Cartels uncovered: Construction in the spotlight

The construction industry is corrupt and the corruption is more ingrained than in any other sector of business. The head of procurement for the London Olympics in 2012 has requested the help of the Office of Fair Trading (OFT) to prevent market rigging in the run up to the 2012 Games. Hotel and office rooms may be broken into and bugged, vehicles tracked and employees paid to spy under guarantee of protection. Look out for the rock in the corner of the boardroom.

This is not sudden paranoia brought on by fears over the cost of the Games: Over the last few years the OFT has been escalating its level of activity in connection with the construction industry. Indeed, last year the OFT investigated allegations of collusive tendering procedures in the Midlands, and this followed fines it had imposed on Scottish Contractors earlier that year for the same offence.

Transparency International, an independent organisation dedicated to combating corruption and the consequential economic and social costs, has called for trade and professional associations to adopt written codes of conduct to impose high ethical standards in order to help exclude corrupt practices.

Against this background, in July 2005, in what may have been a sign of acknowledgement of the problems the industry faces, the RICS asked its members for views on whether adjudication referrals prepared by chartered surveyors should be covered by the Practice Statement and Guidance Note Surveyors Acting as Expert Witnesses.

The RICS already has a set of Rules of Conduct which requires surveyors to act with integrity, be honest, accountable and to set a good example. However, this only generally applies with and to their clients, albeit that there is an overriding duty of professional conduct.

Offices may be broken into and bugged and staff paid to spy under guarantee of protection. Look out for the rock in the corner of the boardroom

If accepted for adjudication, the practice statement would extend this obligation to third parties and any surveyor acting for a party in adjudication would have an overriding duty to the adjudicator. The referral (and presumably the response) would have to be, and be seen to be, the independent and unbiased product of the surveyor and would have to be impartial and uninfluenced by those instructing or paying the surveyor.

In effect, any referral would have to represent the truth, in the surveyor's opinion, based on fact and assumed fact.

Given the quasi-judicial nature of adjudication, there is an argument that a surveyor should, in any event, respect the forum and should act as it would act before a judge or arbitrator and that not to do so may be seen as a breach of professional conduct.

In its Global Corruption Report 2005, Transparency International cites examples of "deceptive conduct" such as contractors and subcontractors claiming the full delay on construction projects, aware of their own contributory delay, providing untrue evidence in support of labour cost claims where timesheets are not present or not particularised, and employers and contractors producing false counterclaims to pressure a party into abandoning its principal claim and falsely alleging defective workmanship in order to retain retention.

When taking on any work linked to the Games, surveyors must accept that they may be placed in a whistle-blower position

The examples given are not uncommon in both commercial negotiation and adjudication; if a surveyor knowingly participates in the submission of such a claim or counterclaim, directly or by turning a blind eye, then, even if only by implication, there does not appear to be any doubt that the surveyor is contributing in looking to deceive the employer, contractor, subcontractor or adjudicator.

The step from deceptive conduct to fraudulent conduct can often be a small one and surveyors should not assume that the current investigations by the OFT have no impact on their working practices, or that such conduct would not be a breach of the rules of conduct.

Currently, the prosecutions in Scotland and the investigations in England are based on breaches of the Competition Act 1998, which result in limited fines. However, the OFT has not ruled out the possibility of a criminal investigation of the cartel offence under the Enterprise Act 2002, any breach of which may result in imprisonment or extradition, along with an unlimited fine.

These are all serious matters that require serious consideration by the construction industry.

When taking on any work linked to the Games, surveyors must accept that they may be placed in a whistle-blower position. Having let the genie out of the bottle and asked the question it will be interesting to see whether the RICS takes the next step in confirming stricter professional standards in the conduct of adjudication.