Project Anti-Corruption System (PACS)

 

PACS STANDARDS

PS 2: Transparency

 

(Note:  Please refer to the Frequently Asked Questions (FAQs) at the end of this PACS Standard for further guidance on this Standard.)

This PACS Standard makes the following recommendations in relation to transparency on public sector projects.

 

  1. In this PACS Standard, "transparency" means the disclosure of material project information to the public.
  2. Transparency should be provided on individual projects. 
  3. It should be provided in a free, easily accessible and comprehensible form, and on a prompt and regular basis.
  4. The type of information which should be disclosed is project information relating to areas in which the public has an interest and where significant corruption might occur. 
  5. The degree of information to be disclosed should be proportionate to the size and cost of the project and to the size and cost of individual project contracts.
  6. The following tables show the recommended type and degree of disclosure for small and major projects, and small and major contracts:

Table 1:  Recommended transparency on small projects

     

Table 2:  Recommended transparency on major projects

     
  1. The timing of disclosures should be determined in accordance with the following guidelines:

(1)  Transparency should be provided for the duration of the project.

(2)  Information should be disclosed as soon as reasonably possible after it becomes available, but not so as to impose an undue management burden on the project.

(3)  Depending on the structure of the project, disclosure should be linked to key stages of the project so that material information relating to a particular stage is disclosed at regular intervals during that stage or, if the stage is short, on completion of that stage.

(4)  In general, the disclosure time-table should be such as to enable the public to receive project information in good enough time to enable action to be taken to investigate, prevent, remedy, and/or penalise suspected or actual corruption.

  1. The method of disclosure used should be cost effective, easily accessible to the public, and sufficient to communicate the information effectively.
  2. Each major project participant should provide the necessary information for disclosure and agree to its disclosure to the public.
  3. The public should be informed of the method of disclosure and that the information is freely available.
  4. Commercial confidentiality concerns should not be a bar to disclosure unless it can be shown in an individual case that there would be undue and severe commercial prejudice suffered as a result of disclosure which would override the public interest in the disclosure.
  5. Information should not be disclosed which would endanger the safety of any person.
  6. In addition to disclosure of project information, there should also be disclosure of the identity, qualifications, nomination, terms of appointment and contact details of the person(s) to whom the public may make reports of corruption or suspected corruption.
  7. This Standard may be implemented on its own.  It is, however, recommended that it is implemented in conjunction with all other PACS Standards, as far as appropriate. 

 

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Frequently Asked Questions

 

 FAQ (1): Why have transparency on projects?

Corruption on construction projects can include bribery, extortion, fraud, collusion, money-laundering, or any similar activity.  It can take place during all the different phases of a construction project, including project selection, planning, design, funding, tendering, project execution, operation and maintenance, and dispute resolution.  It can involve any of the project participants, including government, funder, project owner, contractor, consulting engineer, joint venture partner, agent, sub-contractor and supplier.  It can take place at all links of the contractual chain, from the smallest sub-contract or supply contract at the bottom of the contractual chain, right the way up to main contractor, project owner, funder and government level. 

In view of its complexity, corruption on construction projects is difficult to prevent and to detect. 

Secrecy and concealment of information encourage corrupt activity and also make it more difficult to detect.  Greater transparency on public sector projects will help materially to reduce corruption as follows:

  • Project information will be made widely available, and not only to those who may be implicated in corruption.  The project will, therefore, be subject to greater independent scrutiny.

  • It will increase the likelihood that corruption will be discovered.

  • It will discourage corrupt activity because the potential perpetrators will be aware that there is a greater chance that any corruption will be discovered.

  • It will encourage better governance as project participants may be obliged to disclose their existing practices which may be shown to be inadequate.

  • It may reveal those project participants who have refused to disclose information and may raise legitimate questions as to why they are refusing to provide transparency.

A positive benefit of transparency is that it may help to reassure the public that the project is being conducted properly.

 

FAQ (2):  What transparency is currently provided?

There is currently little information provided to the general public regarding individual projects.  In some cases, there may be information on individual projects regarding the objective of the project, the estimated cost and the selected contractor(s).  However, there is usually little information regarding the details of the project selection process; method of project funding; project design; procurement process;  terms of contract(s); original contract price, programme and specification; final contract price, programme and specification; variations and claims paid; and the final overall project cost with a detailed explanation of the reasons for any escalation.   

The need for transparency is becoming more accepted.  For example, the UK Anti-Corruption Forum, which comprises a large number of construction sector stakeholders, has published a policy paper supporting the provision of transparency and recommending disclosures very similar to those recommended in the two tables referred to in clause 6 above.  Similarly, the CoST (Construction Sector Transparency) Initiative also promotes transparency.  The relevant websites for these are listed in Transparency.

 

FAQ (3):  Does Freedom of Information (FOI) legislation provide sufficient transparency?

No, it usually does not.  FOI legislation varies from country to country, but it normally permits members of the public to be provided with information only if a specific request has been made for this information.  Consequently, it results in piecemeal disclosure of some information only to those members of the public that have made the request. It may also result in disclosure being slow, and information emerging too late to be of any use.  Also, it means that a member of the public will need to know that a document actually exists before it can ask for it.  This does not constitute adequate transparency.

 

FAQ (4): Who should be responsible for setting up and operating the transparency process?

The project owner is likely to be the most appropriate party to be responsible for disclosing the information in relation to a particular project.  This would involve ensuring that the relevant mechanism is set up for making the disclosures and for ensuring that other project participants are contractually bound to co-operate in providing necessary information for disclosure. 

 

FAQ (5):  Who will pay for transparency to be provided on individual projects?

The method of funding the transparency will be determined by the party which has required the transparency to be provided.  The funding may be provided by:

  • The government

  • A project funder

  • Individual public or private sector project owners

 

FAQ (6):  Which projects should be required to provide transparency?

Ideally, there should be disclosure to the public in relation to all public sector projects. This would, however, result in disclosure for a very large number of projects.  The process could be kept within manageable proportions by ensuring that the degree of information disclosed for each project is proportionate to the size, value and importance of the project. This would involve setting project cost thresholds, and then setting levels of disclosure that should be made within those thresholds.   Where a regulatory authority is introducing the concept of transparency, it may wish to start with the larger projects and gradually expand the process to include smaller projects. 

 

FAQ (7):  How can project thresholds be determined?

Project thresholds may be set according to estimated project cost.  The estimated project cost will need to be used because transparency should be provided at the outset of the project and, at that stage, only the estimated cost will be available. 

Project costs thresholds will differ from country to country due to the wide variation in project cost.   Consequently, setting these thresholds will be a matter for the relevant organisation (e.g. government, funder, or project owner) that is requiring transparency to be provided.

It may be difficult to set these thresholds and to determine the degree of information that should be provided within those thresholds.  There is no perfect equation for this.  It will be a matter of discretion and judgment for the party which is requiring the transparency to be provided.

 

FAQ (8):  What sort of information should be disclosed?

Corruption can take place in any project phase and can involve any of the project participants, including government, funder, project owner, contractor, consulting engineer, joint venture partner, agent, sub-contractor and supplier. 

Such corruption may result in theft of public funds, and in infrastructure which is dangerous or in breach of environmental or other regulations or which has gone ahead as a result of corruption in project approvals. 

Consequently, there should be disclosure of:

  • information relating to each project phase including: project selection, planning, financing, design, procurement, execution, maintenance and operation;

  • information, within each project phase, relating to all areas in which the public has an interest and where significant corruption might occur.   

However, it would be impossible to provide disclosure of all such information, so transparency should be focused on the major decisions, major contracts and major sub-contracts.

The two tables referred to in clause 6 above give more specific recommendations as to the type of information that should be disclosed.

Some examples of the sort of information which should be disclosed in order to uncover corruption or at least alert stakeholders to the possibility of corruption are as follows:

(1)  In the project identification phase, a project may be selected wholly or partly for a corrupt reason.  Disclosure of the feasibility and cost-benefit studies may reveal suspicious circumstances – they may be patently false, they may be inadequate, they may be carried out by a consultant with a vested interest in the project, or there may be no such studies. 

(2)  Planning permission may have been obtained through corruption.  Disclosure of  planning approvals may help to reveal this.

(3)  There may be corruption in the provision of funding.  For example, a local bank employee may wish to enhance his performance bonus and so may turn a blind eye to the corrupt nature of the project which is to be funded.  Disclosure of the funder’s feasibility etc. studies may help to identify whether the bank should properly fund the project.

(4)  There may be corruption in the terms of funding.  For example, a bank may have bribed a representative of the project owner to secure an unduly high rate of interest on the loan.  This may be revealed by disclosure of the funding agreement.

(5)  A donor may be failing to take adequate steps to prevent corruption on the project.  Disclosure of the terms on which funding was provided may help to reveal this.

(6)  The project may be over-designed in order to hide a significant bribe for a corrupt government official and to enable the chosen contractor to secure a higher profit.  Disclosure of the project design may help to reveal this.

(7)  Disclosure of the tender procedures, the identity of the tenderers, the identity of the evaluators (after award of contract), and the evaluation criteria may help to reveal any corruption in the tender process.

(8)  Disclosure of original contract terms, including price, programme, specification and contractor, may disclose whether the contract terms are corrupt.  For example, whether the price is unduly high, whether the programme is unduly generous, whether the specification has been varied following contract award in order unfairly to assist the selected contractor, and whether terms for valuation of variations and claims are unduly generous.

(9)  Disclosure of interim variations, claims paid and final contract price may help to reveal whether there has been corruption in amounts paid to the contractor or in refusal to pay the contractor sums which are due.

(10)  Disclosure of the identity and terms of appointment of agents, sub-contractors and joint venture partners may help to reveal whether their appointment is suspect in that they are organisations of bad reputation and/or their scope of work appears suspect and/or their remuneration is disproportionate to the supposed legitimate services that they are providing.

 

FAQ (9):  What is meant by “major projects” and “major contracts”? (See clause 6)

This PACS Standard recommends the sort of disclosures that should be provided for “small” and “major” projects”, and for “small” and “major” contracts.   Project cost thresholds should be established in order to define “small” and “major” projects. Contract cost thresholds should be established in order to define “small” and “major” contracts. 

For how to establish thresholds, see FAQ 7.

 

FAQ (10): When should the provision of transparency commence and terminate on a project?  (See clause 7)

Disclosure of information should be provided for the duration of the project.  Disclosure should if possible commence when the project is being considered for selection (as the whole purpose of the project, or selection of project type or location can be corrupt), and should only terminate once the project is complete (as corruption can continue right the way through construction, operation and maintenance).

If, however, following completion of the project, there are outstanding issues which are of public interest (for example, litigation of claims), then information relating to these issues should be disclosed even if this takes place after project completion.

 

FAQ (11): At what intervals should the disclosures be made during a project? (See clause 7)

There can be no specific formula for this.  Much will depend on the size and timescale of the project.  Disclosures should be made as soon as reasonably possible and so as to enable preventive action to be taken, or remedial action where the corruption has already occurred.  Where possible, disclosure should be linked to key stages of the project so that material information relating to a particular stage is disclosed at regular intervals during that stage or, if the stage is short, on completion of that stage.  

 

FAQ (12):  What method should be used to disclose the information?  (See clause 8)

 

The method of disclosure will depend on the technology available and the degree to which the public has access to that technology.  An appropriate method would be disclosure on a project website operated by the project owner.  However, if there is inadequate public access to the web, then the information could also be made available at the project owner’s offices, or by whatever means will maximise public availability.  Whichever method is chosen, the public should be informed that the information is available and how it may be accessed.

 

FAQ (13):  Who are the “major project participants” and how can they be required to provide the necessary information for disclosure and to agree to its disclosure to the public? (See clause 9)

The “major project participants” are the project participants whose role in the project could result in significant corruption.  Consequently, this is likely to include the project owner, project funders, major contractors, and major sub-contractors.  The decision as to who is a “major” contractor or sub-contractor will depend on the size of the project and the relevant contract or sub-contract.

Each major project participant (including the project owner) should provide a contractual obligation that they will provide the necessary information for disclosure and agree to its disclosure to the public.  This obligation could be one of a number of anti-corruption commitments to be provided by all major project participants.  See clause 6(15) in each of PS 5 and PS 6

 

FAQ (14):  How can the accuracy of the disclosed information be assured?

The first priority of transparency is to publish the information to the public.  Disclosure of information on a website is relatively cheap and easy.  Most contract information is now prepared and kept in electronic form and can be downloaded onto a web-site.

The second priority is to ensure as far as possible that the published information is accurate. This is more difficult and can be expensive.  The accuracy of the disclosed information may be achieved in a number of ways:

  • The officer responsible for making the disclosures may wish to ensure that accurate information is disclosed.  There may, however, be a risk of false disclosure if, for example, he has been bribed to disclose false information.  This risk can be reduced if he is a person of integrity, and is made aware that making false disclosures may make him personally liable for fraud.  There is also a risk that he may be fed false information.  This risk can be minimised by requiring the disclosing officer to check the original project data to ensure accuracy, but the extent to which he can do this may be limited.

  • Other project participants seeing the information on the website may realise it is inaccurate and report that to the project owner or other relevant party.

  • A member of the public who is experienced in projects of this type may believe that there is an error and report it.

  • A person may have the task of verifying the accuracy of disclosed information. 

The final alternative above is the most likely alternative to result in accuracy.  PACS deals with this issue by requiring the Independent Assessor to verify the accuracy of the information disclosed and also to assess whether it reveals any possible corrupt activity (see PACS Standard 1, clause 10(2)).  This is likely to be the most effective method of scrutiny.  The independent assessor will be an appropriately qualified professional.  He will be “embedded” in the relevant projects and so will be better able to analyse the information disclosed.  He will have been appointed by an independent and reputable organisation, and his scrutiny of project information will be part of his overall scope of work.  This will as a result be a relatively cost effective way of analysing information.  

The public should be informed of the identity and qualifications of the person carrying out the independent verification so that they have some assurance that the verification process is reliable, and can report to that person any apparent discrepancy they uncover on the web-site. 

 

FAQ (15):  Will the project information which is disclosed be too complicated for the public to understand?

Some of the information disclosed may be difficult to understand for some members of the public.  However, the public is made up of a wide range of people with diverse interests and skills.  It will include engineers, contractors and other industry stakeholders, lawyers, accountants, as well as members of the public who may be directly affected by the particular project.   Therefore, the project information disclosed will be capable of being understood by those with the relevant skills. 

 

FAQ (16):  Should the project information which is disclosed be simplified to enable it to be understood by all members of the public?

The risk of simplification is that much valuable information may be lost in the process.  It may also allow for important details to be concealed on the pretext that the intention was to simplify the material for disclosure. Simplification is also in itself an expensive and time consuming process, as someone needs to be appointed to undertake the simplification.

It would be better to provide disclosure, as far as possible, of unsimplified material and, if desired, to provide, in addition, some interpretation of that material. 

 

FAQ (17):  Will much of the information to be disclosed be subject to commercial confidentiality concerns?

In most cases, there should not be significant commercial confidentiality concerns in relation to the material project information disclosed.  (See, for example, the recommended disclosures in the two tables referred to in clause 6 of this PACS Standard.)  Where there are any confidentiality concerns, these will normally be overridden by the public interest in disclosure. 

The claim of “confidentiality” is often falsely used as a convenient excuse by parties who do not want their activities to be disclosed.

The contents of a tender are confidential prior to tender award, but should no longer be confidential after contract award.

Some manufacturing processes may be confidential, in which case they could be eliminated from disclosure.

A person having building works undertaken on his private home is entitled to see the full design and pricing of the works, as it is his money which is paying for the works.  Similarly, on a public sector project, it is the public’s money being used to pay for the project.  Therefore, the public should be entitled to see the same details in relation to the project which the private house owner would expect.

 

FAQ (18):  What should happen if a member of the public believes that the disclosed information shows corruption?

This will depend on the circumstances of the case.  The individual may report his suspicions to, for example:

  • the independent assessor, if any, appointed on the project and whose name and contact details should be disclosed to the public.  (See PS 1: Independent Assessment)

  • the project owner;

  • the project funders;

  • the criminal authorities;

  • the media;

  • relevant local or international NGOs;

  • members of the construction industry who may be able to help interpret the data;

  • influential politicians or public figures.

Whether or not he reports to the above persons, or makes any report at all, will depend on his own perception of the reliability and integrity of those persons and of the risks he may be taking in making a report.

The individual should always take care not to make a report in such a way as to put himself or another person in any danger, or to be liable for defamation.

 

FAQ (19):  Will the process of providing transparency be cost effective?

It is impossible to calculate whether or not transparency will necessarily be cost effective.  Will it save more money in preventing corrupt practices than the cost of making the necessary disclosures and having them independently verified?  As corruption is hidden, the actual cost of corruption cannot be calculated and nor, therefore, can one calculate the savings in corruption cost which may be made by requiring greater transparency.  The cost assessment therefore should be undertaken on certain assumptions.

Many observers assume the cost of corruption at a minimum of 5% of project value.  Bribes as high as 30% of the project value are common in some territories and sectors.  In addition to the actual bribe paid to procure the project, corruption during project execution also adds to the cost.  This could include matters such as inflated claims (procured by deception and/or bribery), and large variations to the contract scope procured by a bribe. 

In addition to the above attempts to quantify the costs of corruption in financial terms, there are the unquantifiable costs, such as the construction of over-designed or unnecessary projects, the retarding effect of corruption on international development, and the uncertainties and inefficiencies which it introduces into business. 

SeeCost of Corruption for further analysis.

Based on the above analysis, it is reasonable to assume that setting up the required technology, providing disclosure of material project information on a regular basis, and payment for random verification of the disclosed information is likely to be a highly cost effective investment.

In addition, once the technology is developed for providing transparency, and once disclosure becomes a matter of routine, the cost of the process will diminish.

 

FAQ (20):  What is the likelihood of transparency uncovering corrupt activities?

There is no guarantee that the public disclosure of project information will uncover any or all corrupt activities.   Some bribes or corrupt activities may be too well hidden.  The particular disclosure process or material chosen for disclosure may be inadequate.  There may be insufficient scrutiny by the public.  The information disclosed may have been falsified and the independent verification may have failed to identify the falsification.  However, the very fact that project material is to be disclosed will be a major deterrent, and is therefore likely to result in a material reduction in corrupt activities.  There is also a significant chance that greater transparency will uncover corrupt activities which take place.

 

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Return to:

PACS home page

PACS Standards:

PS 1:   Independent assessment

PS 2: Transparency

PS 3:   Procurement

PS 4:   Pre-contract disclosure

PS 5:   Project commitments

PS 6:   Funder commitments

PS 7:   Government commitments

PS 8:   Raising awareness

PS 9:   Compliance

PS 10:  Audit

PS 11:  Reporting

PS 12:  Enforcement

 

 

 

 

Page updated on 1st November 2008

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