Doctors, lawyers, and many other professionals are subject to specific codes of ethics that govern their performance and conduct. Architects and engineers are often governed by codes of ethics. What about construction contractors? Sometimes, when we work on public construction projects, we have to sign an ethics statement. The ethics statement may be something as simple as affirming that we have not provided campaign contributions over a certain amount to the officials of the awarding authority. Sometimes, it is simply a non-collusion affidavit. But what about true construction ethics? In our daily performance as contractors, are we ethical?
DISCUSSION ON ETHICS
I have studied this issue for years. I have developed a program for our local builders’ exchange on construction ethics. We convene young and veteran personnel from construction companies representing construction managers, general contractors, subcontractors, suppliers, and even architects and engineers. I pose numerous scenarios for discussion. Lively debate follows as we ask whether or not the practice is ethical, common in the industry, and even occurs in one’s own company. Consider the following:
- The general contractor accepts a bid from the subcontractor to include in the general contractor’s bid submitted to the owner. The owner accepts the general contractor’s bid. After learning of this acceptance, the general contractor calls the subcontractor demanding that it reduce its bid in order to receive the work.
- A general contractor front-loads or increases the alleged amount of work performed during the initial stages of the project in order to obtain more money upfront from the owner.
- The owner requires the general contractor to review the details of the design and assume responsibility to provide work omitted from the design, but claimed to be needed for a “complete” system.
- A subcontractor or supplier gives different bid estimate amounts to general contractors in order to favor one general contractor over others in getting the work from the owner.
- The contractor is aware of defects in the plans, but bids anyway without telling the owner or architect because it knows it can form the basis of a claim for additional compensation during the project.
In analyzing the above scenarios, it was common for our participants year-in and year-out to say that these practices are unethical, yet common in the construction industry. Often, they generated lively discourse. For example, the first one sounds improper, but could it be nothing more than value engineering? Most would say no. Second, should the subcontractor acquiesce to a demand to lower its bill to get the work? A subcontractor who gets known for agreeing to reduce its bid will probably be asked to do so time and time again. However, a subcontractor faced with such a dilemma may feel it has no choice in order to obtain the work. This was a primary concern during the recession when subcontractors realized that work was at a premium.
Front-loading was deemed extremely common but there is a split of authority as to whether it is ethical. Those who contend it is ethical complain significantly about owners who are slow to make payment and will not make payment for many upfront costs, such as mobilization and the like.
Shifting responsibility to the general contractor to review the details of a design and provide work omitted but needed for a complete system was clearly viewed by the contractors in the room as being unethical. It is shifting design responsibility to the general contractor. Architects, however, indicated that often material suppliers and fabricators are in a better position to provide the information. Further, architects and engineers complain about how compacted their time frame for doing the work has become and the need to shift responsibility in certain circumstances. Delegated design is becoming more and more common as architects and engineers are being pressed in terms of fee and production, they claim.
TO BID OR NOT TO BID
Providing different bid estimates to general contractors in order to favor one or the other was viewed as entirely proper if it is based upon a relationship with a general contractor. General contractors who pay fast may get better bid estimates than those who pay slow. General contractors who provide a lot of work to a subcontractor may get a better price than a general contractor who does not. However, rigging the deal in order to determine who will be the low bidder was viewed improper.
It was considered highly unethical to bid a project with knowledge of a defect in plans knowing it could create a claim later. However, it was also viewed by our participants as very common in the industry. Many contractors say that they must bid based on what is in the drawings. Others say you need to bring defects to the attention of the owner or architect. But, whether or not others bid knowing of the defect, many of our participants said while they do not do it, they are aware that others do.
Contractors are professionals who want to see the best performance by themselves and others in our industry. We also live in a competitive environment with work often going to the lowest bidder. The above are certain scenarios that one should think about as to how they would react in a similar circumstance. ■
About the Author: Thomas L. Rosenberg is a partner at Roetzel & Andress, LPA, which is a full-service law firm with offices throughout Ohio and Florida and in Chicago and Washington, D.C. Based in Roetzel’s Columbus, Ohio, office, Mr. Rosenberg has more than 30 years of experience as a construction lawyer and leads the construction law practice at Roetzel, which has been recognized regionally and nationally as one of the top law firms for construction and construction litigation. Mr. Rosenberg has received numerous honors as a construction lawyer and is actively involved in local, state, and national construction law organizations. He can be reached at .
Modern Contractor Solutions – October 2016
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