Corruption can occur during any phase of an infrastructure project, and can involve any one or more of the project participants. It can include bribery, extortion, fraud, cartels, abuse of power, embezzlement, and money laundering.
This section examines, using hypothetical examples, how corruption can occur in each phase of a project.
Corruption can occur during any phase of an infrastructure project, including:
Corruption in these phases can involve any one or more of the government, project owner, funders, contractors, consulting engineers, sub-contractors, suppliers, joint venture partners, agents, and these parties’ associated and subsidiary companies. Each of these parties will be represented by individuals (i.e. their personnel). In some cases, these parties are the perpetrators of the corruption. In other cases, they are the victims.
Corruption takes place in a wide variety of ways, including through bribery, extortion, fraud, cartels, abuse of power, embezzlement, and money laundering. These actions are normally concealed. The purpose of such corruption may be for the personal benefit of the individual or for the benefit of her/his organisation. See “What is Corruption” for further explanation of these offences.
In some cases, the party involved in the corruption may be acting deliberately with a view to making an illicit gain. In other cases, the party may be acting recklessly (i.e. without proper thought). In other cases, the party may feel forced into the corrupt action as a result of physical, financial or commercial pressures, or through extortion. See “Why Corruption Occurs” for further explanation of the reasons and motivation for corruption.
The following paragraphs summarise some forms of corrupt practice which can take place during the different phases of an infrastructure project, and examine how this corruption can be concealed.
In relation to some of the subsections below, there is a separate linked webpage which gives more detailed examples of corruption in that phase, and an explanation of those examples.
The parties involved in project identification may include the relevant government official responsible for approving the project, and potential project owners, funders and contractors who may also play a part in the construction and operation processes. Corruption can occur where one or more of these parties seeks to choose a project primarily for their own illicit profit or benefit.
Corruption may occur, for example, where:
The parties to project financing transactions include the project owner who is seeking funding for the project (who could be public or private sector), prospective funders (e.g. equity investors or banks), and consultants advising those parties in relation to, for example, the viability of the project. Corruption can occur where one or more of these parties corruptly secures and/or manages a financing arrangement for the project, by way of bribery or fraud or both.
The following are examples of corrupt practices during the provision and management of financing for a project:
The parties involved in the planning and design phases include the project owner, government departments responsible for issuing planning permission and other approvals, the architect or engineer, and design consultants.
The following are examples of corrupt practices during the planning and design phase of a project:
The contractual structure will vary for different projects. The project owner may contract directly with a main construction contractor and with consulting engineers. Alternatively, the project owner may let the whole project to a managing contractor. Alternatively, the project owner may contract with several different contractors for different packages. Corruption can occur in relation to any of these contracts. The parties involved in the pre-qualification and tendering phases include the project owner, the bidders, and consultants involved in bid evaluation.
The following are examples of the circumstances in which bribes could be paid during the pre-qualification and tendering phases of a project:
The examples of bribery given above will normally be accompanied by acts of fraud. The following are examples of fraudulent practices (without bribery) during the pre-qualification and tendering phase.
Beneath the contracts at project owner level, there will be sub-contracts and sub-sub-contracts. Corruption can occur in the pre-qualification and tender phases at each of these levels in similar ways to those listed above.
The parties involved in project execution include the project owner, the project engineer, consultants, contractors, sub-contractors and suppliers.
The following are a few summary examples of the circumstances in which corruption could take place during the project execution phase:
Alternatively, the project engineer or project owner’s site supervisor demands an illicit payment from the contractor in return for issuing the above approvals or certificates when they are validly due.
More detailed examples of corruption during the project execution phase, with accompanying explanation, are contained in “Examples of Corruption during the Project Execution Phase”.
The following are examples of corrupt practices during the operation and maintenance phase:
Corruption is normally concealed. For those parties involved, there are two reasons for concealing their corrupt activity. The first reason is to try to avoid detection and prosecution. The second is to ensure that the corrupt activity achieves the intended benefit. For example:
The following are some of the ways in which corruption is concealed:
These cases are examined below.
The payment of a bribe may be made direct by the payer to the ultimate recipient who is to carry out the dishonest act. However, it is common for a bribe to be paid through intermediaries. This is done so as to make it more difficult to detect that a bribe has been paid. The following are some common methods of concealing a bribe by the use of intermediaries:
In each of the above cases, the bribe may have been deliberately paid with full knowledge of all relevant parties. Alternatively, a bribe may be paid in situations where a related party is unaware of the bribe. For example:
In situations such as the above, a party may be genuinely unaware that these practices are occurring. However, in many cases, the party may have been wilfully blind to the circumstances. In other words, it may have suspected that there was a likelihood of corruption but refrained from making enquiries or taking preventive action. Such wilful blindness would be treated as culpable in most jurisdictions.
Bribery or fraud will normally be implemented or concealed by the use of false documentation. For example:
Bribery or fraud will normally require the making of false claims or statements. For example:
Defective works may be physically concealed by other works. For example, a foundation contractor may, for corrupt reasons, supply inadequate quantities of steel reinforcement for the foundations, and then pay a bribe to the building inspector to certify the steel as correctly laid. The inadequate steel reinforcement will then be concealed by concrete.
Updated on 13th April 2024
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