Corruption and Ethics in The Construction Industry
Posted by MDA Projects on Friday, June 20, 2014 with 2 comments
A conversation with Ian Taylor, Managing Director, MDA (Mitchell du Plessis Associates (Pty) Ltd
It is often intimated that the construction industry is susceptible to ethical misconduct. Some references imply that the construction business is the most corrupt economy worldwide.
For the most part, the construction industry is, I believe, both an honest and ethical economic sector. However, it takes only a few bad apples to spoil the crop. Unfortunately, the construction sector, with its one off purchase (generally) of a project, rather than a production run scenario, is prone to misuse of the system. There is however an infinite number of ‘straight’ participants who get passed over unnoticed while the ‘rotten apples’, once found out, hog the headlines. Politics is perhaps the only ‘industry’ with a more unenviable reputation.
How does the South African construction industry fare in terms of industry corruption and the effective management of ethics?
On the one hand South Africa is still in a state of flux. While our new democracy is 20 years old, there are some deep-seated mindsets that will take generations to overcome.
Now, more so than say 15 years ago, there is a shortening of the time horizon for business. This is because 15 years ago, with the prospect of a glowing future for South Africa there was less of a need for instant (short term) gratification. The future was to take care of that.
Currently, there is some uncertainty about the economic outlook for South Africa and concern that in a period as short as five years, the country’s economic landscape may be entirely different, so the ‘need’ for instant gratification has increased exponentially.
The good news is that ethical management is still in the majority. It must, at every opportunity, be instilled in the workforce that ethical behaviour is a non-negotiable requirement for employment in the construction industry.
In fact, the South African construction industry must be ruthless in its resolve to weed out any and all corrupt practices. It must recover ill-gotten gains for those who are out of pocket and convince the public, private clients and National bodies that project funding will be used for its intended purpose (the project) and not to feather the nests of those who are inclined, and are in a position, to redirect some of the funds. For this to be effective, reasonable and fair, fees and profit mark ups must be accepted.
How does MDA deal with ethical dilemmas and conflicts of interest?
Projects are often high risk, high visibility ventures. The pressure to cheat, or at the very least to cut corners in the construction industry is high as well. The management style at MDA is such that a director is personally charged with overseeing the execution of any project ‘from cradle to grave’. That director, in turn, reports to his board where all decisions on possible conflicts of interest and ethics are taken. From the outset, we eliminate the possibility of a rouge manager getting away with any dishonest undertaking.
What is/are the critical project management ethics issue/s currently impacting the construction industry in a South African context? How does one address this/these issue/s?
Undoubtedly, the biggest ethics issue currently under review in the South African construction industry is the purported, and at times acknowledged, collusion in the build-up to the FIFA World Cup 2010. The Competition Commissioner has levelled fines of various severity levels on the contractors involved in wrongdoing and, for the most part, these contractors have admitted guilt.
In my opinion, any further recourse against the contractors over and above the imposed fines will be futile. As it is the fines have not been directed at the actual guilty parties (certain management within these companies). In other words, in fining the companies and not the specific wrongdoers, profits available for distribution are reduced. This in turn, reduces profits available to shareholders who, although not involved in the collusion in the first place, are penalised anyway. A more appropriate approach is for legal charges to be brought against those individuals directly involved in any wrongdoing. The final outcome of this case is sub-judice (under judgement).
Does MDA have a code of ethics and how does this tie in with your own personal code of ethics?
We often say that, “who you have on your project management team will determine your success” and we’ve been in business since 1979. MDA has a reputation for doing what is right and honourable and we have always made decisions, and taken appropriate actions, based on the best interests of society, public safety, and the environment. Yes, we have a code of ethics and we firmly uphold it and hold each other firmly accountable to it.
My personal journey in terms of work environment ethics started almost four decades ago when I was ‘encouraged’ to look away while a questionable undertaking was to be carried out on a construction site. I did not look away and the questionable undertaking never took place. Fortunately, I have never had any other ‘offers’ but my decision would be the same nevertheless.
I believe in negotiating hard but I never compromise on the honesty and integrity I expect of myself and of others. I always operate from this standpoint with regard to clients, professional team members and contractors. It gives people a reason to trust you. And if you achieve that, you have achieved success.
It is often intimated that the construction industry is susceptible to ethical misconduct. Some references imply that the construction business is the most corrupt economy worldwide.
For the most part, the construction industry is, I believe, both an honest and ethical economic sector. However, it takes only a few bad apples to spoil the crop. Unfortunately, the construction sector, with its one off purchase (generally) of a project, rather than a production run scenario, is prone to misuse of the system. There is however an infinite number of ‘straight’ participants who get passed over unnoticed while the ‘rotten apples’, once found out, hog the headlines. Politics is perhaps the only ‘industry’ with a more unenviable reputation.
How does the South African construction industry fare in terms of industry corruption and the effective management of ethics?
On the one hand South Africa is still in a state of flux. While our new democracy is 20 years old, there are some deep-seated mindsets that will take generations to overcome.
Now, more so than say 15 years ago, there is a shortening of the time horizon for business. This is because 15 years ago, with the prospect of a glowing future for South Africa there was less of a need for instant (short term) gratification. The future was to take care of that.
Currently, there is some uncertainty about the economic outlook for South Africa and concern that in a period as short as five years, the country’s economic landscape may be entirely different, so the ‘need’ for instant gratification has increased exponentially.
The good news is that ethical management is still in the majority. It must, at every opportunity, be instilled in the workforce that ethical behaviour is a non-negotiable requirement for employment in the construction industry.
In fact, the South African construction industry must be ruthless in its resolve to weed out any and all corrupt practices. It must recover ill-gotten gains for those who are out of pocket and convince the public, private clients and National bodies that project funding will be used for its intended purpose (the project) and not to feather the nests of those who are inclined, and are in a position, to redirect some of the funds. For this to be effective, reasonable and fair, fees and profit mark ups must be accepted.
How does MDA deal with ethical dilemmas and conflicts of interest?
Projects are often high risk, high visibility ventures. The pressure to cheat, or at the very least to cut corners in the construction industry is high as well. The management style at MDA is such that a director is personally charged with overseeing the execution of any project ‘from cradle to grave’. That director, in turn, reports to his board where all decisions on possible conflicts of interest and ethics are taken. From the outset, we eliminate the possibility of a rouge manager getting away with any dishonest undertaking.
What is/are the critical project management ethics issue/s currently impacting the construction industry in a South African context? How does one address this/these issue/s?
Undoubtedly, the biggest ethics issue currently under review in the South African construction industry is the purported, and at times acknowledged, collusion in the build-up to the FIFA World Cup 2010. The Competition Commissioner has levelled fines of various severity levels on the contractors involved in wrongdoing and, for the most part, these contractors have admitted guilt.
In my opinion, any further recourse against the contractors over and above the imposed fines will be futile. As it is the fines have not been directed at the actual guilty parties (certain management within these companies). In other words, in fining the companies and not the specific wrongdoers, profits available for distribution are reduced. This in turn, reduces profits available to shareholders who, although not involved in the collusion in the first place, are penalised anyway. A more appropriate approach is for legal charges to be brought against those individuals directly involved in any wrongdoing. The final outcome of this case is sub-judice (under judgement).
Does MDA have a code of ethics and how does this tie in with your own personal code of ethics?
We often say that, “who you have on your project management team will determine your success” and we’ve been in business since 1979. MDA has a reputation for doing what is right and honourable and we have always made decisions, and taken appropriate actions, based on the best interests of society, public safety, and the environment. Yes, we have a code of ethics and we firmly uphold it and hold each other firmly accountable to it.
My personal journey in terms of work environment ethics started almost four decades ago when I was ‘encouraged’ to look away while a questionable undertaking was to be carried out on a construction site. I did not look away and the questionable undertaking never took place. Fortunately, I have never had any other ‘offers’ but my decision would be the same nevertheless.
I believe in negotiating hard but I never compromise on the honesty and integrity I expect of myself and of others. I always operate from this standpoint with regard to clients, professional team members and contractors. It gives people a reason to trust you. And if you achieve that, you have achieved success.
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| Ian Taylor, Managing Director, MDA |
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