Suggestions from China on combating construction fraud

It's not often I refer to Chinese authors, indeed I think this is a first. Deng, Wang, Zhang, Huang and Cui have published an interesting paper in the latest issue of Public Money and Management which discusses fraud risk in public construction projects in China.

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' pressures

• 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

• Avoid wage defaults, wage arrears, and uncompensated overtime.

Improve project management and administration

• 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

• Develop standard procedures to handle project changes and 'dayworks'

Promote ethical education and encourage whistle-blowing

• 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

• Display fraud hotline posters on project sites

Verify construction supervision records

• Standardise contents and formats of construction supervision reports

• Verify construction supervision reports by independent sources

• Make construction supervisions personally responsible for their decisions and evaluation reports 

Enforce existing construction laws and regulations

• 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.

Anyway, give some thought to the recommendations - they may be of use to you.

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