Abstract
Although corruption is widespread across various industries and nations worldwide, it is acknowledged that its prevalence can significantly vary, especially within the construction sector. In recent years, the construction industry in India has been on multi fold growth and has encountered numerous challenges rooted in longstanding practices, with their negative impacts resonating throughout economies, societies, and infrastructure projects globally. From bribery, and extortion to fraudulent activities, corruption compromises the integrity of public infrastructure initiatives, resulting in inflated costs, project delays, and compromised quality standards. Addressing this crucial challenge, the Construction Sector Transparency Initiative (CoST) has risen as a beacon of optimism, presenting a methodical strategy to combat corruption and foster transparency in construction projects worldwide. This article endeavours to delve into the influence of CoST in mitigating corruption and amplifying project transparency on a global level, concurrently advocating for the integration of the CoST Initiative in India. The suggestions outlined in the article encompass fostering collaboration among diverse stakeholders, championing compulsory data disclosure, instituting assurance mechanisms, advancing social accountability, facilitating capacity building with an emphasis on sustainability, policy advocacy, monitoring, and evaluation, and promoting knowledge sharing. The article concludes by highlighting success stories and emphasizing the transformative potential of CoST in cultivating transparent, accountable, and sustainable construction sectors worldwide.
Introduction
CoST – the Infrastructure Transparency Initiative (“CoST”) stands at the forefront of global efforts to improve transparency and accountability in public infrastructure. CoST works in 19 countries spanning four continents. Some of such countries include Mexico, Thailand, Indonesia, Ukraine, Nigeria, Colombia, etc. Founded on the principles of disclosure, assurance, multi-stakeholder working, and social accountability, CoST aims at collaborating with governments, the private sector, and civil society to empower citizens and enhance decision-makers’ accountability in the construction sector.
The construction industry’s vulnerability to corruption presents diverse risks to global economies and societies. Various factors contribute to this susceptibility. Firstly, the scale of projects makes them prone to unethical behaviour. Additionally, the intricate nature of these endeavours creates opportunities for misconduct. Furthermore, the significant influx of public funds into these projects offers ample room for malpractice. Bidding processes may encourage unethical conduct among competitors, and a lack of transparency during bidding exacerbates corruption risks. Additionally, narrow profit margins and monopolistic tendencies in service provision compound the issue. Close relationships among contractors, subcontractors, and project owners can facilitate corrupt practices. Finally, political interference and discretionary investment decisions introduce another layer of vulnerability to the industry.
The dire consequences of corruption within the construction sector, include unreliable, hazardous, and unnecessary projects; uncertainty in tender processes leading to economic harm, extortion, blackmail, and legal actions against companies; personal repercussions such as decreased morale and potential criminal charges, fines, and imprisonment; squandering of tender expenditures; harm to brand reputation; and heightened reputational risks.
If substantial measures are not taken, the construction industry worldwide could potentially lose up to $5 trillion annually to corruption and bribery by the year 2030. This pervasive corruption not only inflates project costs but also prolongs construction timelines and compromises the safety and quality of infrastructure services delivered. From unreliable and unsafe projects to economic damage and individual repercussions such as criminal prosecution, the adverse effects of corruption in construction are far-reaching and profound.
Public infrastructure projects serve as a prominent representation of governments’ utilization of taxpayers’ funds, often constituting a substantial portion of public expenditure, particularly in economically developing nations. Abandoned railway lines corroded by neglect or incomplete airports exceeding their budget serve as distressing reminders of the consequences of corruption and mismanagement of public finances. As per OECD’s Report on Preventing Corruption in Public Procurement, Public infrastructure projects across the globe, typically lose between 10% to 30% of their budget to corrupt practices. This estimation does not even encompass the profound societal costs associated with poorly executed public construction endeavours, which can result in catastrophic events such as collapsed bridges or abandoned hospitals due to flawed design and the use of substandard materials. While major scandals may capture headlines, numerous smaller instances often go unnoticed. Nonetheless, combating corruption in large-scale infrastructure projects presents a delicate challenge, as the implicated parties may extend to the highest echelons of government and business elites.
Analysis of the Core Elements Of CoST Approach
Through the disclosure of construction project details such as budgets, expenditures, and performance metrics, CoST ensures that stakeholders are held answerable for their conduct. Transparency encourages decision-makers and contractors to uphold ethical principles and meet their obligations, recognizing that their actions are subject to public examination. By advocating for transparency in procurement procedures and contract allocations, CoST promotes fairness and deters favouritism or collusion among contractors. This facilitates equitable competition and guarantees that contracts are awarded based on merit rather than personal affiliations or corrupt behaviours.
The Construction Transparency Initiative (CoST) is a worldwide collaborative effort aimed at combating corruption and promoting the efficient use of public funds in public construction projects. It achieves this goal by enhancing transparency throughout the implementation of public infrastructure projects. CoST’s approach is based on securing firm commitments from governments at the highest levels to enhance transparency. Additionally, the initiative involves various stakeholders, including the private sector, civil society, and the media, who serve as watchdogs to ensure accountability. CoST operates through a centralized global Secretariat, providing financial and technical support. This approach fosters local ownership of the process, empowering communities to actively participate in promoting transparency and accountability in construction projects.
The Core Elements of the CoST Approach include Multi- Stakeholder Working, Disclosure, Better value for money & better-quality services, Social Accountability and Assurance.
1) Multi-Stakeholder Engagement: The CoST program initiates by establishing a multi-stakeholder working group (MSG), composed of government agents, private sector, academia, and civil society, convened by the CoST host. The MSG assumes responsibility for overseeing, strategizing, and directing the adoption of the CoST program within the nation, state or infrastructure project, through regular meetings and collective decision-making processes. This inclusive outlook of stakeholder involvement aims at facilitating significant involvement of civil institutions and private entities, ensuring their representation and involvement in making responsible, deliberate, informed and sound decisions. A crucial role of the MSG is to select the individuals who will make up the assurance team. This team must include, inter alia, independent industry experts and representatives of private entities. Such heterogenous representation ensures the team’s impartiality and enhances the credibility of the entire process. Efficacious multi-stakeholder engagement necessitates that partaking entities give the officials, the requisite time to engage and follow through on MSG activities. It is imperative to note that changes in the influence or power dynamics of the host entity or the leadership of key stakeholders may affect the political landscape of the stakeholder group, thus, effective mediation by prominent MSGs, CoST member nations or regional groups becomes crucial for the process’s success.
2) Data Disclosure: Infrastructure project data disclosure adheres to the CoST Infrastructure Data Standard (OC4IDS). CoST programs mandate data disclosure aligned with OC4IDS and endorse legal mandates (acts or decrees) to eliminate legal impediments to disclosure. Moreover, CoST programs strengthen the capability of authorities to meet their obligations regarding disclosure. The OC4IDS extends to infrastructure projects under public-private partnerships (PPPs). While not all CoST members may have the capacity to fully implement OC4IDS, the CoST Secretariat aids the members in progressing toward sustainable implementation. This entails collaboration with relevant authorities or assistance to line ministries in establishing infrastructure data portals. Standardizing data and presenting it in user-friendly formats such as graphics and maps provide robust tools for implementers and policymakers to identify and mitigate risks and monitor infrastructure expenditures and outcomes.
3) Assurance: Assurance involves expert validation to ensure the accuracy and completeness of disclosed data (and eventual OC4IDS compliance).Assurance teams also assess sample projects for exemplary practices, issues, or warning signs, offering recommendations for rectification. Assurance reports are presented in a non-technical format for a broad audience and are submitted to the MSG, which is responsible for addressing raised concerns and advocating the replication of good practices. Assurance is conducted on a sample of projects selected by the MSG to represent various infrastructure projects within a given context. The assurance team examines the disclosed data. It may ask for more information and conduct field visits to the selected projects. This strategy identifies the matters necessitating project-level or policy-level action, such as construction quality deficiencies, inadequate contract management, flaws in project preparation, irregularities in tendering and contract awards, and safety concerns. The assurance team also refrains from duplicating responsibilities already undertaken by others and documents the visual inspection findings to flag any concerns to the relevant stakeholders.
Since the technical complexity of construction projects renders public monitoring or citizen audits insufficient for determining all problems or anomalies, the CoST Initiative emphasizes data validation by assurance teams, contracted to validate a project sample. Participation of industry experts, often academic engineers, in MSGs assures professional input in the pertinent deliberations. Another notable advantage of the CoST assurance process lies in its preventative aspect, given that any project has the potential to undergo an assurance process.
4) Social Accountability: The CoST approach activates informal (horizontal) accountability mechanisms by fostering structured civil society participation in MSGs, facilitating public access to infrastructure project information, and promoting community engagement at the grassroots level. Social accountability exerts pressure on official (vertical) accountability mechanisms to ensure that transparency and participation enhance decision-making and outcomes. Key stakeholders in this process include affected or intended beneficiary communities, media, policymakers, politicians, and organized civil society groups. Infrastructure data portal development demonstrates considerable potential as a mechanism for ensuring shared responsibility and official project tracking (as evidenced in Honduras and Ukraine). CoST programs adapt to local information-sharing preferences (e.g., radio broadcasts in Ethiopia) and support social participation in project monitoring through initiatives such as investigative journalism awards (in Uganda, Honduras, and Malawi), live radio Q&A sessions with the representatives and agents of the civil societies and the government, and provision of a Transparency Monitoring Tool for citizen and contractor/consultant use. Community meetings in Uganda provided additional avenues for raising issues for action by procuring authorities.
Progress in digital governance and open data underscores that transparency alone does not guarantee improved policies or decision-making. Continuous engagement of all the stakeholders in decision-making, coupled with the interpretation of published information, is essential. CoST country programs reinforce such measures, particularly by building the capacity of civil society actors to use data for government oversight. In numerous situations, CoST stands out as the only program involved in enhancing stakeholder capacity, thereby bridging the divide between data disclosure and accountability.
Impact and Implications of Cost Approach
The CoST approach has produced tangible outcomes worldwide, showcasing the efficacy of transparency and accountability measures in combatting corruption within the construction industry. Operating on a global scale, CoST reveals, validates, and interprets data pertaining to infrastructure projects, thereby ensuring that decision-makers are held accountable. Since 2015, adherence to the CoST Infrastructure Data Standard has resulted in the disclosure of 76,767 projects, with 625 projects subjected to review by CoST members, and 8177 government representatives undergoing training. Through collaborative efforts involving multiple stakeholders, alongside initiatives focusing on data disclosure, assurance, and social accountability, CoST has played a significant role in reducing corruption, enhancing project outcomes, and fostering public trust in infrastructure investments.
As the construction sector continues to expand, with global output projected to reach $17.5 trillion annually by 2030, the need for robust anti-corruption measures becomes increasingly critical. CoST’s efforts to promote transparency and integrity in construction projects not only safeguard public resources but also contribute to sustainable development goals, including poverty eradication, economic growth, and climate resilience.
Need for Implementation of the Cost Approach in India
The perception of corruption within India’s construction sector has a longstanding history, characterized by regular occurrences of bribery, kickbacks, and fraudulent activities that compromise the integrity of infrastructure projects. Transparency International’s Corruption Perceptions Index consistently reflects India’s low ranking, signalling enduring corruption issues. Additionally, reports from institutions such as the Centre for Media Studies suggest that corruption within India’s construction sector constitutes a substantial portion of the nation’s overall corrupt practices. Over the past 6-7 years, there has been a noticeable shift in the landscape following the implementation of the Real Estate (Regulation & Development) Act (RERA). The real estate sector is currently undergoing a transformation, with Real Estate Investment Trust (REIT) becoming active in the sector. However, there is still good scope for improvement of prevalent practices.
The CoST Secretariat offers specialized assistance to the CoST members in establishing and sustaining these components, and it designs technological and policy instruments derived from research to promote transparency in infrastructure at all levels. To become a CoST member, a national or sub-national entity should apply to the CoST Secretariat. The Secretariat evaluates the same while considering the adherence to the core principles of CoST, readiness to openly disclose its membership and obligations, and the formulation of a meticulous implementation strategy. The final decision on application approval rests with the CoST Board. Financial support for CoST programs is provided by the CoST Secretariat. Non-compliant members or those consistently incapable of enforcing the vital components of the CoST approach, risk losing their CoST membership.
The angel fundings / ReITs are expecting and insisting on transparency, responsibility and answerability in the sector. While India is currently not a member country of the CoST Initiative, applying CoST approach in the Indian construction sector presents an opportunity to address pervasive corruption, enhance transparency, and improve the quality and efficiency of infrastructure projects. CoST principles and strategies can be implemented in India in the following ways:
1. Multi-Stakeholder Collaboration: Establishing multi-stakeholder working groups (MSGs) comprising representatives from the government entities, private agents, academia, etc. These groups can oversee and foster the implementation of CoST programs, ensuring diverse perspectives and fostering collective decision-making.
2. Data Disclosure: Advocating for the adoption of legal mandates to facilitate the transparent disclosure of infrastructure project data. This includes information on project budgets, timelines, contracts, and expenditures. Establishing standardized data disclosure practices and capacity-building initiatives to empower responsible authorities to comply with disclosure requirements.
3. Assurance Mechanism: Implementing an assurance mechanism to validate the accuracy, transparency, and completeness of disclosed data. Expert assurance teams can conduct reviews of project information, identify areas of concern, and make recommendations for improvement. This process enhances confidence in infrastructure investments and promotes accountability throughout the project lifecycle.
4. Social Accountability: Promoting social accountability through community participation, investigative journalism, and digital tools for public access to information. Engaging citizens in monitoring infrastructure projects, raising awareness about their rights, and empowering them to demand accountability from decision-makers.
5. Capacity Building: Providing training and capacity-building programs for government officials, civil society organizations, and other stakeholders on CoST principles and practices. This includes workshops, seminars, and educational materials to enhance understanding of transparency, accountability, and anti-corruption measures in the construction sector.
6. Policy Advocacy: Engaging in efforts to promote policy reforms and institutional adjustments aimed at enhancing transparency and accountability within the construction sector. This could encompass the implementation of oversight measures and the incorporation of best practices in project administration and procurement.
7. Monitoring and Evaluation: Instituting comprehensive monitoring and evaluation frameworks to monitor the advancement and effectiveness of CoST initiatives within the Indian construction domain. This encompasses conducting routine audits, evaluations, and surveys to gauge transparency, accountability, and the calibre of infrastructure projects.
8. Knowledge Sharing: Facilitating knowledge, sharing of success stories and exchange of best practices among stakeholders in the Indian construction sector and the global CoST network. This includes organizing conferences, seminars, and peer learning events to share experiences, lessons learned, and innovative approaches to combating corruption and promoting transparency. This will also stimulate an increase in Foreign Direct Investment (FDI) flowing into the sector.
By implementing the CoST Initiative in the Indian construction sector, stakeholders can work collaboratively to address corruption, enhance transparency, and improve the quality and efficiency of infrastructure projects. Through multi-stakeholder collaboration, data disclosure, assurance mechanisms, social accountability, capacity building, policy advocacy, monitoring and evaluation, and knowledge sharing, India can pave the way for a more transparent, accountable, and sustainable construction sector.
Conclusion
The CoST approach has demonstrated a significant impact in countries around the world. For example, in Malawi, CoST helped uncover cost overruns and discrepancies in public infrastructure projects, leading to reforms in procurement processes and increased transparency. Since 2016, CoST Ukraine has spearheaded the creation of systems aimed at not only disclosing information regarding infrastructure projects but also at analysing this data and disseminating the findings openly and comprehensively to the public. CoST Uganda has played a pivotal role in fostering year-round prosperity for farmers by organizing community events where locals could voice their concerns to policymakers. Meanwhile, in Thailand, the CoST approach has catalysed behavioural shifts across the private sector, community, and government, resulting in substantial cost savings totalling US $360 million. These success stories underscore the transformative potential of the CoST approach in tackling corruption and promoting good governance within the construction sector.
Continued advocacy, capacity-building, and institutional reforms are essential to mainstreaming the CoST approach and embedding transparency and accountability within the construction sector globally. By leveraging technology, promoting multi-stakeholder collaboration, and strengthening regulatory frameworks, nations can tap into the CoST’s transformative power and construct more robust, inclusive, and sustainable infrastructure, benefiting all stakeholders involved.
Authors and Designation:
Mr. Atul Juvle (Consulting GC & Independent Director) and Ishita Chandra (3rd year student at Dr. B.R. Ambedkar National Law University, Sonepat)
Disclaimer:
The views and opinions expressed by the authors are personal.
Editorial Team:
Managing Editor: Naman Anand
Editor in Chief: Abeer Tiwari and Muskaan Singh
Senior Editor: Harshita Tyagi
Associate Editor:
Ishita Chandra
Junior Editor: Parmi Banker
Recent Comments