Colusive Tendering 3

[sc]

I recently had the unenviable happen, I approached a fellow engineer with the offer of tendering jointly on some structural and civil design. We worked on the tender together with my company taking the lead role due to greater expertice in the area required. We submitted the bid in my name with his firm listed as support staff. This was to me a fairly standard approach to what was a fairly standard project.

Unknown to me he also had his staff submitting another joint bid with another engineering firm. When I found this out I approached him and advised that I would like him to withdraw his support for the other engineering firm. He had stated that he only knew about the job because I told him of it. He also advised that he would not withdraw his other joint bid.

I withdrew my bid and advised the client of the reasons for doing so (uncomfortable with the situation and possible breach of ethics by the supporting engineering firm). The client gave me the job (based on my ethical approach) and refused to deal with the supporting engineer or the other firm again. Took me some time to find a suitable replacement firm, but I did and we completed the project.

Guess what, the supporting engineering firm contacted me and threatened to sue for defamation and breach of contract. Well that has all happened and passed under the bridge, I won.

Is this a common occurence or am I just lucky? I have also reported the problem to the local engineers association for review.

regards
sc

 

[ICman]

Unless it was explicitly forbidden in a contract, the supporting engineer has the right to tender their services wherever they want, even to your competitor. It is no different than equipment and commodities. Say you were building a computer and went to Microsoft for the operating system software. It's unlikely that MS is going to sign an exclusive agreement with you.

In this case, it appears the supporting firm may have solicited business thru one of your competitors, which is, rather underhanded, IMHO. If the competitor asked him for a bid, that's different, but since he said he only heard about the job from you ...

In any case, the subcontractor (supporting engineering firm) cannot disclose any details of your bid, nor your competitor's. THAT would be unethical. I can see where the subcontractor's ethics were questionable, since he didn't tell you about his bid to your competitor.

Next time, make sure that you have a signed contract with all subcontractors/co-bidders stating the "rules of the game" before submitting your bid. You might have been lucky on this one.

Oh, one more note: When I first started this reply, I sided strongly with you ... until I thought about it. It reminded me of a time when my "steady" girl went out on a date (after ours). I was mad, but then she pointed out that we were not committed to one another. Next time, I should have gotten a signed contract .

 

[TD2K]

Hmm, one for exclusive services ICman?

 

[ICman]

Yup, especially when it comes to my wife, who I've had a contract with for 21 years .

 

[TheTick]

sc, you may have had more cause to sue than your "partner". I was in a small company that experienced a "schism" when two guys broke away and proceeded to make their own bids on the work they were already doing.

A lawyer friend (comes in handy, he does) of mine said that he could have shut them down with an injunction inside a week. The operative phrase was "fiduciary trust". Basically, as a professional, there are some things you just shouldn't do. Confidentiality agreements are an example of this. Mostly, they are only necessary to remind the signers of their legal obligation to keep quiet about certain things, an obligation that exists with or without a signed agreement in most cases.

 

[13]

I think everyone is confusing law and ethics. Ethics are a set of principles of right conduct. Those principles either are established are they aren't. If you had a contract with the "lesser" eng. firm than you would have something that is legally binding. But no contract, I don't see why he could not do what he did. Because he went behind your back (Strike 1) and then he sued you when he didn't get the bid (Strike 2) it is obvious that he isn't an honest, ethical, or moral person. You won because you didn't do anything wrong and no contract binds you.

 

[Focht3]

Hmmm,

I'm no lawyer, but an oral contract seems to have been implicitly in force when sc's firm listed the subconsultant on their SOQ/tender offer. It was presented to the owner as a team to complete the planned assignment, with sc's firm in the lead. And I assume that sc prepared a single document for both firms.

BUT the subconsultant blew it by using privileged information to prepare a competing bid - information that he did not get from any source other than sc. Looks like reasonable grounds for sc to cut his sub loose - and withdraw his tender offer. The owner had a right to know why the tender offer was being withdrawn, provided the information was factually presented. And the owner has the right to refuse to do business with any firm.

Looks to me like the subconsultant really blew it. Not only did the subconsultant ruin his relationship with sc's firm, he made his firm's unethical behavior a public spectacle. And he lost any chance to get that project.

For sc (and many of us, too), the lessons are simple: only work with ethical firms/people, discuss your expectations - and reach an agreement - before disclosing privileged information, and commit your agreement to writing at the earliest opportunity. Even if it's only a handwritten fax outlining the understanding.

 

[PM]

ICman comments:

"Unless it was explicitly forbidden in a contract, the supporting engineer has the right to tender their services wherever they want . . ."

WRONG Every engineering code of ethics I've read includes absolute prohibitions on conflicts of interest and most also require engineers to get permission from all parties before they accept benefits from more than one client for the same services. This makes your sub-consultant guilty of engineering law.

Not only is this a breach of engineering law, but it clearly breaches the fiduciary terms of your contract that The TICK notes above.

Also, I would be surprised if the behaviour you describe in this case is not a violation of federal or state commercial law statutes.

I wouldn't say you were lucky at all. This cad that you were involved with, cost you time and energy that could well have been focused productively elsewhere. That engineer has also managed to diminish, in some small way, all the rest of us that struggle to avoid this kind of sleazy behaviour.

The one point I would make about your behaviour is that you managed to hit all the right buttons, more or less in the right order. In my expeience that's not particularly common, even for the best and most ethical of us.

Regards,
PM

 

[PM]

13 raises a good point:

"I think everyone is confusing law and ethics.

To registered CE's, PE's and P.Eng.'s, engineering ethical obligations form an immutable part of the body of engineering law and therefore part of all the laws governing our behaviour. These obligations are just as binding on us as say the municipal by-laws in force in our communities. You folks who live in New York are not therefore bound by the City of Perth Australia's by-laws any more than engineers are bound by the by-laws and regulations binding doctors or accountants. But we are bound by the by-laws, and regulations enforced by our own professional licensing bodies and that surely includes the code of ethics.

Regards,
PM

 

[RDK]

I have to side with PM on this one.

In my jurisdictions the requirement to comply with the code of ethics is enshrined in the Professional Engineer’s Acts. Thus there is a legal requirement for me as a P.Eng to comply with the code of ethics. Not only could the association discipline me but the courts could have a shot as well. (However in Manitoba the Association prosecutes violations of the Engineer Act so it’s unlikely that they would take two shots for the same offence.)

Personally I would consider reporting the supporting engineer (and his other partner) to the local ethics/disciplinary committee. The supporting engineer for breaching his code in violating the fiduciary duties to you and the other partner for taking advantage of this act. (Let them prove that they did not know anything about this.)

The Manitoba Code of Ethics (

http://www.apegm.mb.ca)

has a clause (there is a similar one in others) that states:

4. Each practitioner shall uphold and enhance the honour, integrity and dignity of the engineering and geoscientific professions.

This is a catchall clause but IMHO it covers this situation. There are other clauses about conflict of interests. They may be a stretch because the supporting engineer did not receive compensation from two employers. I would argue that compensation being anything of value, that there was value in his bid being carried forward and therefore he received dual compensation without the consent of all parties.

Once you won the ethics battle, sue them for your time, additional expense and massive damages.

I would also work especially hard to keep that client. It’s rare to find one who will take such a strong stand in supporting ethical conduct in others when it apparently cost them some time and effort in letting you find a second support. They sound like the kind of client that I like to work for.


Rick Kitson MBA P.Eng

Construction Project Management
From conception to completion

http://www.kitsonengineering.com

 

[ICman]

Hmmm, PM, you are correct that this may be (and probably was) a violation of "Engineering Law". However, I believe this is a very common practice, especially on state or federal projects. A few are "disciplined", or maybe even jailed if it goes to court. Most get away with it.

My question is at what point does it become unethical? Assume engineering service is a product, like say, a pump. Normally, the pump vendor can bid his pump to more than one contractor, yes? He doesn't know who will be awarded the job, so he wants to cover his bases.

Now, if the pump vendor provides "insider information" to either or both contractors to give them an edge, he is guilty of a crime (I'm not a lawyer, so I don't know the name, but I'm sure it's a criminal act ), and this would certainly be unethical.

So, if this subcontractor did not pass along any proprietary info, was his behavior unethical?

 

[RDK]

The very nature of engineering tendering makes it a lot more difficult for a sub contractor to bid to more than one general without disclosing or using confidential information across the two generals.

The example of a pump is one where a specific item is being provided. Pumps can be specified to be what is requires and therefore supplier comparisons can be made simply on the basis of lowest cost. If two different suppliers are selling Flytt pumps cost is the main if not only determining issue. For pumps requiring factory order, you might get the identical individual unit from either supplier.

Engineering work cannot be specified like a pump. An engineering tender or proposal is usually a blended statement of work, with lots of discussion on how to approach the issue, what the client really wants, what they really need (which may be two different things) what they can afford, what skills they bring to the table, which supplier will do which items of the work, where the work will be done etc.

The owner’s award of the engineering work is not based on lowest cost but perceived best value for the money.

For someone to be party to two sets of these discussions without cross disclosing the thoughts of the different approaches is impossible. I don’t believe that I can do it and I don’t believe that any one else could either. It could only work if the supplier was a speciality consultant who had a clear defined scope in both proposals and gave the same proposal to both without a lot of discussion. Examples would be a testing or quality control firm or an expert firm who had to give a yes/no opinion on one issue.

In any case it should only be done with the full and complete knowledge of all involved. Last summer I worked on a major proposal for a long term O&M contract (11 year $40,000,000 cap for first year with escalation clauses and about 300 long term jobs.) Not all of the work was engineering but the basis of the proposal evaluation was very similar to engineering proposals.

One main sub contractor was resident in the remote community and dependant on this work for a large part of his income. They were also the only logical choice for that portion of the work for all main bidders. They, with the full knowledge of all concerned, bid to all the main competitors. We kept them at arms length form the main proposal and things worked well. (Except we lost by less than 1% on the overall evaluation.)

This is different than sc’s situation. In his case the sub bid to another general without his knowledge or consent. The sub only knew of the work because of sc’s involvement. If not unethical (and therefore illegal) it shows poor business practices and that sub is not someone I would ever work with again.



Rick Kitson MBA P.Eng

Construction Project Management
From conception to completion

http://www.kitsonengineering.com

 

[Focht3]

RDK (Rick Kitson) made the following statement,

For someone to be party to two sets of these discussions without cross disclosing the thoughts of the different approaches is impossible. I don’t believe that I can do it and I don’t believe that any one else could either.

I have participated in lots of these arrangements as a subconsultant to multiple prime consultantant solicitors. It is neither impossible or unachievable. Usually, the prime consultant has already decided your role; all that you are really providing is resumes of key personnel, a 'blurb' about your company, and perhaps some help with the wording surrounding your firm's role. But the prime consultants generally define your role. In order to avoid the kind of conflict Rick has described, I tell each prime that our firm is on more than their team. Most don't care; those that do appreciate the candor.

Done properly, joining more than one team pursuing a project can be done ethically.

 

[PM]

ICman (Industrial) wrote:

" . . .I believe this is a very common practice, especially on state or federal projects."

". . .at what point does it become unethical?

"Assume engineering service is a product . . ."

The simple answer is that it is unethical at the very moment it is executed. The problem with your analogy is that professional services are not a commodity or product. Therefore the rationale is faulty for the situations at hand. There is usually no problem with a standard commodity being offered to a number of construction bidders on the same project. A pump cannot itself be in a conflict of interest or accept fees from more than one client for the same services. Unique specialty professional services on the other hand afford a competitive advantage to any bid they are attached to.

Regards,
PM

 

[ICman]

I believe engineering services can be and is currently considered a commodity by some organizations. I was layed-off from an EPC company because they considered engineers to be the same as construction workers. It seemed management really thought that they could go down to the engineering union hall and hire whatever speciality they needed. Problem is, I didn't know where the engineering union hall was . However, if you substitute "job shop" for engineering hall, you get the idea.

So, is it unethical for an engineer to apply for a job at competing companies? What if they are both working on, or bidding, the same project?

I don't think it becomes unethical until/unless the engineer passes along confidential information.

Taking this a step further, what if the engineer looking for a job is actually a team of engineers? Would that be any different?

Now, if a sub unfairly offers a "discount" to a contractor friend, but doesn't offer the same to the contractor competitors, that's unethical. I've seen this done - more than once.

I agree with RDK in that the sub here acted unethically, and I too, wouldn't want to work with him or for him or hire him.

 

[RDK]

Focht3

Your role is the kind of specialist role that I was describing. The role where a conflict is inevitable is one where the relative roles of the various sub consultants are not set and are the subject of the discussion.

I agree that it can be done properly. It requires that the sub consultant simply be a supplier of the same services to others and that all know of the multiple bids. It cannot be done where the sub-consultant is party to the core discussions of the prime contractor proposal or all parties are not aware of the circumstances.



Rick Kitson MBA P.Eng

Construction Project Management
From conception to completion

http://www.kitsonengineering.com

 

[PM]

ICman wrote:

"I believe engineering services can be and is currently considered a commodity by some organizations."

You may be right, but more's the pity.

"So, is it unethical for an engineer to apply for a job at competing companies? What if they are both working on, or bidding, the same project?"

Yes, it is unethical unless you clear it with your client (preferably in writing). Obviously, there are competing issues of conflict of interest vs restraint of trade that must be reconciled by negotiation. Sometimes perceived conflicts can be resolved by building a Chinese Wall, . . .sometimes it can be solved with additional compensation for the engineer to bridge over a period of unemployment (say 6 months before joining a new firm), but there are always ways to inventively get your client's approval to work for a competitor

". . .what if the engineer looking for a job is actually a team of engineers? Would that be any different?" Same as above.

Regards,
PM

 

[RDK]

I would differentiate between the job applicant and the sub consultant. In the job application process one is not involved in preparing documents for client approval. You do not go to work, for free, based on the condition that you are to help in submitting a proposal to the client and if and only if the proposal is successful would you be hired. If you do then you are a sub consultant not an employee.

A job applicant is seldom given confidential business information until he is hired.

A job applicant is also usually assumed to be applying to more than one company.

These conditions do not exist for a team of engineers, or even a single consultant, during the bidding and proposal process.


Rick Kitson MBA P.Eng

Construction Project Management
From conception to completion

http://www.kitsonengineering.com

 

[IRstuff]

The situation described here is quite common in the aerospace industry. Unless the first party has a contract with exclusivity, the second party is free to pursue business opportunities as required or desired.

The only caveat is whether the the second party used information covered by a confidentiality agreement with the first party when pursuing the same opportunity with the third party.

Case in point, Hughes Aircraft was a major subcontractor for supplying processor components on the ATF for both YF-22 and YF-23 primes. Hughes was required to firewall their activities by having to completely separate development teams.

TTFN

 

[RDK]

However in this case I would imaging that the two primes has full knowledge of the situation.

If there was not full knowledge of the situation by the two primes, then the action would be unethical regardless of the firewall or not.

I thing thats the conclusion we are all coming to here.



Rick Kitson MBA P.Eng

Construction Project Management
From conception to completion

http://www.kitsonengineering.com