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Joint Venture Partner Seeks to Lower Costs by Using Inferior Hardware

At ASCE's annual leadership conferences, which were held earlier this year, national, regional, section, and branch leaders, along with younger member and student leaders, came together to exchange ideas, network, gain a better understanding of Society activities, and consider ways of leading their groups more effectively. As was the case last year, the 2007 conferences included sessions on engineering ethics that drew on material provided by the National Institute of Engineering Ethics. This month's column discusses the second of two case studies presented at the ethics sessions. The case studies were prepared by William D. Lawson, Ph.D., P.E., and Brian Brenner, Ph.D., P.E., and are based on opinions issued by the National Society of Professional Engineers' Board of Ethical Review.   

Situation

Ethan Roberts, p.e., is a principal in charge of design for Tecxtrans Engineers (te), a firm that has traditionally offered services on state highway projects carried out using the design/bid/build project delivery method. te has worked on several large design contracts for the state of Euphoria's Department of Transportation (edot) and enjoys a good relationship with the department. In its newest highway project, however, edot has decided to let the contract using the design/build approach.

Although te has no design/build experience and is not accustomed to working as a partner with a contractor, Roberts feels that it is important to bid on the project to keep edot happy. Despite his personal belief that te is taking on undesirable risk, he negotiates an agreement with Specialty Transit, Inc. (sti), an out-of-state construction contractor. The two firms settle on a 50-50 partnership, te being responsible for design and sti handling construction. The contract does not address what to do in the event of a design conflict. The new partnership submits its bid for the project, and edot awards it the contract.

As the project is approaching 85 percent completion, Roberts encounters a serious problem. In reviewing subcontractor submittals, he notices that Marc Stanton, sti's project manager, has authorized several field changes that he would have opposed. In an apparent attempt to keep costs under the guaranteed maximum, Stanton has substituted electronics hardware that Roberts considers inferior.

Roberts knows that in a design/build contract the engineer has no incentive to report such concerns to the owner because the engineer is employed by the contractor. Roberts also understands that he needs to learn how to operate within a different context, one in which he is not an impartial adviser to the owner. At the same time, Roberts is concerned about te's reputation and its future dealings with edot. His misgivings arise from his professional obligation to serve edot, his own financial interests, and his legal obligations as a partner in a joint venture. 

Question

How can Roberts best address his concerns from an ethical point of view? 

Decision

Session participants were asked to consider the following options: 

  1. Roberts should discuss the matter with Stanton and explain his concerns about the design change. He should then trust Stanton to do the right thing in light of the available data.
  2. Roberts needs to "push back" and remind Stanton that "design" comes before "build" in the design/build process. As Roberts is responsible for the design aspect, he alone must approve changes to system components. 
  3. Roberts and Stanton should retain an outside engineering firm to perform a peer review of the systems in question and offer recommendations on what should be done contractually with respect to edot.
  4. Roberts must convince Stanton to bring the quality issue to edot's attention. Together, they may be able to convince edot to pay for electronics of higher quality. The risks presented by equipment of poor quality are more important than the possibility that edot may feel the two are conspiring to submit n unauthorized change order.
  5. This situation is best considered "everyone's problem." Bring all the involved parties together and attempt to work out a cost-sharing agreement. Everyone will have to pay, but everyone will also get something in return.
  6. When the project is over, Roberts and edot will still be in town, but Stanton will be gone. Roberts's ultimate responsibility is to the public, so he must go to edot to apprise it of the situation. edot can determine a solution that protects its own interests and rewards Roberts for his loyalty. 

Here we have a situation where the engineer's obligation to "act in professional matters for each employer or client as faithful agents or trustees" (canon 4 of asce's Code of Ethics) seems to run counter to the engineer's principal obligation to "hold paramount the safety, health, and welfare of the public" (canon 1). Session participants saw the importance of communication and the need to weigh long-term interests against short-term gain. While votes were split among the various options, many participants believed that Roberts's best course of action was to pursue a combination of options.

Participants suggested that Roberts might first discuss his concerns with Stanton and then attempt to arrange a compromise or seek third-party recommendations as needed. If all attempts to negotiate or push back are unsuccessful, Roberts must decide whether the design change is an issue affecting public health, safety, or welfare or is merely something that detracts from the project's economic value. If the former, Roberts may have an ethical obligation under canon 1 to report his concerns to edot. If the latter, canon 4 may weigh against notifying edot. If canon 4 is the operative one, Roberts might consider protecting te's long-term interests by having it bear the cost of the better electronics.

One further point of discussion in this session was the importance of anticipating potential issues during contract negotiations. If the contract language had defined a process for resolving design conflicts, Roberts would have had a ready course of action for addressing his concerns.

Members who have an ethics question or would like to file a complaint with the Committee on Professional Conduct may call asce's hotline at (703) 295-6061 or (800) 548-asce (2723), extension 6061. The attorneys staffing this line can provide advice on how to handle an ethics issue or file a complaint. 

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