Peter Gracia FCIOB on the industry’s culture of collusion.
“Dirty deals are done daily”. That’s what one of my contractor clients always used to say. And in my work advising contractors and clients, I’ve often come across evidence that suggests he wasn’t wrong.
It’s not always what you could call corruption or fraud, but undoubtedly in some parts of the industry there is a culture of “dodgy deals”, collusion and communication via back channels that undermine the work being done to make construction more open and transparent.
Cover pricing might no longer be happening so obviously following the OFT’s major investigation, crackdown and fines. But you can still have collusion between contractors on what they’re doing and where they’re operating.
If the government and OFT had really meant business on cover pricing, then those that had been fined could have been rejected completely from future public sector procurement exercises, in accordance with OJEU rules, or have points deducted. Instead, the government issued a guidance note afterwards saying such companies should not be penalised because their behaviour was endemic in the industry – in other words everyone was doing it. In other words, it didn’t really help!
I sometimes tell clients that even though they may think they have a project team working for them, the designers, consultants, quantity surveyors and so on, all that could change as soon as the contractor comes on board. If the client is a one-off client then the professional services firms will be looking to cosy up to the contractor, as that’s who they’ll be working with in the future – they won’t want to be left out in the cold when some big D&B job comes along.
And I’ve often come across clients’ references for contractors or consultants with regards to their performance that “gild the lily” and may not actually reflect what happened during the contract. A project may look as if it turned out well, but dig a little deeper and you’ll find there were all sorts of problems hidden round the back.
I recently had a case where my client had hired a contractor based on a great reference from a public sector client, but their performance on his project was not that great.
When I quizzed the contractor about the reference, they confirmed that not everything was as it seemed. It turned out that the public sector client had run out of money to build Phase 2 of its project, and the contractor – which had cash in the bank – had basically loaned them the money to complete the project. If we knew that at the time then the glowing reference would have lost a lot of its sparkle.
It might not be fraud and corruption as most people would define it, but it is more evidence of the kind of dodgy deals and lack of transparency that are all too common in construction. When inexperienced clients ask me why something particularly crazy has happened on their job I can always reply with “Welcome to Construction!”
Peter Gracia FCIOB FCIArb FQSI is director of Gracia Consult
