Risks associated with corruption on major public transport projects in Victoria and elsewhere must be carefully managed, a webinar has heard.

Hosted by the Independent Broad-based Anti-corruption Commission (IBAC), the webinar explored strategies which are needed to prevent corruption on projects which are being overseen by the Major Transport Infrastructure Authority (MTIA) for the Victorian Government’s $90 billion Big Build initiative.

The webinar followed IBAC’s release of the Corruption risks associated with major transport projects report  in March.

According to that report, corruption risks which can impact major transport projects include:

• fraud, collusion, and bribery during procurement
• collusion and bribery by contractors and subcontractors
• contractor and subcontractor fraud such as false invoicing and false claims; and
• favouritism and fraudulent recruitment practices such as payroll fraud.

For several reasons, the report says that major transport projects are vulnerable to corruption risk.

First, the size, cost and complexity associated with these projects can lead to greater incentive for corrupt practices to occur, a wider range of opportunities for corrupt conduct and greater difficulty in identifying and detecting improper practices.

This is particularly the case on the Big Build, which is the largest transport infrastructure program in Victoria’s history.

All up, the program involves an estimated $90 billion capital expenditure across 165 projects. As many as four current projects are valued at more than $10 billon each (North-East Link, Level Crossing Removal Program, Metro Tunnel (pictured above) and the West-Gate Tunnel). A further two which are in early works – Melbourne Airport Rail and SRL East – are expected to cost $8-$13 billion and $30-$34.5 billion.

The size and scale of these projects also means that the potential impact of any corrupt practices is magnified. These impacts extend beyond value for money considerations and can include poorer outcomes in construction quality, environmental performance and worker/public safety.

Second, the high-profile nature of major infrastructure projects means that public sector delivery agencies are subject to political, economic and performance pressure to bring stages to completion. Potentially, this can lead to compromises regarding the level of diligence that is applied to project controls, policies and procedures.

Finally, the report raises concerns about the restricted number of contractors who have the capacity to deliver major project work along with the limited pool of workers who have the skills and experience which are needed for these projects.

Both of these factors, the report says, can lead to intense competition for securing contractors and specialist workers and a greater risk that potential conflicts of interest could prevail during contracting and recruitment.

Evidence suggests that the level of corruption on major infrastructure work could be substantial.

Between mid-2018 and the publication of the report in March, IBAC received information relating to 26 cases of alleged corruption involving 50 corruption allegations – albeit with most of these allegations not being able to be substantiated.

Complaints related to alleged favoritism (35 percent), lack of sufficient public sector manager/employee action to investigate concerns within their own purview (23 percent) public sector managers or employees exceeding their professional boundaries (12 percent), collusion (12 percent), misuse of resources (12 percent) and bribery (4 percent).

In another concerning statistic, more than three in ten (31 percent) suppliers surveyed as part of IBAC’s 2022 Perception of Corruption report released in December indicated that they would be unlikely to report serious corrupt behaviour in procurement.

To prevent and detect improper conduct, the report recommends that public sector agencies consider several measures.These include:

• A centralised approach to risk assessment, detection and prevention measures along with data collection and analysis between projects.
• Effective information sharing between integrity officers and those responsible for leadership and governance to strengthen integrity frameworks and corruption controls.
• Consideration of use of collaborative contract management frameworks, such as alliance contracting, with open book commercial arrangements and auditing in place. This helps to increase transparency of project expenditure and knowledge-sharing.
• Developing and upholding a culture of integrity and awareness of the public sector standards across entire projects, including among construction partners and suppliers.
• Mandating minimum contracting clauses that protect the public sector from corruption and drive ethical practices. This could include requiring project partners and suppliers to have robust fraud control frameworks, targeted ethical training, and transparent procurement and subcontracting arrangements.

The report also identifies a checklist of ‘red flags’ which may indicate the potential for corrupt conduct.

To name a few, these include

• Organisational red flags, such as manager or director focus on ‘getting the job down at all costs’; managerial apathy toward potential wrongdoing; hostile work environments; and poor practices in areas such as conflict of interest management, sharing of information with auditors, checks and balances and employee supervision.
• Staff or individual red flags, such as a history of internal misconduct or non-compliance with processes; lifestyle changes in excess of salary; refusal to share information; undeclared interests; overly close relationships with external stakeholders; high levels of discretion with minimal supervision; and irregular work practices such as accessing systems or processing transactions outside of work hours, excessive annual leave balances or being prone to absences from work areas.
• Third party contractor red flags such as underquoted tenders; poor corporate registration practices (lack of registration or correct ABN, lack of compulsory licences/insurance, lack of physical or online presence); inexperienced or often changing subcontractors; poor documentation; financial viability concerns; high level of complaints against them; a history of performing works or undertaking changes without approval; and significant use of labour hire workers.

(The West Gate Tunnel project is one of many megaprojects being delivered as part of Victoria’s $90 billion Big Build program).

Speaking about the report, Dan Ong, Senior Strategic Intelligence Analyst at IBAC, stressed that responsibility to ensure that the public interest is served on major infrastructure projects extends beyond the simple delivery agency/head contractor level and incorporates all tiers of contractors and subcontractors who are engaged on the development.

This is important as major projects involve multiple tiers of contractors and subcontractors.

On detection and prevention strategies, Ong stresses the importance of culture, integrity and awareness. In many instances, he says there is an absence of a culture which enables people to feel safe in speaking up or where people are aware of integrity standards.

On the issue of mandating minimum contracting clauses, Ong says it is critical to drive uptake of these beyond the immediate public sector. This is because many personnel within the private sector will likely work for or with the public sector at some stage during their careers.

Next, Ong says that organisations should not wait for red flags to become evident.

Indeed, he encourages managers to be aware of ‘near misses’ and to communicate these with colleagues. More broadly, red-flag incidents can be incorporated into integrity training provided by IBAC and others with appropriate context to share lessons learned across the public sector and industry.

Finally, Ong says the fact that three in ten suppliers are unlikely to report corruption is concerning.

Not only does a failure to report contribute to potential corrupt behaviour remaining undetected, it also inhibits IBAC’s ability to understand corruption trends and to target strategies and initiatives accordingly.

As part of the webinar, key MTIA representatives outlined the main integrity measures which are adopted on Big Build projects. The three representatives included Sarah McIivor, Program Assurance Team Leader; Tom McAvaney, Director Commercial, Legal and Governance at Rail Projects Victoria; and Josh Miller, General Counsel at MTIA.

At the core of this is the MTIA Integrity Framework. This aims to ensure that all staff: understand and comply with their obligations as well as regulations, policies and procedures; avoid putting their private interest before the interest of the public; and report any integrity breaches about which they become aware.

The framework revolves around:

• Culture and embedding integrity at the core of everything that MTIA does and aligning with Victorian Public Sector Values.
• Integrity training which is completed by all staff during induction and is emphasised during annual professional training.
• Policies and procedures regarding conflict of interest, declaration of private interest, confidentiality agreements, gift benefits and hospitality declarations along with other HR policies relating to outside employment approval, misconduct and pre-screening during recruitment.
• Tools and registers including a third-party integrity hotline through which concerns can be reported as well as online registers for gifts, benefits and hospitality and declaration of private interest and conflict of interest.
• Fraud and prevention controls including investigators who are on standby and can be used to commence investigations along with data analytics programs that cover matters such as suspicious transactions from vendor master files or employee bank accounts.

This is supported by a fraud and corruption control framework, through which MTIA aims to: ensure that roles and responsibilities are well understood; establish effective risk management processes; and prevent, detect and respond to instances of alleged corrupt activity.

Whilst the framework applies to MTIA itself, its application extends to the organisation’s engagement with external parties and contractors.

When contracting for projects, MTIA uses five types of contracting models (managing contractor/design and construct/program delivery approach/alliance/public private partnership – see webinar for details).

Each contracting methodology has varying elements. Nevertheless, all are subject to governance and assurance frameworks that involve multi-layered procurement oversight, extensive assessment and probity advisor and auditor sign-off.

Speaking of practical outcomes on the ground, Miller makes several observations.

First, it is important that project leaders both in terms of MTIA as the client as well as the contractor understand the requirements of contracts as well as the accountability framework and are aware of expectations from an integrity viewpoint.

Here, he says a positive and collaborative relationship with contractors as well as leadership which is set from the Director General enables MTIA to obtain transparent contractor reporting when issues occur.

Second, whilst all contract models aim to incentivise contractors to manage project and integrity risks, Miller acknowledges that different contract forms offer benefits and risks from an integrity viewpoint.

In rail projects, for example, collaborative contracts models enable the more effective management of complex interfaces. In particular, alliance-based contracting facilitates an open book arrangement which can provide transparency on pricing, delivery and progress and can facilitate greater visibility as to progress and events on the ground.

Finally, Miller says a collaborative approach toward embedding corruption prevention and detection practices has helped MTIA to maintain cooperation from contractors as integrity practices evolve.

Asked about how MTIA detects potential conflicts of interest, McIver said there is a strong focus on probity in all procurement processes. Anybody involved in procurement is required to complete conflict of interest declarations at all stages of approval. Probity advisors and auditors are employed on the majority of MTIA’s large contracts.

Other checking means can include monitoring any transactions in employee bank accounts that align to those of vendors in MTIA’s system as well as assets checks to identify and shareholdings or others interests which may warrant concern.

Another important point revolves around the hotline and its operation. This is run by whistle blowing hotline and integrity services firm Stopline, which is used by government agencies across Australia.

Using the service, any person can report potential corrupt or improper behaviour via phone, letter or email. Once complaints are received, details are passed to McIver and the Director of Integrity at MTIA for the matter to be dealt with according to MTIA’s aforementioned fraud and corruption control framework.

An interesting note concerns complaints around bullying. In some cases, these will be a straightforward HR concern. Other times, they may become an integrity issue where the matter that led to the alleged bullying relates to practices or conduct that are not appropriate from an integrity viewpoint.

Those who make allegations or complaints can receive information back from Stopline about how the matter has progressed.

The hotline is publicised through the MTIA website, posters displayed throughout MTIA offices and site-based communications.

Asked about potential tendencies for stakeholders to cut corners or exploit loopholes regarding integrity processes and procedures, Miller stresses that MTIA sets high standards and expectations in how it goes about its work. McIver adds that the organisation’s assurance framework ensures that parties understand that there are processes to make certain that all requirements are complied with.

Finally, Ong says the importance of culture should not be underestimated. He says organisations need to maintain awareness about how their culture evolves over time.

“We’ve talked at length about the culture,” he said, referring to the webinar.

“In the public sector, and maybe influencing the private sector culture – those that work with us – I think that cannot be understated.

“Certainly, the frameworks that have been presented here (by MTIA) are quite robust. But nothing is foolproof. It is an ongoing task to get to know our own internal cultures and to make them as safe as possible to enable whistleblowing where that needs to happen.

“So I think understanding your culture is not just primordial. You have a fluid workforce. It’s changing all the time. People are changing sectors. With your old timers, you need to leverage their influence and knowledge. But you also need to be aware that new people will come all the time. They need to be onboarded very well, robustly. We need to draw on lessons that have been learned internally to share that externally towards the broader public sector.

“All those things mean that it is important to not only know your culture, but to track it as it morphs and develops over time.”

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