Archive for 'September, 2009'

Today saw OFT’s announcement of fines averaging 1.5% of turnover for around 100 companies caught in its two-year investigation of ‘bid rigging’. The coverage raised some interesting issues for me:

1. For once, the industry’s spokespeople did well. And much better than when the story first broke in April 2008. Specifically, I heard Stephen Ratcliffe, chief exec of the UK Contractors’ Group, on BBC Radio 4’s Today programme. The BBC’s line was that the fines could have been 10%, so why weren’t they, considering the tax payer had been ripped off “in every case”. More of this in a minute…. But Stephen did a good job of putting across the contractors’ case, whilst reminding the interviewer that even the OFT had led by saying that only a handful of cases involved collusion, the others were the lesser matter of ‘cover pricing’, in order “to stay sweet with the client”, he said twice. A ‘sticky’ phrase, so good work. All in all, great to hear a good spokesperson for the industry on prime time radio, even if in a defensive mode.

2. Cover pricing. We all strongly condemn all anti-competitive practices. Such activity is entirely incompatible with best practice and achieving best value. And it was hardly Ratcliffe’s strongest point when he said that the industry had worked with the OFT to produce a new voluntary code of practice. What? We voluntarily agree not to rip off our clients?? However, cover pricing is, in part, a symptom of poor client practice and is facilitated both by lowest price tendering practices and also rigid prequalification ‘rotas’ in which bidders are fearful of not putting in a bid for fear of being excluded from future work. Our evidence is that lowest tender price doesn’t even deliver lowest outturn price, let alone best value, leading more often than not to claims and an outturn cost greater than the tender price – data shows anything between 20% and 25% on average. Where’s the good competition in that?

3. By the way, by definition there can be little evidence that cover pricing cost anyone any money. Remember they were trying to ensure they lost! We do not know what price the company who sought the cover would otherwise have derived for themselves. It is quite likely that it would have been higher than the other, real, bidders. Therefore it would be hard for any lawyers to justify advising their clients to sue past contractors, or losing bidders, or to blacklist any of those fined by the OFT.

4. Any client who thinks lowest tender price is always best is vulnerable to this sort of thing, as well as other stupidities. The much better approach is collaborative working. The selection of integrated project teams requires much greater rigour and scrutiny at selection and award stages than does lowest price tendering. Selecting lowest price is likely to create a process where collusion is possible. Any fool can bid lower than the next person – and all can count the cost later. Open book accounting, and other commercial techniques of collaborative working, when established at the outset and used during the bid stages and beyond, reduce the risk of cover pricing and forms of collusion. The other need is for a greater focus on the value side of the equation, understanding the outcomes that end users actually need from the project.

So, a dark day for the industry, especially those companies who were fined of course, but “every cloud…”, and if it adds to the case for systematic collaborative working, then all praise the OFT.

This is the first part of a two-parter on ethics in the built environment sector. This first part will look at where I believe the debate on ethics in the sector is currently while the second will start to reflect on particular ethical issues and determine how some of the great western philosophers would have considered them.

As those of you that have met me may know, my background is in philosophy, and specifically in ethics. I somehow ‘landed’ in construction around ten years ago. I have always described it as such deliberately as if I were somehow a visitor from another planet. And quite a distant one at that.

Over the last few years, however, ethical considerations have become more prominent in construction although the use of ethics as a term is still rare. Instead, moral judgements are ensconced in the language of sustainability, corporate social responsibility, fair payments, procurement, collaborative working and elsewhere. I would like to argue that, at present, the built environment sector is only addressing a limited part of the ethical agenda and that a significant widening of that agenda is required if construction can be considered as an industry that is behaving ‘morally’.

What struck me immediately when looking at our industry is that strong parallels exist between how ethical considerations of war and how an ethical framework for construction could be developed. This is not, by the way, because I’m suggesting that construction is inherently a battleground! We’ll have none of that reverting to type round here thank you. Just War Theory is traditionally divided into two main constituent parts. The first, Jus Ad Bellum, is concerned with the decision to go to war; the second, Jus In Bello, considers conduct once hostilities have started. The two areas are not interdependent, i.e. a just war can be fought unethically.

I would argue that the same holds true for construction and would like to posit that there should be a ‘Just Wall Theory’. (No groans at the back please. Trust me, it gets worse). At present, the discussions about ethical behaviours in construction largely consider what happens after a decision has been taken to construct - the Jus In Buildo stage if you will. (Told you). What is missing is consideration of that former stage – the question asked is “can we build it”, but not “should we”. This seems to chime with our view of the world – that there are some things that simply shouldn’t be built. I mean, can any of us really morally defend snow domes in Dubai?

If one agrees that in some cases the act of construction is in itself unethical it leads to the question of how we make that decision. I will move onto that discussion in Part 2 which will come at a later date.

In the meantime, for those of you within the sector that are interested in this topic, I would recommend you seek out Ethics for the Built Environment by Peter Fewings. I was delighted to be able to share a stage with Peter at last year’s Construction Ethics Symposium in Bristol, which I believe to be the first such event in the country. Hopefully more such events will take place in the future to take this debate forward.