GIACC.PS8_000


Project Anti-Corruption System Standards

PS 1:  Independent Monitoring

(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 independent monitoring of a public sector infrastructure project.

  1. Monitoring:  The Project should be monitored by an independent monitor in accordance with paragraphs 1 to 11 below.
  2. Selection, appointment, qualification and termination:
    1. The independent monitor should be selected by an independent body which shall ensure that the monitor is:
      1. an individual of integrity or a reputable organisation
      2. independent of government, the project owner, and project participants
      3. without any conflict of interest in relation to any organisations or individuals involved in the project
      4. appropriately qualified and experienced.
    2. The independent monitor should be appointed and paid either by the project owner or by an independent body.
    3. Depending on the project’s size, value, complexity and corruption risk:
      1. there may be one or more than one independent monitor
      2. the independent monitor’s appointment may be full time or part time
      3. different independent monitors with appropriate skills may be appointed to monitor different project activities.
    4. The appointment of the monitor  should be terminated only as follows:
      •  in the event of any corruption, gross negligence or wilful misconduct on the part of the independent monitor
      • with immediate effect, upon service of written notice by the independent monitor if her/his fees are more than [2] months overdue;
      • upon the expiry of [3] months’ prior written notice from the independent monitor.
    5. In the case of termination, a replacement monitor should be promptly appointed in accordance with the above provisions.
  3. No influence: The project owner should ensure that the independent monitor is able to undertake her/his responsibilities free from any interference or influence from the project owner or its personnel.
  4. Scope of monitoring:  The independent monitor should monitor that the project is being carried out in accordance with applicable anti-corruption laws and procedures and without corruption. This should include the following actions:
    1. Assess the following for possible corruption:
      1. Project selection, planning approvals and design
      2. Project funding
      3. Each major contract.
    2. In relation to each major contract:
      • monitor and assess the procurement process
      • review the major contract documentation, including contract conditions, price, programme, and scope of work or services
      • monitor and assess the appointment of major sub-contractors, joint venture partners, and agents
      • make random inspections of the works, services, materials and equipment;
      • review all major claims
      • review smaller claims on a random basis.
    3. Assess whether the other applicable PACS Standards are being properly complied with.
  5. Duties of monitor:  The independent monitor, in carrying out her/his monitoring obligations, should:
    1. act impartially
    2. be required to do only what is reasonable taking into account the time available under the appointment
    3. be required to make assessments to the best of her/his knowledge and belief and on the basis of the facts available to her/him
    4. keep confidential all information obtained as a result of the monitoring function, unless the information is already in the public domain, or its disclosure is necessary in order to comply with the monitoring duties
    5. not disclose the identity of any person who has reported suspicion of corruption to her/him unless the person who has made the report provides written consent to the disclosure of identity.
    6. only be liable to any party for a failure in the monitoring where such failure is due to gross negligence, wilful misconduct or criminal activity by the monitor.
  6. Timing of monitoring:  Monitoring should commence at the earliest possible stage in the project, and should be carried out throughout the duration of the project.
  7. Access:  In relation to the performance of her/his duties, the independent monitor should be allowed to have, without requiring advance notice, unrestricted access to any of the following in relation to the project owner, and project participants:
    1. office and site premises
    2. personnel
    3. records and correspondence
    4. works, products, services, equipment and materials.
  8. Resources:  The independent monitor should be provided with sufficient funding and resources to be able to undertake the monitoring function effectively.
  9. Public appointment:  The identity, terms of appointment and contact details of the monitor should be disclosed to the public (such details should not include home address).
  10. Investigating and reporting corruption:
    1. The independent monitor should investigate matters of concern which may suggest corrupt activity.
    2. Where the independent monitor identifies reasonable grounds to suspect corruption, the monitor should report such suspicions to the project owner and to the law enforcement authorities.
  11. Record-keeping and reports:  The independent monitor should:
    1. record in writing all activities, findings and outcomes of the monitoring process
    2. submit at least annually a detailed written report of these activities, findings and outcomes to the project owner, and to the appointing body of the independent monitor, together with copies of, or reference to, all relevant documents
    3. retain these records and reports for a minimum of [12] years from project completion.

Frequently Asked Questions

FAQ (1): Why appoint an independent monitor?

Corruption on infrastructure projects is a complex problem.  It can include bribery, extortion, fraud, collusion, money-laundering, or any similar activity.  It can take place during all the different phases of an infrastructure 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 any level in the supply 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. This corruption will usually be concealed. 

In view of the complexity and hidden nature of corruption, it is very difficult for anyone who does not have the appropriate skills, who does not have access to the relevant documents and people, and who does not have an in-depth involvement in the project, to be able to prevent or uncover corruption. 

One cannot rely on the chance that corruption will be discovered and reported by a project participant.  Project participants may have a vested interest in staying silent: they may themselves be implicated in the corruption, they may be intimidated, they may fear loss of business or employment, or they may fear damage to their reputation.  Alternatively, they may not have the opportunity or expertise to identify the corruption. 

Similarly, one cannot rely on interested members of civil society to uncover corruption in a project.  They will in most cases not have the requisite skills or adequate access to the project site, staff and documents.

Consequently, a skilled and properly qualified independent monitor should be appointed whose duty is to monitor the project(s) for corruption on an on-going basis and for the duration of the project, and to make appropriate reports.  The monitor should have full access to all project participants, records and site.  The key aim of the appointment of the monitor is prevention.  Parties are less likely to undertake corrupt practices if there is a reasonable chance that these practices may be discovered by the monitor.  However, if the monitor does uncover corrupt practice, she/he will make appropriate reports so that enforcement action can be taken.

FAQ (2): Who should nominate the independent monitor?

The nomination of the independent monitor is a separate issue from the appointment.  Greater independence would be assured if the independent monitor was nominated by an independent and reputable institution (such as a professional institution or specialist organisation) and then appointed by the relevant party (see FAQ 3).  This would reduce the opportunity for any undue influence by the appointing party, and would help prevent the situation where an monitor may be inclined not to report corruption as she/he may fear that reporting corruption would prevent a future appointment.

FAQ (3): Who should appoint the independent monitor?

The independent monitor can be appointed by an independent body, by a government department, by the project owner, or by the organisation (e.g. bank or regulatory authority) which requires the appointment.

Where a government introduces the requirement for independent monitoring across all of its projects, there could be an approved panel of monitors from which a monitor could be allocated to a project on a full time or part time basis according to the size of the project.  In this case, the monitor could be appointed by an independent body (for example an independent anti-corruption commission), or by the relevant government department.

In all cases, the appointment by an independent body is preferable, as there is a danger that appointment by the project owner or government department could compromise the independence of the monitor.  Such appointment is also more likely to be perceived by the public and project participants as genuinely independent. 

FAQ (4): Who should pay the independent monitor?

The independent monitor could be paid by the government, by an independent anti-corruption commission, by the project owner, or by the bank funding the project.  However, it is vital that the monitor should act, and be seen to act, independently, regardless of who pays.

Payment by an independent body is preferable, as there is a danger that, if he monitor is paid by the government or a project participant, that body could try to influence the monitor by withholding or delaying payment.

FAQ (5): How many independent monitors are necessary?

For a very large project (e.g. the construction of facilities for an Olympic Games), it may be necessary to have a team of several full time independent monitors to monitor the project.  On a large project (e.g. a power station), one full time monitor should be adequate.  On smaller projects, a monitor could be appointed to monitor several projects at the same time.

FAQ (6): Who can be an independent monitor?

The independent monitor should be a person of integrity, be suitably qualified, and be genuinely independent of the project and all project participants.  The monitor should be someone who has detailed experience and knowledge of the infrastructure sector, and a working knowledge of the law of bribery and fraud and of how corruption can occur on infrastructure projects.  

FAQ (7): When should the appointment of the independent monitor commence and terminate?

The independent monitor should be appointed for the duration of the project.  The appointment should if possible commence as soon as the project has been conceived in principle, but prior to it being formally selected and agreed (as the whole purpose of the project, or selection of project type or location can be corrupt).  The appointment should terminate only once the project is complete (as corruption can continue right the way through construction, operation and maintenance).

Once the construction phase is complete, the role of the independent monitor during operation and maintenance could be a significantly smaller and part time role.

On a long term project, the monitor may need to be replaced by another monitor (for example if the monitor resigns).

FAQ (8): What is the scope of work of the independent monitor?

The overriding obligation of the independent monitor is to monitor the project on an on-going basis in order to assess whether there is any suspicion of corruption, and to make appropriate reports if she/he believes that there is evidence of corruption.  The scope of work of the monitor therefore needs to be sufficient to give the assessor a reasonable opportunity to carry out this objective.

The scope of work of the monitor should be tailored to the size of the project.  On a large project, the monitor would probably be appointed on a full time basis, and would be expected to undertake the actions listed in PS 1 above.  On a small project, the monitor would undertake these actions on a random and part time basis.

A detailed suggested scope of work is attached to the model Independent Assessor Agreement

It is not possible to specify each step that the monitor should take in carrying out his duty.  She/he will need to use discretion and common sense.  A skilled monitor will understand what is required.

FAQ (9): Should the independent monitor focus largely on major contracts?

Corruption can involve any of the project contracts between government, funder, project owner, contractor, consulting engineer, joint venture partner, agent, sub-contractor and supplier.

For example:

  • The project selection, design or specification may be corrupt due to actions of the project owner, funder or consulting engineer.
  • Significant bribes can be concealed in the contract prices of the main contractor, joint venture partners, agents, sub-contractors and suppliers, right the way through the supply chain. 
  • Any of these parties can commit fraud during project execution by inflating claims, delivering short quantities or installing defective equipment. 
  • Government officials may extort bribes in return for issuing permits, certificates or payment.

See How Corruption Occurs for further information.

However, it would not be possible or cost effective for there to be independent monitoring of every aspect of every project contract.  Consequently, this PACS Standard recommends that the independent monitoring should focus on major contracts (i.e. those contracts of financial or technical significance) as this is where corruption of any significance is likely to occur.   These would include major contracts for works, services, equipment and materials.

The selection of the size of contract which would qualify as a “major contract” is a decision for the party which is requiring independent monitoring to be implemented.   This party should assess the corruption risk of a particular contract and the resources available to fund the independent monitor.

FAQ (10):  Why should the independent monitor assess the appointment of major sub-contractors, agents and joint venture partners of a major contractor?

Agents, sub-contractors and joint venture partners can be used as conduits for bribery, as bribes can be concealed in agent’s fees or in sub-contract or joint venture contract prices.  It is also possible for agents, sub-contractors and joint venture partners to be independently corrupt, i.e. for them to pay bribes in order to ensure their main contractor wins the contract in cases where the main contractor has no knowledge that a bribe is being paid. 

It is, therefore, important that the monitor examines the appointment of these project participants, in order to assess whether they have a genuine role in the project, whether they are properly qualified for that role, and whether the fees/payments they are receiving are proportionate to the legitimate services that they are carrying out.

FAQ (11):  Why should the independent monitor assess claims?

Contract claims (variations, extensions of time, payment etc.) are a common mechanism for concealing bribery and fraud.  A major variation (e.g. a change to the design of the project) can conceal a major bribe from the contractor to the government representative or consulting engineer.  An application for payment by a sub-contractor may fraudulently claim for a greater quantity of materials than were supplied.  A claim for liquidated damages by the project owner against the contractor may fraudulently allege that the contractor delayed the project in an attempt to enable the project owner to avoid paying the contractor’s retention.

It is therefore important that the monitor reviews all major claims to assess whether they could be corrupt.  The number of claims which the monitor examines, and the detail into which the monitor goes is a matter for the monitor to determine, and depends on the number and size of the claims, and the time available. 

FAQ (12):   Why should the independent monitor need to check compliance with the PACS Standards?

If other PACS Standards (apart from this one) are to be implemented on the project, then there will need to be some independent assessment of whether these PACS Standards have been implemented and complied with, and whether they reveal any possible corruption.  The degree to which the independent monitor checks compliance will be dependent on what is reasonable given the time and resources available to him.

FAQ (13): How should the independent monitor investigate matters of concern which may suggest corrupt activity, and make appropriate reports where there is evidence of corruption?

In carrying out these duties, there are a number of risks for the independent monitor.  For example, the monitor may:

  • be liable for defamation if she/he makes allegations that she/he is unable to substantiate.
  • may alert the wrongdoer prematurely to an investigation so enabling the wrongdoer to destroy or tamper with evidence.
  • may put herself/himself in danger if wrongdoers are aware that he suspects them.
  • may put others in danger if they are key witnesses to suspected corruption.

The monitor should, therefore, have some discretion in the way in which she/he carries out his duties in order to balance and minimise the above risks.  The monitor should investigate any situation which gives cause for concern.  In doing so, it may be advisable initially simply to make further inquiries and gather more information in order to assess whether there is a genuine cause for concern.  This may involve speaking only to the party or parties directly concerned.  In doing so, the monitor should be aware of the need to preserve evidence and protect potential witnesses. 

If the monitor believes that there is evidence of corruption, she/he should then report the relevant facts to the appropriate persons.  These may include: the party who appointed the monitor, the project owner, the project funders, other project participants who may be affected by the corruption, and the criminal authorities.  The importance of reporting fairly widely is to limit the risk of the matter being suppressed, to avoid any perception of collusion by the monitor and a particular party, and also to limit the risk that the monitor could be in personal danger as being the only person who is aware of the potential corruption.  However, the reporting should be done in such a way as to limit the risks of danger to any person, allegations of defamation, and any unwarranted damage to reputation should the concerns prove to be unfounded. 

It is preferable that the monitor has a duty to report evidence of corruption.  Firstly, this duty will act as a significant deterrent to corruption, as the parties involved in the project will be aware that evidence of corruption will be reported.  Secondly, having a duty to report takes away any personal reluctance that the monitor may have to report corruption due to its potentially serious consequences.

FAQ (16):  Why is it necessary to have the agreement of project participants to the activities of the monitor?

If the independent monitor is to be able to carry out her/his duties effectively, she/he will require access to project staff, offices, documentation, records and the works, materials, equipment and services of all relevant project participants (i.e. the project owner, contractors, sub-contractors, consultants and suppliers).  In order to obtain this access, the agreement of the relevant project participants will be required.  This agreement should be given in the form of a contractual obligation in the project contracts in order to ensure that the parties are obliged to provide the required co-operation and access to the monitor. 

FAQ (17):  Can the independent monitor make decisions affecting the project?

It is unlikely that the independent monitor should have the power to require significant action by any project participant (i.e. to stop work on the project, or change the way in which it works).  The monitor’s remit is primarily one of observing, investigating and reporting.  The monitor should, however, be provided with the necessary co-operation and access by project participants in order to enable the monitor’s duties to be carried out.   

FAQ (18):  Will the independent monitor be cost effective?

It is not possible to prove that an independent monitor will necessarily be cost effective.  Will the monitor save more money in preventing corruption than the cost of the monitoring?  As corruption is usually hidden, the actual cost of corruption cannot be calculated, nor can it be shown how much loss due to corruption has been avoided by having a monitor.  Consequently, the decision to appoint a monitor may require certain assumptions to be made as follows.

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 unnecessary, over-designed, or unsafe projects, the retarding effect of corruption on international development, and the uncertainties and inefficiencies which it introduces into business.   

See Cost of Corruption for further analysis.

Based on the above analysis of the costs of corruption, it is reasonable to assume that the appointment of a competent monitor with a carefully controlled and reasonable scope of work and fee structure is likely to be a highly cost effective investment.

FAQ (19): How can the integrity and safety of the independent monitor be assured?

It is an obvious risk that if the independent monitor uncovers a bribe, she/he could be bribed or threatened by the defaulting party not to reveal the bribe.  This risk can be minimised, but not entirely avoided.

  • The bribery risk to the monitor can be minimised by ensuring that the monitor is a person of known integrity, and is a member of a professional association which maintains the highest ethical standards, and which has strict disciplinary procedures. 
  • The risk of personal danger to the monitor can be minimised by rapid and routine disclosure by the monitor of her/his findings to all related parties (subject to the factor in FAQ 13).  Threats are normally designed to prevent information from being published.  Once the information has been published, the threats become less effective.  The monitor’s safety should be taken very seriously, and protection for the monitor may need to be provided in some countries.

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

There is no guarantee that the independent monitor will uncover any or all corrupt activities.  Some bribes or corrupt activities may be too well hidden.  Some monitors may not be sufficiently experienced, alert or diligent, or may not have adequate time under their appointment to examine certain aspects.  However, the very presence of the monitor 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 the monitor will uncover corrupt activities which take place.

FAQ (21): Could the same person carry out the role of independent monitor and technical auditor (see PS 10 Audit)?

Both the independent monitor and technical auditor are likely to be required to have the same or similar professional and technical qualifications and experience.  It is possible, therefore, that the same person could carry out both functions, provided that this does not result in any dilution or compromise of the essential qualities and functions of either role.  For example, the independent monitor’s role should not be limited to that of technical audit.  The independent monitor should be independent of the project.  She/he has a roving remit to inspect as and when she/he sees fit.  Her/his duty relates specifically to identifying and reporting potential or actual corruption.  The technical auditor, on the other hand, will audit the project only at specific times in the project cycle, and will be focusing on technical issues.

FAQ (22): Could the same person carry out the role of independent assessor and financial auditor (see PS 10 Audit)?

This is unlikely to be appropriate.  The independent assessor should be a professional with detailed knowledge of the type of construction being undertaken (so that she/he can identify possible corruption during the project).  A financial auditor on the other hand is likely to be an accountant who is skilled in financial control.  It is unlikely that a financial auditor would have the necessary skill to be an independent monitor.

Updated on 22nd July 2021

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