Public Inquiry Reports In The Construction Industry

Public Inquiry reports in the construction industry

Table of contents

Cover Page

1. Introduction

2. The Dutch construction fraud

3. Royal BAM Group and the Dutch construction fraud

4. Advice

1. Introduction

In the first part of this paper there will be a short explanation of the construction fraud and the relevant stakeholders involved. In the second part the relevant changes, interests and strategies will be described for Royal BAM Group. At the end of this paper an advice will be given to Royal BAM Group to solve problems related to the cultural change process.

2. The Dutch construction fraud

At the end of 2001 former director of a construction company, Ad Bos, reveals an shadow account keeping practices. After his confession a lot of fraud cases in the construction industry are broad to light. The construction companies secretly agreed to overcharge their customers on a large scale. The extra profit that was being created this way was shared among the construction companies. This overcharging led up from thousands up to hundreds of thousands euros for a project. After investigations by the Dutch government, the Dutch cartelization prevention (NMa) and a public inquiry it is estimated that a proximately thirteen hundred construction companies participated in this fraud over a period from 1992 till 2001. The relevant stakeholders during this fraud and during the prosecution of the construction companies are: the Dutch government, the NMa, the whistle-blowers (Mintzberg, 1984) and the construction companies.

The Dutch Government is affected by this fraud in different ways. First of all it is damaged as a client of the construction companies. During the fraud, construction projects that were being done for the government have been overcharged too. Secondly the Dutch government, as a protector of the Dutch citizens, should have found ways to prevent this fraud. But it has been proven that some politicians and civil servants have benefited from the fraud or were bribed to ignore it. This might explain why the Dutch government has not reacted earlier.

The NMa is an institution that should try to prevent cartelization. Cartelization is a process in witch companies secretly make an agreement on the prices that they charge in order to benefit from it. The Dutch construction fraud is a form of cartelization, because there was an agreement among the construction companies to overcharge the building projects and there were made agreements about prices. When the construction fraud had come to light it was up to the NMa to punish the companies that were involved. They did claim money from the thirteen hundred companies, but the amount is in no comparison to the money that was made during the fraud period.

Whistle-blowers seek to expose malfeasance or illegitimacy to the outside of the organization to effect internal policy or strategy changes (Mintzberg, 1984). Besides Ad Bos there were two other whistle-blowers that broad the building fraud to light. In spite of threats and attempts of bribery they wanted to be honest because they think it is the right thing to do. However they were immediately fired while the directors who were responsible for the fraud are still in their same position. They also did not get any thanks or protection from the Dutch government. While they did the right thing.

The last group of relevant stakeholders are the construction companies that initiated the fraud. Their main interest was to create more profit by working together and sharing the gained profits, instead of competing with eachother.

In this paper there will be a closer look on one of these construction companies: The Royal BAM Group.

3. Royal BAM Group and the Dutch construction fraud

The Royal BAM Group nv originally started in 1869 as a carpentry workshop in the Netherlands. Now it's a very successful group of companies with activities in numerous European countries and worldwide. Royal BAM Group is active in different sectors: Civil engineering, construction and property, public-private partnerships, mechanical and electrical contracting and consultancy and engineering. In addition, BAM has an interest in a dredging company that operates worldwide. BAM has around 30,000 employees and is responsible for the implementation of hundreds of projects every year. Their philosophy is "to offer real value to our clients and work with them to provide the optimum solution" (www.bam.nl, December 6th 2007).

BAM is one of the four major construction companies that is prosecuted by the Public Prosecution Office (OM) for participating in the construction fraud scandal. In addition, also two staff members of BAM were personally prosecuted (www.expatica.com, December 17th 2003).

The construction fraud scandal got a lot of media attention. The image damage for the construction sector was huge. Especially for the four major construction companies that were prosecuted, of which BAM is one (Staps, F., in: NRC Handelsblad, Oktober 23rd 2004). The relationship between individual construction companies and public customers was ruined. Civil servants became hesitant to make deals with builders (Staps, F., in: NRC Handelsblad, December 17th 2003). According to Elco Brinkman, chairman of branche organization 'Bouwend Nederland' took it a long time until normal negotiation with public clients was possible. By now, relationships are recovered, the companies are taken serious again (Dohmen, J. & Verlaan, J., in: NRC Handelsblad, November 9th 2006). Wim van Vonno, chairman of the board of BAM until 2005, explains in an interview the whole affaire as an traumatic experience because of the extreme negativity about him personally, BAM and the construction sector as a whole.