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Topics: Construction, Ethics, Leadership
Responsible Decision Making. To Declare or Not?
A Project Manager who has been jobless for over a year due the COVID-19 pandemic recently got two projects back to back.

A firm he owns first won a bid to supply and install Prefabricated Buildings for a Construction Company who was mobilising for a big project. Just as he was preparing to sign the contract, he got another appointment as the Employer's Project Manager for a Bank project. A week after signing the contract as the PM for the Bank's project, a Kick-off meeting was held to start the project. At this meeting, the Project Manager got to know that the Contractor he was going to supply the Prefabricated Buildings to happens to be the same Construction Company going to work on the Bank's project. Secondly, the Prefabricated Buildings were actually meant for the same project. Under the circumstance, what should he do? Decline one of the roles or continue. What will you do under the circumstance?

What happens to Honesty, Responsibility, Respect and Fairness?

Let's hear your thoughts...
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Albert -

Sounds like a conflict of interest. Even if he is able to act in an impartial manner as the PM, there could be the perception of bias by stakeholders. As such, I'd suggest bringing the situation to the attention of key stakeholders and recusing himself from the least (personally) profitable of the two roles.

Kiron
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1 reply by Albert Agbemenu
Jun 21, 2022 9:36 AM
Albert Agbemenu
...
I agree with you, Kiron.

You must leave one of the opportunities and hold on strongly to the other with a clean conscience and free from any conflict of interest situation.
There is the potential for a conflict of interest, but it depends on the terms of the contract.

In this case, you become your own second tier supplier, since you are a sub-contractor to the construction company. Working with your supply chain to provide the best price to the customer is not necessarily unethical. Walmart is the 2nd largest retailer in the world, and they often have some leverage over the supply chain for their vendors to keep prices low.

In other cases it may be unethical or illegal. The US government has special regulations to prevent suppliers from colluding with their subs to get an unfair pricing advantage over competitors in the bidding process.

If you have an ethics or legal department, I would have them weigh in on the specific details of your situation.
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1 reply by Albert Agbemenu
Jun 21, 2022 9:43 AM
Albert Agbemenu
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You have a point there Keith. The question here is, you are going to supervise the activities of the same firm you are supplying to as a vendor. Wouldn't it be difficult drawing the lines between the two relationships thereby falling in the trap of not holding the Construction company to book in the event that they violate a contractual obligation? Your sense of making the right decision may be questioned. The best is to just let one of the opportunities go so you are free from any form of conflict of interest situation...

What do you think?
This is at least a potential conflict of interest.

In a conflict of interest situation there is the concurrent benefit and harm.

Whereas it is not very clear what the harm is in this scenario, it’s best he discloses. He (the PM) has himself become a sub contractor (PEB supplier) to his contractor (as he is also the PMC).

A lee way for this not to be considered a COI will be the timing (sequencing). If he was first ONLY a supplier of the PEB before engaged to act as the PMC to the principal on the bank project, then it’s historic. But a more stringent condition will be if in addition to being first engaged to supply the PEB, this supply has been fully executed before the engagement as a PMC.

No matter what, given the likelihood of different perceptions it’s extremely important he discloses irrespective of the sequence of events.

Since there is some sort of markup by a contractor on subcontractor’s offer to the principal, by disclosing to the principal (the employer) there is the option for the principal to save some cost for him to in addition to being the PMC to the principal also be the supplier of the PEB to the supplier. The principal then hands over the PEB to the contractor as part of client’s free issue items. This will require some scope modification in the contract presumably already signed between the principal and the contractor.

More or less the potential savings forgone by the principal if no disclosure can be interpreted as the harm.

Captions below are portions of PMI code of ethics for easy reference. Key words capitalized.

5.3.1 We do not engage in or condone behavior that is designed to deceive others, including but not limited to, making misleading or false statements, stating half-truths, providing information out of context or WITHHOLDING information that, if known, would render our statements as misleading or incomplete.

CONFLICT OF INTEREST.
A situation that arises when a practitioner of project management is faced with making a decision or doing some act that will BENEFIT the practitioner or another person or organization to which the practitioner owes a duty of loyalty and at the same time will HARM another person or organization to which the practitioner owes a similar duty of loyalty. The only way practitioners can resolve conflicting duties is to disclose the conflict to those affected and allow them to make the decision about how the practitioner should proceed.
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1 reply by Albert Agbemenu
Jun 21, 2022 9:50 AM
Albert Agbemenu
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Richard, you have hit the nail right on the head. Interestingly, the two opportunities became available just around the same time. Just less than a week in-between. You can imagine the scenario..
It is like a conflict of interest. You should notify the sponsor and stakeholders and discuss the details.
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1 reply by Albert Agbemenu
Jun 21, 2022 9:51 AM
Albert Agbemenu
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Abolfazi, you are right. It is definitely a conflict of interest situation and must be disclosed immediately.
Albert,

as everyone has said, you need to disclose this conflict of interest out of ethical considerations, maybe out of legal ramifications in your legislation.

Further, during the project, there will probably be decisions to be made by the PM who support one interest and go against the other. Those decisions may be stressful and hard to defend if challenged. Better to avoid this.

One way to mitigate this situation might be to change acting ownership of your company by e.g. installing a CEO.

Thomas
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1 reply by Albert Agbemenu
Jun 21, 2022 9:55 AM
Albert Agbemenu
...
Thank you Thomas. As always, your contributions are on point. One of the roles must just be let go, under the circumstance. Purely a conflict of interest situation that must surely be prevented from occurring right from the onset.
There are few things about the case that sound a bit far-fetched: how likely would it be that a project manager would only find out about the conflict of interest at his own project kick-off? I don't know about you but when I am ready to do the project kickoff, there's bit a lot of planning and stakeholder management that has already happened.

Be that as it may, the project manager should inform the customer about the situation and propose solutions (recusal, trustee, chinese wall, etc.) and a recommendation.
What a situation Albert?! I think you should try the Ethics toolkit to get answers...Try PMI's EDMF framework and let me know if it worked with you.
Jun 10, 2022 11:43 AM
Replying to Kiron Bondale
...
Albert -

Sounds like a conflict of interest. Even if he is able to act in an impartial manner as the PM, there could be the perception of bias by stakeholders. As such, I'd suggest bringing the situation to the attention of key stakeholders and recusing himself from the least (personally) profitable of the two roles.

Kiron
I agree with you, Kiron.

You must leave one of the opportunities and hold on strongly to the other with a clean conscience and free from any conflict of interest situation.
Jun 10, 2022 1:39 PM
Replying to Keith Novak
...
There is the potential for a conflict of interest, but it depends on the terms of the contract.

In this case, you become your own second tier supplier, since you are a sub-contractor to the construction company. Working with your supply chain to provide the best price to the customer is not necessarily unethical. Walmart is the 2nd largest retailer in the world, and they often have some leverage over the supply chain for their vendors to keep prices low.

In other cases it may be unethical or illegal. The US government has special regulations to prevent suppliers from colluding with their subs to get an unfair pricing advantage over competitors in the bidding process.

If you have an ethics or legal department, I would have them weigh in on the specific details of your situation.
You have a point there Keith. The question here is, you are going to supervise the activities of the same firm you are supplying to as a vendor. Wouldn't it be difficult drawing the lines between the two relationships thereby falling in the trap of not holding the Construction company to book in the event that they violate a contractual obligation? Your sense of making the right decision may be questioned. The best is to just let one of the opportunities go so you are free from any form of conflict of interest situation...

What do you think?
...
1 reply by Keith Novak
Jun 21, 2022 11:47 AM
Keith Novak
...
You are absolutely correct that there may be the appearance of conflict of interest regardless.

If the contracts are lucrative enough, extra layers of process requirements may be created to mitigate the risk. The PM for instance would not be the same for both projects. There may be specific processes and/or contract language depending on who is responsible for the sub-tier performance work and whether it is firm-fixed-price, or cost plus incentive for example. Large corporations will sometimes spin-off whole new business units operating as separate companies to avoid any appearance of self dealing in similar situations. Avoiding the extra layers of bureaucracy to avoid any appearance of an ethical dilemma is a good reason why many companies would avoid this situation altogether.

The risk with process enforced requirements however is that someone may choose not to follow the rules, and it is impossible to simply legislate by process that people do the right thing. Regardless of how many laws and internal governance requirements try to avoid it, there is generally a lot of added cost to provide safeguards, with no guarantee that people won't work around them.
Jun 10, 2022 7:57 PM
Replying to Richard Darko
...
This is at least a potential conflict of interest.

In a conflict of interest situation there is the concurrent benefit and harm.

Whereas it is not very clear what the harm is in this scenario, it’s best he discloses. He (the PM) has himself become a sub contractor (PEB supplier) to his contractor (as he is also the PMC).

A lee way for this not to be considered a COI will be the timing (sequencing). If he was first ONLY a supplier of the PEB before engaged to act as the PMC to the principal on the bank project, then it’s historic. But a more stringent condition will be if in addition to being first engaged to supply the PEB, this supply has been fully executed before the engagement as a PMC.

No matter what, given the likelihood of different perceptions it’s extremely important he discloses irrespective of the sequence of events.

Since there is some sort of markup by a contractor on subcontractor’s offer to the principal, by disclosing to the principal (the employer) there is the option for the principal to save some cost for him to in addition to being the PMC to the principal also be the supplier of the PEB to the supplier. The principal then hands over the PEB to the contractor as part of client’s free issue items. This will require some scope modification in the contract presumably already signed between the principal and the contractor.

More or less the potential savings forgone by the principal if no disclosure can be interpreted as the harm.

Captions below are portions of PMI code of ethics for easy reference. Key words capitalized.

5.3.1 We do not engage in or condone behavior that is designed to deceive others, including but not limited to, making misleading or false statements, stating half-truths, providing information out of context or WITHHOLDING information that, if known, would render our statements as misleading or incomplete.

CONFLICT OF INTEREST.
A situation that arises when a practitioner of project management is faced with making a decision or doing some act that will BENEFIT the practitioner or another person or organization to which the practitioner owes a duty of loyalty and at the same time will HARM another person or organization to which the practitioner owes a similar duty of loyalty. The only way practitioners can resolve conflicting duties is to disclose the conflict to those affected and allow them to make the decision about how the practitioner should proceed.
Richard, you have hit the nail right on the head. Interestingly, the two opportunities became available just around the same time. Just less than a week in-between. You can imagine the scenario..
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