 Fee of Loser’s Bidders tenders on project honourably in order to win tender. Nevertheless, an additional amount is included in the tendered amount without prior notice or knowledge of the client or customer, and futher to this the additional amount is share among losers by the tender winner as compensation.

2.9.9.3 Fixing of price There is genuine competition but the competitors’ agreed not go beyond a certain agreed price per unit.

2.9.9.4 Price covering To be stay in client’s or customer tender list for contractor who are demanding, they obtain the price of their competitors which they inflate in order to lose.

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2.10 THE MECHANISM OF CORRUPTION IN CONSTRUCTION The practice of corruption is present at each and every phase of construction projects be during design stages, awarding of contracts, construction, and even during maintenance services after the project’s completion. (MACMILLAN et al., 2002) 2.10.1 Corrupt activities during planning and design Overdesign and overpricing are outcome of the presence of corruption during design stages. In order to get projects approved it is necessary to provide incentive, without which it would been impossible for the project to pass the planning stage. On the other hand, a project could be collapsed due to critical assessment of environmental impact assessment, as a result bribe have hot been offered. Almost all project needs approval to progress, and which are normally controlled by one or more officials, which requires bribes to proceed, and further to this contractors offer bribery to official in order to get planning plan approved. And there are cases where exchange of bribes to promises are made for future works.

2.10.2 Corrupt during award of contracts 2.10.2.1 Bribery Bribery is the most practised from of corrupt activity in relation to the awarding of contracts, this involves when a contractor offer bribes to a consultants or client’s representative’s in order to win contracts. There are cases where contractors offer bribes, to be advised by the consultants on the best bidding price.

2.10.2.2 Agents Agents is an intermediate between the contractor and the client, which is appointed by the contractor and the agents have contact with the client’s representatives’, the agent is paid on percentage basis of the total amount of contract after the contract has been awarded to the contractor and part of the percentage goes to the client’s representative. Payment is effected in foreign currency or to bank account to conceal bribes or the contactor state it as the scope of works of the agent’s.

2.10.2.3 Joint Ventures & Subsidiaries When contractor’s bids on foreign contracts which from parts of joint ventures, and the contractor make arrangements for agreements which are to be executed and further to this bribes are paid as commission for countries which minimum risk to discover these commissions.

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2.10.2.4 Sub-Contractors Bribe may be claimed through a contractor which is as disguised subcontract works, for instance a subcontract can reach an agreement with a contractor to provide materials and equipment’s to the contractor for an agreed payment, but the services will not be provided by the subcontractor or if provided it will be lower than agreed, then the claim amount will be carried forward to the relevant contractor a bribe.

2.10.3 Corruption activities during construction phases 2.10.3.1 Bribery Bribery does not halt after the awarding of contract, there are multiple activities after the awarding of contract that relates to corrupt issues have a significant financial impact on projects. 1. It is impossible for a project attain it completion without variation, project requires changes in design or in construction methods due to client’s intervention and these intervention results in variations which affect the contract cost. Therefore variation create a suitable environment for bribery to take place between contractor and client’s representative be it is the consultant, architect, engineer or project managers who are on their behalf responsible for certifying these variation. This produces an adverse effect on the cost which affect the whole cycle of the project and also affect the chain between the member of the projects in creating opportunities and offering bribes. 2. Delayed bribes obscured. Variations is the proper mechanism that conceals delayed bribes. A contractor can win tender being the lowest bidder without the help of bribery but with prior arrangement by bribing the client’s representative who will certify variation of larger amount. Since the is no competitions in variation it would be much more easier for the contractor to hide bribes during variation 3. Delays in projects. Almost every project have delays in being completed and this is very common, and the result may be as follows large variation, failure of sub-contractors weather conditions, or delays in procurement, and the cost of delays is a substantial issues as the clients can sue the contractor and claim for liquidated damages. On the other side if the client is at fault then the contractor may on his part claim additional delay cost and disruption from the client. The outcomes of this delay is prone to bribery, as the person who agrees on the time and cost may accept bribe.

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4. Concealment of low graded works. The quality of work produced in projects play an important role. Almost all works produced in a project is concealed by others, and it is challenging and costly to verify those works once there are concealed works. Thus by producing defective works or works not to proper standards can be easily certify or claim by bring officials. And those defects will be buried for years until any effect crops up.

2.10.4 Corrupt events during operational and maintenance services Upon the completion of any project it requires proper maintenance and operational services. The operational services requires consumables project. During contract is awarded and construction phases there exists multiple opportunities of bribery and at the same time bribe can be offered in order to win the maintenance and operation services. Normally in most project the cost of maintenance an operation exceeds the actual cost of the contract price of a project and at time the same contractor who erect those project are the ones who maintain and operate the project, thus the bribe paid to win this contract that will cover up by time. And in hi-tech project the contractor that has constructed the project is the only one who is expertise and capable in maintaining the project. This issues monopolises the project cost this making it difficult to compare with other similar projects, thus increases the opportunity in bribing official. â&#x20AC;&#x201C; (http://www.giaccentre.org 22ND Mar. 2016)

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2.11 DEALING WITH CORRUPTION Dealing with corruption is a challenging task, starting from design and planning to the completion of a project corruption is always present and the risk of committing an act of corrupt activity is always high - (12th Global Fraud Survey, Ernst & Young, 2012) Major factors to implement in construction industry to deal with corruption developed by the AntiBribery and Anti-Corruption Policy (ABAC Policy). 1. ABAC agenda shall be the prime factors to take into consideration by senior managers 2. A risk assessment in corruption shall be undertaken in order to be able to identify and comprehend risk of corrupt activities. 3. After the completion of the risk assessment, the general bribery and corruption acquiescence shall be reviewed to be able to identify the risk and regulate if it is proportional to the programme. 4. Existing methods and training programmes shall be reviewed and to ensure is the target is achieved at higher stage where corruption is likely to occur. According to a survey induced by Ernst & Young, 2012 of their 12th Global Fraud Survey 55% of respondent were responsive to anti-bribery training within their organisation. 5. Due diligence to be conducted on contractors, sub-contractors and official working under projects shall be monitored frequently and complies with the ABAC Laws 6. Clear contracts between contractor and all representative of the projects which complies with ABAC procedures with audit right to review contract records including the payments and expenses of consultants and all other officials which shall be directed by senior organisations. 7. Making uses of an ongoing proactive investigating data and of forensic data analytics which will enable to detect any type of corrupt activity. 8. Expenses such as corporate entertainments shall be monitored and particular attention shall be given to specific recipients. 9. Inspection of major employees, contractor and other officials in unknown companies, based on a report by Global Fraud Survey 59% respondents have failed to check background of third parties suppliers.

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2.11.1 The eight-step program developed by Ernst and Young

1. Conducting risk assessment program The risk that the companyâ&#x20AC;&#x2122;s operation carries, the grade of business it produces and its involvement with government officials, how its make uses of its intermediaries and representatives, the country of origin of the company, the environmental regulatory under which it works. Identification of policies that shall be able to lessen corruption risk and assess its fortes and its flaws. 2. Developing corporate anti-corruption policy Companiesâ&#x20AC;&#x2122; shall issue a clear and definite policy where any act of corruption will not be borne and the policy shall also include guidance on how to report an act and the consequences on bribing officials, receiving or giving gifts, payments facilitations, concealment of funds record. 3. Implementation of anti-corruption policies and controls Implementation of special form and recipients of payments made or received. Undertaking audits to cross-check accounts on regular basis. Develop proper process of company employeeâ&#x20AC;&#x2122;s travels and entertainments. Provide guidance on charitable gifts and ensure that it ends up to the right persons. 4. Implementation of anti-corruption financial controls High-rick countries and high risk project shall be implemented with additional financial control systems. Supporting and proved documentation shall be provided including delegated authority shall be implemented to increase transperancy and accountability. Transactions and payment systems of officials shall be reinforced. 5. Provide anti-corruption trainings For countries that have a made a history in corruption training imperative, for local to be able to comprehend that cultures of differs from countries to countries. Moreover the training given shall be prescriptive and rational, where emphasis shall be given to the requirements of the Foreign Corrupt Practices Act (FCPA) and the UK Bribery Act including examples of the red flags or challenging events that the employees can face in the future. The training provided shall be straight forward to understand and put in practice and shall be based upon the roles and duties of employees and must also be updated for upcoming personnel within the company.

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6. Program monitoring Assessment for compliance by identification of any potential violation shall be able made by companies which is an effective audit for anti-corruption. Moreover an anti-corruption certification form shall be designed for staffs, which will be assessed from time to time. And the test shall be in accordance with the company anti-corruption policy which the staffs shall abide and have clearly understood and face the consequences in committing any corrupt act. 7. Anti-corruption procedures in mergers and in acquisitions Suitable due diligence on probable attainments shall be conducted by companies to prevent any jeopardize of inheriting liability for legal actions. 8. Re-assessments and modification of program Risk assessment in corruption shall be piloted on a recurrently so as to ensure that the anti-corruption program set-up is progressing and will be able to tackle upcoming challenges both in office based and in construction site.

2.11.2 Austria, Vienna in September, 2009 The anti-corruption policies and measure of Fortunes Global 500 was shaped further with the launching of new publication issued by United Nations Office on Drugs and Crime (UNODC) with cooperation of PricewaterhouseCoopers. UNODC Executive Director Antoine M. Costa states that "There is no one-size-fits-all set of rules to prevent corruption, but businesses should not go below international standards contained in the United Nations Convention against Corruption" Furthermore Mr Costa also states that "The private sector has a lot to lose from corruption, and has considerable leverage to stop it" and â&#x20AC;&#x153;This will be a golden opportunity to strengthen corporate responsibility in line with the world's only universal anti-corruption instrument"

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2.12 REPORTING CORRUPTION A regular report shall be made in anti-corruption measures, with guidance with TI – Transperancy International and these are the following information that shall be published by a company 1. Programs of anti-corruption in details; 2. subsidiaries, affiliates, joint ventures and related entities; 3. Financial accounts of projects; 4. One international language shall be implemented in corporate website; - (Transparency in Corporate Reporting; Assessing the World’s Largest Companies (Transparency International, June 2012), p.6.) Subsequently the information will depends on the size of the activity and the nature of the company. Additionally in accordance to the Bribery Act and Foreign Corrupt Practices Act of 1977 (FCPA) – (Annex 3 – FCPA ACT), will assist investors to better understands risk which are involved in countries with weak government and has larger contact with corruption and bribery. - (US Securities and Exchange Commission Final Rule Release on Disclosure of Payments by Resource Extraction Issuers NO. 34-67717; FILE NO. S7-42-10 at 145.) Yet, these rules may also assist in enlightening payments issued that breach the anti-bribery legislation and indicates the level of government intervention. These principles are flexible and result dedicated, permitting members who are involved in construction project to be tailored with the complied procedures. For instance procedure that binds them in managing health and safety issues and the implementation and monitoring properly the anti-corruption measures appropriately.

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2.12.1 WORLD BANK GROUP â&#x20AC;&#x201C; INTEGRITY If any complaints has to be made in regards to fraud, corruption collusion or obstruction in or against World Bank Group financed projects or staff, online forms are available as the Integrity Complaint Form (Attached in online form sample in Annex 1). Where sufficient information shall be provided and a summary in detail of the raised concern with supporting documents. - Integrity World Bank Group 2.12.2 UNESCO UNESCO of his part, have options li email, facsimile, in person, telephone or mail to report or any investigation that concern corruption, fraud or abuse which has occurred or occurring. The following are detail that must be provided when reporting such activity; when, who, what, where, why and how. These cases are handled strictly within the UNESCO staff and are monitored. (Attached online form sample in Annex 1)

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2.13 PROJECT ANTI-CORRUPTION SYSTEM (PACS) â&#x20AC;&#x201C; (GIACC Centre) Project Anti-Corruption System (PACS) is intended in assisting construction project in preventing and detecting any corrupt events, and is furthermore a cohesive and wide-ranging systems. This system make use of multiple anti-corruption measure which can furthermore be implemented in project management and have consequently influences on project at all phases including its participants and at contractual levels, 2.13.1 Necessity of PACS Corruption in the construction is an intricate issues, 1. Corruption may take form of extortion, deception, cartels, collusion, bribery, money laundering, abuse of power and other related criminal offences. 2. Can occur at any phases of project, planning and design stage, tender, operation and maintenance or financing projects. 3. Involvement of government, project financer, consultants, engineers, architect, contractors, joint-venture, partners, agents, suppliers and so on. 4. Take place at any contractual structure. 5. It hides those who are normally aware of or are part of these corrupt act and are unwilling to report such act, thus making difficult to detect these corrupt events.

2.13.2 Practising PACS Private owners, funder, or government may or can implement PACS are as follows:

1. PACS Standards list have a number of measure which are recommended, government or projects owners can make comparison with their implemented measure to that of PACS Standards. 2. If a projects owners or government do not have anti-corruption measure, the latter can implements PACS Standards wholly or part of it, and can improve the implementation of that measure but shall be in accordance of the applied trials. 3. PACS Standards have been applied with the motive to attain a high range anti-corruption safeguarding. Nevertheless, is implementation shall be personalised as per projects according to the size and value, where full measure can be designated to major projects and part or simplified measure to smaller projects. 4. Almost all PACS Templates are tailored for the implementation of anti-corruption procedures.

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2.13.3 PACS Standards PACS Standards consist of 12 standards, which recommends and defines anti-corruption strategies to be integrated in the management of projectâ&#x20AC;&#x2122;s construction and are as follows:

PS 1: Independent Assessment:

In order to monitor and make assessments corruption issues in project and generate suitable reports an independent evaluator shall be recruited. In cases where there is larger projects with complex links, that assessors may be engaged for this specific project, on the other hand for smaller projects assessors may be engaged in multiple projects.

2. PS 2: Transperancy: Government or Project funder/owner shall unveil maximum information on project to public or on website regularly which shall be comprehensible and accessible.

3. PS 3: Procurement: Rational and transparent procurement procedures shall be implemented by project owner which will not provide further an inopportune benefit to any individual or society engaging in projects.

4. PS 4: Pre-contract Disclosure: Applicable details shall be disclosed between project owner and contractor at tender stage in order to divulge any act of corrupt activities, and main contractors should implement the same procedure with each tenderer of sub-contractors.

5. PS 5: Project Anti-corruption Commitments: Anti-corruption commitment should be embraced by project owners and major project participants where main types of corruption will expressed and will force them in implementing anti-corruption measures. Moreover, solution shall be proposed in an event of breach of commitments.

6. PS 6: Funder Anti-corruption Commitments: Anti-corruption commitments should be comprised between project owner and project funder i.e. banks, investors, guarantor, where main types of corruption will expressed and will force them in implementing anti-corruption measures. Moreover, solution shall be proposed in an event of breach of commitments.

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7. PS 7: Government Anti-corruption Commitments Governments units shall take relevant steps to minimise corruption events by their officials in allotting approvals, licences and permits, senior officers shall be recruited to whom anti-corruption acts can be reported and these events shall be publicise and with a list of fee and time-scale relevant to government measures.

8. PS 8: Raising Awareness Awareness among staff should be nurtured of the risk and loss incurred by corruption: 1. Anti-corruption rules included in all projects and site offices 2. Promoting anti-corruption training 3. Implementation of favours and openness policy

9. PS 9: Compliance Compliance manager should be assigned, who will be able to be engaged in taking realistic steps in order to ensure compliance anti-corruption commitments with the company, its management and staff.

10. PS 10: Audit Financial audits procedures shall be carried out, in order to make sure that all payment generated by project owner are made appropriately to authentic societies for authentic payments. Moreover, technical design, specification and construction shall be carried out by technical audits to ensure that these key features are in accordance and providing value for money. Reports should be generated by auditors who on their part must be aware of risk of identified deficiencies caused by corruption.

11. PS 11: Reporting In order for staff, independent assessors, and public to report any event of corruption on a project, a benign and active system should be setup.

12. PS 12: Enforcement Breach of anti-corruption measures should be reinforced by civil enforcement for example, contract termination, disqualifying from tender, damage and sacking form employment and risk of criminal executions included imprisonments and prosecutions.

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2.14 ANTI-CORRUPTION REFORMS IN CONSTRUCTION In order to minimise dereliction, corruption and fraud, an ample effort is being dedicated and focused on procurement stage. Procurement stage must me incorporated with, multiple factors suggest Transperancy International (2006). Primarily, publicised of contracting opportunities. Secondly, awarding of contract must be made to companies and individual who have abide to contract requirements and have the finest proposition. Third, the rules that govern the procurement should be fair and clear. Fourth, a transparent process should be adopted and finally public staff must be accountable. â&#x20AC;&#x201C; Contemporary Issues in Construction by George Ofori To fight corruption on projects, four principles is suggested by the German Agency GTZ (2010) and are as follows: accountability, voice and participation, transperancy and integrity.

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2.15 CORRUPTION PERCEPTION INDEX - CPI Launched in 1995 Corruption Perception Index (CPI) has been broadly accredited in bring over the issues concerning corruption on the international policy programme. With the annual report of the CPI, where countries are rated on a score basis of how corrupt their private sector is, the index forced governments in taking actions and holds influential messages. Unfortunately this index cannot apprehend discrete hindrance, but it do grasp the opinions of analyst and experts around the world. Methodology of Corruption Perception Index (CPI) â&#x20AC;&#x201C; the following index was issues with the support of seven surveys: 1. Three Reports from World Competitive Report from the Institute for Management Development in Lausanne (1992-1994) 2. Three Reports from Political & Economic Risk Consultancy Ltd, Hong Kong (1992-1994) 3. One Report from 1980 survey from Business International, New York

Three figures are set for each country, the primary step is the overall rating out of 10, where ten states the country is clean from corruption and zero states that the country conquered by corruption. None of any countries targeted scores zero or ten. A second column draws the total survey made in which the country is involved; i.e. the higher it score the assessment made is more reliable from 2 to 7. Finally comes the third column where this indicates the altered ranking. The higher the number the higher is the deviation of opinions, the lower it is the impeccable is the concordance.

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2.16 BRIBE PAYERS INDEX - BPI Bribe Payers Index, is an exceptional device that captures resources of international bribery and which focus mainly on bribes which is remunerated by private sectors. Bribe Payers Survey from which data is drawn for the Bribe Payers Index. Business executives are asked to fill out survey “In your principal lines of business in this country, do you have business relationships (for example as a supplier, client, partner or competitor) with companies whose headquarters are located in any of the following countries?” – Transperancy International, 2011 A list of 28 countries are presented to respondents, for example given answers is as follows ‘they do have business relationships with companies headquartered in a country’, and further to this they were asked “How often do firms headquartered in (country name) engage in bribery in this country?” Subsequently, answers are rated on a 5-point scale, where 1 corresponded to ‘never’ and 5 to ‘always’, and then this is further adapted to a 10-point scale system. The index redirects the views of foreign bribery. The BPI of a country is generated by an average scores that the respondents have rated that country, average score is intended to one decimal place in order to classify the 28 countries. A standard deviation calculation is then made for generating an indication of the degrees of agreements in between participant scoring a country. Smaller standard deviation equals to closer agreement. With the use of standard deviation, a confidence level of 90% is calculated, which shows a precise value of the BPI score which is most likely to fall. Narrower confidence level equals to precise score.

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2.17 FACTS AND FIGURES IN CONSTRUCTION Multiple projects mainly government owned outlines are ruled and manage under strict privacy pricing and the norms within the industry encourages projectâ&#x20AC;&#x2122;s cost elements (Items prices) to be undisclosed, even if money of public is spent. This states that concealment is superior to public interest. This type of culture in the construction industry do not only help and assist corruption but makes it indiscernible. - Stansbury (2005) Construction Magazine (CM, 2013), claims that corruption and immoral conduct of professional through construction events, is a routine amongst contractors. Unethical practices includes falsification of identity, inflating working hours of labour (time sheets). For example Balfour Beatty, a key construction in the United Kingdom, reported by CM (2013) that an operation manager who was imprisoned in October 2012 for 3 years, where they were alleged for having defrauded ÂŁ165,000 by approving payments to counterfeits works who were not engaged within the company. Furthermore, prominent cases of corruption in construction are as follows: scandal in South Africa the Lesotho Highlands Water Project (LHWP), 2010 runway expansion swindle the Abuja Airport, project larceny in Botswana the Unik Construction Engineering (pty) Limited water, fraud case of Laxmi Narayan Construction India, China the Hunan Construction Engineering Group Corporation, BRUN-WAY Construction Inc. in Canada, and the most current in Sochi, Russia the Winter Olympics. These corrupt cases contains similar links, and these major investments schemes, unique production and the involvement of large firms. Moreover these projects are rare; hence the affinity of large construction firm hunting these projects are high and wining contracts like prove to be acute and viable for contractor who are involved in, thus an incentive is provided for bribery and corruption events (Darroch, 2007).

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Involvement of government as client or industry regulators may contribute to firm in being involved in corrupt practices and government are definitely are 70% clients of construction and infrastructure project around the globe and private schemes also requires the approval of government for planning permission and for the payment of end-user products (Stansbury, 2005). On the other side Transperancy International, TI (2006, p.30) also states that â&#x20AC;&#x153;numerous permits are often required, where there is insufficient control on how government officials behave. Thus, their power combined with the structural and financial complexity of the projects makes it relatively easy for officials to extract bribesâ&#x20AC;?.

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2.18 CORRUPTION AND THE RENT-SEEKING THEORY The preliminary theory which was practiced to measure corruption is known as rent-seeking theory, and this method is used to compare corruption to lobbying and claims that lobbying is the involvement of resource wasting for preferential treatment. Various forms of pursuing of preferential treatment is considered by traditional rent-seeking theory, by the decision of public for example economical promoting and corruption as rent-seeking. Based on this perception, Tullock (1980) promulgated a model, which states that rational investment through rent-seeking is present until the the input of marginal is lesser that the likely outcome which it generates. Consequently, a formal model can be determined from the results of market equilibrium. Assumption is also made on the winning of competition, where the probability for is (pi) and is proportional to the investment carried by a firm in rent-seeking (xi), in order for the statement to be valid organizations are equally add up to on, only a firm’s probability reduction is undertaken by its competitors probability funds. (Lambsdorff (2001, p.102)) Thus, the result in a case of a number of firms:

xi- the expenses for rent-seeking of organisations (i). Result of equilibrium can be determined easily once the assumption are implemented that the firms are risk-neutral, acts equally and do not influence their competitors’ level of rent-seeking (xj). Maximising the expected profit, E (PiR–xi), then requires:

“Function (1) can be solved by introducing symmetry, xi = xj = x. the Cournot-Nash-equilibrium is the outcome and follows the optimal level of rent-seeking:”

Consequently, for rent-seeking the expenses (S) sum up to:

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Assumption for the model, the number of firms (n) linking with the competition increases, increasing of the dominant rents and more resources (S) are dedicated to resources waste in lobbying. This states that waste is increased with the presence of competition (Lambsdorff, 2001). Nevertheless, this theory does not end corrupt even in firm involved, and further to this Thompson (1993, p.369) states “corruption is bad not because money and benefits change hands, and not because of the motives of participants, but because it privatises values aspects of public life, bypassing processes of representation, debate and choice”. This declaration is hence supported with Leff’s (1964) ‘Economic Development through Bureaucratic Control’, corruption is a substitution of weak rule of law. Without the implementation of corruption, businesses’ wheels may halt exceptionally, predominantly and perhaps in under-developing nations. And this proposal is further explored by Houston (2007, pp.325–42). Yet, the dominant fact must me that corruption is bad, immoral and in most cases an illegal act.

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2.19 PARETO ANALYSIS Pareto Analysis or Pareto Principle is also known as the 80/20 rule, where assumptions are made that the majority of problems (80%) are dogged by few significant issues (20%). This principles was developed by an Italian Economist Vilfredo Pareto, revealed this while conducting a study by end of 18th century, where it was established that 20% of Italian population owns 80% of assets. Pareto Analysis helps in identifying main issues i.e. 20% which leads to 80% of problems which need to be elucidated. Whilst the key issues are identified, diagnosis methods for instance Ishikawa diagram or fishbone analysis can be adopt in order to identify and state the root of these problems. Pareto Analysis in Practice To be able to implement Pareto Principle the following are basic to be met: 1. Measuring â&#x20AC;&#x201C; Identifying problem and documentation in table 2. Defining in order of importance 3. Marking or scoring of recorded issues 4. Grouping of identified problems 5. Action time

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3.0 METHODOLOGY Research is a method adopted to acquire outcome of problems. Analysis of these results navigates around quantitative and qualitative research mainly known as the methodologies. This report is mandatory to include a methodology which will further allow, the implementation of an ample of research methodologies and to collect and investigate material. The adopted and suitable method for this report is a survey questionnaire, which comprises of interviews, and existing information. The implementation of both primary and secondary methods were opted. 3.1 Research Design The research design is mainly dedicated in apprehending the aims and objectives set out for this study. The methodologies adopted for this report is further elaborated as follow in Figure 3.0

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3.2 Flow Chart of Methodology Topic Discussions

Research for materials for Literature Review

Primary Sources E.g. Reports, Publications, Theses, Unpublished Manuscripts, and Company Reports

Secondary Sources E.g. Newspapers, Government Publications, Books, Journals, and Internet

Tertiary Resources E.g. Bibliography, Citation Indices, abstracts, Encyclopaedia, and Catalogues

Evaluation of Materials

Interviews

Questionnaires

Data Analysis & Discussions

Conclusion & Recommendation

Table 4 - Flow Chart of Methodology

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3.3 Primary Data Primary data for this report was directed by means of questionnaires.

3.4 Secondary Data In order to achieve maximum information for the literature review, thus materials were collected from newspapers articles, reports, magazines, books, publications and other data which are related to corruption and the construction industry. Secondary data were gathered form international level in order to form conclusion on present material related to, that was not limited to academic literatures. Moreover documentation on different types of corruption and associated links was sine-qua-non.

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4.0 DATA COLLECTION This part of this report is focused on the explanation of the procedure to be used in order to achieve the objectives set for this project. The methodology opted for is further detailed and discussed and is as follows 4.1 Sampling Design The population of people working in the construction industry is approximately 9.831 Million in 2014 stated

the

Bureau

Labour

Statistics

(www.bls.gov/cps/cpsaat14.pdf)

and

http://www.bls.gov/cps/cpsaat18.pdf), thus this reassessment will be based accordingly to respect with population size. The following formula is used as calculation;

n≥

Zα/2

x p (1-p)

B Where the following are denoted as: n

= sample size

Zα/2 = critical value p

= proportion of successes

B = degree of precision

Postulation made: Confidence Interval = 95% (equivalent to α value of 0.05) Precision Level = ± 5% Z =1.96 at 95 % confidence interval (Standard Normal Distribution curve) thus,

n ≥ (1.96/0.05)2 x (0.25) ≥ 384.16

H A

Sample size (n) = 384

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4.2 Data Collection Questionnaire were set out to respondents during the mid-march 2016 to a number of Contractor, Architect, Structural Engineer, Quantity Surveyors, Building Surveyors, Project Managers, Students, via mail. 200 questionnaires were set out by mail to 8 different countries (United Kingdom, Seychelles, Mauritius, Malaysia, Australia, India, Albania, South Africa (Durban & Johannesburg) and Scotland (Edinburg)) where out of 200 questionnaires there were 82 respondents making 41% of respondents. The questionnaire consisted of closed ended questions which eased the undertaking of the respondents. The core reason for opting this method of data collection is rapid, cost effective and generates flexible in terms of people to be surveyed.

4.3 Design of Questionnaire The survey is premeditated easily understood and precise and comprises of: 4.3.1 Yes / No 4.3.2 Rating scales & Likert scales with precise rating ‘Extremely common’ to ‘not common at all ‘and ‘Very Corrupt’ to ‘Not Corrupt at all’. 4.3.3 Multiple Choice Questions The questionnaire consists of eighteen (18) questions in total. 4.3.4 Ethical considerations Ethical consideration on the confidentiality of data provided by respondents are fundamental while conducting this report. Thus, in order to assure, and to increase their level of confidence in participating in this survey and to certify that the information provided is genuine and precise, ethical consideration shall be taken I consideration. A covering letter was attached to the questionnaire assuring the confidentiality of each and every respondents. **Refer to Annex 3 for a blank questionnaire and covering letter.

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4.4 Structured Interviews The sampling method incorporated for interviews was a non-probability and purposive sampling method. Where interviewed professional have a working experience of 10 to 25 years and surveys comprises largely from private and semi-government institutes. The interviewees were based mainly from (United Kingdom, Seychelles, Mauritius, Malaysia, Australia, India, Albania, South Africa (Durban & Johannesburg) and Scotland (Edinburg)). Where respondents were asked about their on “Corruption in the construction industry”. The respondents were communicated via mail, phone and the social network ‘Facebook’. 1. “Difficult to identify, easy to underestimate” - Building Control Officer & Project Liaison Officer, Hull City, UK 2. “Corruption is an act of immoral professionals” -

Director of Consulting Firm,

Johannesburg, ZAR 3. “An alternative for easy money” - Senior Quantity Surveyor (Contractor), Mauritius 4. “Corruption is the stress-free method of practice” - Senior Architect & Project Manager, London, UK 5. “Corruption helps to build….” - Building Surveyor, Durban, ZAR 6. “ A practice that will kill construction and others” – Director of Building & Landscaping Contractor, Edmonton, UK 7. “Corruption is the modern way for easy life” – Quantity Surveyor, Mauritius 8. “Normal practice for professionals, misfortune for common people” – Lecturer, Albania

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5.0 ANALYSIS & FINDINGS General This section comprises with data collected from survey made from questionnaires received from the participants and thus analysing the report which was generated by the respondents. The percentage response is 41%. â&#x20AC;&#x153;if measured appropriately; within the construction industry a 25 to 30% response rate is considered acceptableâ&#x20AC;? - Easterby-Smith et al, 2006

Categories of firms and clients involved

Aggregate of survey questionnaires sent

Aggregate of effective questionnaires received

Percentage of Reply obtained (%)

Key Firms in Construction

111

41.44

Companies and partners

42.18

Governmental Organisation

36.00

Total

200

41.00

Table 5: Categories of respondents and valid questionnaires The key criticism was generated from the pilot questionnaire and the report is as follows: does this study accounts answers based on rumours from interviewees, and assumption made from facts with are uncertain or which are involved in corrupt acts. The fact that this subject is sensitive and respondents may be doubtful in giving correct answers must be imperatively taken in consideration. With these factors the questionnaire was redesigned and states clearly for the interviewees to be able to give their opinions on the finest knowledge and personal experience acquired.

C H A P T E R 5

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Questionnaire Analysis

5.1 GENDER OF RESPONDENTS

Female 22%

Gender

Male 78%

Figure 1 Respondentâ&#x20AC;&#x2122;s Gender Figure 1 concluded that this survey comprises of 78% which form parts of male and 22% are female respondents.

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5.2 LEVEL OF EDUCATION

LEVEL OF EDUCATION Post-Graduate 20%

Others PhD 0% 9% Diploma 27%

Graduate 44%

Figure 2 Educational Level This section deals with the educational level of respondents, from which 44% possesses a degree, 20% post-graduated, 27% have acquired a diploma whilst 9% of participants hold a PhD. Respondent having a secondary educational level were not taken in account.

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5.3 NATURE OF COMPANY CURRENTLY WORKING

NATURE OF COMPANY 45 40

40 35 29

30 25 20 15

13 11

5 0 0 Client

Architect

Consultants

Services Engineer

Contractor

Others

Figure 3 Nature of company 40% of respondents comprises of Consultants (Quantity surveyor, Project Managers & Building Surveyors). Architects on their side represents 29%. While the Engineers have scored 13 %. On the Client side is represented by 11% and 6% also represents Contractors. No sub-contractors, or suppliers answered making them the least represented group by 0%.

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5.4 AGE GROUP

AGE GROUP 45 40 40 35

30 25

20 15 10

0 19 - 24

25 - 40

41 - 60

Above 60

Figure 4 Age group This section deals with the age groups of respondents, from which 40% of participants are between 25-40 years, 31% representing age group of 41-60 years, 23% express 19-24 years and 6% above 60% which may be considered as retired professionals.

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5.5 YEARS OF WORKING EXPERIENCE

WORKING EXPERIENCE 45 39

35 30 25

20 15 10

8 6

5 0 Below 5

6 – 10

11 – 15

16 – 20

Above 20

Figure 5 Years of working experience From the above bar chart which represent the working experience in, 39 % of respondents have a working experience between 11 - 15 years, 25% between 16 - 25 years, while 22% represents a working experience of 6 - 10 years, 8% with 5 years, and 6% of respondents having an experience of above 20 years.

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5.6 SECTOR INVOLVED

SECTOR INVOLVED Other

6 11

Consultancy Educational

Legal

Facilities Management

4 16

Architect and Design Surveying

Engineering

Construction

23 0

Figure 6 Sector of involvement This part shows the sector from which the respondents were involved, where the maximum was from construction (Contracting, and on site) representing 23%, while 22% from Surveying, on the third place is the Architect and design, 11 % representing Consultancy, whilst 10% are from the Educational sector, 6 % represents Others and Engineering, 4% from Facilities Management and 2% from legal officials in constriction.

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5.7 LEVEL OF EMPLOYMENT

EMPLOYMENT LEVEL Other

Unskilled Manual

Skilled Manual

5 1

Clerial or Administrative Other Professional

18 23

Supervisor Junior Management

Company Director / Senior Manager

12 0

Figure 7 Employment level 41% consist of junior management (may be referred as architect, engineers, M&E Engineers, Quantity Surveyors), whilst 23% are supervisor form construction mainly and 12% were companies Directors or Senior Managers who were involved in this report.

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5.8 PRESENCE OF CORRUPTION IN THE CONSTRUCTION INDUSTRY

PRESENCE OF CORRUPTION IN CONSTRUCTION Not corrupt at all

Some kind of corrupt

Fairly Corrupted

Corrupted

Extremely Corrupted

36 0

Figure 8 Presence of corruption 36% of respondents have a strong feeling that the construction industry is extremely corrupted and 26% believes that corruption is flourishing. Whilst 16% feels that the industry if fairly corrupted and a decrease of 2% suggest that some kind of corrupt activities is present in construction. With research literature conducted, although the construction industry has observed a decrease in corruption events in 2006, 65% respondents claimed that the level of corruption has increased since 2011 stated by Transperancy International Barometer 2013. According with research made, corruption is predominant within construction.

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5.9 LEVEL OF CORRUPTION IN CONSTRUCTION STAGES 5.9.1 Design & Planning Stage

DESIGN & PLANNING STAGE Not at all corrupt

Not very corrupt

Moderately corrupt

Very corrupt

10 0

Figure 9 Design & Planning Stage 5.9.2 Tender Stage

TENDER STAGE Not at all corrupt

Not very corrupt

Moderately corrupt

Very corrupt

16 0

Figure 10 Tender Stage

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5.9.3 Awarding of Contracts

AWARDING OF CONTRACTS Not at all corrupt

Not very corrupt

Moderately corrupt

Very corrupt

Figure 11 Awarding of contracts

5.9.4 Construction Process

CONSTRUCTION PROCESS Not at all corrupt

Not very corrupt

Moderately corrupt

Very corrupt

Figure 12 Construction process

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5.9.5 Variation

VARIATION Not at all corrupt

Not very corrupt

Moderately corrupt

Very corrupt

Figure 13 Variation

5.9.6 Sales of Tender Documents

SALES OF TENDER DOCUMENTS Not at all corrupt

Not very corrupt

Moderately corrupt

Very corrupt

Figure 14 Sales of Tender Documents

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5.9.7 Claims

CLAIMS Not at all corrupt

Not very corrupt

Moderately corrupt

Very corrupt

Figure 15 Claims

5.9.8 Final Account

FINAL ACCOUNT Not at all corrupt

Not very corrupt

Moderately corrupt

Very corrupt

Figure 16 Final Account

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5.9.9 Operation and Maintenance

OPERATING & MAINTENANCE Not at all corrupt

Not very corrupt

Moderately corrupt

Very corrupt

Figure 17 Operation and Maintenance

5.9.10 Offering Bribes to Obtain Planning Permission

OFFERING BRIBES TO OBTAIN PLANNING PERMISSION Not at all corrupt

Not very corrupt

Moderately corrupt

Very corrupt

45 0

Figure 18 Offering Bribes to Obtain Planning Permission

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5.9.11 Employment of Illicit Workers

EMPLOYMENT OF ILLICIT WORKERS Not at all corrupt

Not very corrupt

Moderately corrupt

Very corrupt

Figure 19 Employment of Illicit Workers

5.9.12 Offering Bribes to Obtain Tender/Contracts

OFFERING BRIBE TO OBTAIN CONTRACT/TENDER Not at all corrupt

Not very corrupt

Moderately corrupt

Very corrupt

Figure 20 Offering Bribes to Obtain Tender/Contracts

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5.9.13 Leaking Information to a Preferred Contractor/Bidder

LEAKING INFORMATION TO A PREFERRED BIDDER Not at all corrupt

Not very corrupt

Moderately corrupt

Very corrupt

Figure 21 Leaking Information to a Preferred Contractor/Bidder

5.9.14 Certifying Defective Works

CERTIFYING DEFECTIVES WORKS Not at all corrupt

Not very corrupt

Moderately corrupt

Very corrupt

Figure 22 Certifying Defective Works

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5.9.15 Certifying Larger Variations

CERTIFYING LARGER VARIATION Not at all corrupt

Not very corrupt

Moderately corrupt

Very corrupt

Figure 23 Certifying Larger Variations

5.9.16 Producing Fraudulent Timesheets

PRODUCING FRAUDULENT TIMESHEETS Not at all corrupt

Not very corrupt

Moderately corrupt

Very corrupt

Figure 24 Producing fraudulent timesheets

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5.9.17 Producing Fraudulent Invoices

PRODUCING FRADULENT INVOICES Not at all corrupt

Not very corrupt

Moderately corrupt

Very corrupt

Figure 25 Producing fraudulent invoices

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5.9.2 GRAPHICAL REPRESENTATION ON THE LEVEL OF CORRUPTION STAGES IN CONSTRUCTION

35.00% 30.00%

GRAPHICAL REPRESENTATION OF CORRUPT EVENT IN CONSTRUCTION 29.53% 25.29%

25.00%

24.12% 21.06%

20.00% 15.00% 10.00% 5.00% 0.00% VERY CORRUPT

MODERATELY CORRUPT

NOT VERY CORRUPT

NOT AT ALL CORRUPT

Figure 26 – Graphical Representation The graph represent the percentage of corruption presence on construction from very corrupt to not at all, it can be concluded that above 50% of respondents’ states that the presence of corruption in the construction is raving. And 24.12% states that the industry is have a low level of corruption, whilst 21.06% believes that corruption is not present in construction. This claims that corruption issues is very alarming in construction and further to this an ample of measure must be implemented in order to minimise risk at every stage in construction processes.

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5.9.3 PARETO ANALYSIS - LEVEL OF CORRUPTION PERCEPTION IN STAGES OF CONSTRUCTION

Item No.

Construction Stages

Very Corrupt + Moderately Corrupt

Cumulative Count

Cumulative Percentage (%)

Certifying larger variation

79.00

9.63%

Offering bribe for planning permission

79.00

158.00

19.27%

Producing fraudulent timesheets

74.00

232.00

28.29%

Offering bribe to obtain contract/tender

70.00

302.00

36.83%

Construction process

67.00

369.00

45.00%

Producing fraudulent invoices

65.00

434.00

52.93%

Operating and Maintenance

58.00

492.00

60.00%

Sales of tender documents

55.00

547.00

66.71%

Final account

55.00

602.00

73.41%

Awarding of contracts

44.00

646.00

78.78%

Certifying defectives works

40.00

686.00

83.66%

Variation

39.00

725.00

88.41%

Tender stage

38.00

763.00

93.05%

Employment of illicit labours

29.00

792.00

96.59%

Design and Planning stage

28.00

820.00

100.00%

Table 6 - Cumulative Count & Cumulative Percentage

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PARETO ANALYSIS - LEVEL OF CORRUPTION PERCEPTION IN CONSTRUCTION STAGES 90.00

120.00%

80.00

y = -0.0006x2 + 0.0462x + 0.1294 R² = 1

100.00%

70.00

60.00

80.00%

50.00 60.00% 40.00

30.00

40.00%

20.00 20.00% 10.00

0.00

0.00%

Figure 27 – Pareto Analysis Right Y-axis of this chart show the percent of total l of corrupt events in construction stages. Whilst the left Y-axis illustrates the count of those corrupt event at each stages rated by respondents. The orange line exemplifies cumulative percentage, which helps to conclude the influence of each stages. The bars is the counts (the percentage of total) of each category.

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On this section, Pareto analysis was implemented due to multiple sets of data. As it can been seen on the above chart practically 80% of significant corrupt events arises from 10 stages in construction mainly; Certifying larger variation, offering bribe to obtain planning permission, producing fraudulent timesheets, offering bribe to obtain contract/tender, construction process, producing fraudulent invoices, operating and maintenance, sales of tender documents, final account and certifying defective works. These are key factor to be given prime attention, in order to minims impact of corruption in construction. Additionally, respondentâ&#x20AC;&#x2122;s form this survey concluded that corruption is present in all stages in construction starting form project design to tendering, and form contract awarding to operation and maintenance. Thus in order to combat corruption responses can be devised in three categories mainly rules and regulation, issues of people and issues in project process which is further elaborated in recommendation section. It might be quasi impossible to prevent corruption, but professionals institutions, governments and anti-corruption bodies can anticipate to implement reinforced strategies or under what condition these corrupt event are likely to occur.

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5.10 MOST CORRUPT ACTIVITY IN CONSTRUCTION INDUSTRY

MOST CORRUPT STAGES Don't know

All of the above

Operation & Maintenance

Project Execution

Pre-Qualification Stages

Project Planning

9 0

Figure 28 – Corrupt Stages The respondents, reacted that all the stages which are present within the construction industry are prone to corruption, concluded by 46% of respondents. Furthermore, 23% participants claimed that Pre-qualification stages are at risk, the main reason is that this stage needs particular involvement of evaluation and determination of the competiveness of contractor/ competitors who are undertaking projects. Thus, as a result contractors are shortlisted and are then called upon to tender process which must be executed in an open and rational process. There is an ample of corruption practices which takes place in during this particular stage, linking multiple competitors. This is inclusive of clients, contractors and also consultants who are the bids evaluator. And corrupt even takes place between companies who are planning to double deal other during this process and Project planning with 9%. Project execution has a rating of 11% Normally in most project the cost of maintenance an operation exceeds the respondents Operation is rated with 3% of being corrupt, this is so because of poor connection and completion being involved in this development, though according to literature review executed operation and maintenance, ‘actual cost of the contract price of a project and at time the same contractor who erect those project are the ones who maintain and operate the project, thus the bribe paid to win this contract that will cover up by time’ – (http://www.giaccentre.org 22ND Mar. 2016)

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5.11 RESPONSIVENESS OF THE PRESENCE OF CORRUPTION IN CONSTRUCTION INDUSTRY

AWARENESS OF PRESENCE OF CORRUPTION IN CONSTRUCTION Unsure 18% No 20%

Yes 62%

Figure 29 Awareness of the presence corruption in corruption industry This section related to the awareness of the respondents of the presence of corruption in the construction industry. 62% claimed that corruption in present in construction, this outcome states that respondent feels that there high level of corruption in corruption. This is not surprising as a fact, with the colossal sum of money being invested in projects and unique developments make construction the utmost industry for corruption to flourish. Contractors offer incentive, in order to stay in the run and thus increasing profitability and level of project in achieving, key developments. Consultants, Architect, Engines on their behalf encourages competitors in engaging in corrupt activities by evolving significant improvements in construction, thus increasing level of corruption and as well the awareness of upcoming professional to corruption. While 20% states that there is no corruption construction. That may also state that the construction industry is very familiar with corruption and is being treated as a normal practice, as no action in being implemented to minimise the risk in occurring. On the other hand 18% if respondents were unsure of the occurrence of corrupt activities in construction, this may be on the environment of work where these respondents were involved in, where there is minimum or no corrupt activities.

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5.12 INVOLVEMENT IN CORRUPT ACTIVITIES

INVOLVEMENT IN CORRUPT ACTIVITIES Yes 27%

Unsure 41%

No 32%

Figure 30 Involvement in corrupt activities The research states that 27% of respondents agrees there were involved in in corrupt activities, and further to this reasons may be as follows for the to be engaged in these delinquents acts: poor wages, a necessity for future survival, insecurity of employment, as for contractors increase profitability, stay longer in tendering phase in major projects. Rise in number of competitors, amongst contracts, consultants, engineers, architect and other professionals, thus involving in corrupt activities are being treated as normal practice. This may relates also to, un-reinforced Bribery Act, which is not being implemented by companies rules and regulations. Furthermore 32% and 41% of participants for this survey, claimed that they were not engaged and were unsure in being involved in corrupt activities, which may implies of lack of awareness of towards corrupt events or due to delicate subject, answer might be given accordingly.

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5.13 REPORTING CORRUPT EVENT, IF DISCOVERED

REPORTING UNCOVERED CORRUPT EVENTS Yes 5% No 42%

Unsure 53%

Figure 31 Reporting disclosed corrupt activities This survey states that 53% and 42 % of respondent claimed that they were either unsure or have not reported corrupt act respectively. It can be assumed that either these respondents does not feel secure, or they were director or senior of companies who were themselves engaged in corruption. This might be also due to the fear of being sacked for reporting such act or lack of awareness of how corrupt event are reported. Further to this awareness of must be raised in construction of how to report corruption, through governments, anti-corruption bodies and professional institutions and the witnesses must be secured while reporting. Moreover a 6% of respondents claim that they reported corrupt event.

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5.14 LEVEL OF CORRUPTION IN CONSTRUCTION INDUSTRY OVER LAST 5 YEARS

LEVEL OF CORRUPTION IN CONSTRUCTION Stayed the same 24%

Increased 46%

Decreased 30%

Figure 32 Level of corruption in construction industry over last 5 years 46% of participants states that the level of corruption has increased over the last 5 years, and 30% concluded that a decreased in corruption has been observed. Whilst 24% of respondents claimed that that corrupt activities stayed the same over the last five years. However this survey states that, there is no change in corrupt activities in corruption. The result obtained from respondents, are based on their level of experience and knowledge on corruption within the industry. It can also be concluded that respondent may have been involved in corrupted activities multiples times, within companies which are involved with high rating project, thus increasing the level of corruption over last 5 years on personal assessment.

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5.15 CONTRIBUTION OF PROFESSIONAL, GOVERNMENT AND ANTI-CORRUPTION BODIES AGAINST CORRUPTION

CONTRUBUTION AGAINST CORRUPTION

Yes 31%

No 69%

Figure 33 Contribution of professional, government and anti-corruption bodies against corruption In this wave of survey 69% states that no emphasis is being given to combat corruption, this implies that people who are engaged in construction industry are related to corruption even are tends to see it as a normal way of living as such this will be an encouragement from them for be engaged in this delinquent acts. The result of this is the lack of awareness and poor or no contribution of professional, government and anti-corruption bodies to combat corruption. This striking reflection may be opinion of respondent who are engaged in corrupt activity which were not uncovered or the answers relies on recent scandal within construction industry. 23% of respondents from this survey states that contribution are being made from professional, government and anti-corruption bodies in order to fight against corruption, there participant might be representatives from anti-corruption instructions or professionals who have implemented anticorruption regulation within organization to minimise risk or corrupt activities.

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5.16 REASONS OF CORRUPTION

REASONS OF CORRUPTION Don't know

Authorities in charge - law not applied

Corruption is being accepted as a normal way of living

Low income or poor socio-economic factors

Money is not spent in a trasparent manner

Light or No sentences for corrupt activities or no prosecutions

Government is ont enough engaged in fighting against corruption

Close relation between politics and government

23 0

Figure 34 Reasons of corruption activities 23% of participants concluded that close relation between politics and government and 22% states that government is not enough engaged in fighting against corruption and this can be supported with the fact that multiple permission is required form the government in order for project to be approved at multiple stages. Moreover, government owned project are award to preferred contractors and whereby the government official in charged obtains incentive in return. Infrastructure for instance dams, airports, school and other major development fare from government side where billions are financially feasted to these projects it is thus more stress-free for the concealment of bribes and inflation of claims. 12% of respondents claims that there are no prosecution or light sentences for corrupt acts. And a decrease e of 1 percent states that money are not spent in transperancy. 11% feels that due to low or poor socio-economic factor are reasons that encourages corruption event to take place, where people tends to make more money or to survive their daily needs thus engaging in corruption proves more profitable for them, on the contrary it can be also be assumed that this occurs due to insecurity of work placement due to a decrease of construction projects. 9% relies that corruption is a normal way of living and an ease method which further simplifies routes and process for project as well as for professional.

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6.0 CASE STUDY Beside questionnaires and data form interviews, this report takes into account five case studies of high level of corruption in order to deliver a comprehensive and concrete understanding how construction companies generates corruption events and are enclosed in the Table 7.0.

Table 6.0 – Case Study, Major Construction Companies involved in Corrupt

Case Company Name & Nature of Corrupt No. Activity

Bouygues Construction, Suez-Lyonnaise des Eaux & Vivendi, FRANCE

Year

Case Result

Behaviour of Company which Lead to Corruption

1998 to 2005

Funds of public were misled; ‘kickbacks’ public Trials and servant executives including engagement in complex Penalties contracts.

2014 to 2015

Fraudulent contract award, construction companies and public executive have unjustifiable clan, Still under significant level of contract promoting, appointing investigation immoral companies and tender process were influenced.

Scandal in Construction Contracts, multiple construction organizations, TURKEY

Dantata & Sawoe Ltd, ‘Kickback’ payment Nigerian Naira 1.30 Billion, involving government officers, NIGERIA

Jun-14

Subcontractors were awarded fraudulently by Still under government officials, misleading tender, project investigation estimates were inflated and periodic valuations were deployed

Involvement of State of Delaware in Balfour May-13 Beatty Plc, UNITED STATES

Proof of multifaceted contract agreement and fraud, Court Trials bidding process were lobbied, moreover excessive payment were effected from companies

C H A

Involvement of multiple construction companies in The Charbonneau Commission, Public Contracts scam, CANADA

Oct-11

Lobbying, contract prices, items rates were Trials and influenced, gratuitous dealings were exchanges Penalties between contractors and government officials

P T E R 6

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7.0 RECOMMENDATION In line with report conducted, is can be deduced that corruption is a negative protagonist in construction. Multiples strategies can be further developed in order to minimise or even eradicate this cancer of the flourishing industry. Delays, reduction in expenditure, growth which is generated by projects and quality of development and significant increase in operational and maintenance cost are examples of the presence of corruption in construction. Following to the issues raised by corruption in construction developments, efforts must be encompassed on the following in: 7.1 Raising of Awareness Substantial contribution for the reduction of corrupt events and larceny, with implementation of greater transperancy, thus by endorsement of greater transperancy covering action of executives will further generates hindrance for these officials to be engaged in corrupt activities and will also raise awareness of others. Moreover, data must be published for instance, after tender amounts (after tendering process), arrangement made through contracting, and annual reports on developments shall be made accessible to public, thus making it challenging for official to lead astray resources and to be limited according to budget. 7.2 Strengthening of Professional Institutions Major role are played by professional institutions, whereby the conduct of officials are regulates upon their decisions. More emphasis must be allocated on ethical values and standards for the construction industry. Moreover, to assure due diligence engagements by construction industry so as their officials, partners in joint ventures and sub-contractor engaged in major works is not engaged in corrupt events. There are four principles which are significant for professional must adopt and are as follows: reliability and trustworthiness, respectful life, being a leadership who is responsible, precision and veracity. 7.3 Provision for Multiple Site Supervision and Audits Implementation of multiples measure both at project and sectoral level in order to guarantee due diligence in supervising and executing of proposed developments, and must also include monitoring of corporeal outcomes and expenditures, proper surveying of labour and costs, endorsements for nonconformity and reinforcement of rules and regulations. Moreover, audits must verify accounts independently to minimise the minimum risk of corrupt activity.

C H A P T E R 7

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7.4 Reliability of Agreements To ensure that all parties who signed contract during bidding process must not be engrossed in any corrupt events, moreover they must give consent that their financial and other records to be inspected by independent external audits and to face consequences for breaching any of the agreement, and this must be applied for both private and public sector

7.5 In order to curtail and annihilate corruption the succeeding approaches are meant to be embrace and developed further:

1. Implementation of ethical construction culture and honest development. 2. Random selection of institution for random checks. 3. Process of construction must be supervised over the project life cycle.

7.5.1 Implementation of ethical construction culture and honest development In line with rules and regulations, construction sector is a significant factor to be given substantial importance. Even the most strict rules and regulations will not make any effect, this is because the root of corruption is the people. Thus, it is the ethical and cultural duty of people to create a clean and honest construction industry. More emphasis must be given by anti-corruption bodies and government to promote trustworthy and clean initiatives, both theoretically and morally, aesthetically and ethically. The following strategies must be considered while promoting these methods. 1. Commitment between government and political leaders are critical. 2. Vulnerability and identification of corruption risk factors must be assessed, moreover staff must be made aware of those risk and employees must be fortified to report the minimum act of corruption uncovered. 3. An atmosphere of trust and honest must be adopted by companies, form which staff can feel secure and safe to report such delinquent act.

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7.5.2 Random selection of institution for random checks. Reviewing officials conduct in construction is a key aspect, and this can be assessed by random or regular inspection. This scrutiny must be in detailed process where procurement process must be reviewed entirely on selected developments, and the advantages of random or regular check are: 1. No officials or companies linked with the projects will be victimised. 2. The nature of this process, will ensure that these officials are randomly selected and will thus avoid corrupt reports and bribing officials. 3. Supervisory resources will be maximised. 4. These check will eventually, identify easily the least misconduct of executives towards corrupt activities during construction process.

7.5.3 Process of construction must be supervised over the project life cycle. The role and responsibilities to the conduct of representatives who are involved in construction industry, must be monitored by independent supervisors. Theses supervisors plays a sine qua non role, and thy must not be dependant only on reports prepared by staffs, but must assure themselves to be able to assess and committed in identifying and recognising prone areas of corruption in construction process. Moreover, particular attention must be allocated to random and regular checks.

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7.6 Key Areas of High Corruption Risk No.

Area of Concern

Action

Use of unauthorised land.

Project design and land use permit must be in accordance to conditions, and must be check with seniors.

Failure in obtaining planning permission or failure to produce original documents with must imperatively comply with planning permission or conditions of land use.

All approvals acquired by relevant client, financier must be examined and must be ensured by authorities that they were obtained in transperancy and are relevant to proposed project.

Examination of all fess and tax must be amount pre-agreed. Fee and Tax must be check on developer or land occupants agreements

Fee or tax evasion

Scope of Project: illegal changes

Tender Evaluation

Project design and documents must be reviewed and to make sure that drawings complies with proposed project and has not been altered in whatsoever way and also check if project corresponds with project owner. It must be properly examined of tender satisfies firmly the scope and nature of project. Moreover, if the criteria of preparation of tender has been completed upon call of tender.

Preferred tenderers

Reviewing if tender complies with the terms and conditions, and to investigate if any favour has been allocated

Tenderers

To ensure invitations to tender is attached with tender qualification conditions and to review the competence and current projects. Furthermore, deep investigation must be executed in past projects, performance and company profile.

Collusion among tenderers

Contract must be evaluated in order to guarantee compliance with documentation and design, and also to make sure that tender contract does not allocate any type of additional benefits which does not form part of tender or design to any parties.

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No.

Area of Concern

Action

Offering bribe during tender process

To be certain that appropriate data is provided by tenderers, these tenders must be analysed and rates provided in tender must be supported with proper documentation. Work must be also audited by internal members and assess if any preferential assistance is provided during tendering stage.

Competence of technical section

An assessment must be conducted, for the competence of tenderer to be able to execute the allocated work and assessors must not be in any kind of relation to the proposed tenderer.

Qualification and on-site competence

Major emphasis must be give o qualification on the capacity and experience of the contractor and must ensure that fraudulent documentation is not presented.

Collusion: on-site and supervisor

Regular and random check must be conducted to minimise and risk of corruption act on site, and to allocate proper auditing on procured materials.

Examination of all materials and certification and quality control testing must be presented to architect, engineer or consultant. Moreover, Usage of second-hand or substandard independent laboratory must be engaged for materials material testing and to confirm certification provided.

Tender price, contract price and final account must align. Sources of variations must be Determination of contract price: must examined and authorisation of variation must correspond with tendering process and be necessary. Furthermore, clear instruction final cost must be provided to the contractor for the extent of variation and approval of financial before variation works takes place.

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No.

Area of Concern

Action

To guarantee that work is being executed under contract and specification requirements. Supervisor must provide daily report on performance on contractor. If Compliance to contract: Client and extension of time, it must be properly be Contractor examined and to what extent it is necessary and who is liable for delay must be takin in consideration as per terms and conditions of contract.

Plant and Equipment

To be certain that all plants and equipment undergo periodic maintenance and complies with contract requirement as are properly tested and licenced.

Payment and Final Account

Examination of contract price and final price in order to ensure that variation and extension of time authorisation were necessary and under any circumstance reasonable. Data from contract must be reviewed, to ensure there is no under delay or delinquent act in evaluating and approving final payment.

Even though it is quasi impossible for one company or institution to fight against corruption, it is worth to be engaged in. To be successful in combatting corruption and to generate reform the construction sector must imperatively be combined with monitoring of the government and the motivation of private sector.

â&#x20AC;&#x153;Announced on 18th April 2016, that the Chinese Supreme Court and Supreme Prosecutors have decided to implement death penalty for people who have received bribe above US $ 460,000. This decision has been undertaken with support of anti-corruption campaign launched by the Chinese President Xi Jinpingâ&#x20AC;? â&#x20AC;&#x201C; Published 18th April 2016 at 10:50 - Imene Boudali

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8.0 CONCLUSION Defies of corruption practices such as frauds, kickbacks bribery, lobbying and larceny which can take place at each and every stages in construction are significant.

There has been an urge of obligation for anti-corruption bodies to act, in order to combat corruption within the construction industry. It is a prime factor to reinforce the construction market, through implementation of an improving rules and regulation, and transperancy in working areas where ethical conduct are given consideration.

Raising awareness, ample endowment for site supervision, consolidation of professional institutions and the implementation of audits in organization are favourable strategies that will fight against corruption. Furthermore, improving the liabilities and reducing corruption in construction will result to an improvement on construction practices and thereby to construct, drive and maintain the quality of projects more sustainably.

It can be deduce form this study that confronting corruption is challenging, the outcome of this issue is that there is a palpable remuneration for those who are engage in this delinquent act, in an economic judgement. Despite the involvement of multiple anti-corruption bodies and professional institutions to combat against corruption, corruption is still haunting the construction industry. The act of corruption has a firm link to the culture and beliefs that holds people, taking in consideration of the nature and mannerism of corruption in account, thus the path on which the construction industry takes may perhaps tend to make those people susceptible to engage in corruption. The principle which most construction industries undertakes is the normal practice of extended supply chains and complex contractual engagements, moreover negotiating for construction developments are customary, which hereby creates a strong opportunity for consultants, contractors and clients to gain additional benefits and too influence prices. Hitherto, there is a diverged interpretation of what is corruption activities, what does it constitutes of

C H

and to what extent corruption has been integrated in the construction industry. Conversely, outcomes

from this reports states that the cultural organisation of construction along with the nature create a

suitable environment to be easily engaged in corrupt activities.

T E R 8

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The report, also claims that the omnipresence of contractor and consultants, the deficiency of transperancy during tender stage, urging of contracts cartels and claims, contracts awarding and other stages are corruption supporting factors during construction, in a traditional means and hereby fuels corruption to move further. It was interesting to note that the respondents from the survey made was able to distinguish between the option available â&#x20AC;&#x153;Corruption might be an alternative for easy money or stress-free method to ease the process of construction of projects, opting for this substitution we professional of construction are annihilating an industry which is efficient, advanced technologically and which drives growth across the entire economy, without realising the outcome of being engaged in this aberrant act.â&#x20AC;?

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9.0 LIMITATION & CHALLENGES OF THIS STUDY Multiple challenges were faced to gather materials especially while to reach participants during survey. Nevertheless, this restriction have not disturbed the legitimacy of this report.

9.1 Limitation to this report

1. Restriction of some online sites, for accessing information form companies, who were engaged in corrupt activities. 2. Anti-corruption bodies, were unable to provide information, as this dissertation topic was new in the construction industry. 3. Difficulty in devising a corruption scale, because of poor level of data. 4. Case studies were not accessible, as it was a matter of privacy.

9.2 Challenges Confronted

1. Respondents were not liaising during survey, as they had strong feeling that they were being inspected on corruption issues. 2. Correspondents also notify that prior mail must be sent, in order to ask for willingness to fill in survey. 3. Some officials from construction industry, claim that they were risking their employment in filling forms. 4. Officials form anti-corruptions bodies clearly that, not information will be obtained on this topic.

C H A P T E R 9 Page 98

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ANNEX 1 CORRUPTION REPORTING FORMS

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WORLD BANK GROUP â&#x20AC;&#x201C; CORRUPTION COMPLAINT FORM

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ICAC â&#x20AC;&#x201C; SOUTH WALES CORRUPTION REPORTING FORM

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UNESCO - COMPLAINT FORM ONLINE

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ANNEX 2 Foreign Corrupt Practices Act of 1977 (FCPA)

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ENFORCEMENT The Department of Justice is responsible for all criminal enforcement and for civil enforcement of the anti-bribery provisions with respect to domestic concerns and foreign companies and nationals. The SEC is responsible for civil enforcement of the anti-bribery provisions with respect to issuers.

ANTIBRIBERY PROVISIONS

BASIC PROHIBITION The FCPA makes it unlawful to bribe foreign government officials to obtain or retain business. With respect to the basic prohibition, there are five elements which must be met to constitute a violation of the Act:

A. Who -- The FCPA potentially applies to any individual, firm, officer, director, employee, or agent of a firm and any stockholder acting on behalf of a firm. Individuals and firms may also be penalized if they order, authorize, or assist someone else to violate the anti-bribery provisions or if they conspire to violate those provisions. Under the FCPA, U.S. jurisdiction over corrupt payments to foreign officials depends upon whether the violator is an "issuer," a "domestic concern," or a foreign national or business. An "issuer" is a corporation that has issued securities that have been registered in the United States or who is required to file periodic reports with the SEC. A "domestic concern" is any individual who is a citizen, national, or resident of the United States, or any corporation, partnership, association, joint-stock company, business trust, unincorporated organization, or sole proprietorship which has its principal place of business in the United States, or which is organized under the laws of a State of the United States, or a territory, possession, or commonwealth of the United States. Issuers and domestic concerns may be held liable under the FCPA under either territorial or nationality jurisdiction principles. For acts taken within the territory of the United States, issuers and domestic concerns are liable if they take an act in furtherance of a corrupt payment to a foreign official using the U.S. mails or other means or instrumentalities of interstate commerce. Such means or instrumentalities include telephone calls, facsimile transmissions, wire transfers, and interstate or international travel. In addition, issuers and domestic concerns may be held liable for any act in furtherance of a corrupt payment taken outside the United States. Thus, a U.S. company or national may be held liable for a corrupt payment authorized by employees or agents operating entirely outside

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the United States, using money from foreign bank accounts, and without any involvement by personnel located within the United States. Prior to 1998, foreign companies, with the exception of those who qualified as "issuers," and foreign nationals were not covered by the FCPA. The 1998 amendments expanded the FCPA to assert territorial jurisdiction over foreign companies and nationals. A foreign company or person is now subject to the FCPA if it causes, directly or through agents, an act in furtherance of the corrupt payment to take place within the territory of the United States. There is, however, no requirement that such act make use of the U.S. mails or other means or instrumentalities of interstate commerce. Finally, U.S. parent corporations may be held liable for the acts of foreign subsidiaries where they authorized, directed, or controlled the activity in question, as can U.S. citizens or residents, themselves "domestic concerns," who were employed by or acting on behalf of such foreignincorporated subsidiaries.

B. Corrupt intent -- The person making or authorizing the payment must have a corrupt intent, and the payment must be intended to induce the recipient to misuse his official position to direct business wrongfully to the payer or to any other person. You should note that the FCPA does not require that a corrupt act succeed in its purpose. The offer or promise of a corrupt payment can constitute a violation of the statute. The FCPA prohibits any corrupt payment intended to influence any act or decision of a foreign official in his or her official capacity, to induce the official to do or omit to do any act in violation of his or her lawful duty, to obtain any improper advantage, or to induce a foreign official to use his or her influence improperly to affect or influence any act or decision.

C. Payment -- The FCPA prohibits paying, offering, promising to pay (or authorizing to pay or offer) money or anything of value.

D. Recipient -- The prohibition extends only to corrupt payments to a foreign official, a foreign political party or party official, or any candidate for foreign political office. A "foreign official" means any officer or employee of a foreign government, a public international organization, or any department or agency thereof, or any person acting in an official capacity. You should consider utilizing the Department of Justice's Foreign Corrupt Practices Act Opinion Procedure for particular questions as to the definition of a "foreign official," such as whether a member of a royal family, a member of a legislative body, or an official of a state-owned business enterprise would be considered a "foreign official."

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The FCPA applies to payments to any public official, regardless of rank or position. The FCPA focuses on the purpose of the payment instead of the particular duties of the official receiving the payment, offer, or promise of payment, and there are exceptions to the anti-bribery provision for "facilitating payments for routine governmental action" (see below). E. Business Purpose Test -- The FCPA prohibits payments made in order to assist the firm in obtaining or retaining business for or with, or directing business to, any person. The Department of Justice interprets "obtaining or retaining business" broadly, such that the term encompasses more than the mere award or renewal of a contract. It should be noted that the business to be obtained or retained does not need to be with a foreign government or foreign government instrumentality.

THIRD PARTY PAYMENTS The FCPA prohibits corrupt payments through intermediaries. It is unlawful to make a payment to a third party, while knowing that all or a portion of the payment will go directly or indirectly to a foreign official. The term "knowing" includes conscious disregard and deliberate ignorance. The elements of an offense are essentially the same as described above, except that in this case the "recipient" is the intermediary who is making the payment to the requisite "foreign official." Intermediaries may include joint venture partners or agents. To avoid being held liable for corrupt third party payments, U.S. companies are encouraged to exercise due diligence and to take all necessary precautions to ensure that they have formed a business relationship with reputable and qualified partners and representatives. Such due diligence may include investigating potential foreign representatives and joint venture partners to determine if they are in fact qualified for the position, whether they have personal or professional ties to the government, the number and reputation of their clientele, and their reputation with the U.S. Embassy or Consulate and with local bankers, clients, and other business associates. In addition, in negotiating a business relationship, the U.S. firm should be aware of so-called "red flags," i.e., unusual payment patterns or financial arrangements, a history of corruption in the country, a refusal by the foreign joint venture partner or representative to provide a certification that it will not take any action in furtherance of an unlawful offer, promise, or payment to a foreign public official and not take any act that would cause the U.S. firm to be in violation of the FCPA, unusually high commissions, lack of transparency in expenses and accounting records, apparent lack of qualifications or resources on the part of the joint venture partner or representative to perform the services offered, and whether the joint venture partner or representative has been recommended by an official of the potential governmental customer.

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You should seek the advice of counsel and consider utilizing the Department of Justice's Foreign Corrupt Practices Act Opinion Procedure for particular questions relating to third party payments.

PERMISSIBLE PAYMENTS AND AFFIRMATIVE DEFENSES The FCPA contains an explicit exception to the bribery prohibition for "facilitating payments" for "routine governmental action" and provides affirmative defences which can be used to defend against alleged violations of the FCPA.

FACILITATING PAYMENTS FOR ROUTINE GOVERNMENTAL ACTIONS There is an exception to the anti-bribery prohibition for payments to facilitate or expedite performance of a "routine governmental action." The statute lists the following examples: obtaining permits, licenses, or other official documents; processing governmental papers, such as visas and work orders; providing police protection, mail pick-up and delivery; providing phone service, power and water supply, loading and unloading cargo, or protecting perishable products; and scheduling inspections associated with contract performance or transit of goods across country. Actions "similar" to these are also covered by this exception. If you have a question about whether a payment falls within the exception, you should consult with counsel. You should also consider whether to utilize the Justice Department's Foreign Corrupt Practices Opinion Procedure, described below on p. 10. "Routine governmental action" does not include any decision by a foreign official to award new business or to continue business with a particular party.

AFFIRMATIVE DEFENSES A person charged with a violation of the FCPA's anti-bribery provisions may assert as a defences that the payment was lawful under the written laws of the foreign country or that the money was spent as part of demonstrating a product or performing a contractual obligation. Whether a payment was lawful under the written laws of the foreign country may be difficult to determine. You should consider seeking the advice of counsel or utilizing the Department of Justice's Foreign Corrupt Practices Act Opinion Procedure when faced with an issue of the legality of such a payment. Moreover, because these defences are "affirmative defences," the defendant is required to show in the first instance that the payment met these requirements. The prosecution does not bear the burden of demonstrating in the first instance that the payments did not constitute this type of payment.

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SANCTIONS AGAINST BRIBERY CRIMINAL The following criminal penalties may be imposed for violations of the FCPA's anti-bribery provisions: corporations and other business entities are subject to a fine of up to $2,000,000; officers, directors, stockholders, employees, and agents are subject to a fine of up to $100,000 and imprisonment for up to five years. Moreover, under the Alternative Fines Act, these fines may be actually quite higher -- the actual fine may be up to twice the benefit that the defendant sought to obtain by making the corrupt payment. You should also be aware that fines imposed on individuals may not be paid by their employer or principal.

CIVIL The Attorney General or the SEC, as appropriate, may bring a civil action for a fine of up to $10,000 against any firm as well as any officer, director, employee, or agent of a firm, or stockholder acting on behalf of the firm, who violates the anti-bribery provisions. In addition, in an SEC enforcement action, the court may impose an additional fine not to exceed the greater of (i) the gross amount of the pecuniary gain to the defendant as a result of the violation, or (ii) a specified dollar limitation. The specified dollar limitations are based on the egregiousness of the violation, ranging from $5,000 to $100,000 for a natural person and $50,000 to $500,000 for any other person. The Attorney General or the SEC, as appropriate, may also bring a civil action to enjoin any act or practice of a firm whenever it appears that the firm (or an officer, director, employee, agent, or stockholder acting on behalf of the firm) is in violation (or about to be) of the anti-bribery provisions.

OTHER GOVERNMENTAL ACTION Under guidelines issued by the Office of Management and Budget, a person or firm found in violation of the FCPA may be barred from doing business with the Federal government. Indictment alone can lead to suspension of the right to do business with the government. The President has directed that no executive agency shall allow any party to participate in any procurement or non-procurement activity if any agency has debarred, suspended, or otherwise excluded that party from participation in a procurement or non-procurement activity.

In addition, a person or firm found guilty of violating the FCPA may be ruled ineligible to receive export licenses; the SEC may suspend or bar persons from the securities business and impose civil penalties on persons in the securities business for violations of the FCPA; the Commodity Futures

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Trading Commission and the Overseas Private Investment Corporation both provide for possible suspension or debarment from agency programs for violation of the FCPA; and a payment made to a foreign government official that is unlawful under the FCPA cannot be deducted under the tax laws as a business expense.

PRIVATE CAUSE OF ACTION Conduct that violates the anti-bribery provisions of the FCPA may also give rise to a private cause of action for treble damages under the Racketeer Influenced and Corrupt Organizations Act (RICO), or to actions under other federal or state laws. For example, an action might be brought under RICO by a competitor who alleges that the bribery led to the defendant winning a foreign contract.

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ANNEX 3 PILOT QUESTIONNAIRE & QUESTIONNAIRE

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PILOT QUESTIONNAIRE

The following comments were gathered while the questionnaire was set for a pilot test amongst 5 professionals. 1. The questionnaire was direct and simple. 2. Removal of Secondary by implementing PhD in Educational level, question no 2. 3. Question no 3, include experience level above 20. 4. Additional question: reasons of corruption in order to better investigate and how to tackle corruption and for whom is it the responsibility to fight against corruption. 5. Will respondents be willing to express their feeling while satisfying the criteria of the questionnaire? 6. Will the questionnaire be set out locally or on an international basis for a genuine research? 7. Does the questionnaire caters for all stages in the construction industry? 8. What methodologies or scale will be taken in consideration in order to analyse the questions?

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PILOT QUESTIONNAIRE SAMPLE Questionnaire Survey: CORRUPTION IN CONSTRUCTION Please put a [√] under your chosen answer against each question. 1 Details of Respondent Company Gender

: Male

Female

2 What is the nature of company you are currently working in? Client

Architect

Consultants

Services Engineer

Contractor

3 What is the highest level of education? Secondary

Diploma

Graduate

Post-Graduate

Others 4 What is your age group ( in years old)? 19 - 24

25 - 40

41 - 60

5 How many years of experience do you have in the construction industry? Below 5

6 – 10

11 – 15

16 – 20

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6 Which sector are you involved with ? Construction

Engineering

Surveying

Architect and Design

Facilities Management

Legal

Educational

Consultancy

Other

7 What is you level of employment? Company Director / Senior Manager

Junior Management

Supervisor

Other Professional

Clerical or Administrative

Skilled Manual

Unskilled Manual

Other

8 To what level do you think that corruption in present in the construction industry? Common

Fairly common

Extremely common

Not Common

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9 What is your level of corruption perception on the following events? Very corrupt Design and Planning stage

Tender stage

Awarding of contracts

Construction process

Variation

Sales of tender documents

Claims

Final account

Operating and Maintenance

Offering bribe for planning permission

Employment of illicit labours

Offering bribe to obtain contract/tender

Leaking information to a preferred bidder

Certifying defectives works

Certifying larger variation

Producing fraudulent timesheets

Producing fraudulent invoices

Moderately corrupt

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Not very corrupt

Not at all corrupt

10 During which stage in construction, corruption is most rampant? Project Planning

Pre-Qualification Stages

Project Execution

Operation & Maintenance

All of the above

Don't know

11 Are you aware of the presence of corruption events during projects construction? Yes

Unsure

12 Have you been involved in in any corrupt activities? Yes

Unsure

Don' Know 13 If you have uncover any corrupt events, would you report it to an anti-corrupt organisation? Yes

Unsure

14 What is your views of the level of corruption in the construction industry over the last 5 years? Increased

Decreased

Stayed the same

15 Do you think that we as professionals, government and anti-corruption bodies are doing enough in order to fight against corruption in the industry? Yes

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FINAL QUESTIONNAIRE

To whom this may concern

Dear Sir/Madam

11th March 2016

RE: Survey for project report I Golaram Yashveer am currently pursuing my final year in Quantity Surveying (Honours) at the LEEDS BECKET UNIVERSITY, based in the UNITED KINGDOM. In proper fulfilment of the requirements of this degree, I need to conduct a research on the topic for my dissertation which is as follows: “Investigating Corruption in the Construction Industry”

I will be very grateful if you could kindly complete the questionnaire attached along with this letter and shall not take you more than 10 minutes of your time. Kindly be assured that under the professional code of ethics that all information provided will be treated under strict confidentiality, privacy and will remain anonymous.

Please email it to the following address ygolaram@gmail.com before the end of this month. Should the above options not be suitable for you, I will gladly collect it personally.

Your assistance will be greatly appreciated. If you have any queries, please feel free to contact me on + (230) 5 860 90 91

Thanking you beforehand.

…………………………………….. Yours faithfully, Golaram Yashveer

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6 Which sector are you involved with ? Construction

Engineering

Surveying

Architect and Design

Facilities Management

Legal

Educational

Consultancy

Other

7 What is you level of employment? Company Director / Senior Manager

Junior Management

Supervisor

Other Professional

Clerical or Administrative

Skilled Manual

Unskilled Manual

Other

8 To what level do you think that corruption in present in the construction industry? Extremely Corrupted

Corrupted

Fairly Corrupted

Some kind of corrupt

Not corrupt at all

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9 What is your level of corruption perception on the following events? Very corrupt Design and Planning stage

Tender stage

Awarding of contracts

Construction process

Variation

Sales of tender documents

Claims

Final account

Operating and Maintenance

Offering bribe for planning permission

Employment of illicit labours

Offering bribe to obtain contract/tender

Leaking information to a preferred bidder

Certifying defectives works

Certifying larger variation

Producing fraudulent timesheets

Producing fraudulent invoices

Moderately corrupt

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Not very corrupt

Not at all corrupt

10 During which stage in construction, corruption is most rampant? Project Planning

Pre-Qualification Stages

Project Execution

Operation & Maintenance

All of the above

Don't know

11 Are you aware of the presence of corruption events during projects construction? Yes

Unsure

12 Have you been involved in in any corrupt activities? Yes

Unsure

Don' Know 13 If you have uncover any corrupt events, would you report it to an anti-corrupt organisation? Yes

Unsure

14 What is your views of the level of corruption in the construction industry over the last 5 years? Increased

Decreased

Stayed the same

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15 Do you think that we as professionals, government and anti-corruption bodies are doing enough in order to fight against corruption in the industry? Yes

16 In your opinion what are the reasons of corruption? Close relation between politics and government Government is not enough engaged in fighting against corruption Light or No sentences for corrupt activities or no prosecutions Money is not spent in a transparent manner Low income or poor socio-economic factors Corruption is being accepted as a normal way of living Authorities in charge - law not applied Don't know

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ANNEX 4 CODE OF ETHICS

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4.1 CODE OF PRACTICE - QUANTITY SURVEYORS Registration Body for Quantity Surveyors CODE OF PROFESSIONAL CONDUCT STANDARDS FOR Quantity Surveyors This Code should be read in conjunction with the Building Control Act 2007 and where there is a conflict the Act will take precedence over the Code Table of contents Introduction 1 Section 1 Guiding Principles 1.1: Statutory Duty 1.2: The Public Interest 1.3: Ethical Conduct 1.4: Professional Conduct 1.5: Conflict of Interest 1.6: Confidentiality 1.7: Professional Development 1.8: Insurance 1.9: Record of Services 1.10: Advertising Section 2 Relationship with Clients 2.1: Provision of Service 2.2: Client Accounts Introduction This Code for Quantity Surveyors reflects the ethos and culture of the profession and the spirit of the law governing it. It identifies the key principles and values that should guide day to day practice and emphasises the core values that are to be honoured. The Code sets out the minimum standard of professional conduct and practice to be expected of Quantity Surveyors in the provision of services. It requires of them not only a recognition of their responsibilities to their clients but also their responsibilities to the public and fellow professionals. Adherence to the Code demonstrates an ongoing commitment to ethical business practices as well as professional integrity and honesty and the provision of efficient and effective services. Quantity Surveyors subscribing to this Code also demonstrate a commitment to ensuring that public confidence in the profession is maintained at a high level. This Code is binding on all Registered Quantity Surveyors.

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1. GUIDING PRINCIPLES 1.1: Statutory Duty Quantity Surveyors are obliged to be aware of their legal obligations, and to ensure that they and their employees comply fully with these obligations and all future relevant legislation.

1.2: The Public Interest Quantity Surveyors should recognise and accept that they have a responsibility to the public and should at all times, in the conduct of their professional business, act in a manner which affirms this. They should endeavour, in the conduct of their business, to ensure that public confidence in the integrity, probity and honesty of the profession is maintained by adhering to the highest standards of ethical behaviour.

1.3: Ethical Conduct Quantity Surveyors should, in the conduct of their business, uphold at all times the standards set out in this Code and should conduct themselves in accordance with the standards of conduct expected of Quantity Surveyors in their practice. They should, in their day to day practices, adhere to an ethical standard of business practice and behave with independence, integrity, and fairness towards the public, their clients and fellow professionals.

1.4: Professional Conduct Quantity Surveyors should, in the conduct of their business, act in a manner consistent with the good reputation of the profession and refrain from any conduct which might discredit it. For the avoidance of doubt, the latter conduct does not include: - normal competitive commercial activity, or advertising not prohibited elsewhere in this Code. A Quantity Surveyor shall not take over the work of another Quantity Surveyor without communicating to that Quantity Surveyor that they have taken over such work. Where a client transfers from one Quantity Surveyor to another, the second Quantity Surveyor shall inform the client that he may be liable to fees for both. Quantity Surveyors should, at all times, act objectively, with honesty and free of any conflict of interest and not allow their actions or advice to be unduly influenced by others.

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1.5: Conflict of Interest A Quantity Surveyors has a conflict of interest where he is in a position of trust which requires the exercise of judgment on behalf of a person for whom he is acting and also has either private or business interests or obligations of a sort that might interfere with the exercise of his judgment. Where a Quantity Surveyor identifies the existence of, or the potential for, a conflict of interest he should, as soon as practicable, inform the person for whom he is acting, in writing, of the circumstances and unless such person(s) consent(s) or requests in writing to his continuing to act, he must cease to act in provision of that service. Where a Quantity Surveyor is offered any form of inducement by a third party or potential third party he shall immediately inform his client.

1.6: Confidentiality A duty of confidentiality exists in respect of information gathered in the course of business. Confidential information may only be used or disclosed in accordance with statutory requirements. The duty of confidentiality shall remain even after the relationship has been terminated.

1.7: Professional Development Quantity Surveyors have an on-going duty to maintain professional knowledge and skill at a level which ensures that they deliver an efficient and effective service to the highest standard.

1.8: Insurance Quantity Surveyors should arrange, where appropriate, insurance cover in respect of professional indemnity together with statutory insurances.

1.9: Record of services Records of service provided shall be retained for a period of at least six years and be made available for inspection by the Professional Conduct committee.

1.10: Advertising Quantity Surveyors should not publish or cause to be published any material or advertisements that are false, misleading or dishonest. Any advertising material must take notice of advertising codes as well as consumer legislation.

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2. RELATIONSHIP WITH CLIENTS

2.1: Provision of Service Quantity Surveyors should take reasonable steps to ensure that they: • Only engage in the provision of services for which they are qualified, and • Not claim to have expertise or experience which they do not have. • There is clarity on the part of the Quantity Surveyors on the precise nature of the services requested by the client, • There is clarity on the part of the client on the precise nature of the service to be provided by the Quantity Surveyors, • No agreement or letter of engagement is entered into for services which the Quantity Surveyors has not a reasonable expectation to fulfil by nature of competence, ability and resources, • Where he requires to engage specialist expertise to assist in carrying out the agreement he shall inform the client before entering into an agreement with any such specialist, • An agreement for the provision of services and conditions of engagement should be in writing, • The terms of any such agreement are lawful, fair and reasonable, and include the following:• The name of the Quantity Surveyor. • The address and contact details of the Quantity Surveyor. • Registration number.

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2.2: Client Accounts Quantity Surveyors who receive money other than fees in relation to the provision of Quantity Surveying services shall open and operate appropriate Client Accounts. The rules for operating such accounts shall be as follows: • All client money shall be kept in an account, or accounts, separate from any personal, office or business account. • A client account shall be a current or deposit account in which the word “client” appears and which is kept in a bank at a branch in the Republic of Ireland. • Quantity Surveyors shall provide the client with notice of the lodgement of money to the client account and, on reasonable request, shall inform the client of the amount of money held in his client account. • Quantity Surveyors shall maintain an up to date record of client accounts for inspection by the Professional Conduct Board. • It will be the responsibility of Quantity Surveyors to ensure that records of client accounts are audited on an annual basis. Such an audit report should be retained for a period of six years from the closing of the client account. • All monies in client accounts shall be clearly identifiable. • All relevant money shall be lodged to client accounts without unreasonable delay, and no later than five working days from receipt by the Quantity Surveyor of such money. • Each client account shall be held in credit until it is closed.

Code of professional Conduct standards for Quantity Surveyors 28th February 2008 .doc

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4.2 CODE OF ETHICS - CONTRACTORS (a) Definition. As used in this clause“Agent” means any individual, including a director, an officer, an employee, or an independent Contractor, authorized to act on behalf of the organization. “Full cooperation”(1) Means disclosure to the Government of the information sufficient for law enforcement to identify the nature and extent of the offense and the individuals responsible for the conduct. It includes providing timely and complete response to Government auditors’ and investigators’ request for documents and access to employees with information;

(2) Does not foreclose any Contractor rights arising in law, the FAR, or the terms of the contract. It does not require(i) A Contractor to waive its attorney-client privilege or the protections afforded by the attorney work product doctrine; or (ii) Any officer, director, owner, or employee of the Contractor, including a sole proprietor, to waive his or her attorney client privilege or Fifth Amendment rights; and

(3) Does not restrict a Contractor from(i) Conducting an internal investigation; or (ii) Defending a proceeding or dispute arising under the contract or related to a potential or disclosed violation. “Principal” means an officer, director, owner, partner, or a person having primary management or supervisory responsibilities within a business entity (e.g., general manager; plant manager; head of a subsidiary, division, or business segment; and similar positions). “Subcontract” means any contract entered into by a subcontractor to furnish supplies or services for performance of a prime contract or a subcontract. “Subcontractor” means any supplier, distributor, vendor, or firm that furnished supplies or services to or for a prime contractor or another subcontractor. “United States” means the 50 States, the District of Columbia, and outlying areas. (b) Code of business ethics and conduct. (1) Within 30 days after contract award, unless the Contracting Officer establishes a longer time period, the Contractor shall (i) Have a written code of business ethics and conduct; (ii) Make a copy of the code available to each employee engaged in performance of the contract.

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(2) The Contractor shall(i) Exercise due diligence to prevent and detect criminal conduct; and (ii) Otherwise promote an organizational culture that encourages ethical conduct and a commitment to compliance with the law.

(3) (i) The Contractor shall timely disclose, in writing, to the agency Office of the Inspector General (OIG), with a copy to the Contracting Officer, whenever, in connection with the award, performance, or closeout of this contract or any subcontract thereunder, the Contractor has credible evidence that a principal, employee, agent, or subcontractor of the Contractor has committed(A) A violation of Federal criminal law involving fraud, conflict of interest, bribery, or gratuity violations found in Title 18 of the United States Code; or

(B) A violation of the civil False Claims Act (31 U.S.C. 3729-3733). (ii) The Government, to the extent permitted by law and regulation, will safeguard and treat information obtained pursuant to the Contractor’s disclosure as confidential where the information has been marked “confidential” or “proprietary” by the company. To the extent permitted by the law and regulation, such information will not be released by the Government to the public pursuant to a Freedom of Information Act request, 5 U.S.C. Section 552, without prior notification to the Contractor. The Government may transfer documents provided by the Contractor to any department or agency within the Executive Branch if the information relates to matters within the organization’s jurisdiction.

(iii) If the violation relates to an order against a Government wide acquisition contract, a multi-agency contract, a multiple-award schedule contract such as the Federal Supply Schedule, or any other procurement instrument intended for use by multiple agencies, the Contractor shall notify the OIG of the ordering agency and the IG of the agency responsible for the basic contract. (c) Business ethics awareness and compliance program and internal control system. This paragraph (c) does not apply if the Contractor has represented itself as a small business concern pursuant to the award of this contract or if this contract is for the acquisition of a commercial item as defined at FAR

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2.101. The Contractor shall establish the following within 90 days after contract award, unless the Contracting Officer establishes a longer time period: (1) An ongoing business ethics awareness and compliance program. (i) This program shall include reasonable steps to communicate periodically and in a practical manner the Contractor’s standards and procedures and other aspects of the Contractor’s business ethics awareness and compliance program and internal control system, by conducting effective training programs and otherwise disseminating. (ii) The training conducted under this program shall be provided to the Contractor’s principals and employees, and as appropriate, the Contractor’s agents and subcontractors

(2) An internal control system. (i) The Contractor's internal control system shall(A) Establish standards and procedures to facilitate timely discovery of improper conduct in connection with Government contracts; and

(B) Ensure corrective measures are promptly instituted and carried out. (ii) At a minimum, the Contractor’s internal control system shall provide for the following: (A) Assignment of responsibility at a sufficiently high level and adequate resources to ensure effectiveness of the business ethics awareness and compliance program and internal control system. (B) Reasonable efforts not to include an individual as a principal, whom due diligence would have exposed as having engaged in conduct that is in conflict with the Contractor’s code of business ethics and conduct. (C) Periodic reviews of company business practices, procedures, policies, and internal controls for compliance with the Contractor’s code of business ethics and conduct and special requirements of Government contracting, including(1) Monitoring and auditing to detect criminal conduct; (2) Periodic evaluation of the effectiveness of the business ethics awareness and compliance program and internal control system, especially if criminal conduct has been detected; and (3) Periodic assessment of the risk of criminal conduct, with appropriate steps to design, implement, or modify the business ethics awareness and compliance program and the internal control system as necessary to reduce the risk of criminal conduct identified through this process. (D) An internal reporting mechanism, such as a hotline, which allows for anonymity or confidentiality, by which employees may report suspected instances of improper conduct, and instructions that encourage employees to make such reports.

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(E) Disciplinary action for improper conduct or for failing to take reasonable steps to prevent or detect improper conduct. (F) Timely disclosure, in writing, to the agency OIG, with a copy to the Contracting Officer, whenever, in connection with the award, performance, or closeout of any Government contract performed by the Contractor or a subcontractor thereunder, the Contractor has credible evidence that a principal, employee, agent, or subcontractor of the Contractor has committed a violation of Federal criminal law involving fraud, conflict of interest, bribery, or gratuity violations found in Title If a violation relates to more than one Government contract, the Contractor may make the disclosure to the agency OIG and Contracting Officer responsible for the largest dollar value contract impacted by the violation. (2) If the violation relates to an order against a Government wide acquisition contract, a multi-agency contract, a multiple-award schedule contract such as the Federal Supply Schedule, or any other procurement instrument intended for use by multiple agencies, the contractor shall notify the OIG of the ordering agency and the IG of the agency responsible for the basic contract, and the respective agenciesâ&#x20AC;&#x2122; contracting officers. (3) The disclosure requirement for an individual contract continues until at least 3 years after final payment on the contract. (4) The Government will safeguard such disclosures in accordance with paragraph (b) (3) (ii) of this clause. (G) Full cooperation with any Government agencies responsible for audits, investigations, or corrective actions. (d) Subcontracts. (1) The Contractor shall include the substance of this clause, including this paragraph (d), in subcontracts that have a value in excess of $5,000,000 and a performance period of more than 120 days. (2) In altering this clause to identify the appropriate parties, all disclosures of violation of the civil False Claims Act or of Federal criminal law shall be directed to the agency Office of the Inspector General, with a copy to the Contracting Officer.

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4.3 CODE OF ETHCIS ENGINEER Statement of Ethical Principles The Engineering Council, in collaboration with the Royal Academy of Engineering and a number of the leading professional engineering institutions, has created a Statement of Ethical Principles to which it believes all professional engineers and technicians, and related bodies should subscribe. Professional engineers and technicians work to enhance the welfare, health and safety of all, whilst paying due regard to the environment and the sustainability of resources. They have made personal and professional commitments to enhance the wellbeing of society through the exploitation of knowledge and the management of creative teams. This Statement of Ethical Principles sets a standard to which members of the engineering profession should aspire in their working habits and relationships. It guides them in meeting the UK-SPEC1 requirement to exercise responsibilities in an ethical manner. The values on which it is based should apply in every situation in which professional engineers and technicians exercise their judgement. There are four fundamental principles that should guide engineers and technicians in achieving the high ideals of professional life. These express the beliefs and values of the profession and are amplified below.

Accuracy and Rigour Professional engineers and technicians have a duty to ensure that they acquire and use wisely and faithfully the knowledge that is relevant to the engineering skills needed in their work in the service of others. They should: • Always act with care and competence • perform services only in areas of current competence • keep their knowledge and skills up to date and assist the development of engineering knowledge and skills in others • Not knowingly mislead or allow others to be misled about engineering matters • Present and review engineering evidence, theory and interpretation honestly, accurately and without bias. • Identify and evaluate and, where possible, quantify risks

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Honesty and Integrity Professional engineers and technicians should adopt the highest standards of professional conduct, openness, fairness and honesty. They should: • be alert to the ways in which their work might affect others and duly respect the rights and reputations of other parties • avoid deceptive acts, take steps to prevent corrupt practices or professional misconduct, and declare conflicts of interest • reject bribery or improper influence • Act for each employer or client in a reliable and trustworthy Manner

Respect for life, law and the public good Professional engineers and technicians should give due weight to all relevant law, facts and published guidance, and the wider public interest. They should: • ensure that all work is lawful and justified • minimise and justify any adverse effect on society or on the natural environment for their own and succeeding generations • take due account of the limited availability of natural and human resources • Hold paramount the health and safety of others • act honourably, responsibly and lawfully and uphold the reputation, standing and dignity of the profession

Responsible leadership: listening and informing Professional engineers and technicians should aspire to high standards of leadership in the exploitation and management of technology. They hold a privileged and trusted position in society, and are expected to demonstrate that they are seeking to serve wider society and to be sensitive to public concerns. They should: • be aware of the issues that engineering and technology raise for society, and listen to the aspirations and concerns of others • Actively promote public awareness and understanding of the impact and benefits of engineering achievements • be objective and truthful in any statement made in their professional capacity Engineering Council

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Engineer Council Operating under a Royal Charter, the Engineering Council is the UK regulatory body for the engineering profession. It sets and maintains the internationally recognised standards of professional competence and commitment, which are detailed in the UK Standard for Professional Engineering Competence (UK-SPEC). The Engineering Council also holds the national register of professional Engineering Technicians (EngTech), Incorporated Engineers (IEng), Chartered Engineers (CEng) and ICT Technicians (ICTTech). Holders of these titles must be members of a professional engineering institution licensed by the Engineering Council or in some cases a Professional Affiliate. In order to achieve registered status individuals will have demonstrated to their institution that they possess a range of technical and personal competences and are committed to keeping these up to date, and to acting with integrity in the public interest. The award and retention of these titles ensures that employers, government and wider society - both in the UK and overseas – can have confidence in the knowledge, experience and commitment of engineers and technicians on the register.

Royal Academy of Engineering As the UK’s national academy for engineering, we bring together the most successful and talented engineers for a shared purpose: to advance and promote excellence in engineering. We provide analysis and policy support to promote the UK’s role as a great place to do business. We take a lead on engineering education and we invest in the UK’s world-class research base to underpin innovation. We work to improve public awareness and understanding of engineering. We are a national academy with a global outlook. We have four strategic challenges: drive faster and more balanced economic growth; foster better education and skills; lead the profession; and promote engineering at the heart of society.

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4.4 CODE OF PRACTICE - ARCHITECT

Code of Professional Conduct For Members of the Royal Institute of British Architects Introduction 1. This Code and its accompanying Guidance Notes set out and explain the standards of professional conduct and practice that the Royal Institute requires of its members. 2. This Code comprises: • Three principles of professional conduct • Professional values that support those principles • Guidance Notes which explain how the principles can be upheld. The Royal Institute’s Values Honesty, integrity and competency, as well as concern for others and for the environment, are the foundations of the Royal Institute’s three principles of professional conduct set out below. All members of the Royal Institute are required to comply.

The Three Principles Principle 1: Integrity Members shall act with honesty and integrity at all times. Principle 2: Competence In the performance of their work Members shall act competently, conscientiously and responsibly. Members must be able to provide the knowledge, the ability and the financial and technical resources appropriate for their work. Principle 3: Relationships Members shall respect the relevant rights and interests of others.

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Upholding the Principles The notes below offer some brief guidance on how members can uphold the three principles. More detailed advice is set out in Guidance Notes to the Code, which are available separately from the Royal Institute. 1. Principle 1 – Honesty and Integrity 1.1 The Royal Institute expects its Members to act with impartiality, responsibility and truthfulness at all times in their professional and business activities. 1.2 Members should not allow themselves to be improperly influenced either by their own, or others’, self-interest. 1.3 Members should not be a party to any statement which they know to be untrue, misleading, and unfair to others or contrary to their own professional knowledge. 1.4 Members should avoid conflicts of interest. If a conflict arises, they should declare it to those parties affected and either remove its cause, or withdraw from that situation. 1.5 Members should respect confidentiality and the privacy of others. 1.6 Members should not offer or take bribes in connection with their professional work. 2. Principle 2 – Competence 2.1 Members are expected to apply high standards of skill, knowledge and care in all their work. They must also apply their informed and impartial judgment in reaching any decisions, which may require members having to balance differing and sometimes opposing demands (for example, the stakeholders’ interests with the community’s and the project’s capital costs with its overall performance). 2.2 Members should realistically appraise their ability to undertake and achieve any proposed work. They should also make their clients aware of the likelihood of achieving the client’s requirements and aspirations. If members feel they are unable to comply with this, they should not quote for, or accept, the work. 2.3 Members should ensure that their terms of appointment, the scope of their work and the essential project requirements are clear and recorded in writing. They should explain to their clients the implications of any conditions of engagement and how their fees are to be calculated and charged. Members should maintain appropriate records throughout their engagement.

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2.4 Members should keep their clients informed of the progress of a project and of the key decisions made on the clientâ&#x20AC;&#x2122;s behalf. 2.5 Members are expected to use their best endeavours to meet the clientâ&#x20AC;&#x2122;s agreed time, cost and quality requirements for the project. 3. Principle 3 â&#x20AC;&#x201C; Relationships 3.1 Members should respect the beliefs and opinions of other people, recognise social diversity and treat everyone fairly. They should also have a proper concern and due regard for the effect that their work may have on its users and the local community. 3.2 Members should be aware of the environmental impact of their work. 3.3 Members are expected to comply with good employment practice and the RIBA Employment Policy, in their capacity as an employer or an employee. 3.4 Where members are engaged in any form of competition to win work or awards, they should act fairly and honestly with potential clients and competitors. Any competition process in which they are participating must be known to be reasonable, transparent and impartial. If members find this not to be the case, they should endeavour to rectify the competition process or withdraw. 3.5 Members are expected to have in place (or have access to) effective procedures for dealing promptly and appropriately with disputes or complaints.

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Application of the Code 1. Professionalism The purpose of this Code is to promote professional good conduct and best practice. Members should at all times be guided by its spirit as well as its precise and express terms. 2. The Law Members must comply with all relevant legal obligations. It is not the remit of this Code to duplicate the provisions of business, employment, health and safety, environmental and discrimination law. 3. Amendments and Additions Periodically the Royal Institute will publish further guidance on specific aspects of professional practice and conduct. Members must observe such amendments and additions as they come into effect. Other Applicable Codes 1. United Kingdom Codes Chartered Members who are also registered in the United Kingdom are subject to The Architects’ Code, published by the Architects Registration Board (ARB). 2. Other National Codes A member practising in a country outside the United Kingdom may be required to be a member of, or registered by, that country’s professional or regulatory body for architects. If this is the case the Royal Institute recognises that a member’s first obligation will be to comply with the rules of conduct published by the local professional or regulatory body. 3. Other Professions’ Codes This Code applies to all members regardless of their fields of activity, contracts of employment or membership of other professional organisations. The Royal Institute recognises that members may participate in other professional activities and that when they do so the rules of the relevant professions’ governing bodies will take precedence over this Code. Under normal circumstances the Royal Institute would take no action under this Code if the matter is also under consideration by another, more directly involved, professional body. However, such action may be considered necessary if the matter raises issues connected with a member’s status as a member or an architect.

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Discipline 1. Contraventions of this Code Any member who contravenes this Code shall in accordance with Byelaw 4 of the Royal Institute’s Charter and Byelaws, be liable to reprimand, suspension or expulsion. The power to sanction a member for professional misconduct is exercised by the Disciplinary Committee on behalf of the Royal Institute’s Council through a delegation of authority made under Byelaw 4.4. 2. Remit Members’ conduct outside the practice of architecture will not normally fall within the remit of this Code and the Royal Institute’s Disciplinary Procedures, unless the Disciplinary Committee determines that such conduct generally offends against the honour and integrity of the profession. 3. Judgments from External Competent Authorities A judgment from a competent court or tribunal against a member in his or her professional capacity as an architect may be considered sufficient evidence of a breach of this Code. 4. Investigations Any member, against whom a complaint of professional misconduct has been received, may be required to answer inquiries arising under the Disciplinary Procedure Regulations. At the conclusion of an investigation, the Disciplinary Committee may reprimand, suspend or expel any member whose conduct is found to be in contravention of this Code or otherwise inconsistent with the status of a member. 5. Professional Conduct Committee Judgments from the ARB Where a member is sanctioned by the ARB’s Professional Conduct Committee, the Disciplinary Committee shall determine whether or not to impose the same, or an alternative, sanction on behalf of the Royal Institute.

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ANNEX 5 OPERATION CAR WASH / LAVA JATO

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Operation Car Wash “Brazil is facing a corruption scandal that simply won’t go away” After the re-election to nominate the President of Brazil, where the current President Dilma Rousseff’s was alleged for corruption at the state oil’s firm Petrobrás, and further to this an investigation was launched. Following this investigation multiple directors of Petrobras was suspected for taking bribes from construction companies which was used to fund government parties. “She was head of Petrobrás from 2003 until 2010. Even more problematic for the governing elite – the corruption scandal allegedly took place on their watch after the discovery of potentially vast oil reserves in November 2007.” Significant loss was operated by Petrobras with debt arising up to $135 Billion. Former director Paulo Roberto Costa was arrested, cause allegation for being involved in corruption, during the time of Dilma Rousseff, where he claimed that “there was a political campaign over the Petrobrás claims, yet only days later the Brazilian Supreme Court authorised a congressional inquiry into the corruption claims.”

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By Lise Alves, Senior Contributing Reporter SÃO PAULO, BRAZIL – “Two years after the start of the largest corruption investigations Brazil has ever witnessed, the Lava Jato (Carwash) has rendered 93 convictions and returned to the government more than R$2.9 billion worth of proceeds from bribes and money laundering.”

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