Corruption in Infrastructure Procurement

Addressing the Dynamic Criticalities

Emmanuel Kingsford Owusu, Albert P.C. Chan

• Publisher: Routledge
• Year: 2020
• ISBN:
  9781000209297
• Edition: 1
• Topic: Arquitectura
• Subtopic: Práctica profesional en la arquitectura

This book presents an extensive study on the extant constructs of corruption in infrastructure-related projects and aims to contribute to the determination and elimination of its incidence and prevalence in infrastructure projects.

The book conducts a comprehensive examination of the various determining factors of corruption that negatively affect the procurement process and, in the end, result in cost and time overruns. The authors present an in-depth understanding of how the identified determining factors of corruption can be addressed. Thus, it is intended to broaden the reader's knowledge of the causes, risk indicators, and different forms of corrupt practices in the procurement process of infrastructure works, before explaining how they affect its stages and activities A dynamic model is developed to demonstrate how to tackle the overall impact of corruption within the procurement process and, at the same time, increase the effectiveness of the extant anti-corruption measures. In short, this book demonstrates that the fight against corruption in the procurement process is strategically feasible and must continue.

This book is essential reading for academics, researchers, professionals and stakeholders in the procurement of infrastructure projects and civil works, as well as those with an interest in corruption, construction management and construction project management.

1 Contemporary overview of corruption in infrastructure procurement process

Introduction

Corruption remains one of the world’s socio-economic plagues that continuously evolves to match the order of the day. It continues to thrive from country to country, institution to institution, and person to person. Since its first mention around 3000 bc in the form of bribery, current studies record innumerable forms of corruption in different contexts and disciplines (Noonan 1984; Transparency International 2020). With the very same nature as a virus, corruption has a powerful ability to spread at all levels of an organizational structure. It cuts across different contexts (public and private) and manifests in different forms depending on the context, even though there are some generic forms that transpire across different contexts. The forms range from solicitation to money laundering, extortion, facilitation payments, collusion, favoritism, lobbying, bid-rigging, and suppression among several others (Chan and Owusu 2017).

Smith et al. (2013) pointed out that corruption is linked to various socio-economic and political problems that hamper economic development. Not only does it cripple statutory institutions and the macroeconomic indicators of countries, but it also denies a large percentage of a population that depends mostly on the government for quality life (Odeku 2018). Despite the significant efforts by governments and institutions to deal with corruption, it continues to thrive (Le et al. 2014a,b). This can be justified by the annual corruption perception index (CPI) by Transparency International (TI), which indicates that no country has ever had a perfect score since this measurement scale was first introduced in the early 1990s (Heinrich and Hodess 2011).

One of the public sector institutions reported to be severely vulnerable to corruption is the public procurement sector. The procurement process of infrastructure works also remains one of the most susceptible processes to corruption globally (Monteiro et al. 2018; Owusu et al. 2019a). From the falsification of contractual documentation (also termed cooking the books) to greasing a project participant’s elbow for illicit gains, corruption remains one of the most disastrous plagues in infrastructure-related projects. It is undeniable that none of the activities captured under the IP process, which commences with the definition of a project’s requirements through to contract close-out, are invulnerable to corruption. There have been countless incidents of corruption-related catastrophes in construction projects across different parts of the world that have not only resulted in the exploitation of funds but also resulted in shortening project lifespans, putting properties and lives at risk, and, most importantly, contributing to the loss of human lives.

A few of the notable global cases include the “Operation Car Wash” in Brazil (Watts 2017), the Rana Plaza collapse in Bangladesh (Sinkovics et al. 2016), and the falsification of concrete test results during the construction of the Hong Kong (HK)–Zhuhai–Macau Bridge that resulted in over HK$58 million (approximately 7.5 million USD) (Wong 2019). There are a number of other local-related, state-related, federal-related, and international project corruption cases in every part of the world. According to the annual reporting of Transparency International (TI), regarding the perception of corruption worldwide, it can be argued that no country or territory is free from the incidence and impacts of corruption. And so, this is the public procurement sector as well as the procurement of public projects. This book is not intended to prove that corruption exists in projects because there are favorable conditions to instigate corrupt acts. Rather, it intends to find out the possible risks, loopholes, and other negative conditions that render infrastructure projects susceptible to corruption. It is intended to examine the stages of the project lifecycle that is most vulnerable to corruption and also most impacted by the criticalities of corrupt practices.

This book draws on the developments of corruption-related scholarship within the domain of infrastructure-related works. In sum, it synthesizes and draws significant deductions from the constructs developed under the various thematic areas of corruption, which include the forms of corruption and associated causal factors, the risk indicators of corruption, anti-corruption measures, and the barriers that hamper the effectiveness of anti-corruption measures (Owusu et al. 2019b). Each thematic construct is examined to identify the underlying measurement items or variables, and their individual criticalities and relative impacts on the various activities and stages of the procurement process. Thus, while the investigation into any of the constructs of corruption within a given context may be appropriate, considerable attention is first to be expended on the determination of the activities’ vulnerabilities to corruption at the generic level, before scoping it down to the specific activities in specific contexts. The overall impacts of the negative constructs, as well as the effectiveness of the anti-corruption measures (ACM) on the procurement process, are ascertained to draw both theoretical and practical implications on the subject matter. This study is, therefore, intended to present a comprehensive exploration of all the thematic structures of corruption in infrastructure-related studies discussed in the literature; the appropriate methodologies to examine the respective constructs of corruption and significant lessons to be drawn from each assessment. This chapter, however, presents a generic overview and theoretical framework of corruption and the relationship between the constructs of corruption and the activities of the procurement process.

The complexities of corruption in IP processes

Broussard (2017) likened corruption to any smuggling operation related to weapons, drugs, human beings, fake medicine, counterfeit goods, among many others. Corruption is noted to be extremely problematic since, irrespective of the measures stipulated to mitigate its prevalence, it continues to evolve due to its clandestine nature. This nature of corruption is not uncommon in the modus operandi of IP processes. The exploration of corruption (and the associated constructs) in IP-related studies may vary from technology, manufacturing, the supply chain of dairy and farm produce, even though similar thematic constructs can emerge from these disparate contexts. Corruption in IP cuts across different contexts ranging from banking, infrastructure procurement, maritime supply chain (Roh et al. 2018), and construction projects (Bowen et al. 2012).

The extensive diversity and relational attributes that exist among the networks or parties involved in the IP of these various contexts contribute to the complexities in determining the varying extent of corruption in IP and the mechanisms needed to extirpate their incidence, proliferation, and impacts. Moreover, the contextual disparities that relate to geographical jurisdictions make the complexities even worse as different contexts define corruption differently (particularly as it relates to their contexts). These factors, coupled with other challenging factors, make the examination of corruption in the IP processes of different manufacturing industries in different geographical jurisdictions an arduous task to achieve. It may probably constitute one of the reasons for the inconsistent exploration and knowledge contribution to this subject matter. Liu and Tiru (2013) argue that, considering the complexities associated with the supply chain process, a small scale of corruption can always impair and disrupt the entire reputation of an institution. This is arguably analogous to the procurement process (Owusu et al. 2017).

The acts and impact of corruption particularly possess the potency of transcending from one stage or activity within the procurement process to another. Thus, even though a corrupt act can commence as a negligible or light-scale corrupt act, it can always lead to dangerous and large-scale consequences if left unchecked. Lastly, emphasizing the complexities of the networks, particularly regarding the parties involved in the procurement process, corruption is bound to happen in any of the activities captured under the IP process and their respective stages. Any of the contractual parties within the procurement network can corrupt any of the activities or stages within the IP process, especially when the party occupies an authoritative position. This book addresses the vulnerability of each project party within the procurement chain to corruption. Determining how vulnerable each of the procurement parties within the IP process is will help inform project stakeholders involved in the procurement planning process and anti-corruption activists in developing suitable ex-ante measures to tackle corruption in the respective networks responsible for its incidence and proliferation.

Procurement systems and stages

Procurement refers to the organized process of obtaining or purchasing tangible and intangible goods and services, usually via an established contractual arrangement (Owusu et al. 2020). In other words, it is regarded as the different pathways of undertaking or executing the procurement process (Ruparathna and Hewage 2015). The choice of a suitable procurement method to satisfy the specific needs of a client cannot be overemphasized as the methods determine the operation rules, contractual relations, and the determination of labor divisions among parties for a specific project (Ogunlana 2003; Ruparathna and Hewage 2015). The choice of a suitable procurement has always depended on contract conditions, project delivery method, and price formation method. Given the critical importance attributed to the selection of the right procurement method for a specific project, construction managers and project owners are often obliged to select a suitable method for a planned project right after demining the project’s objective and goals (Owusu et al. 2019a). Selecting an inappropriate method for a given project can create serious repercussions such as cost and time overruns and, in this context, the likelihood of a project to become vulnerable to corrupt practices. Ruparathna and Hewage (2015) conducted a thorough review of the various existing construction procurement methods in existence to date. The authors identified and explicated over 11 different methods. From the Design and Construct method to the Force Account method, all the identified methods are presented in Table 1.1.

Table 1.1 Procurement systems at a glance

Each method is made up of the respective stages under which different activities are captured. While there may be slight differences in the stages and activities captured under each method, there are some commonalities that exist among the stages and activities of the procurement methods, typically with methods involving the tripartite contractual system (i.e., systems made up by the client or employer, the consulting team, and the contractor). The stages and underlying activities of such procurement methods are presented in Figure 1.1.

Figure 1.1 Procurement process (adapted from Ruparathna and Hewage, 2015; Owusu et al. 2019a).

Policies and procedures

According to Ruparathna and Hewage (2015), the procedures and policies of procurement regulate the selection of a suitable contractor to adopt a favorable procurement method. ...