Ethics in Construction Construction: A stressful environment?

Paul Netcher Construction Management Consultant and Writer

“What are the costs of unethical practices? What are poor ethics? Why are good ethics important? What shouldn’t be considered unethical?

Are there ever legitimate reasons for acting unethically?

A study by PwC of public contracts in 8 countries in the EU in 2010 identified the direct loss due to corruption accounted for 18% of project budgets, 13% was due to corruption and 5% to mismanagement. Imagine, for every Euro spent 18 cents disappeared. A one million Euro project costs 200,000 Euros extra.

It seems the problem has worsened. The EU anticorruption report estimated the annual direct cost of fraud at 120 billion Euros in 2014.

“Corrupt practices occur throughout the various construction project phases and can be perpetrated by any project stakeholder.”

Unfortunately, corrupt practices occur throughout the various construction project phases and can be perpetrated by any project stakeholder. This corruption is due to direct and deliberate corrupt practices, as well as mismanagement, and incompetence.

Contractors and the construction industry are often viewed as unethical. Regrettably, there are unethical Contractors, but equally, some Clients also engage in unethical practices, and certain Construction Professionals act unprofessionally.

But not all Contractors and Clients are unethical. What are unethical practices?

Poor Ethics can be a deliberate act of committing fraud, which includes not paying for services rendered, paying or accepting bribes, theft and falsifying documents.

It’s deliberately taking advantage of another project stakeholder, maybe the Client, Contractor, Subcontractor, Supplier, Employee, Neighbours, or Taxpayer to benefit you or your company. This includes discrimination, one-sided contracts, and supplying inferior products.

Poor ethics can also be an act of negligence due to laziness and not carrying out your required duties, a lack of diligence, not acting to correct something which is wrong –turning a blind eye, or failure to apply or comply with specifications and legislation.

How do we define ethics

Being ethical is about how Contractors deal with the Client, how they deal with their Employees, and how they treat their Suppliers and Subcontractors. It's about how Clients treat their Contractors and other project stakeholders.

“Ethical behaviour is about being honest and fair in all your dealings.”

Ethical behaviour is about being honest and fair in all your dealings. It means not compromising safety or quality. It means complying with the conditions of the project and paying what is due and fair. It’s also about only claiming what’s due and fair.

What should not be viewed as unethical

Sometimes Contractors and Clients are wrongly accused of poor ethics for the following: Submitting variation claims (change orders) for delays or extra work or changes, where the Contractor is entitled to claim, and these are a fair reflection of their entitlements. Making a large profit on a project where these have been earned. Deducting monies from Contractors, Subcontractors or Suppliers, for reasonable valid reasons. Applying the terms of the contract in a fair manner, even when this costs one of the parties.

The consequences of unethical behaviours

“Ultimately poor ethics, fraud, and corruption costs somebody. It’s often you and me.”

Unethical behaviour leads to loss of reputation, which impacts future work. It can lead to large monetary fines, even jail time. It could result in Contractors being barred from certain Clients and projects.

Contractors avoid pricing projects for Clients with a reputation for unethical behaviour, or, add additional monies to compensate for problems they know they’ll encounter with the Client. Some Contractors deliberately take shortcuts or use inferior products to compensate for unfair treatment. Ultimately the Client pays more for their projects or gets a poor quality project.

In the same way Contractors who treat their Subcontractors and Suppliers unethically may find it difficult to find Suppliers and Subcontractors to work for them. Or their Suppliers and Subcontractors are unwilling to put maximum effort into the project.

Contractors who mistreat employees inevitably find productivities on their projects are bad, which costs them money. On occasion unhappy employees have deliberately damaged equipment, materials and completed work, or stolen from the project. (There are many stories of disgruntled workers deliberately blocking plumbing pipes?)

“Unethical behaviour is contagious.”

Unethical behaviour is contagious. People who witness unethical acts assume this is acceptable behaviour. People who are dealt with unethically often respond in an unethical manner. People who are unethical are often blind to other’s unethical behaviour.

Ultimately poor ethics, fraud, and corruption costs somebody. It’s often you and me. It’s sometimes everyone!

There are no excuses for poor ethics in construction

I’m only following orders. Everyone does it. They aren’t treating me/us fairly so it’s ok to get them back. I’m too busy. Nobody will notice. It won’t make a difference. They’ve got so much money, or they are making money. I’m not paid enough, or we aren’t paid enough, or we’re losing money. We’re behind schedule. None of these justify poor ethics and fraud.

Conclusion

“We don’t have to engage in unethical behaviour to be profitable.”

I’m sure we have all been guilty of being unethical at some stage – but is this the way you always operate?

We don’t have to engage in unethical behaviour to be profitable. In fact, companies that act in an ethical manner, who employ ethical people, who deal with all their stakeholders in an ethical manner, are often more profitable than companies that are not ethical.

“Make the decision to be ethical in all your actions today.”

Conducting business in an ethical manner takes a conscious decision. It takes leadership. Make the decision to be ethical in all your actions today. Take the lead.

Ask yourself these questions:

“Would I be happy if someone did this to me, or treated me in this way?”

“Am I proud of my projects?”

“Do I always do my work diligently?”

“Are my actions always ethical?”

Bio

Written by Paul Netscher, a construction professional with 30 years’ experience and author of several practical construction management books, including; ‘Successful Construction Management: The Practical Guide’ and ‘The Successful Supervisor and Foreman’, and ‘Construction Management from Project Concept to Completion’. Visit www.pn-projectmanagement.com for more articles and information.