Dilemma 8:  Sub-contractor - Answer

There is a risk that the project owner’s representative may be recommending the sub-contractor for corrupt reasons.  He may, for example, have a secret shareholding in the sub-contractor, or he may have been offered a bribe by the sub-contractor. While, therefore, accepting his recommendation may not in itself be criminal, it could lead to criminal activity in which both you and the company could be implicated.  This is because it may be thought that you and the company were aware of the risks of corruption but turned a blind eye to those risks, or that your company did not have adequate procedures in place to deal with those risks. 

As a general rule:

• You should be very cautious about using individuals or organisations recommended by representatives of the project owner unless the recommendation is a formal and open part of the bidding process (e.g. a nominated sub-contractor).
  
  
• Unless there are good and legitimate reasons to the contrary, you should use open competitive tendering in selecting sub-contractors.
  
  
• In relation to any large or high risk sub-contractors and suppliers, undertake as far as reasonable an assessment to establish whether they are likely to behave ethically in connection with your company’s business.  In particular:
  • Establish:
    • whether the sub-contractor/supplier has an anti-corruption programme in place, or will agree to comply with the company’s anti-corruption policy;
    • whether the sub-contractor/supplier, or any of its directors or shareholders, has been investigated, convicted or debarred for corruption.
  • Undertake due diligence on the sub-contractor/supplier to see whether it has a reputation for corruption (e.g. by undertaking a web-search, by obtaining references, and/or by asking other businesses or industry bodies).
  • Hold a meeting with the management of the sub-contractor/supplier to discuss its anti-corruption commitment and policies.
  • Based on the outcome of the above enquiries and meeting, does the company’s senior management trust the sub-contractor/supplier not to engage in corruption?
  • When agreeing the sub-contractor/supplier’s scope of work and price, take reasonable steps to ensure that the work to be provided is legitimate, and that the amount to be paid for the work is market value (i.e. that the price does not conceal a bribe).
  • The purpose of this assessment is not to eliminate all possible risk of corruption. The purpose is to identify, after making reasonable and proportionate enquiries and giving the issue reasonable and proportionate consideration, whether the risk of bribery appears to be sufficiently low that it is reasonable to allow the sub-contractor/supplier relationship to proceed or continue.  The cost of the risk assessment and due diligence should be proportionate to the size of the relevant business, transaction or project so as to make it cost effective.
    
    

Similar procedures should be adopted for joint venture partners.