Risk

Poor performance of contractors

Contractors provide services and products with delays or poor quality.

Risk type: Consequence

Risk driver: External

DESCRIPTION

In carrying out their operations, water sector organizations usually obtain some services (e.g. installations, repair work, measurements, etc.) and goods (e.g. equipment such as pumps, pipes, etc.) from external contractors. These contractors can try to ‘save’ money and time by providing goods and services that are delayed, of lower quality, with different specifications than those contracted, or simply defective.1 This is usually covered up by collusion between project officers and contractors, where favours or kickbacks are exchanged. It can also be the case that the contractor bribes and/or colludes with its supervisor (e.g. a quantity surveyor) in order to meet agreed standards of services and goods. In some cases, it may also be that project officers simply lack the competence to detect low-quality works.

If contractors fail to meet agreed standards of services and goods, the project owner does not receive value for money. Faulty or sub-specification work may require early repairs or expensive correction.1 Insufficient quality may significantly increase costs of operations and maintenance. Or, in the worst cases, the entire task and investment has to be redone.

RED FLAGS

  • Staff and customers make complaints regarding the quality of goods and services.
  • There is continued acceptance of, or regular legal disputes over, poor-quality goods and services and unfinished tasks.
  • The unit that is supposed to control the execution of contracts has insufficient resources and/or an unclear mandate.
  • During inspections the executed work does not seem to match the contract specifications.
  • Contract specifications show discrepancies with invoices and supporting documents or test and inspection results.

KEY GUIDING DOCUMENTS

Stansbury, C. and Stansbury, N., 2008, Examples of Corruption in Infrastructure, Global Infrastructure Anti-Corruption Centre (GIACC)

WIN and TI, 2011, Integrity pacts in the water sector – An implementation guide for government officials, Water Integrity Network (WIN) and Transparency International (TI)

STRATEGIC, 2009, Corruption Practices and the Available Complaint, Feedback and Redress Tool(s) and Anti-corruption Tool(s) in Water and Sanitation Sector – Bondo District, Strategic Public Relations and Research Limited, Draft prepared for Kenya Water for Health Organisation (KWAHO) and United Nations Development Programme (UNDP)

GENERAL EXAMPLES

Pump repainted instead of replaced2

Location: Bondo District, Kenya

Indeed in one of the projects, there was a pump installed that was meant to be new but even a casual glance shows one that it was an old pump that had just been painted. [According to one commentator] “If we had good representatives, these are things that should not be accepted.”

Low price comes at high costs1

Location: n.a.

A contractor or operator wins a bid with a very low price, but once the contract is signed, charges higher fees, withholds delivery, or performs poorly to compensate for low income, or uses substandard materials or outdated equipment to offset costs.

Supply of inferior materials3

Location: n.a.

A concrete supplier is obliged to supply concrete to a particular specification. The concrete supplier deliberately supplies concrete of a cheaper and inferior specification, but invoices the contractor for the required specification.

False work certificates3

Location: n.a.

An earth-moving sub-contractor signs a contract with the contractor to remove unsuitable material from site and to replace it with suitable material. The earth-moving sub-contractor will be paid by the load. The contractor appoints a quantity surveyor to count on site the number of loads removed and replaced by the earth-moving subcontractor. Each load will have a written load certificate, which will be signed by the earth-moving sub-contractor and counter-signed by the quantity surveyor. The manager of the earth-moving sub-contractor agrees with the quantity surveyor that the quantity surveyor will falsely certify more loads than the earth-moving sub-contractor actually undertakes. In return, the earthmoving sub-contractor will pay the quantity surveyor 30% of the payment received by the earth-moving sub-contractor for each false load. The quantity surveyor certifies 20 false removals and 20 false replacements. The earth-moving sub-contractor submits both its genuine and its false certificates to the contractor for payment. The contractor pays in full, resulting in an illicit profit to the earth-moving subcontractor. The earthmoving sub-contractor pays the quantity surveyor his share.

Oversight Oversight officials are bribed or extort payments4

Location: Africa

Oversight officials are bribed or extort payments to ignore instances when specifications are not adhered to (e.g. depth of pipe work, foundation materials) or works are not completed, or when lower quality materials are used (e.g. type of pipes), and provide fraudulent documentation. Typically these practices help contractors minimise costs and result in sub-standard works, affecting sustainability and quality of WSS [water supply and sanitation] service delivery.

Collusion between contractor and architect3

Location: n.a.

A contractor has been delayed in completing the project. Two reasons could account for the delay. The first is the delayed delivery of materials by one of the contractor’s suppliers for which delay the contractor is responsible under the contract and for which he/ she would be liable to pay liquidated damages to the project owner. The second is a change to the specification for which delay the project owner is responsible under the contract and for which the contractor would be entitled to receive an extension of time and additional cost. The contractor is aware that the whole or part of the actual cause of the delay is the supplier delay. However, the contractor submits a written claim to the architect appointed by the project owner which alleges that the whole delay was attributable to the change in specification. The architect accepts the contractor’s claim, and awards the contractor an extension of time and additional payment. The project owner pays the additional payment.

FULL REFERENCES

  1. WIN and TI, 2011, Integrity pacts in the water sector – An implementation guide for government officials, Water Integrity Network (WIN) and Transparency International (TI)
  2. STRATEGIC, 2009, Corruption Practices and the Available Complaint, Feedback and Redress Tool(s) and Anti-corruption Tool(s) in Water and Sanitation Sector – Bondo District, Strategic Public Relations and Research Limited, Draft prepared for Kenya Water for Health Organisation (KWAHO) and United Nations Development Programme (UNDP)
  3. Stansbury, C. and Stansbury, N., 2008, Examples of Corruption in Infrastructure, Global Infrastructure Anti-Corruption Centre (GIACC)
  4. Plummer, J. and Cross, P., 2006, Tackling corruption in the water and sanitation sector in Africa, Working Paper, Water and Sanitation Program
Last updated 07 December 2017

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