Why is CoST necessary?
In every country the construction sector is responsible for building crucial infrastructure and contributing to economic prosperity and the alleviation of poverty. Publicly funded construction is a large consumer of public spending, accounting for up to 30 percent of public budgets across sectors such as transport, energy, water, health, education, and housing, and has significant impacts on employment and resource use.
Internationally, the supply of construction services and equipment has become a global business, with competition and partnerships between international and local firms and the global dissemination of technology and practices. The sector also receives large inflows of foreign direct investment and of international and regional development aid.
Thus concerns about mismanagement and corruption in the sector have both local and international significance, and they affect the quality, safety, and value of the built environment. Estimates of the cost of mismanagement, inefficiency, and corruption in public construction typically range from 10 to 30 percent of a project’s value, but of course vary considerably across countries and projects.
Specific investigations have found much larger losses in some cases, including projects that were paid for but never built and projects that collapsed with injury and loss of life. A scan of the media shows that the problem is significant in both developed and developing countries, including a growing number of bribery cases that have been successfully prosecuted.
Factors contributing to the problem include:
- Poor management practices
- Opaque and unaccountable institutions
- Complexity of the construction project cycle
- Diversity of actors involved
- Capture by powerful government or business interests.
The results can be seen in many ways, including:
- Waste of public funds
- Unsuitable, defective, or dangerous construction projects
- Unfair competition and reduced entry into the market
- Undermining of the rule of law
- Poor economic and social development outcomes.
Sources:
- Transparency International 2008, 'Transparency International Bribepayers’ Index, 2008.'http://www.transparency.org/policy_research/surveys_indices/bpi/bpi_2008
- American Society of Civil Engineers, July 31 2006, http://www.asce.org/pressroom/news/display_press.cfm?uid=2789
- Organisation for Economic Co-operation and Development– Development Assistance Committee (OECD–DAC) (2005), Harmonising Donor Practices for Effective Aid Delivery. Vol. 3: Strengthening Procurement Practices in Developing Countries, OECD, Paris.
