The construction industry needs to do more to tackle corruption according to a new report from Grant Thornton. The consultant estimates that fraud could cost the industry between 5% and 10% of revenues, or as much as US$ 860 billion per year.
Clare Hartnell, Grant Thornton’s global leader for real estate and construction, said, “More companies need to take their head out of the sand and recognise that fraud and corruption costs, not only in terms of profits, but also a company’s reputation. It’s a real threat to growth. Fraud is often seen as the cost of doing business. This does not have to be the case.
“Information technology and the internet offer both threats and opportunities. There are many data analytics tools that can help to identify and thereby prevent fraud.”
Grant Thornton’s findings are based on research carried out in Australia, Canada, India, the US and the UK. The company said that as growth returns to the global industry, the opportunities for fraud will increase and the real estate and construction industry risks being targeted as a weak link by fraudsters as levels of other crime fall.
Fraud and corruption in Construction can take several forms, from falsely representing the numbers of hours a contractor works, through to collusion when bidding for contracts or paying bribes. These increase costs and inflate the contract price.
The report, Time for a new direction: fighting fraud in Construction, argues that this does not have to be the case and makes recommendations to help companies avoid falling victim to fraud. One is to make better use of information technology to fight fraud – an area where construction companies lag other sectors, such as finance.
The report also recommends companies put aside representational issues and speak more openly about the issue of fraud. This will foster a greater willingness by companies to prosecute the perpetrators.
Ms Hartnell said, “Companies should consider a more open approach and prosecute perpetrators more often. This will send out a message that the construction industry is not open for fraud.”
Author; Chris Sleight