Question

Define corruption? Why does corruption occur?

Answer 1

Corruption may include many activities including bribery and embezzlement, though it may also involve practices that are legal in many countries. Political corruption occurs when an office-holder or other governmental employee acts in an official capacity for personal gain.

Answer 2

This section examines why corruption occurs in the infrastructure, construction and engineering sectors.

Corruption usually occurs because some individuals are willing to use illicit means to maximise personal or corporate profit. However, in order for these individuals to become involved in corrupt activity, circumstances must exist which do not prevent or discourage them from doing so. This section considers the motivation for corruption, and examines the factors which make it easier for corruption in the infrastructure, construction and engineering sectors to take place and which are, therefore, largely responsible for corruption occurring. These factors exist at project, national and international level.

As explained in What is corruption, GIACC uses the term "corruption" in the wider sense to include bribery, extortion, fraud, cartels, abuse of power, embezzlement, and money laundering.   Consequently, the discussion in this section applies to all such criminal activity.

The motivation for corruption

Voluntary. In some cases, the corrupt practice may be a voluntary act undertaken by the relevant party with the deliberate intention of gaining a competitive advantage or obtaining additional unjustified compensation.

To level the playing field. In other cases, the practice may be undertaken so as to “level the playing field”. For example, a contractor may feel compelled to offer a bribe during tendering if it believes that its competitors will be offering a bribe. Alternatively, a contractor may feel that it is necessary to inflate a claim artificially if it believes that the project owner will automatically and unjustifiably reduce the contractor’s claim or raise artificial counter-claims against the contractor.

Extortion. In some circumstances, a bribe may be extorted from the payer. For example, a contractor may be informed that if it does not pay a bribe, it will not receive a payment to which it is entitled. Alternatively, a police or immigration official may, in threatening circumstances, demand a bribe.

Normal business practice. Some offences are committed in the mistaken belief that practices, such as the inflation of claims or the wrongful withholding of payment, are normal business acts and do not constitute criminal offences.

Factors at project level which facilitate corruption

Absence of project anti-corruption systems: Many infrastructure projects have few or no means by which corruption during any phase may be prevented, deterred or detected. Some methods are used, but these may focus on one or two aspects of corruption, such as monitoring of the tender process, and leave the rest of the project without sufficient safeguards. Proper anti-corruption systems which are imposed on projects by government departments, implemented by project owners, and required as conditions of funding by funders are critical to the reduction of corruption. If these were introduced and properly operated then they would serve to reduce corruption on individual projects even where a large number of the other causes of corruption listed in this section remained outstanding.

The nature of infrastructure projects: The nature of infrastructure projects facilitates corruption. In particular, the complex contractual structure, the diversity of skills, different project phases, the large size, uniqueness and complexity of projects, the concealment of some items of work by other items, the lack of transparency in the industry, and the extent of government involvement all contribute to an environment in which bribery, extortion and fraud can be difficult to prevent and detect. Each of these features is discussed in more detail below.

Contractual structure: Infrastructure projects normally have a large number of participants linked together in a complex contractual structure. Each link has its own contractual documentation, and particular risks and difficulties. The project owner may contract with funders, consultants and with a main contractor to construct the project. The main contractor may then sub-contract key parts of the project to major sub-contractors.