Politics, Ethics, and Alternative Procurement of Construction in Texas – Where is the line?

Abstract

Construction, at least in the private sector, has always been a high touch, relationship-oriented business. Over the past two decades, much of the public prime contract delivery in the U.S. has shifted to “best value” procurement with increased reliance of discretionary factors other than price. Naturally, the importance of relationships and a healthy dose of advocacy with the decision makers were key factors in awards of public contracts. Add in the political process with pressure to make well-placed campaign contributions to help get a “friend” elected and thus insure favorable vote on a key project -- the line of unethical behavior can get very fuzzy.

By the ‘80s and ‘90’s, building relationships with the decision makers and making the investment in “business development” became a matter of survival for most general contractors and subcontractors. According to many experts, the U.S. business (the construction industry being no exception) had reached an ethics crisis culminating with Enron. Even prior to Enron, increasing procurement scandals on a local and national level and highly publicized qui tam prosecutions of major corporations resulted in widespread codification of procurement ethics and enforcement of penalties for ethics breaches.

With advent of Sarbanes-Oxley and a host of similar state and local ethics regulations in the few years, Chief Compliance Officers have become as important as Chief Relationship Officers in the management teams of many large companies. Indeed, for publicly held companies, aggressive ethics education for all employees and a comprehensive strategy for developing an ethical corporate culture are no longer optional.

With the race to legislate morality, ethics compliance has become a complex mosaic of regulations and affirmative obligations at multiple levels at the same time depending on where the company is doing business and with whom. Reliance upon individual responsibility to do what is obviously legal or morally right is no longer sufficient to avoid disastrous consequences to both individuals and their companies, including severe fines, disbarment, and irreparable damage to a contractor’s most valuable asset – its reputation.

The purpose of this paper is to provide an overview of the more common ethical issues facing contractors as they navigate the perilous line of building relationships and ethically leveraging their resources and relationships to obtain an award and successfully complete the project.

1. Introduction
2. Ethics in Public Procurement
1. Gifts and Entertainment
2. State and Local Ethics Codes
3. Lobbying Rules
4. Contingent Fees for Lobbyists and Marketing Consultants
3. Common Ethics Requirements in Private Contracts
4. Ethics of Competition: Texas Alternative Procurement Considerations
1. Superior Knowledge
2. Below Cost Pricing
5. Political Contributions
1. Campaign Contribution Limitations in Federal Elections
2. Texas State and Local Limits for Individual Contributions
3. “In-kind” Contributions
4. Simple Guidelines for Campaign Contributions
5. Penalties for Campaign Contribution Compliance Failures
6. Increased Penalties Under Bipartisan Campaign Reform Act of 2002
6. Current Codes of Ethics in the Construction Industry
1. BOMI Code of Ethics
2. Construction Manager Code of Professional Ethics
7. Evolution of Corporate Codes of Ethics
8. Developing an Effective Ethics Program

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