The relationship between owners and constructors works best when trust is at the center of business dealings. Unfortunately, there is a long history of breakdowns between owners and constructors due to unethical behavior. This behavior needs to be corrected to support higher excellence of work in the construction industry.
Oftentimes, relationships break down before any work actually begins. During the critical bidding stage, constructors are often tempted to participate in unethical activity such as bid rigging (or collusion), bid shopping, bid cutting, and bid peddling.
These unethical actions can easily turn into legal disputes. In the latest edition of our Ethics for Constructors series, we will examine a familiar situation around big rigging that is one of the most common legal factors affecting the construction industry.
Bid Rigging: An Example of Legal Issues in Construction
– Ethics in Construction Situation: Let’s say that you attend regular, monthly local association meetings for your company. At these meetings, you socialize with colleagues and are provided with local industry updates by the association president.
During the last meeting when the president was reporting on upcoming projects, one of your competitor colleagues stood up to present his viewpoint. He said in front of the entire group that in light of current economic conditions, everyone needed to seriously think about working together to provide project owners with bids that were all in the “same ballpark.”
Your colleague argued that companies could no longer remain competitive and profitable if they continued to lower their bids in hopes of winning projects. He claimed that without some form of cooperation, all of the member companies would go out of business.
This individual then proceeded to give his opinion of the “ballpark costs” that he thought were represented by the upcoming projects the president mentioned. No one in the room commented or verbally agreed with him.
After taking time to reflect on what occurred, you know the statement was inappropriate, but what should you do?
– Ethics in Construction Answer: In this situation, you need to discuss what happened with your supervisor and company owner. You should tell them that they should consult legal counsel. What occurred at the meeting could be considered a collusive action and bid rigging.
If the bids all come in within the same “ballpark” and someone knows what occurred at that meeting, everyone in that room could be subject to a criminal investigation. At the very least what occurred was unethical. At most, all of the participants involved in the meeting could expose their company to legal risk.
Support Constructor Excellence Through Ethical Dealings
Bid rigging is not worth the cost. This practice will expose your company to serious legal risks that will far outweigh the perceived benefits of colluding with other contractors to receive more favorable outcomes working with owners.
Instead, contractors should strive to foster healthy, collaborative working relationships with owners to ensure that both parties are in the best possible position to benefit from fair agreements. Taking an ethical approach to bidding is always the right answer, even in difficult economic conditions.
– To learn more about other ethical issues and legal factors affecting construction, we encourage you to become an AIC member. We offer the opportunity to learn from professionals who have walked your same path navigating ethical and legal situations. Take advantage of our resources to support your company.
– We also encourage you to subscribe to the AIC email newsletter. You’ll receive valuable information about legal issues in construction directly to your inbox. Visit the email sign-up box at the bottom of this page and enter your email address to start receiving our newsletter.