1. Engineering Risks Management & Integrity Building Capacity Building Package on Corruption Prevention for Construction Industry

2. Suggested Programme For Site Supervisory Staff  Main Parties to a Construction Contract  Corruption Prone Areas and Preventive Measures in Site Supervision  Integrity Issues  ICAC Services for Private Sector

3. Main Parties to Construction Contract Client: (Government / Public Body / Developer) Client: (Government / Public Body / Developer) Architect / Engineer (In-house Staff/ Consultant) Main Contractor Sub-Contractor

4. Corruption Prone Areas in Construction Process Contract Letting Site Supervision Contract Administration

5. Site Supervision Inspection Arrangement Testing of Construction Materials

6. Site Supervision Inspection Arrangement Corruption Risks Site supervisory staff connive at substandard works of contractors Lack of accountability and checks and balances in site supervision, resulting in lax supervision over the works executed by contractors Preventive Measures Put in place a quality site supervision plan system, setting out the work items to be inspected, inspection frequencies, and rank of inspecting staff Require the inspecting staff to maintain detailed site inspection records and sign against them Require supervisors to conduct regular site checks on the inspections

7. Site Supervision Inspection Arrangement Corruption Risks Undesirable relationship between site supervisory staff and maintenance term contractors built up over a long period of time while carrying out their inspection duties (for term maintenance contracts only) Preventive Measures Change posting of site supervisory staff periodically

8. Site Supervision Testing of Construction Materials Corruption Risks Site supervisory staff manipulate the process for selection of test samples to ensure that only compliant samples are selected for testing Preventive Measures Issue guidelines on the number of samples to be selected and the sample selection procedures Monitor compliance by regular supervisory checks and audits Require test samples to be selected randomly, and document the sample selection process (e.g. location/batches of the samples selected)

9. Site Supervision Testing of Construction Materials Corruption Risks Site supervisory staff connive at tampering with test samples by contractors (e.g. swapping of selected samples with compliant ones) Preventive Measures Implement security measures on the storage and transportation of test samples to the laboratory Adopt, where practicable, unique identifiers to enhance the traceability and identification of test samples Implement a stock identification/ control system on site to ensure only materials passing the tests will be used for the works

10. Site Supervision Testing of Construction Materials Corruption Risks Contractors tamper with the test reports to ensure a pass before sending them to clients/consultants Preventive Measures Require laboratories to send the test reports to the clients/consultants and the contractors in parallel

11. Site Supervision Testing of Construction Materials Corruption Risks Laboratories appointed by contractors are unduly influenced to prepare biased test reports with a view to covering up the use of substandard materials Preventive Measures Avoid direct employment of laboratories by the contractors Engage the laboratories through the consultants or the clients themselves Require the contractors to declare any conflict of interest with the laboratories Arrange independent parallel tests on materials which are expensive or used in bulk

12. Integrity Issues Prevention of Bribery Ordinance (Cap. 201) Acceptance of Advantages and Entertainment Management of Conflict of Interest Handling of Confidential Information Use of Contract Cars Carrying Out Inspections Outside Hong Kong

13. solicits / accepts Any prescribed officer advantage without general / special permission of the CE guilty of an offence Penalty : $100,000 fine and 1 year imprisonment Integrity Issues Prevention of Bribery Ordinance – Section 3 (for government employees only)

14. Integrity Issues Prevention of Bribery Ordinance – Section 4 without lawful authority or reasonable excuse offers to do/ not to do any act in his official capacity Offence – Max. Penalty : $500,000 fine and 7 years imprisonment Public servant Any person solicits / Accepts advantage guilty of an offence (for public servants only)

15. Integrity Issues Prevention of Bribery Ordinance – Section 9(1)&(2) Penalty : $500,000 fine and 7 years imprisonment Agent (Employee) Any person without lawful authority/reasonable excuse solicits/accepts offers advantage in relation to principal's (employer’s) business guilty of an offence

16. Integrity Issues Prevention of Bribery Ordinance – Advantages Gift, loan, fee, reward, commission Employment, contract Payment, release or discharge of loan or liability Service, favour (except entertainment) Exercise of any right or power

17. Integrity Issues Prevention of Bribery Ordinance – Entertainment Provision of food or drink for consumption on the occasion, and any entertainment provided at the same time. Not ‘advantage’ but…  sweetening process  obligatory position  conflict of interest

18. Integrity Issues Acceptance of Advantages and Entertainment Corruption Risks Staff accept advantages from contractors/suppliers for conniving at sub- standard works or materials Staff solicit advantages from workers seeking employment in contractors/sub-contractors under their charge Preventive Measures Issue guidelines to prohibit staff from soliciting or accepting advantages from contractors, suppliers and workers Include a probity clause in contracts/ sub-contracts to prohibit the contractors/ sub-contractors’ staff from soliciting or accepting advantages

19. Integrity Issues Acceptance of Advantages and Entertainment Corruption Risks Contractors provide frequent/ lavish entertainment to site supervisory staff, and over- socialise with them (e.g. high stake gambling) Site supervisory staff solicit donations from contractors on behalf of their professional institutions or other organizations Preventive Measures Issue guidelines to prohibit site supervisory staff from accepting frequent/ lavish entertainment from contractors and over- socialising with them Issue guidelines to prohibit site supervisory staff from soliciting donations/ sponsorships from contractors under their supervision

20. Integrity Issues Management of Conflict of Interest Private interest !? Official duties !? when private interests compete or conflict with interests of organisation or official duties

21. What are Private Interests? Financial and other interests of the staff member himself family or relations personal friends group with personal or social ties any person owed favour or obligated Integrity Issues Management of Conflict of Interest

22. Does a Conflict Exist? Public and/or third party perception are the paramount considerations The “Sunshine Test” Onus of proof on the staff member himself Integrity Issues Management of Conflict of Interest

23. Corruption Risks Conflict of interest of staff in contract letting, e.g.  the chairman of the tender assessment panel has financial interest in a particular tenderer  the staff responsible for drawing up the specification of a construction material is a relative of the sole supplier of the material Conflict of interest of staff in site supervision and contract administration, e.g.  the project clerk of works has financial interest in a sub-contractor employed by the main contractor for part of the works under his supervision  the project architect and the site agent of the contractor are close personal friends

24. Integrity Issues Management of Conflict of Interest Preventive Measures Lay down guidelines on handling conflict of interest declared by staff, e.g.  require the staff to abstain from handling the project  require supervisors to monitor the work of the staff who are not required to abstain due to the minor nature of the conflict of interest declared, etc. Designate the authority (e.g. immediate supervisor, chairman of committee/ panel, etc.) for handling any conflict of interest declared by staff Properly document the actions taken

25. Integrity Issues Handling of Confidential Information Corruption Risks Staff leak confidential information (such as tender price information) for personal gain Preventive Measures Properly classify confidential information Implement security measures to prevent unauthorised disclosure of such information Require staff to sign an undertaking on keeping information in strict confidence Follow the need-to-know principle in handling confidential information

26. Integrity Issues Use of Contract Cars Corruption Risks Contractors order the contract car drivers to serve site supervisory staff for private use of the contract cars (e.g. to pick up family members or for personal use), with a view to sweetening them Preventive Measures Restrict the use of contract cars for work related duties only Enlist public support in monitoring the use of contract cars to prevent abuse by making them more visible to the public (e.g. displaying in prominent positions and a conspicuous size the restriction on the use of contract cars and the contract information) (to be cont’d)

27. Integrity Issues Use of Contract Cars Corruption Risks Serve site supervisory staff for private use of the contract cars (cont’d) Contractors sell under- priced contract cars or other valuable items to site supervisory staff Preventive Measures Maintain records on the use of contract cars (e.g. user, date, time, trip and purpose) to be signed by the users after use Subject the records to regular checking Prohibit staff from accepting advantages, including under-priced contract cars and other valuable items, from contractors

28. Integrity Issues Carrying Out Inspections Outside Hong Kong Corruption Risks Improper conduct and practices while carrying out inspections outside Hong Kong for pre-fabricated construction components (e.g. accept lavish entertainment from contractors during the trip) Preventive Measures Require prior approval of supervisors on conducting inspections outside Hong Kong Include the inspection arrangement as well as frequency in the quality site supervision plan Keep the number of persons joining the inspections to the minimum necessary (to be cont’d)

29. Integrity Issues Carrying Out Inspections Outside Hong Kong Corruption Risks Improper conduct and practices while carrying out inspections outside Hong Kong for pre-fabricated construction components (cont’d) Preventive Measures Avoid requiring the contractors to directly pay for expenses incurred during inspection visits to avoid conflict of interest Issues guidelines to prohibit the inspecting staff from accepting frequent/ lavish entertainment from the contractors (to be cont’d)

30. Integrity Issues Carrying Out Inspections Outside Hong Kong Corruption Risks Improper conduct and practices while carrying out inspections outside Hong Kong for pre-fabricated construction components (cont’d) Preventive Measures Lay down the standard of accommodation and transportation to be provided by the contractors Require the inspecting staff to report to their supervisors when the standard is exceeded

31. Advise private companies on corruption prevention controls and practices Code of Conduct Provide corruption prevention training to supervisory staff ICAC Services Advisory Services Group “Company’s Health is Wealth”

32.  Hotline: 2526 6363  Fax: 2522 0505  Email: asg@cpd.icac.org.hk Pledge Response within 2 working days ICAC Services Advisory Services Group

33. Declaration This Capacity Building Package aims at providing general guidance on the common corruption risks and preventive measures in construction and does not purport to deal with corruption issues that may arise in any given situation. Names of all characters, locations and incidents portrayed in the drama are entirely fictitious. Description and explanations of the legal requirements under the relevant Ordinances and the recommended procedures and practices are necessarily general and abbreviated to make this Package easy to understand from the layman’s angle. Users of this Package should refer to the original legislations or seek ICAC’s advice as and when necessary. While we endeavour to ensure the accuracy of the information in this Package, no statement, representation, warranty or guarantee, expressed or implied, is given by us as to the accuracy, completeness or appropriateness of such information for use in any particular circumstances. The ICAC, Construction Industry Council, Development Bureau and Hong Kong Housing Authority are not responsible for any loss or damage whatsoever arising out of the use of this Package or in connection with any information contained in this Package. The copyright of this Capacity Building Package is owned by the ICAC. Interested parties are welcomed to produce any part of this Package for non- commercial use. Acknowledgement of this Package is required.