A Conversation About Conflicts of Interest Vendors and

NSPE Online Seminar Series

Ethics Forum

October 16, 2019 - pg. 1

A Conversation About Conflicts of Interest–Vendors and Colleagues

October 16, 2019

Arthur E. Schwartz, CAEDeputy Executive Director & General Counsel

National Society of Professional EngineersAlexandria, Virginia

[email protected]

Engineering Ethics


Ethics Forum

October 16, 2019 - pg. 2

NOTICEThe NSPE live webinar is presented and copyrightedby the National Society of Professional Engineers®. Allrights are reserved. Any transmission, retransmissionor republishing of the audio or written portions of thisprogram without permission of the National Society ofProfessional Engineers® is prohibited.


Ethics Forum

October 16, 2019 - pg. 3

A Conversation About Conflicts of Interest–Vendors and Colleagueshas been approved for continuing education credit by New York State.

Participants requiring documentation for New York will receive direction to the online quiz that is required following this session.

Engineering Ethics


Ethics Forum

October 16, 2019 - pg. 4

Engineering Ethics

• Black and White Areas – Easy

− Right vs. Wrong

• Gray Areas – Tougher

− Right vs. Right

− Lesser of the Evils/Dilemma

• Other Factors

− Time/Money

− Family

− Career

− Reputation


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October 16, 2019 - pg. 5

Why Study Engineering Ethics?

• To Understand the Standards Governing What is Acceptable Behavior in the Practice of Engineering

Why Practice Engineering Ethically?

• Personal Injury/Property Damage

• Disciplinary Action

• Impact on Reputation, Employer, Clients, Profession

• Possible Loss of Job, Business, etc.

Engineering Ethics


Ethics Forum

October 16, 2019 - pg. 6

Engineering Ethics

Three Basic Ethical Obligations:

(1) Public

(2) Employer/Client

(3) Other Professionals

Never Mutually Exclusive - Reciprocal

Not A “Zero Sum Game”

All Need To Be Considered At All Times

Should Be Complementary to Integrated With One Another

to the Fullest Extent Possible

Ethical Integration = Professional Integrity


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October 16, 2019 - pg. 7

Engineering Ethics

Seven Principles Impacting Each Obligation

1. Protecting the Public Health, Safety and Welfare

2. Demonstrating Professional Competence

3. Maintaining Objectivity/Truthfulness

4. Addressing Conflict of Interest

5. Preserving Confidentiality

6. Receiving and Providing Valuable Consideration

7. Emerging Areas/Emerging Challenges


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October 16, 2019 - pg. 8

Conflicts of Interest

• Not all conflicts are conflicts of interest

• What is a conflict of interest?

• Financial/Organizational

• Why is a conflict of interest a problem?

➢ Reliance on professional judgment

➢ Public health, safety, welfare

➢ Competence

➢ Bias

➢ Deception

➢ Trust

Engineering Ethics


Ethics Forum

October 16, 2019 - pg. 9

Engineering Ethics

How to address a conflict of interest

• Disclosure

• Manage

• Recusal

• Resignation


Ethics Forum

October 16, 2019 - pg. 10

NSPE Deputy Executive Director and General CounselArthur Schwartz will discuss issues relating to furnishinglimited engineering advice, engineer's inspection ofwork, appraisal of a manufacturing facility, failure todisclose other business interests, and other issues.Polling questions and opportunity for Q&A will allowopportunities for audience interaction.

Engineering Ethics


Ethics Forum

October 16, 2019 - pg. 11

Conflict of Interest—

Serving as a Manufacturing Representative

Case:


Ethics Forum

October 16, 2019 - pg. 12

Facts:

Engineer A is a partner in ABC Engineering, a firm that primarilyperforms site investigation work for developers and other clients.

ABC Engineering does not perform any building design orconstruction-related services.

Case:

Conflict of Interest—Serving as a Manufacturing Representative


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October 16, 2019 - pg. 13

Facts:

XYZ Building Materials and Products approaches Engineer A andinvites Engineer A and ABC Engineering to become its manufacturingrepresentative in a specific territory in which XYZ does business.

Engineer A agrees and ABC Engineering agrees and establishes aseparate company to perform those services on behalf of XYZ.

Case:



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October 16, 2019 - pg. 14

Question:

Would it be ethical for Engineer A and ABC to accept XYZ Company’soffer to become its manufacturing representative in a specificterritory in which XYZ does business?

Case:



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October 16, 2019 - pg. 15

Section II.2.a. – NSPE Code of Ethics

Engineers shall undertake assignments only when qualified by education or experience in the specific technical fields involved.

Case:



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October 16, 2019 - pg. 16

Section II.4. - NSPE Code of Ethics

Engineers shall act for each employer or client as faithful agents or trustees.

Case:



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October 16, 2019 - pg. 17

Section II.4.a. - NSPE Code of Ethics

Engineers shall disclose all known or potential conflicts of interestthat could influence or appear to influence their judgment or thequality of their services.

Case:



Ethics Forum

October 16, 2019 - pg. 18

Section III.5.a. - NSPE Code of Ethics

Engineers shall not accept financial or other considerations,including free engineering designs, from material or equipmentsuppliers for specifying their product.

Case:



Ethics Forum

October 16, 2019 - pg. 19

Section III.5.b. - NSPE Code of Ethics

Engineers shall not accept commissions or allowances, directly orindirectly, from contractors or other parties dealing with clients oremployers of the engineer in connection with work for which theengineer is responsible.

Case:



Ethics Forum

October 16, 2019 - pg. 20

Conclusion:

It would be ethical for Engineer A and ABC to accept XYZ Company’soffer to become its manufacturing representative in a specificterritory in which XYZ does business. However, if the firm’s workexpands into building design and construction-related activities,Engineer A and ABC Engineering should take appropriate steps,including full disclosure and divestiture if necessary of its businessinterests as a representative of XYZ Company.

Case:



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October 16, 2019 - pg. 21

Polling Question #1

Under the facts of this case, it would have been ethical for EngineerA and ABC to accept XYZ Company’s offer to serve as amanufacturing representative even if they performed building designservices as along as the manufacturing representative service was forwork was outside of the territory in which Engineer A and ABC didbusiness.

• Agree

• Disagree

• Not Sure

Case:



Ethics Forum

October 16, 2019 - pg. 22

Conflict of Interest – Loan from Contractor

Case:


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October 16, 2019 - pg. 23

Facts:

Engineer A is a consulting engineer that performs both design andinstallation observation services.

Following client review and approval of Engineer A’s designs,Engineer A is generally requested to recommend a contractor toperform installation services.

Case:

Conflict of Interest—Loan from Contractor


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October 16, 2019 - pg. 24

Facts:

Engineer A frequently recommends that his clients hire Contractor Bto perform the installation services because Contractor B performsquality construction.

Recently, Engineer A mentions to Contractor B that Engineer A plansto expand his consulting engineering practice.

Thereafter, Contractor B offers to lend Engineer A $20,000 at aninterest rate significantly below market rate.

Case:



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October 16, 2019 - pg. 25

Question:

Would it be ethical for Engineer A to accept Contractor B’s offer tolend Engineer A $20,000 at an interest rate significantly belowmarket rate?

Case:



Ethics Forum

October 16, 2019 - pg. 26



Case:



Ethics Forum

October 16, 2019 - pg. 27

Section II.4.c. - NSPE Code of Ethics

Engineers shall not solicit or accept financial or other valuableconsideration, directly or indirectly, from outside agents in connectionwith the work for which they are responsible.

Case:



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October 16, 2019 - pg. 28


Engineers shall not accept commissions or allowances, directly orindirectly, from contractors or other parties dealing with clients oremployers of the Engineer in connection with work for which theEngineer is responsible.

Case:



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October 16, 2019 - pg. 29

Conclusion:

It would not be ethical for Engineer A to accept Contractor B’s offerto lend Engineer A $20,000 at an interest rate significantly belowmarket rate. Further, the Board questions the propriety of engineer-contractor relations of this nature.

Case:



Ethics Forum

October 16, 2019 - pg. 30

Polling Question #2

It would have been acceptable for Engineer A to accept a loan fromContractor B at current market rates as along as Engineer A madeclear to Contractor B that the loan would not affect Engineer A’sjudgment.

• Yes

• No

• Not Sure

Case:



Ethics Forum

October 16, 2019 - pg. 31

Conflict of Interest – Spouse as Employee of Vendor

Case:


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October 16, 2019 - pg. 32

Facts:

Engineer A, a quality assurance manager at Company C.

Engineer A learns that the purchasing manager for Company C hascontracted with a new supplier of precision plastic components.

Case:

Conflict of Interest—Spouse as Employee of Vendor


Ethics Forum

October 16, 2019 - pg. 33

Facts:

It turns out that the production manager at the new supplier is thequality assurance manager’s (Engineer A’s) spouse—a fact unknownto everyone at Company C.

The quality assurance manager (Engineer A) did not create thissituation, and there is no effort to put pressure on any party inconnection with the dealings between the parties.

Case:



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October 16, 2019 - pg. 34

Question:

What are Engineer A’s ethical obligations under these facts?

Case:



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October 16, 2019 - pg. 35



Case:



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October 16, 2019 - pg. 36

p. 36

Section III.1.e. - NSPE Code of Ethics

Engineers shall not promote their own interest at the expense of thedignity and integrity of the profession.

Case:



Ethics Forum

October 16, 2019 - pg. 37

Section III.5. - NSPE Code of Ethics

Engineers shall not be influenced in their professional duties byconflicting interests.

Case:



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October 16, 2019 - pg. 38

Conclusion:

Engineer A should provide full disclosure to appropriate managerswithin his company that he is the spouse of a key employee of avendor. Further, Engineer A would be required to recuse himself fromspecific dealings with the vendor.

Case:



Ethics Forum

October 16, 2019 - pg. 39

Polling Question #3

If Engineer A was not the Quality Assurance Manager, but wasinstead a design engineer, Engineer A would not have had anobligation to make the disclosure.

• Agree

• Disagree

• Not Sure

Case:



Ethics Forum

October 16, 2019 - pg. 40


Participation in Seminar and Reward Program for Specifying Systems

Case:


Ethics Forum

October 16, 2019 - pg. 41

Facts:

Engineer A receives the following solicitation from a company:

“EFG Building Supply Company would like to invite you to participate in anew program tailored for engineers of septic/drainage systems...

Case:




Ethics Forum

October 16, 2019 - pg. 42

p. 42

Facts:

“To qualify for this plan, attend the Complimentary EFG Building SupplyCompany Seminar on Septic/Drainage Systems…

“If you are convinced of the value of our system, simply note on systemplans that EFG carries septic and drainage products...

Case:




Ethics Forum

October 16, 2019 - pg. 43

Facts:

“For the EFG Building Supply Company Reward Program, yourcustomer makes discounted purchases of EFG septic pipe on your EFGcash account (this is strictly a pay as you go basis)…

“Every month you will receive a rewards certificate…

Case:




Ethics Forum

October 16, 2019 - pg. 44

Facts:

“This certificate is based on a percentage of monthly sales. Prioritycash coupons may be redeemed at EFG and the East Westville Resortand Country Club…”

Case:




Ethics Forum

October 16, 2019 - pg. 45

Questions:

1. Would it be ethical for Engineer A to attend the complimentaryEFG Building Supply Company Seminar on Septic/DrainageSystems?

2. Would it be ethical for Engineer A to participate in the EFGBuilding Supply Company Reward Program?

Case:




Ethics Forum

October 16, 2019 - pg. 46

Section II.4.c. - NSPE Code of Ethics

Engineers shall not solicit nor accept financial or other valuableconsideration, directly or indirectly, from outside agents in connectionwith the work for which they are responsible.

Case:




Ethics Forum

October 16, 2019 - pg. 47

Section III.5. - NSPE Code of Ethics

Engineers shall not be influenced in their professional duties byconflicting interests.

Case:




Ethics Forum

October 16, 2019 - pg. 48

p. 48

Section III.5.a. - NSPE Code of Ethics

Engineers shall not accept financial or other considerations, includingfree engineering designs, from material or equipment suppliers forspecifying their product.

Case:




Ethics Forum

October 16, 2019 - pg. 49


Engineers shall not accept commissions or allowances, directly orindirectly, from contractors or other parties dealing with clients oremployers of the engineer in connection with work for which theengineer is responsible.

Case:




Ethics Forum

October 16, 2019 - pg. 50

p. 50

Section III.9.e. - NSPE Code of Ethics

Engineers shall continue their professional development throughouttheir careers and should keep current in their specialty fields byengaging in professional practice, participating in continuingeducation courses, reading in the technical literature, and attendingprofessional meetings and seminars.

Case:




Ethics Forum

October 16, 2019 - pg. 51

Conclusions:

1. It would be ethical for Engineer A to attend the complimentaryEFG Building Supply Company Seminar on Septic/DrainageSystems.

2. It would not be ethical for Engineer A to participate in the EFGBuilding Supply Company Reward Program.

Case:




Ethics Forum

October 16, 2019 - pg. 52

p. 52

Polling Question #4

It would have been acceptable for Engineer A to participate in theEFG Building Supply Company Reward Program provided Engineer Adisclosed this fact to his clients:

• Agree

• Disagree

• Not sure

Case:




Ethics Forum

October 16, 2019 - pg. 53

Review of Key Points

Engineering Ethics


Ethics Forum

October 16, 2019 - pg. 54

• Black and white ethical situations are among the easiest ethicalsituations to resolve.

• A conflict between the public health and safety and the duty ofconfidentiality is an example of a gray area ethical situation.

• In the hierarchy of ethical obligations, protection of public healthand safety is paramount.

Engineering Ethics


Ethics Forum

October 16, 2019 - pg. 55

• While it is important to understand the various individualprovisions of the Code of Ethics, reading the Code in its entirety iscritical to understanding an engineer’s ethical obligations.

• Engineers practicing internationally should be mindful of theirobligations to continue to adhere to US laws and regulations.

• Giving due credit to and recognizing the contributions ofprofessional colleagues is a critical part of being an ethicalprofessional engineer.

Engineering Ethics


Ethics Forum

October 16, 2019 - pg. 56

• Conforming to the requirements of state engineering licensure lawsand regulations often involves proactive measures on the part of aprofessional engineer in relation to the public, employers/clientsand professional colleagues.

• Sustainable design and development principles should incorporatedin all professional engineer’s services.

Engineering Ethics


Ethics Forum

October 16, 2019 - pg. 57

“The social responsibility of business is to increase profitwithin the bounds of the law which is to say, engage in openand free competition, without deception or fraud…”

– Milton FriedmanNobel Prize Winning Economist

Engineering Ethics


Ethics Forum

October 16, 2019 - pg. 58

Engineering Ethics

“Ethics is knowing the difference between what you havea right to do and what is right to do…”

– Potter StewartFormer Justice, US Supreme Court


Ethics Forum

October 16, 2019 - pg. 59

“The reputation of a thousand years may be determinedby the conduct of one hour.”

– Japanese proverb

Engineering Ethics


Ethics Forum

October 16, 2019 - pg. 60

Discussion

Engineering Ethics


Ethics Forum

October 16, 2019 - pg. 61

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Ethics Forum

October 16, 2019 - pg. 62

NOTICE

The NSPE Online Seminar series is presented and copyrighted by the National Society of Professional

Engineers®. All rights are reserved. Any transmission, retransmission or republishing of the audio or written

portions of this program without permission of the National Society of Professional Engineers® is prohibited.


Ethics Forum

October 16, 2019 - pg. 63

Documents

A Conversation About Conflicts of Interest Vendors and