Thursday, 4 June 2015

Corruptions Going Hidden Beneath Political Mud Slashes

Good governance is the theme of previous election that resulted in a new government, which I consider, is a crucial technical deficiency in the system of governance. What the masses wanted was to search for corruption and punish the culprits. When spoken about corruption, road projects that were spearheaded by the previous regime came under surveillance. A common allegation was while road projects have had consistently positive development results, fraud, corruption, and collusion plagued the entire sector chaotically. From high ranking officials diverting funds, a known fact is that corruption took place in contracting firms offering bribes for new jobs and technical officers approving bills on a commission. The removal of National Procurement agency itself is evident in the early start of this bad governance. With the disbandment of this agency, the state projects never wanted to abide by then the procurement guidelines. ICTAD national contractor registration scheme also became unimportant. On one side, this paved the way towards extortion where some ministers were heard of taking 10 to 15 percent of the awarded contract prices as ‘bribes’. Though the devastating impacts include increased project costs, we find no criminal prosecution, fines, or blacklisting so far in the pursuit of good governance.

It is imperative at this juncture to clarify some of the key issues surrounding the road projects before we talk about corruption. From a technical point of view, cost is one of the key variables throughout the project management life cycle regarded as the driving force of project success. Despite its proven importance, it is common to see a construction project failing to achieve with the cost parameters. Cost variation is a very frequent phenomenon almost associated with nearly constructing roads including highways. Due to many reasons, the total cost of a project can significantly vary from the initial estimated cost. When said, cost as a concept may encompass not only the cost on physical construction. It also includes initial professional disbursements on feasibility studies, architectural and engineering services, quantity surveying and management services. It may even be inclusive of compensation to the masses affected by the project and costs on the delivery of local government authority services. At glance, the reasons could be changes basically in the original scope of work or changes in the quality, performance and workmanship otherwise desired at the beginning. Variation orders are created when changes occur and when they are raised; they bring several negative effects to both the client and the contractor. More particularly, the magnitude of these variations varies considerably from project to project. Hence, variations orders bear great importance right from the inception to completion.

Case studies have revealed that the causes in the local context differ from those in the international context. Of them the poor estimation is the most dominant. Estimation involves guesswork, thumb rules and technical and economic assumptions that warrant some scientific approach. For example, without adequate investigations, the actual requirements may not be capable of precisely articulating. Further, clients do not have in their in-house teams capable professionals to carry out estimating. Therefore, the tendency is to under estimate the project resulting in subsequent cost overrun when the actual eventualities are dealt with.

Arguably, variation orders may be seen as counter to the principle of waste reduction. The more the variation orders implant on a project, the greater the likelihood that they become time consuming, costly and disputed. When a variation order occurred, the contractor tends to charge higher rates for variation items which in turn affect the client’s budgetary arrangement. If the variations are unavoidable, at least, their impact on the budget must be minimised.  However, factors influencing the occurrence of variation orders and their adverse impact on project performance again vary from one project to another. Factors include the nature of work, the complexity of the project, and the procurement method. Though it is likely that variation orders cannot be avoided completely, they can be minimized or prevented, as stated, if their origin and causes can be known. In nutshell, the successful execution of construction projects and keeping them within the estimated cost and prescribed schedules depend on methodology that requires sound engineering judgment.

Let us now look at the ways in which corruption can take place in the supply chain. Corruption can occur where decision takers choose a project primarily for their own illicit profit. This may occur, for example, where an airport project is commissioned when it is not necessarily a national priority. Also, a power project could be approved while imposing tariffs far in excess of the population’s ability to pay back. In project financing, corruption can occur where project owner or funding agency corruptly secures a financing arrangement for the project, by way of bribery or fraud. For example, a bank may pay a bribe to a senior official of the project owner, possibly through an agent, in return for the bank being awarded the contract to finance the project at enhanced interest rates. A representative of the funder may be entitled to a performance bonus if a funding transaction is completed. In order to ensure that he receives bonus, he may conceal adverse project data which would have prevented the funder’s board from approving the contract. Further, the project owner may pay a bribe to the funder’s consultant to issue an engineering report which conceals adverse site, social or environmental data in relation to the project. The funder may then make a decision on the viability of the project on the basis of false advice.

In planning and design, the project owner may bribe a local authority official in order to obtain planning permission. A government official may extort bribes as a condition of his approval of the project, for example, he may require cash payment, shares in the project owner, or the use of his own company to provide construction services or supplies to the project owner. On the other hand, a bidder may bribe the consulting engineer to specify a design which improperly favours that bidder over the others. For example, a certain technology which is only possessed by one of the bidders may be specified, even though other technologies may be preferable or cheaper. This would normally result in those bidders who do not possess the specified technology being kept off the pre-qualification list, or being rejected as non-compliant at tender stage. A tenderer may make a donation to the ruling political party, in return for which a party official ensures that the tenderer wins a contract, or obtains a preferential treatment. Unfortunately, the politician’s acumen on these aspects has now been found to be none other than mud slashes.

During the execution, a bidder may have bribed the project owner’s representative to persuade him to award the contract to the bidder. These two parties may also have agreed that the cost of the bribe would not be included in the tender price, but would be fraudulently included in the cost claimed for a large variation during execution of the project. Deferring recovery of the cost of a bribe until after the appointment of the contractor can be an effective means of concealment, since there is normally no competitive tender for variations, and post-contract award variations attract much less scrutiny and publicity. A contractor may bribe the project owner’s representative to persuade him to issue an unnecessary variation which materially increases the contractor’s scope of work and which has an inflated price. A contractor may bribe the engineer to persuade him to issue an extension of time to the contractor, which is not properly due. A contractor may bribe the project owner’s quantity surveyor to persuade him to approve the interim bills. A contractor may bribe the project owner’s works inspector to persuade him to approve defective or non-existent work. Conversely, contractors may agree with contract administrators to account for off-site materials which are not properly designated and set aside for the project in question. They may also offer bribes to facilitate approval of claims for additional money, or time where such claims are not properly justified. I again say, unfortunately, the politician’s acumen on these aspects has now been found to be none other than mud slashes.

At the end, corruption is concealed to try to avoid detection and prosecution. For example, a bribe paid to have an inflated contract claim approved must remain secret otherwise the contract claim will be rejected. A bribe paid to secure planning permission must remain secret otherwise the planning approval will be set aside. The payment of a bribe may be made direct by the payer to the ultimate recipient who executed the dishonest act. However, it is common for a bribe to be paid through intermediaries, so as to make it more difficult to detect that a bribe has been paid. A company bidding for a contract which wishes to hide the payment of a bribe may appoint an agent who has contacts with a representative of the project owner or with the government of the country concerned. The company will enter into an agency agreement with the agent which purports to be an agreement for legitimate services. However, the scope of those services will often be false or exaggerated and the size of the payment due under the agreement will often be significantly in excess of the value of the legitimate services specified in the agreement. The payment may sometimes be expressed as a percentage of the contract price and the agent will normally receive the payment when the company is awarded the contract. The agent may then pass the whole or part of the payment to the representative of the project owner or government who has dishonestly ensured that the company would win the contract. The payment is often made in foreign currency into an offshore bank account. I reiterate, unfortunately, the politician’s acumen on these aspects has now been found to be none other than mud slashes.

Coupled with the deliberate failure to act on these charges against the ministers and state officials and their cronies, a question arises as to why the general public should shoulder these pains any longer. While corruption is very difficult to trace mainly because the involved parties only deal with hard cash, it has become a ‘technical’ cancer not easily detectable. It is more and more arduous, if not impossible, when it is connected with the supply and demand side of the construction means, processes and procedures. The most pathetic situation is that, with the political mud slashes, the real culprit goes unattended by the law enforcement agencies in the country.



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