This is the January 2023 edition of our monthly series of Ethics case studies titled What Do You Think? This series is comprised of case studies from NSPE archives, involving both real and hypothetical matters submitted by engineers, public officials and members of the public.

Your peers and the NSPE Board of Ethical Review have reviewed the facts of the case as shown below. And, here are the results.

Your opinion has been registered for the January 2023 edition of our monthly series of Ethics case studies titled What Do You Think?

Your vote is recorded as:

It is ethical
Want to know how your peers voted? We’ll send you an email with the poll results on January 24.

Your opinion has been registered for the January 2023 edition of our monthly series of Ethics case studies titled What Do You Think?

Your vote is recorded as:

It is not ethical
Want to know how your peers voted? We’ll send you an email with the poll results on January 24.

A Review of the Facts

Engineer Albert, principal in ABC Engineers, P.A., retires and sells his stock to ABC. He takes a 25% down payment with the remaining balance to be paid over a period of five years.

After retirement, he offers his services to various clients as an advisory consultant—one who is not involved in design or planning, but rather assists them in decision-making. One of his responsibilities as an advisory consultant is to help clients select a consultant to do the design work.

Albert is involved in the interview of consulting firms and has informed his clients of his previous interest and continuing interest as far as the note receivable with the ABC firm is concerned. He then, on the basis of his judgment, recommends ABC for the commission to do design work on a project for a public agency, and ABC is retained.

Engineer Jimmy at a competing firm complains to the client on the basis that Albert has continuing financial interest in the ABC firm, because of the installment note arrangement, even though he has no voice in the direction or operation of the firm.

Is it ethical for Albert to be involved in the selection of the ABC firm under these circumstances?

Here is the result of our survey of your peers:

Applicable NSPE Code References:

III.1.e
Engineers shall not promote their own interest at the expense of the dignity and integrity of the profession.
III.4
Engineers shall not disclose, without consent, confidential information concerning the business affairs or technical processes of any present or former client or employer, or public body on which they serve.
II.4.a
Engineers shall disclose all known or potential conflicts of interest that could influence or appear to influence their judgment or the quality of their services.
II.4.b
Engineers shall not accept compensation, financial or otherwise, from more than one party for services on the same project, or for services pertaining to the same project, unless the circumstances are fully disclosed and agreed to by all interested parties.

Discussion

Taken in its simplest form, there is an economic conflict of interest on the part of Albert in recommending the retention of his former firm in light of his interest in having the firm receive the necessary fees to enable it to make good on its obligations to him. Whether that degree of conflict of interest, however, is barred by the cited code provisions is a somewhat more complex issue.

A review of the cited codes is in order:

Code III.4 turns upon disclosure of “confidential” information concerning the business affairs of the ABC firm. While it is technically true that the ABC firm is neither a former “client” nor a former “employer” of Albert, if those were determinative words, we would be inclined to apply the intent of the language to this case. However, there is no indication in the facts that Albert’s judgment in recommending his former firm related to “confidential” information concerning its business affairs. Yet we note that realistically, Albert could hardly help being influenced to some degree by his intimate knowledge of the business (and professional) operations of the ABC firm, and would be much less knowledgeable about the business and professional affairs of the competing firm.

Code II.4.a is basically a disclosure requirement, and we are told that Albert has made full disclosure of his prior relationship with the ABC firm to the clients he counsels. But there is another aspect of the wording of Code II.4.a which might properly lay the foundation for us to expand its meaning beyond disclosure. After stating the disclosure standard, the language goes on to state, “or appear to influence their judgment or the quality of their services.” If we read the word “or” and the following words with that kind of emphasis, we might logically conclude that Code II.4.a establishes two standards, (1) disclosure and (2) whether others might regard the circumstances as creating a conflict of interest. In that light, it is clear from the submitted facts that Jimmy did construe the facts as constituting a conflict of interest. The question would then recur as to whether Jimmy’s interpretation was “reasonable” under the stated facts.

Whether or not Code II.4.a should be read to cover both points, Code III.1.e provides a basis to conclude that in these circumstances where public funds are involved, the engineer should “avoid” the problem by not making the recommendation to retain the firm in which he has an economic interest. However, we observe that if the work was for a private owner, the required ethical standard would not be as severe in terms of the possibility of public suspicion. If the private owner, with full knowledge of the facts, was satisfied that there was no improper motivation on the part of the engineer, the disclosure standard would be sufficient.

Code II.4.b is also pertinent to the extent that it raises the question of whether Albert would be accepting compensation from more than one interested party for the same project. We believe the answer must be in the affirmative because Albert’s economic benefit comes from two sources regarding the selection of the ABC firm on his recommendation. He is paid by the client who was advised by him to retain the ABC firm, and he is being paid in part under the installment note from funds received from that client by reason of its selection on his advice. Unlike Code II.4.a, the language of Code II.4.b does not permit the conflict solely on the grounds of full disclosure. It goes on to require “agreed to by all interested parties.”

Is Jimmy an “interested party” within the meaning of Code II.4.b? In previous cases, we held that an architect who was the prime professional and who had retained an engineer for part of the design was an interested party when there was a dispute about the quality of the work performed by the engineer (Case 68-3). And in Case 68-12, we held that a land developer who had abandoned a project was an interested party. In both of those cases, the “interested party” had been directly involved in the project prior to the development of the problems, which led to ethical questions.

Here, however, Jimmy had no prior involvement in the project itself; his only interest was in seeking the assignment along with other competing firms. On that basis, therefore, we do not interpret “interested party” under these particular circumstances to extend to those who merely seek an assignment as distinguished from those directly involved in a project.

The Ethical Review Board’s Conclusion

It is not ethical

It was not ethical for Albert to be involved in the selection of the firm under these circumstances.

BOARD OF ETHICAL REVIEW

Louis A. Bacon, P.E., F. Wendell Beard, P.E., James G. Johnstone, P.E., Robert H. Perrine, P.E., Marvin M. Specter, P.E.-L.S., L.W. Sprandel, P.E., Robert R. Evans, P.E., Chairman

Note – In regard to the question of application of the Code to corporations vis-a-vis real persons, business form or type should not negate nor influence conformance of individuals to the Code. The Code deals with professional services, which services must be performed by real persons. Real persons in turn establish and implement policies within business structures. The Code is clearly written to apply to the Engineer and it is incumbent on a member of NSPE to endeavor to live up to its provisions. This applies to all pertinent sections of the Code. This opinion is based on data submitted to the Board of Ethical Review and does not necessarily represent all of the pertinent facts when applied to a specific case. This opinion is for educational purposes only and should not be construed as expressing any opinion on the ethics of specific individuals. This opinion may be reprinted without further permission, provided that this statement is included before or after the text of the case.