A History Lesson
Construction ethics programs fly in the face of decades of systematic legal and ethical violations by the industry—from bid shopping, fraudulent change orders and overbilling to sexual harassment. As recently as 2004, a survey by FMI and the Construction Management Association of America (CMAA) found that 84% of 270 respondents had "experienced, encountered or observed" behavior that they considered unethical during the previous year. In April, Lend Lease Corp.'s subsidiary in the New York City area pled guilty to criminal fraud charges for overbilling on some projects it worked on between 1999 and 2009 and agreed to pay $56 million in fines and restitution.
"The construction industry has not done a good job of regulating itself," says FMI's Patron. "The attitude we've seen in a lot of companies—not ones that lead the industry, but ones just trying to get by—is: I know where the line is, and I want to be just on it. There's plenty of stuff that's legal but unethical."
Leading the Way
Large construction companies such as M.A. Mortenson Co. of Minneapolis; Canada-based PCL Constructors Inc.; and publicly traded Granite Construction Inc., Watsonville, Calif., a multiple Ethisphere ethical company winner, are helping to change that mentality. Big companies are at the forefront of ethics reform partly because government contracts that require ethics policies make up a large portion of their business, especially during an economic downturn. Even though small contractors aren't legally required to have ethics programs, many are instituting them because the larger companies they do business with demand it.
Spanish construction giant Grupo ACS' U.S. branch, Dragados USA Inc., New York City, started its ethics program in 2008, when the company bought Schiavone Construction Co. of Secaucus, N.J. Shortly after the deal, Schiavone discovered it was being investigated by a grand jury for alleged disadvantaged business enterprise fraud. "The management at Dragados and Schiavone looked around and said, How did this happen? How can we prevent this kind of thing going forward?" says Lorraine D'Angelo, Dragados' senior vice president of ethics and compliance. "Then they implemented an ethics and compliance program.""We've seen a combination of best practices, ethical practices and compliance, which reduce the risk of ramifications from both the government and the private-sector arenas," says construction attorney Gene Commander, managing shareholder for the Denver office of Polsinelli Shughart PC. "Ethics programs make companies more competitive.""Most larger firms are well down the path and continue to have robust compliance programs. The biggest thing is you need to be vocal about compliance," says Dan Johnson, Mortenson's chief operating officer and author of the company's compliance policy.