By Tara Hoke
ASCE is one of countless professional organizations in the United States that have chosen to enact and enforce codes of ethics regulating the professional conduct of their members. While the societies that draft such codes believe them crucial in demonstrating their members' commitment to honesty and integrity, they must take care that the provisions of their codes do not fall foul of state or federal laws regulating the marketplace and fair competition. This article is the first of two describing challenges to ASCE's Code of Ethics for violations of federal antitrust law.
Decision
For its part, the NSPE chose to litigate the issue of whether its ban on price competition constituted an unlawful restraint of trade. In 1978 the U.S. Supreme Court upheld the finding of the lower courts that the NSPE had violated the Sherman Antitrust Act. It held that that law reflected the opinion of the legislative branch that unrestrained competition resulted in better goods and services for the public. Professional associations such as the NSPE could not, the high court said, substitute their own judgment as to whether competition in a particular industry was "contrary to the public interest."
The Supreme Court opinion noted that the Sherman Antitrust Act did not mean that price bidding was mandatory in all situations; it required only that bans on price bidding derive from legislation, not from agreements reached by private parties. Indeed, nearly six years before that decision Congress approved one piece of legislation restricting price bidding for engineering services. The Brooks Act, enacted in 1972 and still in effect, requires federal agencies to award contracts to engineers and architects "based on the demonstrated competence and qualifications of prospective contractors to perform the services at fair and reasonable prices." This act, along with numerous laws similar in spirit at the state level, outlines a qualifications-based selection procedure for federal as well as many state and local engineering and architectural design projects.
Background
In November 1949 ASCE's Board of Direction approved the insertion of a canon pertaining to price competition in its Code of Ethics. This canon, Canon 4, held that "it shall be considered unprofessional and inconsistent with honorable and dignified bearing for any member of the American Society of Civil Engineers... to participate in competitive bidding on a price basis to secure a professional engagement."
The new provision reflected ASCE's belief that price-based competition for engineering projects would create a climate in which engineers would be forced to offer low-priced service at the expense of quality. The Society felt that preventing its members from engaging in fee discussions during the bidding process would ensure that contracts would be awarded on the basis of qualifications, thereby ensuring high-quality service and enhancing public safety and welfare.
After the insertion of Canon 4, the Committee on Professional Conduct (CPC) conducted a number of investigations on claims that ASCE members had, in violation of the new canon, engaged in price competition. In one such case, concluded in 1954, some 14 members of the Society were expelled or suspended for engaging in price bidding during competition for a contract offered by South Carolina's highway department.
Challenge
In 1971 the U.S. Department of Justice (DOJ) ordered ASCE to turn over the documents relating to the ban on price competition. Soon afterward, it signaled its intention to file a civil suit against ASCE for violating section 1 of the Sherman Antitrust Act. This federal law prohibits agreements "in restraint of trade or commerce," and the DOJ contended that, by requiring its members to adhere to its Code of Ethics, ASCE was inducing its members to participate in anticompetitive agreements.
ASCE was not the only professional association targeted by the DOJ at the time. Both the American Institute of Architects (AIA) and the National Society of Professional Engineers (NSPE) had provisions in their codes of ethics barring price competition, and both groups were similarly charged with violating the Sherman Antitrust Act.
Faced with exposure to liability both in the federal suit and in potential private litigation, ASCE and the AIA negotiated a consent agreement with the DOJ. ASCE removed the offending provision, which had since been relocated to Canon 3 and revised to hold it unethical "to invite or submit priced proposals under conditions that constitute price competition for professional services." In its place, the following footnote was added:
Under the Code of Ethics of the American Society of Civil Engineers, the submission of fee quotations for engineering services is not an unethical practice. ASCE is constrained from prohibiting or limiting this practice and such prohibition or limitation has been removed from the Code of Ethics. However, the procurement of engineering services involves consideration of factors in addition to fee, and these factors should be evaluated carefully in securing professional services.
(In the current Code of Ethics, the various aspects of this question are treated in the guidelines to practice for Canon 5.)
Tara Hoke is ASCE’s general counsel and a contributing editor to Civil Engineering.
© ASCE, ASCE News, February, 2007
