Duty Of Engineer Regarding Inspection Of Clients Work Involved In Inspection And Reanalysis

A professional engineer renders services through a variety of business associations, be it a sole proprietorship, partnership, business corporation, professional corporation, or other entity. How such a company is structured and how it represents itself may raise ethical issues for professional engineers.

The Board has had occasion to review situations involving innovative business structures and the ethical issues involved in rendering services in this manner. In BER Case No. 86-1, Part 1, Engineer A had the opportunity to join a business consortium consisting of his engineering firm, an architectural firm, a construction firm, and a financial firm. The general purpose of the consortium was to improve general marketing and business development. To defray consortium expenses for promotion, publicity, overhead, etc., each firm was required to pay to the consortium an entrance fee plus a percentage of income derived from business successfully generated from referrals by other consortium members. In BER Case No. 86-1 Part 2, Engineer B had the opportunity to join a business consortium consisting of his engineering firm, an architectural firm, a construction firm, and a financial firm. The general purpose of the consortium was to improve general marketing and business development. To defray consortium expenses for promotion, publicity, overhead, etc., each firm was required to pay the consortium an entrance fee. In addition, Engineer B was required to pay a referral fee directly to the consortium firm member that "found" the new business client for Engineer B. If Engineer B "found" a new business client for a member of the consortium, Engineer B would receive a finder’s fee. In discussing these situations, and whether it would be ethical for the engineers involved to participate in these arrangements, the Board noted that A "consortium" is generally defined as a business combination established for the benefit of its members. The general structure of such entities varies, of course, depending upon the nature of the venture, size, and a whole host of factors. However, what is common to almost all such entities is the fact that the members of the entity generally conduct business primarily for the benefit of its members. The Board noted that the key issue in the case was whether an individual engineer may ethically join together with other business and professional groups in an arrangement which would offer incentives to its members for referrals to one another. The Board noted that engineering firms must balance a number of factors before seeking association with other firms or business and whether such an entity may exist within the bounds of the NSPE Code must be determined by a close and careful analysis of the NSPE Code and cases interpreting the applicable NSPE Code provisions.

In BER Case No. 86-1, the Board focused attention on the fact that engineers act for the benefit of their clients in rendering their services. Their technical knowledge and experience are heavily relied upon by their clients. Engineers are called upon to render judgments in a variety of areas including recommendations, referrals, and the like. A client should be entitled to expect the best judgment the engineer has to offer. In this regard, the engineer should not be guided by personal gain or private concerns. Like all professionals, the engineer should be free to make the best, most informed, and impartial judgment he is capable of making. In concluding that Engineer A’s actions were ethical and Engineer B’s were not, the Board noted that both consortiums are being formed primarily for marketing purposes and represent, in effect, a "pooling" of individual firm marketing capabilities, but that in one case, Engineer B was receiving a “finder’s fee” and, therefore, Engineer B’s professional judgment could be compromised or at least appear to be compromised.

We think the general ethical principles of BER Case No. 86-1 bear upon the present case. The lessons drawn from BER Case No. 86-1 relate to the great importance of the engineer focusing upon the best interests of the client and the need for the engineer to avoid actions that could compromise or appear to compromise judgment. In this connection, under the facts in the present case, the Board is of the view that, assuming from the facts that all of the design and construction work has been paid for by the Owner and there are no remaining or outstanding payment issues in connection with Engineer B’s professional services provided to the client, the NSPE Code dictates that the Owner should not be left in the middle of a conflict between the two former partners. The facts do not suggest and, therefore, one can only speculate on whether there was a written agreement between the original land development firm and the Owner. In this connection, such an agreement may have addressed the issue of ownership and reuse of the documents, drawings, plans, specifications, etc. Most well-drafted agreements provide the owner with the right to use the documents on a particular project, particularly, as here, where the engineer has been paid in full for professional services.

Engineer B’s actions were clearly a violation of the NSPE Code of Ethics. At the same time, since Engineer A is an employee of one of the former partners of the land development company, by offering to perform the work, Engineer A could potentially inject himself into this dispute which might exacerbate this situation. On balance, the Board is of the view that Engineer A could ethically perform the services described in Questions 1, 2, and 4. However, whether such an action would best serve the interests of the Owner is another issue Engineer A and his employer would be advised to seriously consider. While an alternative that could avoid potentially injecting Engineer A into this dispute is for the Owner (possibly with the ABC Engineering Company’s assistance) to find an independent third-party professional engineer who could perform the final inspection on behalf of the owner. This approach would serve the interests of the Owner by providing the Owner with the required approvals and also avoid having Engineer A or Engineer A’s employer, ABC Company, being viewed as exacerbating this conflict.