Construction Management Fundamentals Kraig Knutson, Ph.D. Senior Lecturer Del E, Webb School of Construction “Arizona State University Tempe, Arizona Clifford J. Schexnayder, PE., Ph.D. Eminent Scholar Emeritus Del E Wed School of Construction ‘Arizona State University Tampe, Arion Christine Fiori, Ph.D. Assstane Director of Undergraduate Programs -Myers-Lawson School of Construction Virginia Polytechnic Institute and State University Blacksburg, Virginia Richard E. Mayo, P.E., Ph.D. Late Associate Professor ‘Arizona State University Tempe, Arizona MeGraw-Hi Higher Education Boston Burr Ridge, IL Oubucue, 1A New York San Francisco St.Louis Bangkok Bogoté Caracas Kuala Lumpur Lisbon Londen Madrid) Mexico City Mian Montreal New Delhi Santiago Seoul Singapore Sydney Taipei Toronto‘thes ‘Al constuction an design orgonzasions ublih code of this to guide the behavior oftheir ‘members Ehhies Insoles doing the ight hing and rowcing he public CHA PIT ER Overview of the Construction Industry ‘The construction industry is the second largest goods-producing industry in the United States, It employs more than 6.4 milion people in craft and management positions. Construction can be broken down by type of construction into residen: tial, commercialfinstitutional building, industrial, and heavy/highway segments, Most contracts are awarded 10 a general contractor who awards subcontracts to specialty contractors, Ihe most common project delivery system used in com mercial construction, heavy/highway work, and nearly all government construc tion is design-bid-build, also known as competitive low bid; but that system is slowly being replaced by other project delivery systems suck as design-build. BUILDING YOUR FUTURE Every person entering the construction industry needs to remember that we are in the business of building things, and the most importat thing each of us will ever build is our oven reputation, Reputation building is @ one-person ja that is inseparable from issues of persoaal ethies, It requires alte work every day, No fone can build a reputation for someone else, so build yours carefully. Always ask yourself if you would be proud to read about the actions and decisions you make today in tomorrow's newspapes Philosopluers have been discussing ethics for centuries, but people in busi- ness today need to have a practical working code of ethics. Its as Aristotle taught, moral judgments are not the product of reading moral treatises and applying them to case histories. He counsels that if you need moral guidance, seek out a person who has succeeded in living a moral life rather than someone who has succeeded in memorizing moral arguments. Many students seem to believe tha the ethical standards ofthe construction industry need to be improved. Along with that perception of less than perfect this inthe industry, however, isthe fact that most who hold such beliefs have very little direct exposure to the industry, The industry is undoubtedly more Chapter 2 Overiew of he ConstnetonIncsty cthical than many tend to believe, but some improvements can be made, As in ‘ny industry if changes in the overall reputation of the industry and the prac- tices that form the foundation for that reputation are ever going to change, it js the new people coming into the industry, today's college students, who will ‘linately be the influence that causes those changes. It can safely be assumed that today’s members of the construction industry have already established their ‘own ethical codes and are accustomed tothe way the industry curently is, New entrants into the construction industry therefore carry a great responsibility for helping to raise the ethical standards ofthe industry ducing their careers, ‘The best working definition of ethics is “doing the tight thing." Those who follow the rule of doing what they believe to be right will be ethical people, People who shop for bids, a technique called bid shopping, are aware that they are engaging ina practice that is considered tobe unethical. Bid shopping means that a contractor (usually a general contractor) tells another contractor (usually a subcontractor or supplier) the amount of a third competing contractors bid, and sks the second contractor to beat the other contractor's bid because, “I would rather give the work to you.” The truth is, bids ae submitted in confidence and deserve tobe kept confidential. Bid shopping is not ethical, ‘Some owners have tied to prevent bid shopping by requiring contractors to submit their list of subcontractors along with their bid, Some cities have estab- lished bid depositories, where prospective subcontractors submit their bids, and general contractors may collect them, The subcontractor bid amounts are recorded withthe bid depository and may aot be changed. Some government agencies such asthe city of New York and the state of Wisconsin use a system of multiple prime contractors to prevent bid shopping. Certain specialty contrac- tors such as electrical and mechanical contractors submit thei bids directly 10 the government to prevent their prices from being shopped, Professional organizations such asthe American Society of Civil Engineers (ASCE), the National Society of Professional Engineers (NSPE), the American Instiute of Architects (AIA), and the American Institute of Constructors (AIC) publish a code of ethics, which their members promise to uphold. Students are ‘encouraged to visit the websites of these organizations, study these codes, and begin an understanding of the importance of ethics in one's professional lite. Contractor organizations, however, are reluctant to publish a code of ethics because the federal government may interpret policies of discouraging activities such as bid shopping as restraint of free ade, in violation of federal statutes. Even though ethics would require that we refrain from bid shopping, the law does not. Some actions may be lawful, but not ethical. There is a difference between ethics and law. Students need to know the difference, ‘There are still situations where making “under the table” payments to the right person of influence may help a company obtain work or get a proposed development approved. The AIA Code of Ethics and Professional Practice, Rule 2.201, states, “Members shall neither offer noc make any payment of a gift to a public official with the intent of influencing the officals judgment in Connection with an existing or prospective project in which the Members are imterested” All codes of ethics contain a similar statement or rule. Normally bid stopping Unethical procedure of requesting preferred ‘beonractors 2 lower ideo meet or boa bids ubmined the GC by another iia “subeontractor Specialy contractor eniming under Controt the Ge specialty contract See subcontractor