84% Saw Unethical Practices in Past Year

Special to CONTRACTOR

RALEIGH, N.C. — The results of FMI’s Survey of Construction Industry Ethics were released in mid-May at the Construction Management Association of America’s spring conference in Boston. The survey was conducted by FMI with support and participation from CMAA.

When asked if they had “experienced, encountered or observed construction industry-related acts or transactions they would consider unethical in the past year,” 84% of the contractors, subcontractors, owners, architects and construction managers responding to the survey say that they have; 34% say they have experience with unethical acts “many times”; and 61% think that the industry is “tainted” by unethical acts.

Whether the acts experienced or witnessed by those responding to the survey are small transgressions or large-scale scandals awaiting court dates, this is a serious knock to the construction industry, FMI noted. FMI termed the 84% statistic “alarming.”

Unethical behavior also affects the cost of getting projects built, according to 61% of survey respondents, who estimate that from $5,000 to $50,000 for every $1 million in project cost is lost or “unaccounted for” in some sort of unethical transaction.

“Issues concerning trust and integrity as underlying values lead the list of concerns voiced in this survey,” said Dennis Doran, author of the survey and market manager/owner services for FMI. “The reputation of individuals and the companies they represent depends on trust and integrity. People want to be trusted as well as trusting. Results from other surveys conducted by FMI point to the importance of collaboration and communication for completing successful projects; it is not surprising then to see the concern for trust here as an important quality in collaborative relationships.”

Other issues examined in the report include ethics of leaders, bid shopping, reverse auctions, over-billing and training in ethical practices. Bid shopping and reverse auctions are among the top issues commented on by survey respondents, with more than 90% agreeing that bid shopping is unethical and 70% saying that reverse auctions are unethical.

Unethical vs. illegal

What do we mean by “moral principles and values”? FMI asked. Defining ethics is an important part of the issue. The consulting firm opined that morality is a set of accepted standards or rules about what is right or wrong conduct. Conduct or behavior is the way a person responds to a set of conditions. Therefore, when one speaks of an action being “unethical,” it means an action that is inconsistent with agreed-upon moral conduct.

The problem, FMI noted in its report, is when one gets down to specifics. People in the industry who commit unethical acts often do so because they think it’s good for the company, at least until they get caught.

In contrast, 44% either disagree or strongly disagree that people in construction are committing illegal acts, such as bribery, harassment or alcohol use on the job. Ethics are governed by societal norms, FMI said, while illegal acts are defined by laws and regulations.

Some of the most common unethical practices reported to FMI were classed as “games,” related to change orders, payment and claims. The two other biggest problems reported are bid shopping and unreliable contractors, such as one who promises to crew a job a certain way but does not.

Except for the unreliable contractor, the other four practices all are attempts to profit at the expense of another.

Survey participants are less clear on whether bid shopping, Internet reverse auction bidding and over-billing are unethical. A huge majority thinks bid shopping is unethical, but 6% do not. More telling is the response to the reverse auction question — while most think it’s unethical, 20% say they “don’t know.” Similarly, while most say that over-billing is unethical, a strong argument can be made that over-billing is necessary to preserve the cash flow — and survival — of subcontractors as long as they are not getting paid in a timely manner.

The report looks at how the industry scores itself on the subject of ethical practices and examines some of the gaps between ethical practices and values as well as the need for better understanding among the various industry participants.

The survey was conducted for FMI by a third party and includes members of the Construction Management Association of America and the American Subcontractors Association. Of the survey respondents, 30% are specialty contractors; 29% are general contractors; 23% are construction managers; 8% are architects, engineers or consultants; 8% are owners, developers or facility managers; and 2% are program managers.

More information on the Survey of Construction Industry Ethical Practices Report, is available from Dennis Doran at 919/785-9219, or [email protected].