There’s a country western song by Little Texas that says, “You’d better dance with the one that brung ya.” It’s an old phrase but it takes on new meaning when applied to teaming arrangements in design-build competitions. Teams are formed quickly when a new project is announced and sometimes a contractor or consultant says yes to the first dance partner, only to have a more attractive offer made later. Can you switch teams? Can you participate on more than one team? Can you drop a team member after the proposal is submitted? These are all ethical questions that confront design-builders, especially on public projects.
Ethics in Forming the Team.
Design firms and contractors try to put together the most qualified team to win design-build competitions. The credentials and experience of the team, including special consultants, is critical when weighted selection criteria are tied to qualifications. Everyone wants to assemble the most qualified team and sometimes that means an experienced consultant will be contacted by more than one team. What are the ethical issues here? Like a popular girl being asked by different boys to the same high school dance, a consultant has to choose its dance partner. If a consultant says “yes” to one team, only to get a more attractive offer from another suitor, there will be bad blood if the consultant jumps teams. Ethical concerns include: Will the first team be harmed by the consultant pulling out of the team? Is there time for that team to get another qualified member? Was there confidential information given to the consultant that might be leaked to a competitor? One way to prevent these disputes is a written “teaming agreement” signed by the parties as they agree to participate on a team. Such agreements should protect confidentiality of information exchanged, prohibit team members from participating on competing teams for the same project, and from jumping to another team when it looks like a competitor has a better chance of winning. Imagine the surprise if your top technical consultant showed up at the interview session with a competing team, not to mention the confusion by the selection committee.
NSPE’s Board of Ethical Review dealt with this issue in a 1980 case in which two firms, called Able and Carlson (not the true names) were competing for the same project, both making the short-list. The public agency notified Able that his firm lacked qualifications in some specialized aspects and suggested that Able joint venture with another firm with such capabilities. Able contacted Engineer Baker, who agreed to participate as a joint venture. The government agency made the same suggestion to Carlson, who also contacted Baker, who agreed to participate in a joint venture with Carlson, but without notifying Able of this. Citing ethical rules about disclosing conflicts of interest, the Ethics Board ruled that is was unethical for an engineer to agree to participate in a joint venture with more than one of several firms being considered without making a disclosure to all of the firms.1 Baker’s conflict of interest might have been resolved by full disclosure and written consent from both firms. If Able objected, then Baker could not have ethically joined Carlson’s team.
Teaming also raises ethical rules that prohibit architects and engineers from revealing information they have been asked to maintain in confidence, such as the ideas, pricing or technical designs of competing teams if you are a member of more than one team. See, e.g. AIA Rule 3.401 and NSPE Rules III.4.a & b. Each team works hard to develop a marketing approach to win the commission and it would certainly be unethical to reveal that approach to a competing team. This might happen if a contractor is competing for two different design-build projects with different team members, where there is temptation to reveal confidential information gained while on Team A to help the contractor’s chances of winning the job with Team B. Some teams are so concerned about leaks of information that separate Confidentiality Agreements are entered into at the outset, with remedies of injunctions and damages if a party breaches the pact. Once the contract is awarded, the ethical issues are by no means over.
Changing Members of the Design-Build Team.
The team that is identified in the proposal and that participates in the interview is the one that the owner expects it is getting. Many RFQs or contracts will require the design-build contractor to identify all major subcontractors, including MBE and WBE participants, and prohibit any changes without the owner’s written consent. Subcontractor “listing” statutes have been passed in some states so that contractors are locked into a team when the proposal is submitted. Absent such restrictions, some contractors have been alleged to use a price from Subcontractor A when preparing a bid, but then “shop” that number to other subcontractors after award and give the actual work to Subcontractor B, for a lesser price — pocketing the difference. This type of “bid peddling” or “bid shopping” is considered by most to be unethical, though it may not be technically “illegal”.2 Federal legislation introduced June 9, 2005, known as the “the Construction Quality Assurance Act of 2005” (H.R. 2834), would impose penalties for bid shopping on federal projects, such as termination of the contract or the imposition of liquidated damages. On design-build projects, this raises new ethical issues when the team has been selected not just on a low-bid price, but based on qualifications as well. Changing the team without the owner’s consent would likely be deemed unethical and might disqualify an entire team, to the detriment of all team members — including loss of stipends and weeks of hard work.
In 2001, Minnesota passed a law which prohibits a design-build contractor from replacing any individual or firm identified in a response to an RFQ without the written approval of the public owner. The statute provides that the State “may revoke an awarded contract if an individual or a design-build firm identified in a response to an RFQ or RFP is replaced without the commissioner’s written approval.” Minn. Stat. § 161.3424. To qualify for approval, the design-builder must document that the proposed replacement individual or firm will be “equal to or better” than the one originally proposed. Federal highway regulations likewise bar a team from switching members after contract award. 23 CFR § 636.118 states that, “Where the offeror’s qualifications are a major factor in the selection of the successful design-builder, team member switching (adding or switching team members) is discouraged after contract award.” The owner is permitted, however, in its discretion to review team changes or team enhancement requests on a case-by-case basis.
While changing team members after award has been found to be unethical, changing team members during the selection process has found to be proper if: (1) done with the owner’s consent; and, (2) the same opportunity was given to other competing teams. In a 1978 NSPE Ethics Board case, a public utility authority solicited proposals for the design of a power plant using a qualifications-based selection process. The agency short-listed seven firms, one of which was a joint venture. Following the initial interview, the public agency told Firm A that the selection panel felt that its proposal did not indicate sufficient experience nor technical personnel. Firm A then arranged for other participation on its team and asked permission to revise its proposal, which was granted. The ethical issue was whether it was proper for Firm A to seek to alter its qualifications proposal in order to improve its position. Without addressing whether the public agency had itself violated any ethics or procurement laws, the Ethics Board found that it was not only ethical, but that Firm A “had no ethical choice but to upgrade its qualifications” or to eliminate itself from further consideration. The Board relied on ethical rules that prohibit engineers from seeking work for which they are not qualified. The Board found that if the same opportunity is given to all the competing firms, there was nothing unfair about letting Firm A improve its team.
Choose Your Dance Partners.
Before you get all dressed up for the big dance, choose your teammates carefully. And once you’ve done so, “You’d better dance with the one that brung ya” or there may be trouble brewing for you and your entire team.
Endnotes
1 Participation of Engineer with Competing Firms for Same Contract, Case No. 80-4, NSPE Board of Ethical Review.
2 See, e.g. Guidelines for a Successful Construction Project. Rule B.4, The Associated General Contractors of America/American Subcontractors Association, Inc./Associated Specialty Contractors (2003).
G. William Quatman, Esq., FAIA, DBIA, is both an attorney and a licensed architect who practices law with the firm of Shughart Thomson & Kilroy, P.C., in Kansas City, MO. He can be reached at (816) 421-3355 or www.stklaw.com. Mr. Quatman is the 2005 Chairman of DBIA’s Legislative Committee and serves on the Designation Board.