Sonny Lykos has posted this comment regarding the General Contractor who arranged with the local hospital owners to 'bid low' with the mutual expectation of Change Orders to make the work profitable (an example cited in my Seven Tips for Construction Marketing Success). I'd like to follow up on this because I think it's an important issue in our industry. Here’s the problem I see with the Pennsylvania GC and his relationship with the hospital administrators.The people represented by the administrators are being denied the opportunity of obtaining the best price for the project by the arrangement between the administrators and contractor. They are also being led initially to believe that the contract price will be the final price. That contractor/hospital relationship in itself is a deceptive practice to those they represent.For the purpose of the bidding process, the administrators have eliminated any bidding, and at this point it doesn’t matter why they have come to this “arrangement” with the contractor, only that they have, and in doing so they have violated their fiduciary responsibility to those they represent. Any one in the construction industry knows very well that there are ways to ascertain deficiencies in blue prints and specifications for new construction and how to determine potential hidden problems in remodeling “before” any price is estimated. So one must then ask why no attempt is made to clarify potential problem areas, again, “before” a price I like(n) this manner of doing business to me hiring a painting contractor to paint the interior of a customer’s home, only to be told upon the starting date that since the home currently has yellow walls, my customer must pay more since yellow is more difficult to cover in one coat, mandating two coats. This is the same painter who, upon inspecting my home, obviously saw the yellow painted walls. In this scenario I represent the hospital administrators. Should I tell the painting contractor to go ahead and just create a Change Order for my customer under the guise, or using the “rationalization” of me knowing the contractor does excellent work? In my opinion, deceptive practices can never be justified any more than when an employee steals from his employer, justifying the act by telling himself that he deserved the raise he didn’t receive. And that’s the problem with far too many people, their cavalier attitude of rationalizing unethical acts to get what they want. We know what the GC wanted, being awarded the project. We don't know what the hospital administrators wanted, and obviously got. Either way, the agreed upon tactic is tacky!
Lykos is of course right that the hospital and contractor are up to something less than pure and pristine, but the underlying issue here is the quality of their relationship. Let me start by clarifying that I am assuming that hospital administrators are not accepting personal gifts, favours, or benefits and simply wish the best quality work for their organization. Many times, wrong things are often rationalized when 'off the book' deals are arranged -- so my assumption that there is nothing fishy here and quality is the only concern is of course a very big one.
is estimated.
Rather, let us look at the issue from the other perspective -- the problem of shoddy work, 'forced' change orders and other devices when the "low bid must win the job" rules apply and the less-than-perfect low bidder applies and wins.
The costs of bad relationships, bad work, bad results on commercial and public sector projects are immense -- it isn't surprising that contractors who do their work really well and professionally are invited to find creative ways to work around the 'low bid must win' rules.
Of course, the public sector often realizes the importance of quality and in the past few years, qualitative assessment programs have been introduced. These indeed solve the "price is everything" problem, but not perfectly.
I remember well spending a day with a Washington D.C. area general contractor who proudly showed off his work for the Navy -- one project after another, all built to the highest standards, so good that the contractor virtually always won virtually every Navy Department project in his area on the qualitative assessment program.
Then as he drove past a Post Office, he said: "I know we can do that work, and better and less expensively than the (other name) General Contractor who always gets these jobs. But even though our bids are always competitive we never can get our foot in the door."
Hmm. I don't think this contractor realized how two-faced he was; but this contractor's perspective is clearly not uncommon -- I've seen it many times in several years observing this business.
So, we have the trade-offs; good, healthy relationships invite manipulation of the rules to maintain the relationships; perhaps resulting in less-than-perfect competitive results and conceivably opportunities for significant ethical breaches.
But you clearly aren't going to win the game by conducting your relationships and doing business improperly; by thinking "low bidding wins the work" is the solution, and not realizing that integrity ultimately pays off in the long run. I took the hospital/GC story at face value; as an organization wanting to avoid the shoddy work and painful problems of low bidders who really should not win the work; but I also see how the very quality of work and ethical standards of this GC that led to the 'special arrangement' may have taken it over the line. Black and white here merge to a definite grey.
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2 years ago
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This is turning into an interesting discussion. It’s a shame others have not made comments.
That said, I must remain steadfast in my contention.
Mark stated: “Many times, wrong things are often rationalized when “off the book' deals are arranged .........“ and commented about “shoddy work and forced change orders” and ended his comments with talking about black and white merging to a definite grey.
First of all, no shoddy work needs to be accepted if the customer has hired a competent person to oversee the customer’s interests.
Second, most Boards, Administrators, etc., have at their option to NOT award the project to the lowest bidder, “if” they can justify the reasons, usually proof of the caliber of the other bidders. I often do work for condo associations, and a few times have been hired to write up specifications for work to be bid out. I have always recommended that on larger projects, like a complete clubhouse renovation, that the condo Board, hire a competent person to do as I suggested, review the specs, perhaps even interview each GC, and finally oversee all work.
In addition, for all general contractors, their relationship with the customer includes an inherent responsibility of the GC for work done by all subcontractors.
I’m not adverse to black and white merging into a grey area. It happens often during our daily lives, business and personal. But when obvious options exist that eliminate the greying merge, it’s not only foolish, but invites either disaster, chaos, of in this case, unethical tactics being employed.
Unfortunately, far too many GCs employ such tactics to win projects. In my city, it’s not unusual for a GC to bid a project with “0” net profit included. Upon being awarded the project, that profit is then obtained buy stalling payment to the subcontractors until they are nearly desperate for money, in which case the GC tries to settle with them at eighty cents or less on the dollar.
Workmanship quality is a separate issue and can be terrific or horrendous regardless of the contract specs.
If I were the type of husband who provided a gorgeous home with furnishings for my wife, took here often on vacations, was a terrific father to our children, but just happened to also be a spouse abuser, would that scenario be in contention for a “grey “ merge?
Mark also stated: “But you clearly aren't going to win the game by conducting your relationships and doing business improperly; by thinking "low bidding wins the work" is the solution, and not realizing that integrity ultimately pays off in the long run.”
Integrity does not often pay off in the long run if getting to the “long run” includes unethical tactics to get there. In that case, the “long run”, as with the end of each of our lives, is nothing more than the sum total of the combined decisions each of us make during our lives. Again, in my opinion rationalizations are being employed to justify a desired result. The means do not justify the end.
I did some work for a couple, and while there he accidentally broke an admittedly inexpensive wood framed mirror he bought from Wal-Mart. I commented that the next time he went there he could just buy another one. H boxed it back up telling me he would return it and tell them that it was like that when he unopened it. A few weeks later he called me for more things to do for him and I told him I was booked up for several months.
I refuse to work for people of that caliber, knowing many of them exist. But in this case I was present to experience his deceit so I knew first hand that he was of that character. He reminded me of the plumber who cracked a toilet while installation and called his supplier to say it was cracked when he opened the box. I made a mental note to never use him as a sub again. In both cases I thought, not “if”, but “when”, I would be the next recipient of their lies.
Since my Mother had MS, for many years I was raised by one of my two older sisters, who constantly drilled into me to always to right by people. That philosophy was enhanced by one of my two older bothers (I was the youngest of 5 siblings) who always said: “When you got your sh*t together, you don’t have to play games, lie, deceive, or manipulate people to get what you want out of life.” Both are etched in my brain.
So, while I will acknowledge that grey areas often do exist, I do my best to make that area as short as possible because frankly, I don't like "grey." Ethics helps me do so, and easily, and money has no part in it.
“Winning” anything does not reside on any pedestal I bow too if doing so mandates I must compromise my core character.
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