Construction Journal

Clarity on corruption How and why does corruption occur in our industry? What can we do to prevent it?

PG. 10

What would you do? Fitter infrastructure Good conduct November/December 2018 Responses to ethical How can the infrastructure Guiding APC candidates on rics.org/journals dilemmas in construction industry transform itself? the ethics competency

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CISRS - PS - Emma.indd 1 23/01/2018 11:46 2 NOVEMBER/ DECEMBER 2018 CISRS - PS - Emma.indd 1 23/01/2018 11:46 CONTENTS RICS CONSTRUCTION JOURNAL

Front cover: contents © iStock

4 CONTACTS Doing what’s right For Tim Fry the question is not why be ethical – it’s why would CONSTRUCTION JOURNAL you not?

Editor: Steph Fairbairn 5 E [email protected] Update

The Construction Journal is the journal of the Project 7 Management and Quantity Surveying & Construction Professional Groups Standards update

Advisory group: 8 Helen Brydson (Faithful+Gould), Gerard Clohessy (Arcadis), Virtues between the vices David Cohen (Amicus), Christopher Green (J. Murphy & Sons The great thinkers can help us Limited), Andrew McSmythurs (McSmythurs Consulting Ltd), gain both understanding and David Reynolds (Bloomsbury Project Management), Rachel perspective on ethics, affirms 18 Titley (Arcadis), Tim Fry (Project Management Professional Dr Andrew Knight Don’t hold back Group Chairman), Alan Muse (RICS), Steven Thompson (RICS), Anil Sawhney (RICS) Chris Green assesses the impact 9 of payment retention in the Our stance on ethics light of Carillion’s collapse, and Construction Journal is available on annual subscription. All The RICS is committed to considers some alternatives enquiries from non-RICS members for institutional or company providing the most relevant subscriptions should be directed to: guidance on ethics and conflicts 20 of interest, says Peter Bolton King Infrastructure’s infrastructure E [email protected] Proquest – Online Institutional Access The infrastructure sector has T +44 (0)1223 215512 for online subscriptions 10 work to do to transform itself, say Being clear on transparency Alan Muse and Anil Sawhney Published by: Royal Institution of Chartered Surveyors, Kathryn Higgs, Director Parliament Square, London SW1P 3AD of Business Integrity at 22 T +44 (0)24 7686 8555 W www.rics.org Transparency International, Elemental approach ISSN: ISSN 1752-8720 (Print) ISSN 1759-3360 (Online) offers some insights on Joe Martin discusses using BCIS corruption in our industry data to produce an elemental Editorial and production manager: Toni Gill order of cost estimate at the Sub-editor: Matthew Griffiths 13 earliest stage of a project Guiding light Designer: Will Williams The co-founders of the Global 26 Advertising: Chris Cairns T +44 (0)20 7871 0927 Infrastructure Anti-Corruption Good conduct E [email protected] Centre, Catherine and Neill Susan Hanley details what APC Design by: Redactive Media Group Printed by: Page Bros Stansbury, outline the tools and candidates need to know about guidance it offers the competency Ethics, Rules of Conduct and professionalism 14 What would you do? 29 A group of construction Beyond a bribe professionals discuss appropriate RICS members must be proactive courses of action when faced by to avoid falling foul of the Bribery potential ethical dilemmas Act 2010, warns Shy Jackson

While every reasonable effort has been made to ensure the accuracy of all content in the journal, RICS will have no responsibility for any errors or omissions in the content. The views expressed in the journal are not necessarily those of RICS. RICS cannot accept any liability for any loss or damage suffered by any person as a result of the content and the opinions expressed in the journal, or by any person acting or refraining to act as a result of the material included in the journal. All rights in the journal, including full copyright or publishing right, content and design, are owned by RICS, except where otherwise described. Any dispute arising out of the journal is subject to the law and jurisdiction of England and Wales. Crown copyright material is reproduced under the Open Government Licence v1.0 for public sector information: www.nationalarchives.gov.uk/ doc/open-government-licence

NOVEMBER/ DECEMBER 2018 3 RICS CONSTRUCTION CHAIRMAN’S COLUMN JOURNAL CHAIRMAN'S COLUMN Doing what’s right For Tim Fry the question is not why be ethical – it’s why would you not?

not.” Quite right, Oprah. You I believe more firms shouldn’t need to be told how upstream need to take to behave: you should know. responsibility. If they don’t, To do our jobs we need we are simply kicking the can moral authority. No project down the path. One day it will manager will get very far if no bounce back and hurt us. I one believes a word they say. I think clients deserve a more am pleased Stephen R. Covey holistic approach. agrees with me when he says: “Moral authority comes Work to do from following universal The application of standards and timeless principles is covered in this issue by I like to define what I mean by like honesty, integrity, and a discussion of conflicts of a statement and then explain treating people with respect." interest, most importantly how big name requires a critical what I intend to do about it. As he’s the author of The 7 to avoid or mitigate them. The mass, which creates bigger Let’s take the RICS definition Habits of Highly Effective guidance RICS provides – the firms, and these are then Iof ethics, which is the subject People – a rather good book Conflicts of interest global inevitably small in number. of many articles in this issue. about management – and a professional statement and The ethical barriers RICS professionals respected businessman with the Rules of Conduct – is consequently created within demonstrate their a record of success, I am clear and concise. But there these firms to allow them to commitment to ethical inclined to listen to him. are issues out there that I conduct some business are behaviour by adhering to the think we need to consider and extremely open to abuse. We five global professional and Taking responsibility improve on. can put in place all the secure ethical standards. Bearing The last RICS ethical standard For example, how do we files and firewalls, process in mind that successful is “take responsibility”. This actually manage conflicts protocols and procedures businesses are built on is in my view something that of interest? We now refer to that we want, but in the end relationships, and that strong we don’t do enough. Some ethical barriers or information it would only take one person relationships are built on people cite professional barriers, and I understand to leave one key document trust, mutual respect, integrity indemnity insurance as the the need for these. There on a desk and another with and appropriate standards reason for this; others think are a limited number of firms different interests to find of behaviour, applying RICS the subcontractors can with the demonstrable track and read it to make those ethics is clearly the right thing accept responsibility, and record and capability for measures redundant. to do. Why wouldn’t you? some subcontractors then fulfilling certain roles and, The only proper defence is feel obliged to do so to get in a busy market, we need behaving in the manner Oprah Business advantage on to the next tender list. The to respond to client needs describes, by applying the The things that differentiate industry has an obsession promptly and to the best of ethical standards that RICS us from other professionals that we call passing risk down our ability. Thus, the talent provides – and to which you as RICS members are the line, or backing off risk. pool is confined to a certain sign up and adhere. b ethics and standards, so I know, as do you, that risk few organisations. by complying with both you is best managed by those who Relying on a big name are giving yourself, and by have the skills to mitigate or can be a safe option and Tim Fry is the Chair of the RICS association your employer, a remove it. The problems I see many clients, particularly Professional Group Board for Project Management, a member business advantage. Oprah arise when it’s passed to those public ones, prefer to opt of the Global Standards Setting Winfrey said: “Real integrity at the bottom of the chain – for big names to counter the Transformation Group and is doing the right thing, the sole traders and very small perceived risk of questions Director at Currie & Brown knowing that nobody’s going enterprises – that are not in about who they appointed [email protected] to know whether you did it or the position to do this. and why. Yet to qualify as a

4 NOVEMBER/ DECEMBER 2018 UPDATE RICS CONSTRUCTION JOURNAL

EVENTS

RICS Commercial UPDATE Management in Infrastructure Conference 2 April 2019, Cavendish Conference Centre, London Group seeks to promote n www.rics.org/commercial best-value procurement infrastructureconference

Over the coming months, a newly formed bb predictability: to devise metrics for RICS Quantity Surveying & group of built environment professionals the predictability of asset performance Construction Conference will seek to change procurement culture that will indicate whether it works the way 23 May 2019, Etc. Venues, in the construction market, aiming to it is meant to and, by implication, how well St Paul’s, London help clients to select tenders on the the contractors and consultants perform n www.rics.org/qsconference basis of best value rather than lowest bb procurement behaviours: to look cost. The government has backed this at the procurement process itself, RICS Digital Built initiative, which was commissioned by particularly from the perspectives Environment Conference the Construction Leadership Council of clients, consultant advisors and June 2019, London following July’s Construction Sector Deal contractors, and examine what tools we n www.rics.org/ (https://bit.ly/2IihpzS) and the Procuring can develop to change behaviours digitalbuiltenvironmentconference for Value report (https://bit.ly/2zrBYqw). bb procurement and the digital agenda: The new initiative comprises four to develop ways of integrating procurement working groups, drawing on the expertise into construction’s digital landscape. of professional bodies in the Construction RICS releases Industry Council. These four groups are: Each of the four groups has up to 20 bb the procuring for value model: to industry experts; Steven Thompson, report on MMC define what constitutes value to clients Associate Director of the Built and end users, and develop metrics to Environment at RICS, sits on the benefits measure compliance with the brief and procurement behaviours group. RICS recently published the report other value indicators n https://bit.ly/2xO4xfW Modern Methods of Construction: A forward-thinking solution to the housing crisis? This calls for MMC to become a much more prominent PII changes due part of UK construction and help the New Australian RICS requirements for the professional industry meet growing demand for its guidance indemnity insurance (PII) run-off cover for services in the residential sector. UK firms that are closing or ceasing to The report offers clear evidence published trade and for retiring RICS professionals of the potential benefits and are due to change in April. impacts of MMC technologies, sets The new guidance note RICS Changes were proposed after a review out best practice, and provides and Global Cost and Commercial aimed to ensure private consumers are a basis for future MMC strategy. Management of Construction: adequately protected from any possible The technologies can supplement Australia outlines the role of gaps in cover, and that regulated firms our existing capacities, it says, commercial management in can close by being able to obtain supporting alternative models the country’s construction sufficient cover. The RICS UK and Ireland for delivery and allowing for the market, providing Regulatory Sub-Board then consulted consideration of more housebuilding guidance on the most on five options, preferring the one that options, in turn speeding up the common tasks that provided for an extension to the existing growth of the construction sector. a commercial assigned risks pool to give run-off cover n www.rics.org/beyondbricks manager will for a minimum of six years. At the time of perform on publication, a project. This responses Journal set includes understanding to a second estimates, value engineering, consultation for revamp supply-chain management, valuing that From the February/March issue, readers work, understanding cost, cost–value recommended will receive a redesigned Construction analysis, cash and cost flow analysis, this option Journal with a fresh look. The new and commercial decision-making. are being design will enhance readability and bring n www.rics.org/ assessed. out technical content to better reflect australiacommercialmanagement n rics.org/ the dynamic world of quantity surveying piiresponse and project management today.

Image © iStock NOVEMBER/ DECEMBER 2018 5

UPDATE RICS CONSTRUCTION JOURNAL Standards update: forthcoming The Black Book in 2019 The first edition of the Black Book is a suite of guidance notes that define good technical standards for quantity Work on a number of RICS standards is surveying and construction professionals. Work is now in the early stages for the two outstanding guidance notes expected to continue throughout 2019, to complete the first edition, on the subjects of change and those relevant to construction are procedures and subcontracting. During 2019, we will continue to work on the Black Book detailed below second edition, revising out-of-date material, and expanding coverage of and applicability to the global marketplace. While the first edition is a suite of guidance notes published piecemeal, the second will be published as one handbook with the aim of condensing the material. ICMS 2nd n rics.org/blackbook edition

The International Construction Measurement Standards New Rules of (ICMS) were published in July Measurement 2017 with the aim of providing global consistency in classifying, The New Rules of Measurement (NRM) provide a standard defining, measuring, analysing and set of rules and essential guidance for cost management presenting entire construction costs at a project, regional, of construction projects and maintenance works. state, national or international level. Since their They consist of: introduction, they have gained considerable interest from bb NRM 1, which construction stakeholders, and feedback has indicated that provides guidance on the they would be even more useful were they to incorporate quantification of building lifecycle costs. works for the purpose of A second edition – ICMS 2 – will address this, as well preparing cost estimates as feedback from software vendors and professionals and cost plans concerning the data hierarchy and classification. It will bb NRM 2, which is written also look to extend the number of civil engineering entities mainly for the preparation of that are covered. A draft is currently in development and bills of quantities and quantified consultation is expected to take place next spring. This schedules of works will be the first global standards publication for chartered bb NRM 3, which gives guidance quantity surveyors in 2019. on the quantification and n rics.org/icms description of maintenance works for the purpose of preparing initial order of cost estimates.

Cost prediction Work will continue throughout 2019 to make textual corrections and to clarify the text based on feedback from Work is under way on a global users. Errata will then be published for all three parts. We professional statement in cost also aim to develop the first digital edition of the rules, prediction. The objective is to add starting with NRM 2. process requirements for cost n rics.org/nrm estimating and planning to ICMS and reflect global best practice across buildings and civil engineering. A draft is expected soon, while consultation is also expected to take rics.org/standards place in the spring.

Image © iStock NOVEMBER/ DECEMBER 2018 7 RICS CONSTRUCTION OPINION JOURNAL Virtues between the vices Ethics is an often-misunderstood concept, but the great thinkers can help us gain both understanding and perspective affirms Dr Andrew Knight

e live in times Public reputation of trouble: The professions, ours included, have uncertainty over taken a beating from the public and Brexit, fear of press over recent times. This should not terror attacks, surprise us. Professions claim a special anxiety over status in society – their membership, fake news and organised into professional bodies, has lack of trust historically been given credentials by in professionals. As an antidote to the the state in the form of charters, royal current moral panic, the great thinkers of patrons and the right to postnominals. about the practical nature of ethics, and Wthe past can provide us with perspective At the centre of this special status are how the good life is achieved through on our current concerns and offer high-level expertise, codes of conduct the exercise of the virtues. According to practical advice on how to live, both and trust. And it’s not just in professionals’ Aristotle, the virtues exist at a “golden privately and professionally. respective areas of expertise that society mean” between the vices. So the virtue expects integrity, because professions of truthfulness in our self-expression, for Understanding ethics command wider authority: think, for instance, stands between the vices of There are two popular misconceptions instance, about who can and cannot boastfulness and understatement. about ethics: first, that it is all about countersign passport applications in the One strength of Aristotle’s approach prescribing a goody two-shoes approach UK. However, from the mass murderer is that there are no absolutes: context is to life’s problems, and second, that it is Dr Harold Shipman to the directors of everything. Those who are wise adjust the exclusive domain of religion. Both of Carillion, this pact has been broken, and their actions to the situation and therefore these are false. even though the culprits are few the exercise a whole set of virtues, from Ethics is fundamentally about how damage is significant to the reputation of courage to patience. Developing these we ought to live our lives. Every person, the professions as a whole. virtues is part of daily life and of cultivating religious or not, is constantly navigating Carillion provided the world with a very excellence in character, but that does not life by making moral decisions on a daily visible case of how modern corporate mean this is a part-time activity. basis, ranging from whether they should culture seems to have diverged so If we value our profession because we refuse a lunch from a friendly contractor markedly from the claims made by the think RICS is a power for the public good to making life-defining decisions, such as professions that they are working for then we need to take a deeper interest requesting when to turn off life-support the public good. It is difficult to think in ethics generally, beyond the Rules of for a partner. how much more damming the House Conduct and beyond our own intuitions, These are both moral decisions, and of Commons report on its collapse to reflect more deeply on our values, who while religion provides guidance for could have been. It stated: “Carillion’s we are and what we want to achieve, both some, ultimately – as Jean-Paul Sartre rise and spectacular fall was a story of individually and collectively. b famously stated – we are free to choose recklessness, hubris and greed,” a strong and hence responsible for our own moral moral claim by any standard. choices. Moral reasoning is therefore a However, to be charitable, some necessary component of being human, employees may not have been driven and the choices we make throughout our by greed but may instead have found lives, including the time we spend at work, themselves in situations where moral define who we are. dilemmas appeared unresolvable: what Dr Andrew Knight FRICS is Dean of the Although we may try to separate work do you do when you are asked to act School of Architecture, Design and the Built from home, we are morally accountable in a questionable way and refusal may Environment at Nottingham Trent University as individuals wherever we are. An result in job loss? The commercial world [email protected] important confusion often arises at is untidy, and abstract concepts such as this point between moral and legal “integrity” can be difficult to cash out in accountability: in fact, what is legal and moral grey areas. what is moral are often very different, as Related competencies include can be seen in the contrast between the The good life Ethics, Rules of Conduct and professionalism greedy practices that led up to the 2008 In the Nicomachean Ethics, Aristotle [previously Conduct rules, ethics and financial crisis, and the dearth of legal used the term “eudaimonia” to describe professional practice] convictions since. the good or flourishing life. He writes

Image © iStock 8 NOVEMBER/ DECEMBER 2018 LEADER RICS CONSTRUCTION JOURNAL

RICS is committed to providing the that all members must be able (rics.org/commercialconflicts) to demonstrate that they: for those dealing with most relevant guidance on ethics and bb act with integrity commercial investment among bb always provide a high other matters, banned the conflicts of interest to its members. standard of service practice of double dipping. Peter Bolton King details how bb act in a way that promotes Some months on, feedback trust in the profession shows this publication has bb treat others with respect clearly helped to enhance bb take responsibility. our profession. And now we continue to act: our current Our stance These statements, while ethical standards have not valid, are fairly generic and been reviewed since 2012, principle-based. How do you but in the meantime RICS has on ethics actually put them into practice led the development of the in any given situation? The International Ethics Standards clearly at the heart of what it feedback we received from (IES) as part of a coalition means to be a professional, the research indicated that of almost 130 not-for-profit and you could put yourself at professionals felt there was a organisations in land, property, considerable risk if you do not. need to reconsider the current construction, infrastructure requirements, providing more and related professions. Rules of conduct context and additional best We are committed to The RICS Rules of Conduct practice guidance. implementing the IES’s and ethical principles have The example of conflicts of 10 high-level principles been in place for many years. interest is an interesting one. (www.ies-coalition.org). At present, the former state Our Rules of Conduct state We are now undertaking that firms and members alike that such situations should be the task of consulting on a Citing Aristotle’s belief that should observe the following: avoided, but the interpretation new professional statement there are no absolutes and bb ethical behaviour: of what constitutes a conflict on conduct and competence that context is everything, members shall at all times is often difficult. For example, aimed at providing clear CDr Andrew Knight says we all act with integrity and avoid in the commercial property guidance on how to deal with daily have to make ethical and conflicts of interest, and avoid sphere, dual agency – or what ethical difficulties. The current moral decisions that are not any actions or situations that the press termed “double RICS Rules of Conduct, our always as clear-cut as we’d are inconsistent with their dipping” – has prompted much ethical standards and the hope (see opposite). professional obligations debate. This is the practice IES will provide a basis for Personally, I entirely agree. bb competence: members of an agent acting for both this. I look forward to all RICS But the very fact that all is shall carry out their the seller and the buyer on an professionals feeding back not black and white means professional work with due investment transaction. their comments on the draft that, as professionals, we skill, care and diligence and If an information barrier when it is published. b are expected to be able to with proper regard for the was implemented in a firm to consider, reflect and come technical standards expected allow dual agency, did it truly to a reasoned decision that of them ensure there was no conflict may differ from our personal bb service: members shall of interest? And regardless beliefs. Indeed, the ability to carry out their professional of how secure such a barrier put one’s own emotions to one work in a timely manner may be, what is the public’s side is essential in reaching a and with proper regard for perception of it? However balanced decision. the standards of service legal and transparent this Peter Bolton King is Global Director of Professionalism and We recently commissioned and customer care that are kind of arrangement is, the Ethics at RICS independent research to expected of them. perception of it is often [email protected] look at what professionalism somewhat different. means to RICS firms and Standard statements members. This found several The RICS Global Professional Reputation at risk factors to be highly important: and Ethical Standards state In this instance, RICS needed bb ethical behaviour to be seen to take action on Any RICS firm is welcome to apply b to become a business supporter of b resisting client pressure behalf of our professionals, the IES, with no financial or legal and forming an independent or run the risk of serious implications. Contact the author professional point of view reputational damage to us all. for more information bb integrity Behaving So, after considerable bb an understanding of international consultation, the conflicts of interest ethically is global professional statement bb knowing your limits Conflicts of interest clearly at the Related competencies include b b lifelong learning. (rics.org/conflictsofinterest) Ethics, Rules of Conduct and heart of what it became mandatory from professionalism [previously These were judged to be just means to be a 1 January 2018. In the Conduct rules, ethics and as important as technical UK, a supplementary professional practice] ability – behaving ethically is professional professional statement

NOVEMBER/ DECEMBER 2018 9 RICS CONSTRUCTION CORRUPTION JOURNAL

Being clear on transparency How and why does corruption occur in our industry? What can we do to prevent it? Kathryn Higgs, Director of Business Integrity at Transparency International, offers some insights

n its absolute worst This results in communities losing out Why construction? form, corruption in leaving them hungry, poorly educated Construction and infrastructure are the construction and with limited access to healthcare, particularly susceptible to corruption for industry can lead to education and basic entitlements. a number of reasons, the first being the death. You only have In countries such as the UK, corruption fact that the industry is particularly reliant to look at the 1999 is perhaps more subtle. There are, of on working relationships. While this can İzmit earthquake in course, cases of cash payments or be a positive for a working environment Turkey, in which more preferential treatment, but on the whole and for building trust with contractors, it than 17,000 people lost their lives, for an corruption means an unlevel playing field can also lead to conflicts of interest and example. Many of the buildings that were in the industry. Small and medium-sized a lack of transparency in decision-making Idamaged in the earthquake – causing enterprises (SMEs) that are trying to earn around supplier selection. There is often these fatalities and catastrophic injuries an honest living as contractors or suppliers a fine line between building a good among the survivors – were not up to can often miss out on jobs and income relationship and inappropriately seeking code, and bribes had in fact been paid to due to unethical practices, for instance. to influence someone. get them signed off as compliant. The 2011 edition of Transparency International’s Bribe Payers Index Table 1 (https://bit.ly/2EAyXs4) found public How do you define corruption? works contracts and construction comprised the area most likely to Type of experience all three types of bribery – corruption Definition grand, petty and political (Table 1). In the Grand Acts committed at a high level of government that distort policies or the absence of an updated report, we can’t central functioning of the state, enabling leaders to benefit at the expense point to specific data to say this is still the of the public good case; but the industry is certainly still at an extremely high risk of corruption. Petty Everyday abuse of entrusted power by low- and mid-level public officials in their interactions with ordinary citizens, who are often trying to access Whatever form corruption takes, basic goods or services in places such as hospitals, schools, police people suffer. In developing countries, if a departments and other agencies company wins a contract through bribery there’s a good chance that money that Political A manipulation of policies, institutions and rules of procedure in the allocation of resources and financing by political decision-makers, who could have been spent on the project itself abuse their position to sustain their power, status and wealth or the community where it’s being built is being funnelled to corrupt individuals. Source: Transparency International

10 NOVEMBER/ DECEMBER 2018 RICS CONSTRUCTION JOURNAL

Construction companies have two main duties when it comes to opposing corruption: sharing experiences and being courageous

Of the 180 countries ranked, more than two-thirds of countries scored below 50, with an average score of 43. The scale runs from 0 to 100, where 0 is highly corrupt and 100 is very clean. In terms of the construction industry, we focus on changing the environment in which firms operate so they’re less likely to be put in the uncomfortable position of being asked to participate in corrupt From the most basic level of looking and do things unethically. This puts activity. We seek organisations with the for a contractor to work on your home up pressure on businesses to compete in a right cultural attitude and the will to tackle to bigger construction projects, including market where the standards differ. corruption so we can work with them. international ones, trust is incredibly The regular interaction between the For example, in the UK we run a Business important. One stumbling block is often construction industry and government Integrity Forum (https://bit.ly/2MJ8sEV), the fact that there are countries around officials also increases corruption risk, through which we engage with member the world where relationships are valued and so does the fact that the industry companies to help them better more highly than others. For example, in often works with related industries in understand the risks they face and how certain African cultures, helping family high-risk environments such as mining or their programme benchmarks against and friends to get employment or to win resources including oil and gas. others. We provide them with guidance, a contract is seen as a positive. In these and an opportunity to talk to peers and areas, it can be challenging to explain that Transparency International other companies operating in the global you also need to impose a framework of As a global movement, Transparency economy about how to manage risk. business ethics on such relationships. International’s mission is to achieve a We also offer country risk seminars International construction and world in which politics, business, civil focusing on countries of concern, and infrastructure projects are also influenced society and the daily lives of people are invite members to discuss these at by the fact that different countries and free of corruption. We have chapters in round-tables. For example, if you want companies have different tolerances more than 100 countries, and in each of to know about the risks in South East for engaging in practices that others these we engage in activity to improve Asia, member companies will share would consider to be bribery or unethical corruption standards. their experiences at the relevant forum conduct. This can make operating on a In 1995 we launched the Corruption alongside experts from Transparency level playing field difficult. Sometimes, Perceptions Index, and each year we use International and other risk advisors. a firm can find itself competing for a this to score countries on how corrupt Much of our work focuses on general contract with one from another country their public sectors are seen to be, campaigning to change the public’s view that is willing to cut corners, cross lines capturing the views of analysts, business of what is expected of companies, so people and experts around the world. investors and clients will have higher The index has widely been credited with expectations and ultimately drive change. putting the issue of corruption on the international policy agenda. The latest What can companies do? Whatever form report, Corruption Perceptions Index Construction companies have two corruption takes, 2017 (https://bit.ly/2Npo7or), highlighted main duties when it comes to opposing that the majority of countries are making corruption: sharing experiences and people suffer little or no progress in ending corruption. being courageous. n

Image © iStock NOVEMBER/ DECEMBER 2018 11 RICS CONSTRUCTION CORRUPTION JOURNAL n Sharing experiences means easier, quicker option, but there’s a good collaborating to develop a common risk then that someone you let go will find understanding of risks. This involves a job with one of your suppliers, someone talking about scams that professionals with whom they’ve built a relationship, It’s up to us, as a have experienced and how these have and end up working with you again. In dedicated, ethical operated, and looking at corruption from effect, you could then be the victim, so the point of view of the industry as a you’re not helping others or yourself by majority, to effect whole rather than just the interests of letting this employee out into the wider change in the your own business. construction community. There are cases in which an individual Larger, more established companies industry will be employed in one organisation and must take the lead on this, as it’s harder be identified as doing the wrong thing. for SMEs to do so given that they suffer While they will be moved on from the from the tight margins in the sector. of Ethics and Compliance at Balfour organisation, details of their behaviour Larger companies need to set an Beatty is that the stereotypes of the won’t be shared, which puts them in a example that supports the smaller, less sector being corrupt aren’t fair. There are position to do the same at their next well-resourced construction players, a huge number of professional individuals workplace. This can continue, and even initiating a trickle-down effect. who are expected to conduct their work though they may eventually not be hired to a certain standard, and who care very by a top-tier organisation they’ll still be What can individuals do? passionately about the fact that they active in the industry and causing trouble Individuals at a leadership level need to are building important infrastructure, at another level. talk about what matters. You can’t lead providing services that communities need Being courageous often means taking by example silently, you have to bring and creating legacies. what seems at the time to be the more issues out into the light. Individuals at any These individuals would be incredibly difficult route, but this will ultimately result level should be vigilant and pay attention disappointed if their hard work were in better outcomes. If someone in your to risks. Construction is an industry that undermined by corrupt conduct that led organisation does the wrong thing and is very good at thinking about risk – a lot to harm. I have conducted a lot of training you want them to leave, the easy way is of attention is paid to health and safety and given a lot of advice in the industry, often just to let them quit or compromise risks, and the same should be the case and construction professionals have them out, usually by giving them a when it comes to corruption and integrity. been easier to convince about the merits severance payment in return for which Assume nothing – if something doesn’t of doing business ethically than other they agree not to go to a tribunal. In fact, look right then speak up, be thorough, industries with which I’ve worked. the best action to take is to terminate conduct risk assessments, and think Unfortunately, it’s the minority of them: this provides more transparency through the dangers and how they can corrupt individuals who are letting us and allows you as a company to have be mitigated. Carry out risk assessments down. It’s up to us, as a dedicated, ethical control over the narrative. at the earliest stage when entering into a majority, to effect change in the industry. It also means that you will conduct project, and then decide how to proceed Whatever your role, you can speak out. a disciplinary. A firm that conducts a with the project in light of your findings. Don’t assume; be vigilant, anticipate and disciplinary for every employee who Once the project is in progress, maintain evaluate risk, and contact us if you have leaves – whether they resign or have constant vigilance. any concerns. Let’s work together to help their contract terminated – sets a great If you see something, don’t assume ourselves and the industry as a whole to example, because it means there is someone else is going to speak up. If you eliminate corruption. b always a record, whether it finds in put your head in the sand, the problem favour of or against the behaviour of the doesn’t go away, it gets worse. If you see individual in question. things that aren’t right, raise them with This kind of bravery is incredibly someone in your organisation you trust important. It may be tempting to take the who can help you to address them. In situations where you may have concerns about speaking up – for example if money laundering is involved – the best option is to raise your concerns Kathryn Higgs is Director of Business Integrity, Larger companies Transparency International elsewhere in your organisation rather www.kathrynhiggs.com need to set an than with the individual you believe is involved. Escalate it to someone senior in example that a legal, financial or risk role – depending on the size of your organisation, this supports the could be the chief compliance officer, www.transparency.org smaller, less head of risk, head of legal, chief financial officer or chief executive officer. Also, well-resourced where a company has a whistleblowing channel, you can raise it through that. Related competencies include construction Ethics, Rules of Conduct and professionalism players, initiating a Passionate and professional [previously Conduct rules, ethics and My experience of working in the professional practice] trickle-down effect construction industry as the former Head

12 NOVEMBER/ DECEMBER 2018 CORRUPTION RICS CONSTRUCTION JOURNAL

bb anti-corruption programmes for governments, funders, project owners, companies and associations bb guidance on risk assessment, due diligence, gifts and Guiding light hospitality, and other anti-corruption controls Co-founders of the Global Infrastructure bb Project Anti-Corruption System (PACS) bb training modules Anti-Corruption Centre Catherine and bb advice on how to deal with corrupt situations outline the tools and bb information on anti-corruption standards, conventions, Neill Stansbury indices, surveys, forums and initiatives. guidance it offers Project standards orruption in the construction One of the anti-corruption tools developed by GIACC is PACS, sector was previously tolerated which is designed to be implemented on major construction as necessary or unavoidable, projects. There are 12 PACS standards, each of which deals with but is now regarded as a separate anti-corruption measure. A government or project unacceptable. This change owner can benchmark its project management practices against in attitude has resulted in PACS, and improve its practices as necessary. calls both at national and The standards are as follows. international level for effective bb PS 1: Independent assessment: an independent assessor action to be taken to prevent should be appointed whose duty is, for the duration of the it. As a result, a policy of zero project, to monitor and assess the project for corruption and tolerance for corruption is make appropriate reports. increasingly being adopted bb PS 2: Transparency: the project owner should disclose by companies, governments, project owners and funders. The project information to the public on a website. concern for these stakeholders is no longer whether they should bb PS 3: Procurement: the project owner should implement seek to eliminate corruption in their organisations, projects or fair and transparent procurement procedures, which do not business dealings, but how to do so. Consequently, there is a provide an improper benefit or advantage to any individual Cneed for practical anti-corruption tools and guidance. or organisation. bb PS 4: Pre-contract disclosure: at tender stage, the Promotion of prevention project owner and each tenderer for a major contract should The Global Infrastructure Anti-Corruption Centre (GIACC) was provide each other with relevant information, which could reveal founded in May 2008 in order to help meet this need. It is an a risk of corruption. independent, not-for-profit organisation based in the UK but bb PS 5/6: Project anti-corruption commitments: the project operating internationally, which works in close collaboration owner, funders and each major project participant should with all types of stakeholder, in particular with construction provide anti-corruption contractual commitments. professionals. GIACC has anti-corruption alliances with the bb PS 7: Government anti-corruption commitments: relevant World Federation of Engineering Organisations, the World government departments should take steps to prevent and deal Council of Civil Engineers, and three regional and 17 national with corruption in the issuing of permits, licences and approvals. professional engineering associations, and has affiliates in bb PS 8: Raising awareness: anti-corruption training should be Germany, Italy, Tunisia, Zambia and Zimbabwe. provided to relevant project staff. GIACC’s objective is to promote the implementation of bb PS 9: Compliance: major project participants should appoint anti-corruption measures as an integral part of government, a compliance manager who will take all reasonable steps to corporate and project management. GIACC’s policy is to ensure anti-corruption compliance by the company and its staff. promote change. It does not cast blame on any particular bb PS 10: Audit: financial and technical audits of the project stakeholders for the existence of corruption, neither does it should be carried out and published. investigate or report on allegations of corruption. bb PS 11: Reporting: systems should be established by which GIACC played a leading role in the development of corruption on the project can be reported by the public, project the standard ISO 37001: 2016 Anti-bribery Management staff, and independent assessor. Systems, and its predecessor BS 10500: 2011 Anti-bribery bb PS 12: Enforcement: enforcement for breach of Management System. ISO 37001 specifies the implementation anti-corruption commitments should include civil enforcement by an organisation of reasonable and proportionate policies, (e.g. disqualification from tender, termination of contracts, procedures and controls that are designed to prevent bribery damages and dismissal from employment) and criminal taking place by, on behalf of, or against the organisation, and to enforcement (e.g. fines and imprisonment).b detect and deal appropriately with any bribery that does take place. It takes account of internationally recognised good Catherine and Neill Stansbury are co-founders and directors of the anti-bribery practice, and is applicable to small, medium and Global Infrastructure Anti-Corruption Centre (GIACC) large organisations in the public and private sectors. It is capable [email protected] of third-party certification in the same way as other management [email protected] standards such as ISO 9001 quality management. The GIACC Resource Centre (www.giaccentre.org) provides free access to information, guidance and tools to help stakeholders understand and prevent corruption. It offers: Related competencies include bb detailed analysis of what corruption is, why and how it Ethics, Rules of Conduct and professionalism [previously occurs, why to avoid it, and the liability for and cost of corruption Conduct rules, ethics and professional practice] bb examples of corruption

NOVEMBER/ DECEMBER 2018 13 RICS CONSTRUCTION ETHICS JOURNAL

Participants Ethical

Steven Thompson (ST), Associate Director of the Built dilemmas: what Environment, RICS would you do?

Sebastian Chambers (SC), Partner, CIL Consultants

A group of construction professionals Ian Frankton (IF), Director, discuss the appropriate course of action Frankton Hill Limited in the face of potential ethical dilemmas

n an industry where The scenarios business pressures are Bryony Goldsmith (BG), ever present, there will Director, Arcadis inevitably be tensions Test: business ethics, bordering on between the ethical criminal law and the commercial, The contractor submits an interim and professionals application for payment on a construction will find themselves project that includes amounts claimed facing dilemmas on a regular basis. In for work. It is clear to the consultant Chris Green (CG), Group an attempt to illustrate these tensions, quantity surveyor from a visual inspection Commercial Director, J. Murphy Iwe have devised five ethical scenarios that this work has not been completed & Sons Limited – situations that any practising quantity on site. When challenged, the contractor surveyor or project manager is likely to suggests that this was a genuine error face in the course of their career. on their part. What action should the As expected, these questions, and consultant quantity surveyor take in the tests that frame them, provoked respect of the potential fraud that they much debate. This demonstrates the believe has been attempted? Rod Nathan (RN), Commercial subjectivity and uncertainty that can Manager, Crossrail often surround such scenarios, and thus ST: In most cases, the client’s quantity the importance of discussing them. surveyor will probably see the Steven Thompson, Associate Director contractor’s actions as sharp commercial of the Built Environment at RICS, draws practice rather than an attempt at both on this role and his own experience criminal fraud. Of course, each particular as a practising quantity surveyor to circumstance will be different, but as a Kevin O’Grady (KO), provide a comprehensive answer to each principle – were fraud not suspected – Associate Director, Arup of these scenarios. the consultant quantity surveyor would A number of other industry probably be well advised to leave matters professionals then give their thoughts at the project level, and merely adjust the on the best course of action; while RICS contractor’s application for payment. does not endorse these responses, it Were an attempted fraud suspected, presents them as potential options. We however, the scale and extent of this Luke Turner (LT), Partner Quantity would always urge our members to refer would be relevant and it would be Surveyor, Playle & Partners LLP back to RICS guidance when facing any appropriate for the surveyor to report the ethical dilemma, and in the following we incident to their boss. If they have firm advise which particular document relates evidence of fraud, this should be reported to each scenario. to RICS Regulation.

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RN: Never use the word “fraud” unless their client of the implications of following tenders in the report. This is an absolute you have taken specific legal advice – through their instructions. essential in terms of public procurement there is a very high bar of proof. The If the client is adamant, it would be and an ethical imperative in the private quantity surveyor should strike the advisable for the quantity surveyor or sector. However, the quantity surveyor work not completed on site from the project manager to confirm those client could also advise the client of their application and escalate the issue instructions in writing and seek an options – either to consult the other slowly up the chain of command of the indemnity from the risk of action against tenderers or not award and retender – contractor’s management. them by the other tenderers. In addition, and of the potential reputational damage CG: The client’s quantity surveyor should the consultant quantity surveyor or this course of action may entail. reduce the amount to be certified by the project manager should make the facts KO: The quantity surveyor cannot value of the work not yet carried out, and circumstances around the tender proceed as if the tender has not been within the response period specified by return clear in their report, recording the received late because this would go the contract. While this is poor practice, I fact that the lowest tender was late but against RICS’ and the company’s own do not believe it constitutes fraud, and no that the client instructed them to include ethical standards. action should be taken in this respect. it in the evaluation. LT: If the next valuation were again Problems arise if the client refuses to Refer to: RICS Rules of Conduct significantly overclaimed, I would escalate accept the quantity surveyor or project for Members, Part II. Personal and the response to include the employer manager’s tender report, demanding that Professional Standards, 3. Ethical and more senior management in the such a qualification be removed and the behaviour. contracting organisation. report reissued. The ideal response at this point would be for the consultant Refer to: RICS Rules of Conduct quantity surveyor or project manager to Test: RICS Rules of Conduct for Members, Part II: Personal and refuse to act for the client any further on The consultant quantity surveyor or Professional Standards, 3. Ethical this project. project manager has been asked by a behaviour. CG: Public clients will always ensure favoured, and repeat, business client to strict adherence to best tender practice submit a fee proposal for a particular because failure to do so will lead to costly construction project. Once submitted, the Test: business ethics; potentially RICS challenges for the procurement. Private client approaches the quantity surveyor Rules of Conduct clients are not bound by such regulation or project manager and indicates that Competitive tenders are due to be and are effectively free to accept any they very much wish to appoint them for submitted at a particular date and time, tender, however late; nevertheless, the project, but notes that unfortunately but one of them arrives late and is the they do so at the risk of damaging their theirs was not the lowest fee proposal lowest of those submitted. The client reputation and may therefore restrict received. The client advises that if the is very keen for this late tender to be the value for money they can achieve in quantity surveyor or project manager considered and asks the consultant future construction works. were able to reduce their fee to a certain quantity surveyor or project manager to IF: Should a client request that you level – that is, below the lowest fee include it in their report, as if it had not include a late tender return in your proposal received – then they would be been late. What should the consultant assessment and report as though it had appointed the project. How should the quantity surveyor or project manager do been returned on time, all tenders should consultant quantity surveyor or project in this situation? be returned and all tenderers asked to manager respond? resubmit their bids at a new tender return ST: This scenario is only likely to occur date. This will allow all contractors to ST: Should the client be expecting a in the private sector, given that in the review their original submissions and take purely commercial reduction in the level public sector the quantity surveyor or into account any subcontract tenders of the fees, the consultant quantity project manager must refuse to open received after the original deadline. surveyor or project manager should the tender. In the private sector, on one RN: Basically, the quantity surveyor absolutely decline to lower their original level, the consultant quantity surveyor or should refuse – they should not omit fee offer. If, however, the consultant project manager is expected to follow relevant facts or include disqualified quantity surveyor or project manager their client’s instructions and anything were able to enter into a dialogue with covered in the terms of engagement, the client to explore what element of their although those terms are unlikely to go services could be removed in return for a into this level of detail. It may well be that lower fee then this would be acceptable, this scenario has been discussed with the Public clients will provided that this element of the services client in advance, and a plan put in place always ensure strict for removal had a proportional fee for such a situation. reduction attached to it. Whether a plan was in place or not, adherence to best In addition, the consultant quantity given that the proposed action renders tender practice surveyor or project manager should the client – and the quantity surveyor advise the client that it would be correct or project manager – open to the risk because failure to to offer such a revision of scope of of a challenge for not following the services to the other firms bidding, so that assumed tendering rules and operating do so will lead to they had an opportunity to revise their a level playing field for all tenderers, the costly challenges original fee proposals in a like manner. consultant quantity surveyor or project CG: If a further submission of prices manager would be well advised to warn for the procurement is to be permitted – that is, a best and n

NOVEMBER/DECEMBER 2018 15 RICS CONSTRUCTION ETHICS JOURNAL

n final offer – this should be afforded to all In addition, the quantity surveyor competitors for the work. should warn the client that they risk KO: If the tender evaluation has been paying a greater sum for the project than robust and the award was based solely With today’s they need to do, but that, as client, they on the lower price, the client should afford electronic systems have the right to act as they see fit. The all bidders the opportunity to submit a quantity surveyor has a duty to warn best and final fee proposal. and internal but cannot force their client to take a RN: From my experience, it is unwise computer networks, particular course of action. rather than unethical to engage on the For the final account statement the basis that the client may be saying the it is unlikely that quantity surveyor should, if the client same to all tenderers. This is not a good requires, complete the normal contractual sign in terms of what it indicates about true separation will paperwork in respect of the final future commercial engagement. be possible valuation recommendation to issue the final certificate. The quantity surveyor Refer to: RICS Rules of Conduct should record the sum due as a balance for Members, Part II: Personal and expertise, it may be possible for to the contractor as a result of the client’s Professional Standards, 4. Competence, conditional security walls and direct agreement. On occasion, however, and 5. Service. non-disclosure agreements to be put a client may instead draw up a legal in place. These arrangements must be agreement for a final account settlement clearly auditable and in line with client, without requiring any further input from Test: professional ethics, RICS Rules of RICS and ethical standards. the quantity surveyor. Conduct; potentially conflict of interest LT: I would confirm that I would be happy BG: The consultant quantity surveyor A client that is both a developer and a to provide a service for either one of should state, for the record, what they felt contractor asks a consultant quantity the roles, but would not be willing to was a true market or fair settlement and surveyor if they are able to act on the undertake both. share the benchmarking evidence that same development project in the capacity RN: I would decline on the basis of the supports this and their rationale. of consultant quantity surveyor, advising likely conflict of interest. In most circumstances, the client is the developer side of the business, as in direct contract with the contractor well as on the contractor side of the Refer to: RICS Conflict of interest and therefore the consultant quantity business in managing the subcontract professional statement. surveyor can only advise on best practice. supply chain. What should the consultant KO: The quantity surveyor is not quantity surveyor say? empowered to negotiate the final Test: professional ethics settlement unless instructed by the ST: They should decline the opportunity At the completion of a construction employer; therefore, the employer is on the basis that working in two project, the discussions between the entitled to agree to a settlement value capacities at the same time on the same consultant quantity surveyor and the even if it is greater than the quantity development is likely to result in a direct contractor’s quantity surveyor over surveyor’s assessment. The quantity conflict of interest. However, the fact the agreement of the final account are surveyor should advise the client that the that the client is giving informed consent extremely protracted and fail to arrive at settlement should not change the party’s may be relevant here: if their proposal is an acceptable solution, mainly because obligation or terms under the contract directed to a corporate quantity surveying the consultant quantity surveyor is not conditions, and on larger contracts a firm, it is possible this firm may be able willing to agree with the contractor’s construction solicitor may be the best to work in both capacities if an effective inflated claims. The client therefore loses person to draw up an agreement. barrier were established to ensure that patience with their consultant quantity SC: The client has the right to settle with there were no conflict in practice. This surveyor and arrives at a swift agreement the contractor and indeed the right to could be effected by two separate offices directly with the contractor, but at a level ignore the professional advice for which being retained for each element of that the consultant quantity surveyor still it has paid. service. However, with today’s electronic believes is grossly inflated. What should systems and internal computer networks, the consultant quantity surveyor do and Refer to: RICS Rules of Conduct true separation is unlikely to be possible. say in this situation? for Members, Part II: Personal and BG: The consultant quantity surveyor Professional Standards, 4. Competence, should advise the client that this would ST: Based on typical appointment terms and 5. Service. b only be possible if different teams were and conditions, the consultant quantity If you’d like to provide feedback on used for each area of work. The teams surveyor will be aware that the client this article or take part in one of our would need to work independently of always has the right to suspend any or interactive articles let the Editor know at each other, implementing an ethical all of the quantity surveying services [email protected] barrier to maintain client confidentiality for whatever reason and without and avoid collusion. This scenario would explanation, and take on such duties and need to be declared to all parties with a obligations themselves. In this situation, legal or financial interest in the project, the consultant quantity surveyor should so that they are aware of the potential write to the client, setting out the various Related competencies include conflict of interest. financial issues and explaining the Ethics, Rules of Conduct and professionalism KO: Under certain exceptional reasons for the failure to agree, assuming [previously Conduct rules, ethics and circumstances, where a consultant they had not already done so before the professional practice] possesses unique knowledge and client intervened.

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Although well established, payment retention in the construction industry is a contentious practice. Chris Green assesses its impact in the light of Carillion’s collapse, and considers some alternatives Don’t hold back

etaining cash in cash to be withheld from the tier-one the construction contractor, which in turn withholds money industry supply from the tier-two subcontractors and chain is a suppliers, which then impose retentions long-established on any tier-three sub-subcontractors practice that has and suppliers. The RICS Black Book often come under guidance note GN90/2012 Retention scrutiny. Questions (https://rics.org/blackbookretention) were raised over the practice as early details the methodology for applying as 1994, when the late Sir Michael retentions, as set out in the common RLatham’s report Constructing the Team forms of construction contract that are in was published; while more recently, the current usage. Department for Business, Energy and A retention provides a fund to meet Industrial Strategy commissioned Pye Tait any costs arising from the contractor’s to replicate the client’s retention Consulting to prepare a specific report, failure to perform their duties, and thus throughout the supply chain, thereby Retentions in the Construction Industry, the construction process is somewhat protecting their own cash flow. that was published in October 2017 de-risked from a client’s perspective. The Contracts undertaken before October (https://bit.ly/2Da1iFF). In response to fund also offers a degree of peace of 2011 often required the supply chain to this, the Construction (Retention Deposit mind that the contractor will endeavour wait until completion of the main contract Schemes) Bill 2017–19 is now being to complete works on time and attend before their retention was released. considered by Parliament. diligently to defects. The revisions brought in under the However, retentions present a risk amendments made to the Construction Retention rationale to tier-one contractors because the Act in 2011 outlawed this practice; Retentions were introduced to the 3–5% rate is roughly the same as their however, the change is still not widely UK construction industry during the anticipated profit margin, and this observed, and many tier-two and development of the railway system in profit may be lost if the client becomes tier-three contractors and suppliers view the 1840s. This national undertaking insolvent during the construction the retention as a cost that is unlikely proved too painful for many construction period. The money is also vital to cash to be recovered. Some then price it into companies and the insolvency rate along flow, which ensures the health of the their works, thus artificially increasing the the supply chain was high. The railway organisation and its supply chain. If the cost paid by the client. companies responded by withholding client becomes insolvent during the It can be argued that a well-established 20% of the value of all contracts, construction period, the retention may be business should no longer feel the impact which was repaid to the contractors on lost. Unduly long defects liability periods of retention, as currently withheld monies satisfactory completion. This fund also can even result in the retention being are offset by the release of previous enabled railway companies to procure a overlooked altogether. Consequently, it is retentions. However, this does not hold replacement contractor to finish the work common practice for tier-one contractors true when organisations are growing, as if necessary. the releases from previous work are less Since then, the practice of retention than the retentions on the increasing has become commonplace in the volumes of new work. Retentions hamper industry, with 3% - 5% of contractual The recent failure such development by restricting their value typically withheld until completion working capital. of works. Retentions now also provide of Carillion is an The most significant risk, though, arises security for contractors’ completion of with a tier-one contractor’s or client’s defects, with half of the retained amount example of just how insolvency. The recent failure of Carillion continuing to be withheld until the expiry much money can be is an example of just how much money of the defects liability period. can be lost by the industry’s supply chain lost by the industry’s in retention alone: a significant portion of Current practice supply chain in the company’s supply chain will have lost Retentions are withheld throughout the retentions that were withheld under the supply chain. Many clients require retention alone its subcontracts and supply contracts.

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do not reduce on completion of the works. They come as performance or on-demand bonds and share the characteristics of retention bonds, although on-demand bonds are preferred by clients as no conditions are attached to calling them, giving instant access to monies should they be required. However, contractors generally refuse to give on-demand bonds for the same reason, as unscrupulous clients may call them on completion of works to gain unfair commercial leverage in negotiation of the final account. bb Parent company guarantees: these are guarantees entered into as deeds by the parent company of the contracting organisation to ensure the contractor’s performance. However, many organisations do not have a parent company and are therefore unable to offer this type of guarantee. There is also a risk to clients that the parent company may become insolvent.

Current initiatives Following the publication of the Pye Tait The impact of such an insolvency is that keep project funds both visible and report, and in light of the Carillion failure, therefore widespread. separate from the client organisation. the government is currently considering In the infrastructure sector, given the bb Retentions held in trust funds: trust the whole issue of retentions. MP Peter scale of projects, cash retentions can funds allow money to be secure and Aldous, a former chartered surveyor, distort the market. For example, a 5% visible to the organisations offering cash put the Construction (Retention Deposit cash retention on a £1bn infrastructure retentions. Project bank accounts and Schemes) Bill before Parliament, project would require the tier-one escrow accounts can both be set up as recommending the mandatory use of contractor to have a working capital of trust funds that ring-fence the retained such schemes to protect monies from £50m to undertake the works, restricting monies from the assets of the client, so, misuse or insolvency. the number of eligible tenderers to just in the event of an insolvency, they are The bill does not seek to ban cash a handful worldwide. Defects liability safeguarded from other creditors of the retentions, but aims to give greater periods in this sector are typically insolvent entity. protection for the retention monies. longer as well, often ranging from two This is at second reading stage in the to 10 years in duration. As a result, cash There are also alternatives to cash House of Commons at the time of retentions have become far less common retentions, such as the following. going to press; however, many industry in the infrastructure sector. bb Retention bonds: the client and professionals do not support the bill contractor enter into an arrangement with and are instead seeking to ban cash Alternatives a third-party surety or bondsperson, who retentions outright. b Since the Latham report, the industry agrees to pay the amount of the retention has developed alternative strategies to should the contractor default – typically ensure the security of completion and 5% of the contract price, and reduced defects correction without introducing by half on completion of the works. This the full risk of a straight cash retention. provides clients with the benefits of For instance, there are several ways to retentions without introducing burden to ring-fence cash so it is visible and secure. the supply chain. However, clients may Chris Green is Group Commercial Director at bb all payments resist retention bonds as they can be Project bank accounts: J. Murphy & Sons Limited are made through an account specifically difficult to call, and require legal action [email protected] set up for the project. This has the added to prove default. They may therefore be advantage of ensuring transparent provided as on-demand bonds, alleviating payments to the entire supply chain, the difficulty of calling them; but this and is therefore often mandated on usually directly restricts the contractor’s large government contracts. It does working capital, having the same impact Related competencies include Contract administration, Contract practice, however cost to set up and administer as a cash retention. Ethics, Rules of Conduct and professionalism and requires its own finance system, and bb Performance bonds: these are [previously Conduct rules, ethics and training costs are also incurred. similar to retention bonds, but usually professional practice], Managing projects bb Escrow accounts: these are held amount to 10% of the contract price. [includes Project administration] by third parties, often legal advisors, They are also more expensive as they

NOVEMBER/ DECEMBER 2018 19 RICS CONSTRUCTION INFRASTRUCTURE JOURNAL

is below expected levels and that the existing models for planning, funding, financing, delivering and managing these assets are not fit for purpose. Although there are numerous exemplary An infrastructure projects, best practice and models do not pervade the sector, and there is a broad consensus that the industry faces the for infrastructure following core challenges. 1. Delivery issues: infrastructure If the world is to meet its infrastructure needs the projects continue to underperform in terms of cost, quality, sustainability and sector must work to global standards and take meeting schedules. This leads to poorly advantage of opportunities to transform itself, insist performing assets that do not fully meet the requirements of project sponsors Alan Muse and Anil Sawhney and end users. Project selection, project structuring, estimating and budgeting, procurement regimes, delivery practices, very nation needs 2013, McKinsey Global Institute proposes and risk and knowledge management high-performing that such a saving can be made by practices all need modernising. infrastructure to improving project selection, streamlining 2. Sub-optimal performance of existing enable growth, delivery and making the best use of assets: due to limited uptake of the prosperity and its existing infrastructure. whole-of-life worldview, the sector does citizens’ economic However, by using a set of widely not deliver, operate or maintain and social recognised sectoral challenges such high-performing infrastructure assets. well-being. as urbanisation, climate change, digital Assets are considered at an individual According to the Global Infrastructure technologies and globalisation as level – for instance, project owners or Hub (https://outlook.gihub.org), we need opportunities, the sector can address sponsors focus on a single bridge rather Eto invest $94tr in infrastructure by 2040; issues in construction and infrastructure than considering the entire transportation yet annually, we only spend around 3% project management and infrastructure network – which means that networks of GDP on infrastructure as compared to finance, among other things. and systems do not always provide the the 3.55% required to meet this target, best value or perform well over their leaving a gap in investment of around Global perspective whole life. $0.7tr a year (see breakdown by region in Notwithstanding its socio-economic 3. Lack of standards: standards that Figure 1). importance, the infrastructure sector enable efficient project selection, project Meanwhile, in its report Infrastructure continues to face several challenges. delivery, reduced operating costs and productivity: How to save $1 trillion a year Most stakeholders believe that the useful benchmarks at the same time (https://mck.co/2Nm0xOr), published in current state of infrastructure assets as enhancing asset performance are

Figure 1 Total forecast infrastructure investment gaps by region (2016–40)

> $4,000bn $3,000bn-$4,000bn $2,000bn-$1,000bn $1,000bn-$2,000bn $0-$1,000bn

Source https://outlook.gihub.org/

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not widely available. Core statutory and regulatory standards exist, but standards that include outcomes and value as well as cost and output are needed. While design and engineering expertise 4. Barriers to innovation: the sector is is available in the sector, professionals marred by low diffusion of innovation, and frequently rejects disruptive ideas and who understand the business of technologies. Though some exemplars infrastructure delivery and management exist, grassroots challenges to adoption remain for all in the supply chain. are in short supply 5. Limited attention to sustainability, affordability and useability: current practices and procedures do not The standards have already been The path forward allow the vital issues of sustainability, adopted by many leading global Using international standards to bring affordability and useability to influence construction consultancies, including together key infrastructure stakeholders, the planning, design, operation and Arup, Arcadis, and Turner & Townsend. we can establish a basis for these management of infrastructure assets, In Canada, Infrastructure Ontario has changes. In doing so, the construction networks and systems. embarked on the use of ICMS on its sector must collaborate with government 6. Skills gap: while design and projects with the help of project partners. and academia to explore opportunities to engineering expertise is available in the The role of such international overcome the long-standing challenges. sector, professionals who understand standards in establishing a common It is envisaged that international the business of infrastructure delivery language and common definitions to standards will help unify built environment and management are in short supply. It is unify the various global professions professions, which are already benefitting also alarming that there is practically no associated with financial management from a more holistic approach to several education provision that focuses on these of infrastructure is now becoming clear. issues affecting the sector. Standards aspects of business. This approach to cost benchmarking will help forge new partnerships and can similarly be used to benchmark time, encourage professionals to undertake Transformational themes quality, sustainability and other aspects initiatives that benefit individuals, Turning these challenges into of infrastructure. However, in conjunction organisations and the infrastructure opportunities is pivotal if we are to meet with these measures, standards and sector as a whole. b the infrastructure needs of this changing professional practice statements are also Next year, the Construction Journal will world. The construction sector can needed to ensure project success by: include articles from experts working begin to address these challenges bb helping develop integrated plans in different parts of the world on the through the adoption of global standards: bb setting clear project objectives issues highlighted in this article. Experts these will allow better management bb providing accurate estimates of time will discuss current trends and market of projects and bring much-needed and cost insights and provide a rich mix of transparency and consistency to bb defining delivery structures and innovative ideas that can have a positive the sector, which will in turn attract project governance impact on the infrastructure sector. investment for essential infrastructure. bb clearly articulating commercial and International standards also enable risk mitigation arrangements. projects and assets to be benchmarked, which is crucial to ensuring that they Such additional standards will enable meet the needs of users, asset owners the development of models and systems and society. Such standards can help that ensure efficient project delivery and consistently measure and benchmark commercial management. Alan Muse is Global Director of time, cost, quality, carbon emissions, In these ways, the sector can start Built Environment at RICS sustainability and the performance of accounting for the social value of Anil Sawhney is Director of the projects, assets, networks and systems. infrastructure projects and assets and Infrastructure Sector at RICS Data can then be collected on these providing an holistic appraisal of their through the whole life of the asset, impacts on society. Incorporating social improving the decision-making abilities of value into the analysis will influence project teams. project selection and formulation, Future of Construction Along with 40 global professional improving the operational performance of https://futureofconstruction.org/challenge organisations, RICS is part of the coalition assets. Ultimately, this will result in smart, ICMS Coalition that has launched the International high-performing assets that combine https://icms-coalition.org Construction Measurement Standards physical and digital infrastructure to (ICMS) for benchmarking, measuring extract maximum performance from a and reporting project costs. ICMS new or existing asset. comprise a high-level suite that aims to Further cross-cutting initiatives on Related competencies include provide greater global consistency in the education and qualifications standards, Construction technology and environmental classification, definition, measurement, embedding ethics and increasing the services, Managing projects [includes analysis and presentation of costs at use of digital technologies will also Project audit], Quantification and costing (of a project, regional, state, national or be necessary to drive improvement in construction works), Sustainability international level. delivery and management.

NOVEMBER/ DECEMBER 2018 21 RICS CONSTRUCTION COST ESTIMATING JOURNAL

Table 1A Example elemental order of cost estimate for primary Elemental school external walls Job title New primary school Type of work New build approach Building function Primary schools Project Single- and two-storey primary school with In the second part of a two-part article, external works Market conditions Competitive Joe Martin talks through the process Accommodation and Single- and two-storey primary school; 316 of using BCIS data to produce an design places, max. capacity 420; double height hall/gym Base date for estimate July 2018 elemental order of cost estimate at the Location Suffolk Site description Level greenfield site with good ground earliest stage of a project conditions. Excavation above water table. Unrestricted working space and access. Two areas of protected ecological interest on site he RICS New Rules of Measurement Type of contract Probably NEC 1 (NRM1), Order of Cost Estimating Cost fluctuations Fixed and Cost Planning for Capital Works, Client type Public-sector authority sets out three methods to prepare Size an order of cost estimate, for all 2,158m2 of which BCIS provides data: floor GIFA area method (£/m2); functional unit Vertical envelope 1,951m2 method, such as per bed space; Primary number of 2 and the elemental method. The first storeys two methods are detailed in the first Secondary number of 1 storeys part of this article (Construction Journal September/October, pp.8–9); this second part covers the elemental method. Gross area An elemental estimate can be generated from either elemental Basements – Tcosts per square metre of floor area or from element unit Ground 1,425m2 quantities. For cost analysis purposes, an element is defined Upper 733m2 as a major physical part of a building that fulfils a particular Accommodation schedule function or functions, irrespective of its design, specification 2 or construction. The different elements are defined in the BCIS Useable 1,277m Elemental Standard Form of Cost Analysis (SFCA). Circulation 383m2 Cost advice provided at the outset of a project is key to Ancillary 397m2 its success, but such advice is often based on a schedule Internal divisions 101m2 of accommodation or outline design alone. However, it is Functional units possible to produce a block or wire design from the client’s accommodation and space requirements and quantify this No. of places 315 sufficiently to produce an elemental order of cost estimate Average storey height based on the gross internal floor area (GIFA), element unit Ground floor 3.23m quantities, or a combination of both. Upper floors 3.36m Elemental cost by floor area Design shape by no. of storeys Data required Single 32% This approach is essentially the same as the floor area method Two* 68% described in the first part of this article, but instead uses Indices for adjusting project price level elemental costs per square metre. As with the floor area method, BCIS all-in TPI (base: 313 an estimate of GIFA will be required; this can either be derived 1985, mean = 100) at estimate date (3Q 2018) from a schedule of accommodation or measured from drawings if available. BCIS location factor 98 (Suffolk 3Q 2018) Where a schedule of accommodation is provided, it should Estimate based on the following include ancillary accommodation to arrive at a figure for GIFA, allowing for: Schedule of accommodation bb circulation space; for example horizontal circulation and Outline drawing vertical penetrations for staircases and lift shafts Area and accommodation guidelines bb technical areas; for example plant rooms, lift motor rooms, Credits service risers and maintenance areas Estimate prepared by Joe Martin bb structural areas; for example columns bb hygiene areas; for example toilets, showers, changing rooms and cleaners’ rooms. n * Calculation = upper floor x no. floors, as a percentage of GIFA

22 NOVEMBER/ DECEMBER 2018 RICS CONSTRUCTION JOURNAL

Table 1B BCIS elemental order of cost estimate for primary school external walls; GIFA = 2,158m2

Ref Element EUQ Element Unit rate Cost Cost/ Measurement Unit rate source unit excluding m2 prelims 0 Facilitating works – – – – – – – 1 Substructure total 1,425 m2 £235.00 £334,875 £155 Area of lowest floor BCIS element unit rate study – median 2.1 Frame – – – – – – – 2.2 Upper floors 733 m2 £157.00 £115,081 £53 Area of upper floor BCIS element unit rate study – mean 2.3 Roof 1,425 m2 £267.00 £380,475 £176 Area of roof on plan BCIS element unit rate study – mean 2.4 Stairs and ramps 2 number £15,000.00 £30,000 £14 Number of storey flights Analyses for similar building 2.5 External walls 1,658 m2 £217.00 £359,786 £167 Area of external walls, BCIS element unit rate study – mean based on external envelope (1,951m2) minus window area 2.6 Windows and external 293 m2 £876.00 £256,668 £119 Area of windows, based BCIS element unit rate study – mean doors on percentage of external envelope from similar projects of 15% 2.7 Internal walls and 1,877 m2 £115.00 £215,855 £100 Area of partitions based Analyses for similar building partitions on a ratio of area of partitions divided by floor area = 0.87 2.8 Internal doors 66 number £1,900.00 £125,400 £58 Number of doors, based Analyses for similar building on doors to partitions ratio of 0.035 2 Superstructure total £1,483,265 £687 3.1 Wall finishes 4,870 m2 £22.00 £107,140 £50 Area of wall finishes, Analyses for similar building based on area of external walls plus (2 x internal walls x 0.9) 3.2 Floor finishes 1,942 m2 £77.00 £149,534 £69 Area of floor finishes, BCIS element unit rate study – mean based on GIFA x 0.9 3.3 Ceiling finishes 2,050 m2 £46.00 £94,300 £44 Area of ceiling finishes, BCIS element unit rate study – median based on GIFA x 0.095 3 Finishes total £350,974 £163 4 Fittings and furnishings 2,158 m2 £60.00 £129,480 £60 GIFA Analyses for similar building total 5.1 Sanitary installation 2,158 m2 £20.00 £43,160 £20 GIFA Analyses for similar building 5.2 Services equipment 2,158 m2 £35.00 £75,530 £35 GIFA BCIS element unit rate study – mean 5.3 Disposal installations 2,158 m2 £10.00 £21,580 £10 GIFA BCIS element unit rate study – mean 5.4 Water installations 2,158 m2 £54.00 £116,532 £54 GIFA BCIS element unit rate study – mean 5.5 Heat source 2,158 m2 £86.00 £185,588 £86 GIFA BCIS element unit rate study – mean 5.6 Space heating and air 2,158 m2 £155.00 £334,490 £155 GIFA BCIS element unit rate study – mean conditioning 5.7 Ventilating systems 2,158 m2 £54.00 £116,532 £54 GIFA BCIS element unit rate study – mean 5.8 Electrical installations 2,158 m2 £185.00 £399,230 £185 GIFA BCIS element unit rate study – mean 5.9 Fuel installations 2,158 m2 £4.00 £8,632 £4 GIFA BCIS element unit rate study – mean 5.10 Lift and conveyor 2,158 m2 £19.00 £41,002 £19 GIFA BCIS element unit rate study – mean installations 5.11 Fire and lightning 2,158 m2 £20.00 £43,160 £20 GIFA Analyses for similar building protection 5.12 Communications, 2,158 m2 £54.00 £116,532 £54 GIFA BCIS element unit rate study – mean security and control systems 5.13 Special installations – – – – – – – 5.14 Builder’s work in 2,158 m2 £23.00 £49,634 £23 GIFA BCIS element unit rate study – mean connection 5 Services total £1,551,602 £719 Building subtotal £3,850,196 £1,784 6 Prefabricated buildings – – – – – – – 7 Works to existing – – – – – – – building 8 External works total 16,000 m2 £100.00 £1,600,000 £741 Site area less building Analyses for similar building footprint 9 Preliminaries 15 % – £817,529 £379 Percentage of BCIS prelims study – mean, all projects construction works 10 Main contractor’s – – – Included – – – overheads and profit Total construction £6,267,725 £2,904 works

Building cost/m2 inc. £2,052 preliminaries

NOVEMBER/ DECEMBER 2018 23 RICS CONSTRUCTION COST ESTIMATING JOURNAL

Table 2 Statistics from BCIS elemental unit rate average prices – 712*. Primary schools – external walls (element 2.5) – m2

Type of work: new build; last updated: 7 July 2018, 7.20a.m.; description: element unit rate for the element: area of external walls measured on the inner face, excluding openings measured as for 2.6 windows and external doors (m2); cost excluding prelims, at 3Q 2018 prices, based on a Tender Price Index (TPI) of 313, and UK mean location (index 100); max. age of results: 15 years; number sampled: 68; mean value: 217; standard deviation: 76; *building function

Min 1 2 3 4 5 6 7 8 9 Max

Range 126 – – – – – – – – – 485

Deciles – 156 166 179 183 197 213 226 262 283 –

Quartiles – – 169 – – – – – 240 – –

Median – – – – – 197 – – – – –

most appropriate project. Alternatively, the percentage split of Table 3 the elements shown in the cost analyses can be averaged and applied to a building cost per square metre. Area of internal wall finishes

Area of external walls – 1,658m2 Element unit rates Data required Area of internal partitions 1,877m2 – Element unit quantities (EUQs) can be derived from an outline Both sides x2 3,754m2 design or block CAD diagram, or from the floor area, number Total wall area – 5,412m2 of storeys and building footprint, together with data on the Factor based on previous projects to allow for openings, etc. 0.9 relationship between elements, for example density of partitions (see Tables 1A and 1B). Element unit rates are measured on the Area of internal wall finishes 4,870m2 same basis as is required for the EUQs. Building up an estimate from the basic quantities and unit n NRM guidance rates is referred to as conceptual cost estimating, and is useful As well as the construction works, costs, including contractor’s in informing early shape and layout decisions as the quantities preliminaries, overheads and profit, estimates are required for: for each option can be easily derived. An elemental estimate will bb facilitating and external works also give a basis for developing the cost plan in the initial budget. bb other development costs, such as land acquisition bb client risks, such as design, construction and employer change NRM guidance bb the cost of inflation. Rules for measuring the element unit quantities are given in both NRM1 and the SFCA. For example, the measurement rule for Applying BCIS cost data an external wall element is: the area measured equals the area The elemental costs per square metre for the construction of the external wall, measured on the internal perimeter – the works can be established in several ways using BCIS data. internal face – less the area of windows. bb Average prices: the element cost per square metre NRM1 states that, where insufficient information is available study provides a rate per square metre of GIFA, excluding for a given element, the EUQ for that element is to be the GIFA. preliminaries. It provides the same statistical analysis as the other studies (see Table 1), but also indicates the number Applying BCIS cost data of projects that did not have a particular element, such as Element unit rates are available in the Average Prices and the those without a frame or upper floor. Those elements are Analyses sections of the BCIS site. The statistical analysis in the then excluded from the statistical calculations; allowance will former is the same as the other average prices studies; however, also need to be made for preliminaries. Statistics on current the coverage of the element unit rates section is smaller than preliminaries are available in the Contract percentages study the average element prices (see Table 2). section of BCIS. Analyses with EUQ and unit rates can be selected on the bb Elemental cost analyses can be selected by a range of results page in the Analyses section, under Analysis type. criteria, including: • building function • floor area • number of storeys • client In preparing an elemental • building accreditation order of cost estimate, the • specification. elemental costs can be The selected analyses can be downloaded into a spreadsheet replaced by cost information and the cost per square metre for each element then established by averaging across the analyses or selecting the as the design develops

24 NOVEMBER/ DECEMBER 2018 RICS CONSTRUCTION JOURNAL

some elements and order of cost estimates for other elements, typically services. BCIS supplies estimating data in its online schedule of rates that can be used to build up quantified An elemental order of cost elemental estimates; for details, see rics.org/bcisrates. estimate allows both a robust Conclusion initial estimate and a basis for An elemental order of cost estimate provides the basis for strong cost control during the developing the cost plan as the design develops and allows both a robust initial estimate with greater transparency for the pre-construction period client, as well as a basis for strong cost control during the period before construction. The above principles can also be applied in lifecycle costing and civil engineering projects where cost data Table 2 shows an example build-up of an elemental order of exists in the required format. b cost estimate, illustrating how the EUQs have been derived from the floor area, building footprint and external envelope using ratios from other projects and the source of the Element Unit Rates. For example, the area of internal wall finishes is based on the area of external walls and internal partitions (see Table 3).

Developing the cost plan and cost control Joe Martin is Lead Consultant at BCIS In preparing an elemental order of cost estimate, the elemental [email protected] costs can be replaced by cost information as the design rics.org/bcisrates develops. The latter can be based on measured estimates prepared by the quantity surveyor or quotations from suppliers. Any over- or underspend on an element can be reported and action taken to control the total cost or, if the client desires, Related competencies include increase the budget. Some areas of design will develop faster Design economics and cost planning than others, so the cost plan may contain detailed estimates for

Data collection and international standards

BCIS analyses projects on behalf of its subscribers and other organisations. The data is based on GIFA, which can be derived from the International Property Measurement Standards rules for offices (https://ipmsc.org/standards). An elemental cost plan can be reported in the International Construction Measurement Standards (ICMS) (https://bit.ly/2M1WjGs) format at Level 2 and, once the design has been finalised, at Level 3. An RICS working group is preparing rules to report NRM costs in ICMS format, to enable comparison with international costs presented this way. Table A Data requirements for cost analysis by procurement route We are always keen to add more data, Procurement Required for costs Needed for Optional and provide clients, consultants and route specification contractors with secure online access to Design and build Contract sum Employer’s requirements Drawings the information that relates to their own analysis or contractor’s projects. The analyses can be prepared proposals

from contract documents used in most Specification and Contract sum Specification Drawings procurement routes (see Table A). drawings analysis

Traditional Bill of quantities – Drawings

For further details of how to submit data, visit Target cost Target cost Specification Drawings https://bit.ly/2C5goLV breakdown You can also contact our data collection team [email protected] Note: all projects require GIFA, the date on which the costs were agreed and the location, if not included in the supplied documents

Image © iStock NOVEMBER/ DECEMBER 2018 25 RICS CONSTRUCTION APC JOURNAL

Good conduct Susan Hanley details what APC candidates need to know about the competency Ethics, Rules of Conduct and professionalism

thics, Rules of documentation, and the content should bb always offer a high standard of service Conduct and also have been tested and approved by bb act in a way that promotes trust in professionalism is an APC counsellor. A guide to what the the profession the only mandatory summary of experience should contain is bb treat others with respect Level 3 competency given in Table 1. bb take responsibility. in the RICS APC, so it is imperative What to expect at interview Most candidates will soon identify that that candidates At final assessment, 10 minutes are set they are, in the course of their role, have a detailed understanding of what is aside towards the end of the interview already complying with these, and will required. Ultimately, the aim is to assess for demonstrating that you have fulfilled have copious examples showing where Ewhether you are a safe pair of hands and the competency’s requirements. This time they have demonstrated as much. will foster trust in the profession. is defined in the APC Candidate guide While there is no way to predict what as “Chairperson’s area of questioning questions candidates will be asked at final Assessment method [and it] may include professional and assessment, they need to have detailed Candidates are required to complete technical matters, CPD, Rules of Conduct Level 1 knowledge of the competency the ethics module in the portal of the and mandatory competencies”. In their description. Many candidates make Assessment Resource Centre in the questions, the chair may ask candidates the mistake of memorising the ethical 12 months before final assessment, and to put themselves in hypothetical standards alone, and this is not sufficient. can record the time spent doing so as scenarios and consider how they would The examples of what candidates need part of their CPD. react or respond to these. to know contained in the competency The final assessment process itself descriptor are an excellent starting point starts with the assessor reviewing the What you need to know for revision and include: candidate’s summary of experience. Candidates must know the RICS’ five bb the structure of RICS Before submitting this, candidates should ethical standards: bb the organisation’s global and have checked that it complies with RICS bb act with integrity professional ethical standards

Table 1 What should your summary of experience contain?

Requirement Example Level

Indicate sources of learned knowledge “While undertaking the RICS ethics module, I learned…” 1 “I reviewed the Ethics and the Regulation pages of the RICS website and learned…”

Demonstrate what you know about “I am aware of the RICS’ five ethical standards and its Rules of Conduct for 1 the module members and firms…” “I am aware of the need for professional indemnity insurance...” “I am aware of the requirement for firms to have a complaints-handling policy…”

Give evidence of practical application with “I identified a conflict of interest when…” 2 real-life, project-specific examples “I’m involved in running my local RICS Matrics, and promote the benefit of this to others by…” “I read my employer’s policy on hospitality and checked this against legislation and RICS guidance...”

Offer evidence of giving reasoned advice “I handled my client’s money in accordance with…” 3 “On this project I dealt with a complaint…” “On this project I advised the client regarding a potential conflict of interest…”

Image © iStock 26 NOVEMBER/ DECEMBER 2018 RICS CONSTRUCTION JOURNAL

bb mandatory professional statements, this will generally affect public and for example Conflicts of interest Top tips professional perception of RICS and bb guidance notes bb Before submitting your summary potentially your membership. bb RICS’ CPD policy of experience for final assessment, Counsellors should also be up to date bb the role of professional groups ensure you have checked it against with professional and ethical standards, bb bodies within RICS, such as Matrics the RICS ethical documents. ensuring they comply with their obligations and LionHeart bb Memorising the ethical standards to undertake ethics-based CPD. b bb the Rules of Conduct for members alone is not sufficient; you need a bb the Rules of Conduct for firms comprehensive knowledge of the bb policy documents competency as a whole. bb RICS bye-laws bb Start reviewing ethics and bb government legislation and regulation regulations as early as possible to bb common law ensure you are acting appropriately, bb relevant case law. and identify evidence of practical application, at Level 2, and reasoned Susan Hanley is Director of the APC Academy The regulation pages of the RICS website advice, at Level 3. and RICS Regional Training Advisor for Scotland and the detailed guidance notes, all listed bb Take the ethics test as soon as you [email protected] at the end of this article, will help you gain can to get a feel for the requirements. an understanding of these. You can always retake it nearer the time if need be. Be sure not to leave it Work placements to the last minute – if you do not pass, RICS ethics and professional standards Candidates must take the following due the system can take 24 hours to reset. rics.org/ethics diligence measures while on placements. bb Remember that the way you Conflicts of interest global bb Ensure they are familiar with their conduct yourself both inside and professional statement employer’s policies in relation to outside work can have a bearing on rics.org/conflictsofinterest professional indemnity insurance – who your RICS membership. International Ethics Standards does this cover, and at what level? rics.org/ies bb Investigate the company’s Information for APC assessors and counsellors complaints-handling procedure. are required to embrace and adopt the rics.org/apcinfo bb Look into the policy on gifts and organisation’s ethical standards, both as hospitality, and how this relates to RICS part of their professional practice and in guidance and the Bribery Act 2010. life outside work. RICS guidance states: “All members Related competencies include Summary must maintain a relevant and current Contract practice, Ethics, Rules of Conduct RICS ethical standards form a basis understanding of our professional and and professionalism [previously Conduct for providing professional services. All ethical standards during a rolling rules, ethics and professional practice] APC candidates and RICS members three-year period.” Divergence from

Updated online ethics module launches soon

Since 2014, RICS has been a member of published in 2017 and, at the time assessment model using complex the International Ethics Standards (IES) of writing, the Countering bribery case studies to test the depth of a Coalition. After extensive consultation and corruption, money laundering candidate’s reflection on ethics. The with professionals, built environment and terrorist financing professional new module will launch next year. organisations and other stakeholders, statement is in review post consultation. For those who have already qualified the coalition published a set of 10 We also need to review the way and would like to acquire CPD hours principles that underpin the behaviour we assess candidates joining the on ethics, we are also revamping the of professionals working in international profession, and so we are updating our free resources section to offer videos, markets. All members of the coalition online ethics assessment module, soon podcasts and shorter articles, bearing are committed to adopting these to be renamed the Professionalism the busy schedules of our professionals principles and offering further guidance Module. The new version is being in mind. b to members to help implement them in designed to be thought-provoking and the markets where they operate. engaging, and to enable candidates to We at RICS therefore need to ensure reflect on ethical dilemmas. The module, that our own ethical standards reflect hosted by RICS’ Online Learning the IES. To this end, we’re preparing Academy (academy.rics.org), will feature a series of non-technical professional videos and transcripts and be translated statements setting out the behaviours into a number of languages. Paulo Ferreira is RICS Policy and our professionals must exhibit, wherever Alongside the more traditional Assurance Officer they work. The global Conflicts of multiple-choice questions, we are [email protected] interest professional statement was considering the introduction of an

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28 NOVEMBER/ DECEMBER 2018 LEGAL RICS CONSTRUCTION JOURNAL

those working directly for it or on its behalf, unless it can rely on the defence in section 7 of the act on the basis that it has adequate prevention measures. In April this year, Skansen Interiors Limited was convicted for failing to have such procedures in place. Two individuals pleaded guilty to bribery and were imprisoned for 12 and 20 months and disqualified from acting as directors for six and seven years, respectively. In this case, a managing director had given a developer £10,000 and promised him a further £29,000 in return for confidential information to be used to win commercial property contracts, which resulted in the company securing business with a value of more than £6m. This was to the detriment of other companies that had bid for the same contracts, and the misconduct was only discovered and reported to the police when a new managing director was employed by Skansen.

Future changes This is clearly an issue of growing importance that is being Beyond addressed worldwide. In 2016 the International Organization for Standardization published ISO 37001 (https://bit.ly/2qdkXvX), a new standard that companies and organisations can use to certify their anti-bribery and corruption procedures. a bribe In May this year, it was announced that the House of Lords RICS members must be proactive has appointed an ad-hoc select committee to review and report on the Bribery Act. Its aim is to look at how effective the to avoid falling foul of the Bribery legislation has been, investigate whether there is still uncertainty about it, especially for small and medium-sized enterprises, and, Act 2010, warns Shy Jackson if so, ascertain what could be done to raise awareness. This is a clear indication that individuals and companies need he Bribery Act 2010 came to be aware of the act, and to take active steps to avoid any into force in July 2011. Yet in liability under its provisions. The select committee issued a call 2013, the Chartered Institute for evidence on 20 June and continues to collect oral evidence, of Building published a with the findings expected to be published in 2019. report exploring corruption, On 30 July this year, the Criminal Justice (Corruption which identified that 49% Offences) Act 2018 came into force in Ireland, introducing of respondents believed various new offences and substantial penalties for businesses corruption in UK construction that engage in corrupt practices. was common and businesses were not doing enough to Conclusion prevent it. Regardless of how the 2010 act may be amended, RICS More recently, questions members need to be highly aware of its provisions and the have arisen about the operation of the act. As the cases impact it can have on their business. There is a particular onus discussed below show, it has had an impact on business, and on smaller businesses, which may be less familiar with how such RICS members need to be more aware of it. legislation affects their operation and the steps that can be taken to avoid being found in breach of the act, such as putting TInternational reach in place adequate procedures to prevent bribery. However, the One of the key implications of the act is that a company with a legislation still applies to all businesses, and its international presence in the UK can be prosecuted for bribery, or for failing reach means that nobody should ignore it. b to prevent it, even when the alleged bribery takes place outside the UK. In February 2016, Sweett Group PLC was the first company to be convicted under the act. It was sentenced under section 7 of the legislation and ordered to pay £2.25m in fines following a Serious Fraud Office investigation into its activities in the United Arab Emirates, in respect of bribes paid by its subsidiary Shy Jackson is Partner at Pinsent Masons [email protected] company, Cyril Sweett International Limited, to secure the award of a contract with Al Ain Ahlia Insurance Company. As a result, Sweett Group was also the subject of disciplinary action by RICS, which resulted in an additional £125,000 fine and the imposition of ongoing reporting obligations. Related competencies include A company can also be responsible for bribery carried out Ethics, Rules of Conduct and professionalism by its employees or agents without its knowledge or consent; [previously Conduct rules, ethics and professional practice] indeed, a company can be guilty of failing to prevent bribery by

Image © iStock NOVEMBER/ DECEMBER 2018 29 How to build a long and successful career as a Professional QS

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