The potential corruption pitfalls in procurement and construction processes are manifold but a new research report examining projects led by Victoria’s Major Transport Infrastructure Authority aims to help bridge the common integrity risks.
Infrastructure initiatives usually always involve two things: huge budgets and pressure to deliver on time.
And the projects rank among the most at-risk of attracting corruption among all other areas of public sector investment.
A new report released by the Independent Broad-based Anti-Corruption Commission (IBAC) this week has attempted to distil the common challenges in major projects of this kind.
Acting commissioner Stephen Farrow said these projects were defined as high-risk, high-value initiatives. With that status came a host of issues that attracted corruption and integrity possibilities which required centralised and coordinated risk management.
“Public sector organisations know that corruption prevention starts with strong integrity frameworks and corruption controls, but the culture and expectations of public sector integrity must extend to project partners and suppliers to be successful,” he said.
The research paper found under-resourcing in the public sector had led to staffing constraints which impacted public infrastructure initiatives. IBAC estimated that of 50 specialist roles in the sector, 32 occupations were “potentially in shortage”. This was equivalent to labour and skills shortage in the sector being 48% higher than demand for 2023 alone.
“The limited pool of providers working across multiple projects has complicated recruitment for Victorian agencies and contractors, increasing the likelihood of conflicts of interests,” the report said.
For procurement and construction projects IBAC warned the common risks include fraud, collusion, and bribery during procurement, collusion and bribery.
Contractors and subcontractors fraud will usually take the form of favouritism, false invoicing and false claims, as well as fraudulent recruitment practices including payroll fraud.
The commission added that the major contracting methods in the construction industry were susceptible to corruption.
“Contracting methods including public-private partnerships, alliance contracting and design and construct, are all ways of undertaking complex projects,” the report said.
“Each have inherent risks for business planning, management, construction and completion.”
The report examined a number of MTIA’s projects funded by the Victorian government’s multi-billion-dollar Big Build initiative. These projects include the North East Link Program, the Level Crossing Removal Project, the Metro Tunnel Project, the West Gate Tunnel Project and future major projects including the Melbourne Airport Rail, and the Western Rail Plan.
Another significant issue that applied to most major infrastructure projects was the influence they had on land value for surrounding areas — be it an increase or decrease in property value. This created an extra corruption risk in the event a party with a conflict of interest might want to capitalise on the changing land value.
“Information about the location of future transport infrastructure is valuable and can be misused to generate profit,” the report said.
IBAC said the MTIA was taking action to mitigate corruption risks along eight measures. Among these proactive steps were the adoption of a data analytics program for fraud and corruption control, probity assurance regimes, integrity awareness and training, due-diligence tests, and pre-employment screening.
Farrow added it was up to all actors in large infrastructure projects to speak up and report suspected wrongdoing if they saw something was amiss.
“It is essential that leaders set the ‘tone at the top’ about integrity and that breaches of anti-corruption policies and codes of conduct will not be tolerated,” Farrow said.
The paper also published a three-part checklist to help public servants navigate organisational culture red flags, individual red flags, and third-party red flags for major projects.
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