Conflict of Interest 3

[bigmig]

I need some opinions on the following scenario.

Contractor A hired us to do a project. In the midst of the project, Contractor A fires his partner and our company goes onto finish the project with Contractor A. The project is a success, a prototype of sorts. Multiple future project possibilities are appearing on the near horizon.

Meanwhile, contractor B who happens to be the fired partner, contacts us and asks us to be his PE for some similar, yet different projects.

Is this a conflict of interest? The two designs are different, yet they would compete in the particular market, which is quite local and small. Contractor A has welcomed us onto his "team" and as a result we have gotten a lot of publicity and political recognition. I would hate for him to lose a project because we did a good job for his competitor.

On the other hand, we need the work.

Any advise would be appreciated.

 

[KENAT]

Do you have any formal, or even informal, non compete - or the like - agreements in place with Contractor A?

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[patprimmer]

A lot depends on who retained what rights between contractors A and B.

The inside knowledge you gained from and developed for A while B was a partner (not just an employee)is proprietary.

Before I could advise I would need to know who owned what in A before the bust up and who retained what after it.

I am not a lawyer and laws vary greatly from place to place, so you should also seek legal advice from a local source. I expect that strictly speaking in most developed countries it is against the law to boycott people without good reason, but also it is against the law to disclose someone else's proprietary property or IP.

In this case I think what I think might be the law and what is ethical are in unison.

Regards
Pat
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[msquared48]

What happens in the future if both contractors come to you when they are bidding for the same job?

That scenario is the deciding factor to me and the choice is obvious. Unless there are extenuating reasons you have not mentioned here, I would stick with Contractor A.

Mike McCann
MMC Engineering
Motto: KISS
Motivation: Don't ask

 

[Ron]

Agree with Mike. You will be putting yourself in a potentially untenable situation. It is difficult to not carry pieces and parts of designs across client lines when they produce similar products. If it is perceived that you have, then you've probably lost two clients and opened yourself to some extra liability.

Pick one and stay with them.

 

[rowingengineer]

or just have a side word with contactor A about contractor B approaching you for PE work and see contactors A reaction is, you never know what to expect.

An expert is a man who has made all the mistakes which can be made in a very narrow field

 

[hokie66]

I don't think your decision is an ethical one, it is just a difficult business decision. Discuss it with Contractor A before you proceed.

 

[zdas04]

When I read the OP, the first thought in my mind was "where are these guys going to be when the ex-partners start suing each other?". If you're doing work for both sides, the crap might just slop over into "[third party] contractor stole my design and used it in Contractor A's project". If I found myself in that situation I would document the hell out every design decision I made.

David

 

[apsix]

It may be possible if your company is large enough to have separate teams working for the two contractors (with a chinese wall), but you must be up-front about it with both.

 

[MintJulep]

Unless your contract with Contractor A states differently, you are just a hired gun providing a service.

Imagine if you provided a physical product rather than a service. You wouldn't even think twice about proposing the same product to multiple contractors bidding on the same project would you.

 

[KENAT]

This is why I asked what if any agreements were in place. I've been in situations where we bid to support several 'primes' on the same govt contract. We had supposed Chinese walls with NDA's etc., but given that our solution for both of them was based on the same existing product, and we only had a handful of engineers/designers, the wall wasn't even paper thin.

Like Pat pointed out, none of us are lawyers so if concerned about actual legal issues, not more general 'ethics' concerns take any advice here with a pinch of salt.

I'm tempted to second the idea of broaching the topic with contractor A, but I'm not 100% sure it's a great idea.

It may be more of a business decision, potentially with legal ramifications, than an ethics one.

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[bigmig]

Thanks for everyone's opinions.

In regards to legal or contract issues regarding competition, we wouldn't really ever consider limiting ourselves through verbage like this. Otherwise we would end up being somone's private engineer and our job base would decrease to about half.

In regards to the contractors being in the same market, we do that all the time with residential housing....meaning we apply the knowledge base we have, which was built on someone elses tab, to design for the competition.

Contractor B has obviously caught on to the fact that any "breaking developments" we have while working for Contractor A will obviously roll over into his project (assuming we were working for him) at probably a fraction of the cost Contractor A paid to develop them, which isn't
really fair....I guess. Again, we do this all the time in the residential housing market without thinking twice.

And if Contractor A found out we were working for his nemesis, we would immediately and permanently be working only for Contractor B. And I'm sure he would find out eventually.

So in short, if we are going to be working for one company in the end, it might as well be the one we have a good hand shake with now. I think we would choose Contractor A.

 

[patprimmer]

So long story short, you don't really care about the ethics, you want to know what is the most profitable route long term.

Regards
Pat
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[ajack1]

Well we mostly design tooling for automotive tier one suppliers and nearly all our customers are in direct competition with each other as are all the design companies they use, I do not see that as unethical, it is the way the business works.

It is actually very common to quote the same project for three or more suppliers and for them to get quotes from three or more design companies. If you come up with an innovative solution to a problem you are free to use it on a similar job for a different customer, just as the customer is free to pass your design on to a competitor of yours and say use this as a guide it worked well last time.

If you want to go down the route of one customer stipulating that you cannot supply another then I would want something in return, like they only use us exclusively or a guarantee of a certain amount of work. Even then I don’t think that is great business to have all your eggs in one basket as it leaves you very vulnerable.

On the other hand we do occasionally work with invertors and patent applications and for this we would happily sign confidentially contracts, but this is not our main source of work so does not limit our ability to stay in business.

If I was in the position of the OP I would inform company A of the situation and state that if they want us to not work for company B then we would want something in return. We might get a good deal out of it or we might lose a valuable customer, but they are the sort of business decisions you have to make on a daily basis.

 

[beej67]

What matters is not what we think, nor what some other third party thinks. What matters is what Contractor A thinks, so go ask him, or face the consequences of him firing you.

My firm did a huge amount of work for (Big Box Hardware Store A) who is in direct competition with (Big Box Hardware Store B), both of whom tend to build big box hardware stores across the street from each other, all across the country. Any intelligent engineer from the United States knows which two hardware store companies I'm talking about here. We were told by BBHS-A that under no circumstances were we to do work for BBHS-B. We even had one project that was a large strip shopping center of undetermined tenants, and once our client on that job, a private developer, sought out BBHS-B as a tenant, we had to recuse ourselves from the job.



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[MedicineEng]

a) Inform client A that client B approcahed you;
b) Explain client A that you cannot afford to skip the business with client B without any compensation.

Wait for the reaction and dance according with the music.

 

[MacGyverS2000]

Med,

If I was company A, that line of logic wouldn't follow for me... my response would be "What if company B didn't exist?". Whether or not I would care about you doing business with company B is a different story, just that your initial logic wouldn't float...

Dan - Owner

http://www.Hi-TecDesigns.com

 

[ajack1]

Well as mediceEng’s post seems to say the same as mine a couple earlier maybe I could respond to that, I would simply reply. “That is fine I am sure you will have no problem with us dealing with a company that does not exist, I was just keeping you informed of an outcome that you might feel would sour our relationship.

I might even be a bit more diplomatic than that unless it was a Monday morning or a Friday afternoon.

 

[MacGyverS2000]

jack,

It's irrelevant to company A that you take a financial hit from ignoring company B. You're free to raise your rates to compensate for your overall financial difficulties, but again, that's a business decision that has nothing to do with company A... you failed to adequately provide for your company coffers by bringing in enough clients. To my point, if company B didn't exist, would you charge company A more because you failed to entice some other random client?

What is relevant to company A is any conflict of interest should you take on company B.

Now, the two points may not be mutually exclusive, but I don't believe they are mutually inclusive, either.

Dan - Owner

http://www.Hi-TecDesigns.com

 

[ajack1]

Dan, I agree who I work for or what I charge them has nothing to do with company A and as such they have no right to tell me who I can or cannot work for. If they want to start stipulating who I cannot work for then I would want it to be in the best interests of my company to agree to do that.

It would be foolish to lose the offer of a large contract for company B to secure a small one for company A.

As we have both said what you agree between companies is purely the sort of business decision you have to make on a daily basis.

Personally I would be open and honest with them, that is just the way I like to do business.