How to Minimise Corruption in Public Works Construction Contracts

Publication Date01 Apr 1999
AuthorJohn Lester
SubjectAccounting & finance
Journal of Financial Crime Vol. 7 No. 2 Corruption
How to Minimise Corruption in Public Works
Construction Contracts
John Lester
Public works contracts worldwide have suffered
from fraud and corrupt practices at critical phases
of projects, particularly during tender evaluation,
site supervision and certification of completion.
Improved quality management reinforced with
effective financial and technical audit are considered
to be crucial factors to combat these crimes, which
take place because people are able to use the systems
they operate to solicit and accept bribes. Ineffective
procedures can usually be exploited because of poor
supervision and inadequate levels of accountability.
The administration of public works construction
contracts involves a number of key stages:
assessment of performance standards;
quality management systems;
project design;
contract documentation;
selection of tenderers;
the tender process;
the construction process;
site supervision; and
dispute resolution.
Each one of these stages is examined to provide an
overview of measures to minimise corruption and
economic crime in the administration of large pro-
The recommendations primarily relate to
British Commonwealth practice, but could be
adapted for other systems.
The adoption of quality management systems by
suppliers and contractors should be strongly sup-
ported because inefficiency increases corruption
opportunities. British Standards were developed
and published in 1979 as BS 5750 for use as a con-
tractual document. The International Standards
Organisation (ISO) produced international quality
standards, largely based on BS 5750, which were
published in 1978 as the ISO 9000 scries. There has
been widespread acceptance of these throughout the
world, but third-party applications vary widely.
Britain has extensive third-party registration sys-
tems and independent bodies assess, and then register,
companies on their ability to meet the requirements.
In contrast, many Japanese companies rely on Total
Quality Management (TQM) with the modern
emphasis on zero defects and customer orientation
and satisfaction.
Studies on construction projects in the UK and US
have shown great potential for improving quality
and reducing costs. UK Department of Trade and
Industry research found that the overall cost of a
project could be reduced by 5-25 per cent if the
management systems were improved. The Construc-
tion Industry Training Board found that on UK con-
struction sites up to 45 per cent of work time was
wasted while waiting for separate inspections, other
trades, the supply of materials etc. The Building
Research Establishment found that sub-standard con-
struction was attributed to design errors (50 per cent),
construction faults (40 per cent) and material defects
(10 per cent). Research by the US Construction
Industry Institute found that 12 per cent of overall
project costs were attributed to avoidable design
errors or construction faults. Thirty-three per cent
of the projects monitored were completed late or
over budget.
Quality management systems are a proven method
of improving performance standards and cost con-
trol. The costs of running a quality assurance
Journal of Financial Crime
Vol 7 No 2, 1999. pp 161-169
© Henry Stewart Publications
ISSN 0969-6458
Page 161

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