Contemplating Construction Ethics
August 17, 2005
Ellen Parson
FMI is a firm headquartered in
Besides the fact that 85% of respondents noted witnessing some sort of ethical act in the past year, what were some of the most significant findings of this research? More than 63% of respondents went so far as to say that they agreed or strongly agreed that the construction industry is tainted by prevalent acts they consider “unethical.” However, when asked if they thought “illegal acts” were plaguing the industry, 44% disagreed or strongly disagreed that this was an accurate characterization. Almost 70% said they believe the industry needs to pay more attention to ethical issues, and 21% thought ethical issues put the construction industry “in a bad light.” Despite this consensus, 24% ironically admitted they might work with unethical contractors if the right circumstances dictated • and that they often didn't know if the contractor they hired was ethical or not until after that contractor was onboard.
When asked to choose an estimated range for the cost of unethical behavior on a project, 35% said that between ½% and 2% of the total project cost while 25% estimated between 2% and 5%. That means anywhere from $5,000 to $50,000 for every million dollars spent on a project is lost or unaccounted for in some sort of unethical transaction.
The top five “most critical ethical issues” on respondents' list of concerns were bid shopping (the practice of divulging solicited bids as leverage with contractors to lower their prices), change order games, payment games, unreliable contractors, and claims games. This reminded me of a lawsuit I heard about recently in my area. A general contractor, hired to do a large commercial project for the city, was sued by one of its subcontractors for breach of contract for withholding funds after the work had been completed. The dispute went to court, where the GC was deemed 100% in the wrong and ordered to pay the subcontractor in full. I'm guessing this is exactly the kind of payment game respondents are referring to?
But there's still something here I just don't get. Despite the fact that 91% of respondents considered ethics of utmost importance (49%) or important (42%) when deciding to work with or hire contractors, only 30% had formal or written ethical programs in place • and 11% had no ethics program at all. Furthermore, 58% admitted that the topic of ethics programs never even came up in meetings or negotiations with clients. This seems rather contradictory to me. I know it's certainly an oversimplification, but if ethics is so important, then why not discuss it openly and honestly during contract negotiations? The bottom line is the survey found a large discrepancy between the value people place on ethics and what they actually do in practice to support their values. It's clear that ethics is a topic of extreme importance to most construction professionals, yet no one seems to want to talk about it out loud. Obviously, getting past this hurdle might go a long way toward a cure.
To minimize the chances of unethical or illegal behavior in the construction industry, respondents suggested there should be:
- Stiffer penalties for those caught in unethical or illegal acts
- An industry-wide code of ethics
- More emphasis placed on social responsibility in award criteria
- More training
Even though 85% of respondents believe there should be an industry-wide code of ethics, only 30% agreed that adding regulations concerning ethical behaviors is a good idea. The FMI analysis suggests there's a strong indication that associations should take the lead in crafting and enforcing such codes of conduct. Rep. Paul Kanjorksi, D-Pa., has also taken a stance in Congress by introducing the Construction Quality Assurance Act of 2005 (H.R. 2834) on
With more industry associations and groups like this taking an active interest in the application of ethics in the construction industry • coupled with the majority of good people I know we have in this profession • I'm going to continue to believe things will get better.
Industry Feedback
Respondents of the survey were encouraged to write in specific concerns relating to construction ethics. Following are just a few of their candid comments I found especially telling.
- A contractor is free to do whatever is necessary to make money on a project, as long as he is observed to meet the terms of the contract he holds with the owner.
- Owners play a large part in the unethical behavior of contractors. They try to pass off their responsibilities to others, don't ensure that adequate and complete information is supplied, and they play games with payments, extras, penalties, delays, etc.
- Due to the lack of workforce craft training in many of the common trades, a majority of the newer specialty contractors are uneducated in the craft as well as ethical procedures, and therefore don't even know that they are screwing others, themselves, and/or the industry.
- Unless construction users themselves become thoroughly knowledgeable in project delivery processes and the construction industry, or hire an organization that has expertise in all of the required areas (a construction management firm) as an agent, the problems being addressed here will not abate one iota, regardless of the efforts to establish a practical level of ethics.
- Ethical issues must be driven from the owners. They must first follow their own code of ethics )enforcing the safety requirements for all bidders, shopping prices after the bids are submitted, and honoring field orders, etc.) If owners dictate ethical behaviors and practices, general contractors and their subs will follow or get pushed out.
