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Half of all construction rms are corruption victims - report

ALMOST HALF of all engineering and construction companies have fallen victim to economic crime in the past year, says a report published this week.

Companies working inside the European Union (EU) are as likely to be hit by corruption and fraud as those in the rest of the world.

This is despite the EU's open and transparent procurement system, says the report by management consultant PriceWaterhouseCoopers (PWC).

They are also likely to suffer much greater losses because of their projects are more expensive than those in other parts of the world warned PWC global engineering and construction leader Jonathan Hook.

On average, each of the 186 rms polled by PWC in a survey spanning 26 countries had lost £600,000 to corruption. In the EU the average was higher at £1.25M.

Four main economic crimes were identied in the report.

The most common of which was asset misappropriation.

'This is a middle management issue, ' explained Hook, 'typically it would involve a piece of plant 'going missing' or even labour being diverted to another project.'

Financial misrepresentation was also identified as a major problem. It usually involves a company falsifying its financial situation to win projects they are then unable to complete.

Bribery usually among senior officals was also reported as was suppliers substituting expensive high grade materials for cheaper low grade alternatives and pocketing the difference in cost.

Rising construction demand is likely to increase the problem warned Hook. 'Skills shortages might mean companies have to go outside their normal comfort zone. Clients need to be particularly vigilant.'

Despite all this only 18% of the fims polled believe they were likely to suffer from economic crime in the next five years.

'Given 43% of engineering and construction companies have experienced economic crime over the past two years; this optimism may be somewhat misplaced unless the companies work to implement more concrete fraud prevention measures, ' said Hook.

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