You may not think that recommendations from China are transferable, yet I have been asked about how to combat construction fraud in a number of countries which really struggle with corruption and fraud in construction procurement - amazingly those asking the questions seem to ask the question in private and expect a one-line, off the cuff answer. The recommendations of the authors may help those facing that challenge so I thought they were worth sharing:
Address workers' and managers' pressuresAnyway, give some thought to the recommendations - they may be of use to you.
- Specify actual wages for the workers and managers on publicly funded projects
- Avoid the excessive use of overtime
- Specify the minimum required living and working conditions on project sites
- Ensure that all the workers and managers have 'labour contracts'
- Ensure that all the workers and managers understand their rights and have a contract
Improve project management and administration
- Avoid wage defaults, wage arrears, and uncompensated overtime.
- Ensure that project schedule is not unrealistically short comparing to benchmark projects
- Implement project scope management to reduce project changes
- Implement quality control/quality assurance in the design stage to reduce design errors
Promote ethical education and encourage whistle-blowing
- Develop standard procedures to handle project changes and 'dayworks'
- Develop standard ethical codes on public construction projects
- Require contractors to provide ethical education to works and staff
- Periodically hold anti-corruption and anti-fraud campaigns
- Develop a standard procedure for handling tips from whistle-blowers
Verify construction supervision records
- Display fraud hotline posters on project sites
- Standardise contents and formats of construction supervision reports
- Verify construction supervision reports by independent sources
Enforce existing construction laws and regulations
- Make construction supervisions personally responsible for their decisions and evaluation reports
- Develop detailed and standardised rules and regulations based on the current law and regulations
- Engage a third party (e.g. a project auditor), not the project client or the supervision firm. to assist in enforcing the law, regulation, and rules
- Push for harsher punishment for fraud that causes serious quality defects and safety hazards
- Publicise judicial procedures and decisions on fraud cases
- Use judicial procedures and decisions on fraud cases in ethical education materials.
I also quite like the example which Nassim Taleb cites in his book 'Antifragile' - I think it was from ancient Rome - of making architects of bridges live below their bridges to mitigate the risk of cutting corners but I can't see how we could write that into a contract.
Reference: Deng, X., Wang, Y., Zhang, Q, Huang, J.X, and Cui, J. (2014) 'Analysis of fraud risk in public construction projects in China', Public Money and Management, Vol. 1, No. 1, pp.51-58