The truth is – the construction industry is rife with corruption. Your construction business may face the risk of corruption in various forms, including extortion, bribery, embezzlement, fraud, and other abuses. If you do not pay attention to any potential corruption within your business, it may have a serious impact on your company’s financial health and even its reputation.
Addressing corruption and managing its risks is one of your highest priorities, especially as a business owner, starting with your business’s supply chain.
In this blog, we create a comprehensive guide to help you tackle corruption, take the right actions, and effectively put a stop to any existing corrupt activities.
Why Is the Construction Sector Susceptible to Corruption?
Unfortunately, the high levels of corruption in the sector are mainly because of the very nature of the industry’s business operations, processes, and procurement procedures. The corruption in the sector has already been a deeply entrenched problem with a long history behind it. That is why it is a significant challenge for many construction business owners to overcome.
Below, we cited some of the reasons that have made the construction sector extremely vulnerable to corruption:
- Low supply chain visibility
Speaking of supply chains – the supply chain, especially in construction, can be anything but straightforward! There are usually multiple suppliers involved, and many different complex transactions at the same time. As a result, most businesses lack clear end-to-end supply chain visibility.
This often results in low supply chain visibility. With low visibility in the supply chain, it can be extremely difficult to keep track of all transactions or even ensure compliance with anti-bribery and anti-corruption legislation.
- Varied project expenses
The majority of construction projects can cost anything from hundreds to millions of dollars. And no construction project is the same as another. Every project is unique and has a different scope. So, it means every quote given can also be different. In many cases, it makes it easier for some individuals with corruption plans in mind to inflate costs or conceal bribes.
- High standards and extensive requirements
Any construction project must comply with numerous regulations related to health and safety, quality, equal opportunities, risk management, and fair treatment of workers. However, a lot of construction companies are unable to meet legal requirements and mistakenly believe that it is way easier to do shortcuts or cut corners in order to achieve compliance.
This is where people will most likely engage in corrupt activities, like bribery. For example, the bribery of officials may turn a blind eye to non-compliance.
- Inflate costs
Big construction businesses that typically qualify for high-ticket projects often face corruption risks. This is because the costs of construction materials and services can be easily concealed with bribes or even inflated. This is very true when you handle larger and complex projects, which normally cost hundreds of thousands or even millions of dollars.
Potential Signs of Corruption in Your Company
Corruption always looks different in any construction company and every supply chain. That is why it is not easy to identify. In most cases, it can be hidden so well, especially by the individuals (potentially your employees) who are heavily involved in these acts, that there may be no discernible signs.
However, there will always be a few indicators that corruption might be occurring within your construction business. See these signs below:
- Suspicious invoice
False, duplicated, and backdated invoices can be used to cover illegal payments or generate funds to make bribery payments.
- Unnecessary or poor-quality goods and services
When you notice you have goods or materials that are completely unnecessary in your supply, this can be a sign of having a corrupt supplier. Corrupt payments can be covered as necessary or required purchases.
- Reduced commitments to compliance, ethics, and quality
The corrupt individuals inside your company may have a hard time complying with the compliance or laws you mandated. This is because corruption has been widespread, and concealing payments and fabricating additional funds have become normal practices for these corrupt individuals.
- Biased procurement procedures
Your procurement processes will be prone to corruption, bribery, and biased decisions. This ultimately happens and gets worse when you hire suppliers that are not suitably skilled, qualified, or trained. If this keeps going, it can deprive other candidates on the list of the right to equal recognition and opportunities.
- Suppliers refuse to deal with anything other than their point of contact
Another sign that you might be in a corrupt business relationship with a supplier is when this person does not work with anyone other than the main person of their contact. And you may notice that they stick to their usual contact, which is somehow strange. What is odder and more unusual is the fact that this supplier and whoever their main contacts are refuse to discuss their roles and that person’s role with you or any of your crew. This is clearly a sign of corruption.
- Individuals are unwilling to take leave
The same as the point we have above, people within your company who are possibly corrupt might have a strong unwillingness to use their annual leave for fear of exposure of their corrupt involvement. They are fearful that everything can be revealed – their corrupt dealings, fake invoices, or overspending during a handover to another staff.
Additionally, they refuse to dive into details about their supplier relationships, certain expenses, or projects.
- A sudden increase in job opportunities
Referrals, marketing efforts, seasonal demands, and global events can all be the reasons for a sudden increase in job opportunities. However, if you notice that work suddenly picks up for no clear reason for some people in your construction company, it can be an indication that corruption is at play.
- Lack of written agreements
Individuals who are heavily involved in corruption activities will keep getting involved in illegal construction projects and have unusual business relationships with corrupt suppliers. It can be proven especially when you demand any record or written agreement of contracts, and they cannot show you anything, not even a single one.
Always bear in mind that corruption can take many forms. Therefore, the signs of misconduct you may observe within your company and among your employees may differ. Also, it might be impossible for you to notice any signs at all, and you are left without knowing there’s corruption involved. Whatever the case is – you still have a legal and moral obligation to take proactive steps to prevent any abuse in your construction company.
Ways to Prevent Corruption in Your Construction Business
Corruption may occur one way or another. There will be people who have ill intentions to corrupt within your business. But it does not mean you cannot take proactive steps to stop it and prevent it from escalating. Below, we list some actionable ways you can protect your business from any form of abuse or corruption.
- Open Communication
People who are designated with leadership roles must always encourage an environment where every employee feels confident to express their concerns or voice their opinions openly. For larger construction firms, managing people and their activities can be challenging, which is why implementing a strict whistleblowing policy is crucial. This policy, alongside a construction crew management software, can ensure that all reports of fraud or bribery can be actioned properly.
An intuitive, sophisticated construction software tool has a time-tracking feature that allows you to get valuable information about your crews and provides you with labor productivity insights, alongside daily reports. So, anything suspicious onsite and offsite can effortlessly be tracked.
- Regular staff training
Another way to prevent any bribery or corrupt incidents is through ongoing training. It is essential that all your workforce in your company fully understands corruption and bribery prevention policies and procedures, and adheres to these rules. That is why the training you will carry out must do more than just clarify what is acceptable and what is not within the grounds of your company. The goal is to instill the right acts and behaviors in your people.
- Check your supply chain
Working with many suppliers opens your construction firm to an increasing level of risks. This is because most of these suppliers engage in corrupt practices without your knowledge. In return, these individuals who are behind your back may negatively impact your business in the long run and cause it to suffer. And you do not want that.
That is why, when you choose a supplier, make sure to assess them properly. Ask them if you can see their anti-bribery policies or any procedures during the pre-qualification stage. Doing so can ensure that your company is protected from the very start.
Also, a cutting-edge software tool for material scheduling in construction can be a big help in overseeing your supply chain and the third parties involved in it. It can help you manage your materials, tools, equipment and supplies by having a centralized inventory control and automated tracking.
- Implement due diligence on all third parties
Sometimes, your people are not the only ones you have to train for anti-corruption or anti-bribery policies. Your other third parties should also be informed and trained on these mandated laws. This could be your partners, suppliers or anyone else representing your construction company and brand.
As the business owner, you are accountable for ensuring these third parties comply with anti-corruption laws.
Using Technology to Combat Corruption in Your Construction Business
If you are ready to deal with the corruption happening in your business head-on and seamlessly track your supply chain that ultimately deters and prevents misconduct, take the first step by investing in a modern, intuitive, and powerful construction software.
A versatile, cloud-based construction manpower scheduling software like Pro Crew Schedule includes cloud security, enhanced inventory, stricter rules around construction workflow, project management, crew scheduling, detailed tracking of invoices, payments, and expenses, and more.
Having these features all together in a single platform can go a long way in helping you to detect weak spots in your company’s workflow, complex supply chain, and even the people working under you.
With the right software in your toolkit, you can protect your construction business from danger, making it less vulnerable to fraud, corruption, or any type of abuse.
