Conflict–of–Interest Recusal Relating to Jointly Funded Site Development Study

Ethical issues relating to conflicts of interest are among the most examined areas of ethics by the NSPE Board of Ethical Review. The Board has considered cases similar to this type on other occasions. In an early case, BER Case 62-7, an engineering consultant had been retained by a county commission to perform all necessary engineering and advisory services. The commission did not have an engineering staff, so the engineer acted as the staff for the commission in the preparation of sewage and water studies, the financing of sanitary districts, and the approval of plans submitted by others. The engineer was also retained by a private company to perform engineering design for a development of several thousand housing units, which involved extensive contract negotiations between the commission and the developer.

The Board found that the engineer was in a position of passing engineering judgment on behalf of the commission on work or contract arrangements that the engineer performed or in which he participated. This obviously involved the self-interest of the engineer and divided his loyalties. Even if the engineer acted with the best of intentions, he was put into the position of assessing his recommendations to two clients with possibly opposing interests. Given these realities, the Board concluded that a conflict of interest existed.

Later, the Board decided BER Case 74-2, a case in which a state law required every municipality to retain a municipal engineer with that engineer’s firm usually retained for engineering services for capital improvements needed by the municipality. The Board found that the engineer was not a bona fide employee of the municipality but a consultant, thus it was not unethical for him to serve as municipal engineer and participate in a consulting firm providing engineering services to the municipality. The Board reasoned that the public interest was best served by providing to small municipalities the most competent engineering services that they could acquire. It was assumed that the state law was intended to achieve that end. In all honesty, it is difficult to reconcile these two cases (BER Case Nos. 62-7 and 74-2), as the two cases were based in pertinent part on identical language.

In BER Case 82-4, Engineer A, who was in full-time private practice, was retained by the county as county engineer for a stipulated monthly fee. His duties included reviewing plats and construction drawings to determine whether they met county requirements, and making recommendations to local developers, county commissions, and the planning and zoning board. In addition, Engineer A was retained by the city as city engineer for a stipulated annual fee. His duties included making recommendations to the city council concerning the approval of completed engineering work.

Engineer A also served as project administrator for the county airport authority and as such was responsible for formulating a plan for the continued development of an airport industrial park. Finally, Engineer A was administrator of the city block grant program, and as such oversaw engineering work on various projects. Engineer A had been retained as a consultant by several private firms to help develop city and county project proposals. The Board found that Engineer A did not actually participate in decisions with respect to services solicited or provided by him or his organization in private or public engineering practice but rather reviewed, recommended, formulated, and oversaw plans. Although it was arguable that under the older NSPE Code provisions, Engineer A’s activities would have constituted a conflict as he may have in fact participated in consideration of actions, the Board found that his activities were within the meaning of the amended NSPE Code provisions and did not constitute “decisions” under Section II.4.d. Therefore, the Board concluded that one who serves as both city and county engineer for a retainer fee may provide private engineering consulting services to the city and county.

Later, in BER Case 94-5, City engaged the services of a private consulting engineering firm, Firm A, to provide design review and construction inspection. In accordance with local ordinance governing land development, private developers were required to submit plans to the city for review and approval. The developer was required to pay the city’s expenses for having Firm A review the drawings. Additionally, during construction the developer was required to also pay for inspection services, to be provided by Firm A on the city’s behalf. The ordinance stated specifically that these inspection services were solely for the purpose of ensuring that construction was in accordance with the city’s design standards. The developer was also required to pay for separate inspection services in order to protect his interests. Firm A also provided design and inspection services for private developers within the city and, in fact, used its position as the city’s engineer as a marketing tool, openly telling prospective clients that they could save 50% on inspection costs by using their firm.

In deciding that it was unethical for Engineer A to serve as city engineer and also provide review and inspection services for private developers within the city, the Board reaffirmed the view that the circumstances described were in violation of NSPE Code Section II.4.d. The Board could not see how an engineer could wear many hats and still represent his clients’ best interests. As described by the facts, Firm A was a private consulting engineering firm that regularly prepared drawings for developers and at the same time reviewed those drawings at developer expense for the benefit of the city. Firm A also performed inspection services at developer expense for the benefit of the city. The Board could not see how Firm A could adequately represent the separate and sometimes differing interests of its clients under the facts presented. The Board was particularly troubled by the fact that Firm A was expected to perform review and inspection services for one client while being compensated for those services by another client. The Board was also uncomfortable with Firm A using its position as city engineer to openly market its services with prospective clients. Since the beneficiary of the services in question was the city, the marketing technique suggests that Firm A may be offering developers less than the full range of services required to adequately perform the work but sufficient enough to cause the work to be approved by the city.

In the present case, Engineer A was a board member of the IDA and also a part owner of ABC Engineering, a firm that is contracting with a joint venture consisting of a county and the IDA. While Engineer A is not directly contracting with the IDA but instead with the county, the county is a partner with the IDA, on whose board Engineer A serves. In the Board of Ethical Review’s opinion, a sufficiently close relationship exists and appears to make Engineer A’s participation in the discussions and decisions relating to the study very problematic. While the county attorney has offered an opinion indicating that it would not be necessary for Engineer A to resign from his role as a member of the IDA, it is the Board’s view that NSPE Code Section II.4.e would require Engineer A to resign because the IDA-County joint venture constitutes a “governmental body” under NSPE Code Section II.4.e. Under the circumstances, Engineer A’s recusal from discussions and decisions would not be sufficient under the NSPE Code of Ethics.