...company, of an emergency multibillion-dollar sole source contract for Iraq reconstruction. Ongoing fraud probes in Halliburton’s Iraq work and its reemergence as a Katrina contractor may have re-ignited the furor and raised the term "no-bid contract" to pariah status.

In the shadowy world of lobbying, it is not clear what access to top government officials delivers to firms and what it costs them. But construction industry firms are listed as clients of some top lobbyists friendly to the current administration. The Shaw Group Inc., Baton Rouge, is one of four contractors each awarded a $100-million contract from the Federal Emergency Management Agency for Katrina emergency housing. It became a target of media critics because of its ties to Allbaugh Group LLC, which calls itself a Washington, D.C., "corporate strategy and counsel firm." Its chairman is Joe M. Allbaugh, President Bush’s first FEMA director, with ties back to his Texas governorship.


Shaw Chairman Jim Bernhard, himself a power in Louisiana politics, could not be reached. But in an email, a Shaw spokesman defended the relationship. Allbaugh "did not and does not represent Shaw in any federal contracting activities," the email says, adding that the firm was hired "six months ago to consult with Shaw on its international business, unrelated to emergency response business."

As Katrina worsened and neared the coast, "it was natural that Shaw would seek [Allbaugh’s] advice on how best to be prepared for the storm and its aftermath. The Allbaugh Group provided competent advice and counsel," says the spokesman. Two other Allbaugh associates are alumni of a lobbying firm founded in 1991 by Haley Barbour, now Mississippi governor and former national chairman of the Republican Party.

Shaw claims that its no-bid contract is justified because it is already FEMA-qualified and served the agency in past hurricane recovery efforts. The contractor also emphasizes its Louisiana roots, and those of its 5,000 area employees.

Ralph R. Peterson, CEO of CH2M Hill Cos. Ltd., Denver, another FEMA housing contractor, believes some of the hype over contracting irregularities is linked to partisan criticism. "We’re in a situation where partisanship is winning over statesmanship," he says. "We’re disappointed that the innuendos don’t focus on capability and response but on vague notions of some kind of cronyism."

Even so, industry lobbyists are busy plying the halls of statehouses and municipal buildings. In Pennsylvania, Michael Baker Corp. has 16 lobbyists registered with the state Senate. DMJM+Harris is served by 13. While both have won major state contracts, any connection is not clear. Michael Baker might use a lobbyist to facilitate a meeting with a state official, says spokesman David Higie, "but does not engage lobbyists...on our behalf for legislation." Pennsylvania has no law requiring overall lobbyist registration but such a bill is moving through its legislature.

In Ohio, former lobbyist Paul Tipps is now campaigning against what he considers bidding irregularities in state contracts that may encourage pay-to-play. But Donn Ellerbrock, vice president of government affairs for Associated General Contractors of Ohio, disputes the accusation as political rhetoric. As a registered lobbyist himself, he acknowledges writing language in state law covering liens and construction managers on public sector jobs.

Some firm executives avoid corporate lobbying, replacing it with donations to industry groups or political activism. "I don’t see much lobbying in the small-to-medium firms," says Carl Roehling, president of SmithGroup Inc., Detroit. "We felt it was more beneficial for our individual heads to be active on a local level."

Cleaning Up

The ethics dilemma is also affecting key industry sectors, such as equipment fleet management, in nontraditional ways. Dave Markey, vice president of American Infrastructure, Worcester, Pa., and manager of its $120-million fleet, is pushing a tougher ethics policy between fleet owners and their vendors. As president of the Association of Equipment Management Professionals (AEMP), he has proposed toughening rules in a market sector conducive to backroom bargaining and handshake deals. "It was something that didn’t exist," says Stan Orr, the trade group’s executive director.

Members agreed to support Markey’s "preventive maintenance" checklist for vendor relations. The document, which manufacturers, dealers and end-users must sign to start a membership in AEMP, lays out ground rules in equipment transactions. Among them is refusing to "offer or accept gifts, favors or entertainment," and promising "only what can be delivered." So far, more than two-thirds of the 700-member group have signed the document since March. "Given the state of business today, I think it is way overdue," says one. Adds Markey: "It’s a plumb line. It helps us fix our eyes on the prize."

For some firms, the ethical challenge is in their corporate boardroom. Tampa-based PBS&J executives were dumbfounded to learn in March that CFO W. Scott DeLoach, a 20-year employee, was linked to possible financial improprieties at the engineering firm. He resigned and was replaced Nov. 1 by Donald Vrana.

CFO’s misdeed was "a knife through the firm’s culture."
– John Zumwalt III, chairman and ceo, PBS&J

"We found an error in the medical reserve," says Chairman and CEO John Zumwalt. "The accounting error turned into misappropriation. Our first reaction was that it was a knife through our culture." The firm and the Securities and Exchange Commission are still investigating but Zumwalt has been open to both employees and press about the incident.

The company probe won’t be submitted to SEC until December but PBSJ has named a new compliance officer, installed an ethics "hotline," added non-company board members for the first time and is expanding ethics training firmwide, says Zumwalt. "It has taken front row, center stage," he adds.

Going Global

Globally, funding organizations such as the World Bank are moving to curb high-cost corruption on international projects and more industry associations are taking higher-profile steps to raise the standard of business practice. Watchdog groups such as Transparency International have highlighted corrupt practices on international projects. Now, global industry groups such as the World Economic Forum are joining up. WEF’s engineering and construction group is leading an effort, joined by its mining and metals and energy sectors, to form the Partnering Against Corruption Initiative. The effort already has landed 81 large global industry firms as signatories.

The U.K. government’s Export Credits Guarantee Dept. is working on tightening its standards on anti-bribery and corruption, with a final report due out in December. And in the wake of its biggest-ever bid-rigging scandal earlier this year, Japan is moving to end traditional collusive practices between its infrastructure and transportation agencies and private industry by reforming bidding rules and restricting activities of retiring civil servants (ENR 8/15 p. 18).

Under a plan set up before the bid-rigging scandal, public transportation companies have been privatized, with retirees banned from working for Japanese contractors and open bidding introduced on virtually all projects, not just those over $22 million. Bidding will also be opened to more firms.

The infrastructure and transport ministry is taking similar steps, asking about 150 top officials to voluntarily refrain from taking related private sector jobs for five years after retiring. The ministry also announced it would expand the percentage of its projects let under open bidding, from 2 to 15%.

But critics worry that the changes still have loopholes and may fall far short of what is needed. Even Kazuaki Tanaka, a university professor of public management who is an advisor on the reforms, predicts the measures "will only make matters even worse."

As the gloomy week for industry ethics drew to a close at the end of October, industry associations were taking steps to elevate standards. At its annual meeting, in Los Angeles, the American Society of Civil Engineers on Oct. 27 announced a proposal to rewrite its code of ethics, a key mission of outgoing president Bill Henry (see related story).

"We used to just say ‘thou shalt not be fraudulent,’ and that’s all there was," says Bob Christ, a Black & Veatch vice president and chairman of ASCE’s task committee on ethics and corruption. "Now we can stop it by peer pressure."