Ethics is an essential part of leadership in any industry. In the construction industry – where projects shape communities and require significant commitments of time, labor, and resources – constructors must adhere to a strong code of ethics to support owners and execute according to contracts.

At the American Institute of Constructors (AIC), we emphasize the importance of integrity in every phase of construction management. Ethical dilemmas can arise at any stage, which is why construction professionals must adopt an ethical mindset so they can approach these challenges proactively and with a clear resolution strategy.

We even host a dedicated Collegiate Ethics Competition each year to help Construction Management students (and future professionals) deepen their appreciation of ethics. Included in the competition is a response to a real-world ethical issue that arose in the industry.

Today, we will share examples of ethical construction challenges that may arise at key stages of a project. Gain insights into how to resolve a dispute during each phase to support your proficiency as a construction manager.

Resolving Ethical Construction Issues at 5 Project Stages

Companies break down each phase of a construction project in different ways. We will generalize the stages of a construction project to provide a broad framework for how to resolve ethical issues you may encounter.

1. Bidding Stage

Unethical bid practices, such as bid shopping or bid rigging, are prevalent issues during the bidding process.

• Bid shopping occurs when a contractor takes a subcontractor’s bid and divulges it to competitors to secure a lower price.
• Bid rigging happens when competing firms collude to inflate costs or prearrange winners.

Your responsibility is to ensure that bidding decisions are made responsibly and transparently. Addressing potential concerns early helps avoid complications later and builds trust with stakeholders.

Resolution

What can you do to prevent ethical conflicts during the bidding stage? Consider the following tips.

• Transparency is Key: Clearly define the terms of the bidding process to all bidders and ensure this information is shared equally.
• No Bid Shopping or Rigging: Maintain confidentiality and avoid discussions or practices that compromise fair competition.
• Code of Ethics for Bidding: Implement and enforce a strong ethical code for your bidding team and adhere to professional standards.
• Prequalification Standards: Use prequalification criteria based solely on measurable, objective standards like experience, capacity, and financial stability to avoid any favoritism or conflicts of interest.

2. Contracting Stage

Issues often arise when unfair contract clauses or vague terms are intentionally written to shift disproportionate risk onto one party, often the subcontractors. Another frequent issue is favoritism, where contracts are awarded to firms or individuals based on non-meritorious criteria like personal relationships or bribes.

If you see ethical problems related to the contract, it’s important to address them promptly before work begins. Don’t wait until shovels hit dirt. Evaluate the specific issues, consult with relevant stakeholders, and ensure transparency in communication.

Resolution

Taking proactive steps can help prevent larger conflicts and maintain trust among all parties involved in the project.

• Fair Contract Terms: Draft contracts that fairly distribute risk between all parties. Ensure clarity on deliverables, timelines, and responsibilities to prevent misunderstandings.
• Integrity in Selection: Ensure impartiality in awarding contracts by using a transparent evaluation process driven by clear benchmarks, such as prior performance, qualifications, and cost-effectiveness.
• Third-Party Oversight: Consider appointing independent reviewers or using software-based evaluation to add accountability and eliminate perceived bias.

3. Procurement Stage

A common issue during procurement is material substitution without proper consent. For example, choosing inferior, cheaper materials instead of what is specified in the contract can jeopardize project quality, timelines, or safety. Kickbacks from suppliers in exchange for orders also compromise ethical procurement practices.

If you become aware of improper procurement by your team – or a third party – you need to raise a red flag and alert the appropriate parties. The quality of materials directly impacts the viability of the project and your company’s obligations to the project owner.

Resolution

The temptation to allow cheaper materials to enter the project is not worth it. Here’s how to take action to resolve an ethical dispute involving materials.

• Strict Material Approvals: Enforce a standard review process for material substitutions, allowing changes only if they meet the required specifications without diminishing project quality.
• Contract Review: Ensure everyone on the team is familiar with the materials the project owner approved in the contract, so there are no excuses for mis-selection.
• Audit Procurement Processes: Regularly audit procurement decisions to reduce the possibility of kickbacks or dishonest dealings.
• Approved Vendor Lists: Work exclusively with pre-approved, vetted vendors to avoid engaging with suppliers lacking professional integrity.

4. Construction (Project Delivery)

During the construction phase, safety violations or cutting corners to expedite timelines and reduce costs are significant concerns. Managers may feel pressured to deliver faster at the expense of worker safety or structural integrity.

For example, if you notice that project work is being completed faster than expected, take a close look at the quality of the work in progress. Ensure it’s up to quality standards to deliver the appropriate level of work to the owner.

Resolution

Be involved in the actual project work; don’t take a passive interest in what’s being constructed. Being engaged can help cut off ethical issues during project delivery.

• Commit to Safety: Make worker safety a non-negotiable priority. Implement and enforce strict safety protocols using regular training and toolbox talks to ensure the team understands best practices. 
• Promote Accountability: Foster a “safety-first” culture where employees feel empowered to report hazards without fear of retaliation.
• Quality Assurance: Set benchmarks for structural integrity and conduct regular inspections to ensure standards are consistently met.
• Realistic Timelines: Communicate achievable deadlines with stakeholders and highlight why compliance with safety standards is critical for long-term project success.

5. Close-Out Stage

One of the major ethical dilemmas during project close-out is withholding information about defects or inefficiencies identified during the final stages. Some contractors may also cut corners to expedite completion, passing substandard work to clients.

Financially, contractors may attempt to pocket leftover funds between what was budgeted versus actual expenses. Contractors should always communicate differences with the owner. This way, you allow the owner to determine whether they want a “refund” or if the contractor should retain the leftover funds as a “bonus” for delivering quality work under budget.

When a project is complete, take ownership of how the project is finalized. Withholding information can lead to future issues and erode trust with the client. Open communication about discrepancies is essential so you can work collaboratively with the client to find a solution that satisfies both parties.

Resolution

Make it your responsibility to communicate with the owner about any outstanding issues so that you avoid ethical disputes.

• Transparency in Reporting: Conduct a transparent final walk-through with detailed documentation of any outstanding issues or potential risks identified during the project close-out.
• Punch List Review: Ensure all items on the punch list are resolved before handing the project over to the client. Maintain open communication and share all relevant information about the project.
• Post-Completion Feedback: Actively seek feedback from the client and subcontractors to improve future close-out practices while identifying areas where ethical standards can be strengthened.

Keep Learning About Ethics in Construction

Ethical practices are not just about avoiding conflicts or preventing legal ramifications. They are critical for building trust with all stakeholders, including clients, employees, and communities impacted by the project.

Ethical construction management fosters better relationships, reduces risks, and enhances your firm’s reputation, creating a long-term competitive advantage.

At the AIC, we stand behind ethical leadership and provide tools and resources to help construction managers uphold the highest professional standards. Specifically, we have created a strict Code of Ethics that guides the actions of every AIC member in our organization. We encourage you to review this list and make it part of your dealings as a construction manager.

We also invite you to follow our AIC LinkedIn page to learn more about the latest ethical topics in construction. We regularly share updates to support your knowledge base and understanding of key situations facing constructors. Together, let’s build a more ethical industry.