Scenario Discussion Ethics 11

Week 11:
Project Procurement Ethics
© Blago Blagoev
Learning objectives
▪ Define the ethical pressures in terms of procurement
▪ Identify the risks inherent in unethical procurement practices
▪ Explore tools provided by the Canadian Competition Bureau
▪ Explain common unethical procurement practices
▪ Understand the consequences of unethical procurement
practices (financial fines and jail terms)
▪ Review statements from construction company codes of ethics
© Blago Blagoev
Industry advice – questions
▪ Take notes to help you answer the following questions from the video on
the next slide:
✓ What happens to contractors (GCs) who make a habit of bid shopping?
✓ What consequences do unethical owners experience?
✓ What does Clive Thurston say about teaching ethics?
✓ What advice does Clive Thurston provide in the scenario of the subtrade
offering to cut the lowest price by 10%?
✓ What happens when a large firm may take on a bad contract?
✓ What prevents contractors (GCs) from being honest with an owner?
✓ While everyone is concerned with the ethics of contractors (GCs),
questions should be asked instead about whose ethics?
✓ What should contractors (GCs) do when faced with bad contracts?
© Blago Blagoev
Industry advice
▪ Take notes and prepare to answer a few questions.
▪ Click on this link to launch the video. The password is ethics.
© Blago Blagoev
▪ Watch a brief intro video from an industry expert on the topic
of project procurement.
The realities of the industry
▪ Clive Thurston discusses difficult situations where
professionals may have to choose between on the one hand
risking their position and on the other remaining true to his
or her ethical standards.
▪ From a proactive approach, this means trying to select your
employer or the owners that you work with. If possible, try to
position yourself with a supervisor or manager, who is more
aligned with the way you want to work. Bid on projects
whose owners are fair in their demands.
▪ Finally, it also means remembering to avoid putting your own
subordinates in a difficult ethical position in the future when
you are the one making the big decisions.
© Blago Blagoev
The realities of the industry
continued
▪ An important lesson here is that unethical procurement
practices will be subject to a reaction from two sources.
▪ First, the industry deals with them internally (avoiding unethical
players or charging them higher prices).
▪ Second, the government has legislation in place to deter
unethical procurement. A central source here will be the
Canadian Competition Bureau.
▪ Thus, the odds of engaging in suspect procurement and being
able to benefit from without facing legal or business
repercussions are fairly small. If one manages to avoid a
government investigation, the industry may “punish” them by
refusing to do business with them.
© Blago Blagoev
Scenario 1 – the Ethics of Owners
The industry speaker mentioned the ethics of owners. Is the
following owner ethical? Remember Tom Mason’s advice to a similar
scenario? What did he say about consistency?
▪ Near the bidding process for the construction of a hotel, a project
owner received a recent inquiry from a prospective bidder
regarding some missing information on the structural drawings.
▪ The owner consulted the structural engineer for the project to
determine the requested information and provided the
information to the prospective bidder.
▪ Not wishing to delay receipt of bids for the project, the project
owner decided not to issue an addendum to the contract
documents.
© Blago Blagoev
Mirsky, R. & Schaufelberger, J. (2015). Professional Ethics for the Construction Industry. Routledge: New York, NY.
The Risk of Improper Procurement
Practices
▪ Procurement regulation in Canada is supported by laws which
promote fair competition and punish attempts to collude.
▪ For example, Canadian firm Norda Stelo was ordered to pay
US$550,000 as a punishment for bid-rigging on municipal
infrastructure contracts in an investigation by the Canadian
Competition Bureau (CGR).
▪ As you will see from the penalties discussed in the coming
slides, the risks of engaging in improper bidding, etc., are
significant.
▪ Winning a slightly bigger margin on a job or even several jobs
will not be worth it if you are faced with jail or a heavy fine.