Analysis of Ethical Dilemmas in the Construction Industry

This report delves into the ethical dilemmas prevalent in the construction industry. It highlights various unethical practices, such as bid shopping, manipulation of costs, and the exploitation of inside information, which undermine fair competition and erode trust. The report examines how these issues arise in different stages of construction projects, from bidding processes to supply management. It also explores potential solutions, including adherence to codes of ethical conduct, stricter penalties for unethical behavior, and the cultivation of honesty and integrity within construction companies. The report emphasizes the long-term benefits of ethical practices, such as maintaining customer trust and ensuring the sustainability of businesses in the construction industry. The report concludes that while competition and the pursuit of profit may incentivize unethical behavior, upholding ethical standards is crucial for the industry's integrity and long-term success.

Running head: ETHICAL DILEMMA IN CONSTRUCTION INDUSTRY
Ethical Dilemma in Construction Industry
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1ETHICAL DILEMMA IN CONSTRUCTION INDUSTRY
Executive summary
The construction industry of the world has been affected by unethical practices. From bid
shopping to supply of products, there is presence of unethical practices in everywhere of this
industry. This is termed as ethical dilemma as the companies face the option of whether to adopt
those unfair chances or play a fair game. The following report focuses on the problems of ethics
in this industry with a mention of some examples, and the ways of how such practices can be
reduced.

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Table of Contents
Introduction......................................................................................................................................3
Ethical problems in construction industry.......................................................................................3
Solutions..........................................................................................................................................5
Conclusion.......................................................................................................................................6
References........................................................................................................................................7

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Introduction
Ethics says that a wrong thing can never be done in a right way. In the industrial world,
an unethical practice has always ended up in a courtroom. One of the biggest scam on ethics
happened with Enron in America in the last decade, for which the company ceased to exist. The
construction industry in the world is also affected by unethical practices (Chalker and Loosemore
2016). A new study on the Survey of Construction Industry Ethical Practices has been found
that, the people in this industry consider the unauthorized use of supplies and equipment, and
improper reporting of the actual cost as the unethical practices (Parson 2014). The following
report addresses the ethical dilemma in construction industry and its solutions.
Ethical problems in construction industry
The problem of ethics in the construction industry can exist in any step of the businesses,
starting from bidding for a project to manage the supplies to delivering a final project. To
maintain the loyal customers and the ability to gain and retain the customers is heavily dependent
on the ethical practices by the company. The degree of integrity and trustworthiness in
conducting business measures the ethical behavior of any construction company. Payment and
bidding are two practices where the maximum instances of unethical behavior of the company
occur (Abdul-Rahman, Hanid and Yap 2014).
A construction project starts with either negotiation or open bidding for a project. In the
government funded projects, there is always open bidding for it. During bidding, the constructors
must estimate the cost of it, add the indirect costs and expected profit, and present a final
expected cost. In this process, a company might get involved in unethical practices, such as,

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manipulating the cost to get the project. Sometimes two or more companies come together and
determine the price to be asked. This eliminates the fair chance of others to win the job. In the
bid shopping, a contractor takes the estimated bid from the subcontractor and suppliers and
present in during the auction (Shapiro and Stefkovich 2016).
Another highly unethical practice is that, many times, a contractor shows the bid of one
subcontractor to the other in order to get a lower bid. It forces a subcontractor illegally out of the
process. When this is found out, a contractor loses the trusts of the industry (Kelly 2014).
Sometimes, in a bidding conference, one contractor may be able to see the bid of another due to
poor quality of the specs. He then lowers its price to an unavoidable level and gets the job. Later
on, he asks more money as extras. This practice is highly disregarded in the construction industry
and the trustworthiness of the contractor gets lost (Wang 2013). Again, sometimes a construction
company manages to get some inside information that helps it get an advantage in the bidding
area. This is called smart bidding. In this the company knows something better than the
competitors and gains the benefits of that. However, if the company gets the information from
any insider, then it is an unethical practice to rule out other companies and this practice is
considered as highly unethical.
In this context, the above mentioned survey has found out that, 61% of the people believe
that the cost of the projects gets affected due to unethical practices. It is also found that 58%
people agreed that in the meetings, the discussion on ethics never come up. This seems to be the
possible major cause of this problem. The survey has also found out that, 94% people consider
the divulgence of solicited bids to gain advantage as unethical. However, the competition in this
industry and the existence of bad practices force the companies to be in position, where they
think about adopting this practice. However, according to James Gill, Jr., a lawyer and professor

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of construction law and ethics at Louisiana State University in Baton Rouge, the ethical practices
in the bid shopping have different perspectives. What an owner finds ethical, might be unethical
for the subcontractors (Parson 2014). During a house shopping, the customers always tend to go
for the best prices; however, they are not concerned about the process of price determination.
The suppliers also expect the customers to look around but the subcontractors do not want them
to divulge their prices to other subcontractors (Chalker and Loosemore 2016).
Solutions
The construction companies should always follow the Code of Ethical Conduct of the
industry. This code covers topics like policy statement, definitions, and standards of conduct on
various aspects, such employment, safety, non discrimination, environment, antitrust policies etc.
The antitrust policies include code of conduct on price fixing, bid rigging, claims, market
division etc. (Neuman and Robson 2014) The people in this industry, i.e. owners, construction
managers, general contractor, subcontractor, supplier and employees, all should follow the code
of ethical conduct in the business. The penalties should be made more strict to discourage people
to adopt the unethical practices. The ethical consideration is a relative subject. The principles of
people direct the sense of ethics in life and business. Hence, the understanding of ethical
practices differs. However, the companies should follow the general rules of ethics. They should
maintain honesty and integrity, try to retain the customers by maintaining fair practices, do not
get involve in getting the inside information to gain an advantage during bidding and should
refrain from indulging in any other unfair practices, which gets other contractors out of the
bidding game. It would help the companies to maintain their trustworthiness in the industry and
among the customers, which is beneficial in the long run for the business (Shin et al. 2015).

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Conclusion
It can be concluded that, the construction industry has been affected by unfair practices
for a long time. The rivalry in the industry is high and maintaining fair practices has lowered the
profits of the construction companies. The need to survive in the industry and greed for profit has
pushed the companies to adopt the unethical practices. However, to gain and maintain trusts and
benefit in the long run, the companies should stay away from adopting the unethical practices.

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References
Abdul-Rahman, H., Hanid, M. and Yap, X.W., 2014. Does professional ethics affect quality of
construction–a case in a developing economy?. Total Quality Management & Business
Excellence, 25(3-4), pp.235-248.
Chalker, M. and Loosemore, M., 2016. Trust and productivity in Australian construction
projects: a subcontractor perspective. Engineering, Construction and Architectural
Management, 23(2), pp.192-210.
Kelly, D., 2014. Legal, Ethical, and Practical Considerations of Postbid Negotiations in the
Award of Building Construction Subcontracts. Journal of Legal Affairs and Dispute Resolution
in Engineering and Construction, 8(4), p.B6514001.
Neuman, W.L. and Robson, K., 2014. Basics of social research. Pearson Canada.
Parson, E., 2014. The Construction Industry's Ethical Dilemma. [online] Electrical Construction
& Maintenance (EC&M) Magazine. Available at:
http://www.ecmweb.com/content/construction-industrys-ethical-dilemma [Accessed 26 Aug.
2017].
Shapiro, J.P. and Stefkovich, J.A., 2016. Ethical leadership and decision making in education:
Applying theoretical perspectives to complex dilemmas. Routledge.
Shin, Y., Sung, S.Y., Choi, J.N. and Kim, M.S., 2015. Top management ethical leadership and
firm performance: Mediating role of ethical and procedural justice climate. Journal of Business
Ethics, 129(1), pp.43-57.

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Wang, X., 2013. The construction of researcher–researched relationships in school ethnography:
Doing research, participating in the field and reflecting on ethical dilemmas. International
Journal of Qualitative Studies in Education, 26(7), pp.763-779.