Canons of Ethics
Preamble
Part I
AACE International Members shall uphold and advance the honor, dignity, and practices of Cost
Engineering and Cost Management.
In keeping with the high standards of ethical conduct members shall:
•
Be honest and impartial;
•
Serve employer, clients, and the public with dedication;
•
Strive to increase the competence and prestige of their practice;
•
Apply knowledge and skill to advance human welfare; and,
•
Ensure adherence to health, safety, and welfare standards.
Part II
Throughout the Canons of Ethics the term “Member” shall be read to include:
•
All classes of AACE International membership;
•
All AACE International certificants and those applying for certification and/or sitting
for examination whether they are AACE International members or non-members.
•
Other professionals providing expert input to AACE International through
professional courses of instruction using AACE International materials.
•
Other professionals supporting development of educational and technical products
that bear the AACE International imprimatur.
1
I. Relations with the Public
Members shall hold paramount the health, safety, and welfare of the public, including that of
future generations. [Paragraph: I.1]
Members shall endeavor to extend public knowledge and appreciation of Cost Engineering and
Cost Management and its achievements. [I.2]
Members shall oppose any untrue, unsupported, or exaggerated statements regarding Cost
Engineering and Cost Management. [I.3]
Members shall be dignified and modest, ever upholding the honor and dignity of their profession.
[I.4]
Members shall express an opinion on cost engineering or cost management subject only when it
is founded on adequate knowledge and honest conviction. [I.5]
Members, concerning Cost Engineering and/or/ Cost Management matters, shall issue no
statements, criticisms, or arguments that are inspired or paid for by an interested party or parties,
unless they preface their comments by identifying themselves, by disclosing the identities of the
party or parties on whose behalf they are speaking, and by revealing the existence of any
pecuniary interest they may have in matters under discussion. [I.6]
Members shall approve or seal only those documents, reviewed or prepared by them, which are
determined to be safe for public health and welfare in conformity with accepted cost engineering,
cost management and economic standards. [I.7]
Members whose judgment is overruled under circumstances where the health, safety, and welfare
of the public are endangered shall inform their clients and employers of the possible
consequences. [I.8]
Members shall work through professional societies to encourage and support others who follow
these concepts. [I.9]
Members shall work only with those who follow the concepts of health, safety, and welfare.
[I.10]
Members shall be objective and truthful in professional reports, statements, and testimony. They
shall include all relevant and pertinent information in such reports, statements, and testimony.
[I.11]
2
Unless authorized by the President or the Executive Director/CEO, no members shall represent
that any opinion they offer represents the opinion of AACE International. Further, no member
shall represent to commit AACE International to any task, responsibility, or contract without the
approval of the President or Executive Director/CEO. [1.12]
II. Relations with the Employees and Clients
Members shall act in all matters as a faithful agent or trustee for each employer or client.
[Paragraph: II.1]
Members shall act fairly and justly toward vendors and contractors and shall not accept any
commissions or allowances from vendors or contractors, directly or indirectly. [II.2]
Members shall inform their employer or client of financial interest in any potential vendor or
contractor, or in any invention, machine, or apparatus that is involved in a project or work for
either employer or client. Members shall not allow such interest to affect any decisions regarding
cost engineering or cost management services that they may be called upon to perform. [II.3]
Members, when as a result of their studies, find that a project or work shall not be successful, or
if their Cost Engineering and Cost Management or economic judgment is overruled, shall so
advise their employer or client. [II.4]
Members shall undertake only those Cost Engineering and Cost Management assignments for
which they are qualified. Members shall engage or advise their employers or clients to engage
specialists whenever their employer’s or client’s interests are served best by such an
arrangement. Members shall cooperate fully with specialists so engaged. [II.5]
Members shall treat information coming to them in the course of their assignments as
confidential and shall not use such information as a means of making personal profit if such
action is adverse to the interests of their clients, their employers, or the public. [II.6]
Members shall not disclose confidential information concerning the business affairs or technical
processes of any present or former employer, client, or bidder under evaluation, without consent,
unless required by law. [II.7]
Members shall not reveal confidential information or finding of any commission or board of
which they are Members, unless required by law. [II.8]
Members shall not duplicate for others, without express permission of the client(s), designs,
calculations, sketches, etc., supplied to them by clients or bidders. [II.9]
3
Members shall not use confidential information coming to them in the course of their
assignments as a means of making personal profit if such action is adverse to the interests of
their clients, employers, or the public. [II.10]
Members shall not accept compensation—financial or otherwise—from more than one party for
the same service, or for other services pertaining to the same project or work, without the consent
of all interested parties. [II.11]
Members, employed by others, shall engage in supplementary employment or consulting practice
only with the consent of their employer. [II.12]
Members shall not use equipment, supplies, laboratory, or office facilities of their employers to
carry on outside private practice without the consent of their employers. [II.13]
Members shall not solicit a contract from a governmental body on which a principal officer or
employee of their organization serves as a Member. [II.14]
Members shall not request, propose, or accept professional commissions on a contingent basis
under circumstances that compromise their professional judgment. [II.15]
Members shall act with fairness and justice to all parties when administering a project or work.
[II.15]
Members, before undertaking a project or work for others in which the Member may make
improvements, plans, designs, inventions, or records that may justify copyrights or patents, shall
enter into a positive agreement regarding the rights of respective parties. [II.16]
Members shall admit and accept their own errors when proven wrong and refrain from distorting
or altering the facts to justify their decisions. [II.17]
Members shall not attempt to attract an employee from another employer by false or misleading
representations. [II.18]
Members shall act in professional matters for each employer or client as faithful agents or
trustees and shall avoid conflicts of interest. [II.19]
Members shall avoid all known or potential conflicts of interest with their employers or clients
and shall promptly inform their employers or clients of any business association, interests, or
circumstances that could influence their judgment or the quality of their services. [II.20]
4
Members shall not solicit or accept gratuities, directly or indirectly, from contractors, their
agents, or other parties dealing with their clients or employers in connection with project or work
for which they are responsible. [II.21]
III. Relations with Other Professionals
Members shall acknowledge that credit for Cost Engineering and Cost Management work is
given to those to whom credit is properly due. [Paragraph: III.1]
Members shall provide prospective employees with complete information on working conditions
and their proposed status of employment. After employment begins, Members shall keep the
employee informed of any changes in status and working conditions. [III.2]
Members shall not maliciously or falsely, directly or indirectly, injure the professional
reputation, prospects, practice, or employment of another, or shall they indiscriminately criticize
another’s project or work. Proof that another cost professional has been unethical, unfair, or
illegal in their practice shall be cause for advising proper authority. [III.6]
Members shall not compete unfairly with other cost professionals. [III.7]
Members shall cooperate in advancing the Cost Engineering and Cost Management profession
by interchanging information and experience with other cost professionals and students, by
contributing to public communication media, to cost engineering, and cost management and
scientific societies, and schools. [III.8]
Members shall not seek to acquire or provide to other individuals certification examination
questions or any other certification examination materials, to include derivative materials, not in
the public domain. [III.9]
Members shall not falsify or permit misrepresentation of their own or their associates’ academic
or professional qualifications. They shall not misrepresent or exaggerate their degrees or
responsibility in or for the subject matter of prior assignments. Brochures or other presentations
incident to the solicitation of employment, shall not misrepresent pertinent facts concerning
employers, employees, associates, joint ventures, accomplishments, or membership in technical
societies. [III.10]
Members shall prepare articles for technical or lay press that are only factual, dignified, and free
from ostentatious or laudatory implications. Such articles shall not imply credit to the cost
professionals for other than their direct participation in the project or work described unless
credit is given to others for their share of the project or work. [III.11]
IV. Standards of Professional Performance
5
Members shall be dignified and modest in explaining their accomplishments and merit and shall
avoid any act tending to promote their own interests at the expense of the integrity, honor, and
dignity of the profession. [Paragraph IV.1]
Members, when serving as expert witnesses, shall express Cost Engineering and Cost
Management opinions only when it is founded upon adequate knowledge of the facts, upon a
background of technical competence, and upon honest conviction. [IV.2]
Members shall continue their professional development throughout their careers and shall
provide opportunities for the professional development of cost professionals under their
supervision. [IV.3]
Members shall encourage their Cost Engineering and Cost Management employees to attend and
present papers at professional and technical society meetings. [IV.6]
Members shall uphold the principle of mutually satisfying relationships between employers and
employees with respect to terms of employment, including professional grade descriptions,
salary ranges, and fringe benefits. [IV.7]
Members serving as AACE International Section Officers shall not claim that they or their
employers represent AACE International for the purposes of gaining or soliciting business.
[IV.8]
Administration
Ethics Complaints
Any AACE International member or AACE International staff member may file a complaint
against an AACE International member alleging a violation of this Canon of Ethics. Complaints
shall be filed in accordance with the Constitution and By-Laws and the Policies and Procedures
of Ethics Committee. Complaints from non-members who have direct knowledge of an alleged
violation may also be considered.
Recommendations for changes or corrections:
Recommendations for changes or corrections to the AACE International Canons of Ethics are
welcome. Changes or corrections shall be directed to: Chair, AACE International Ethics
Committee or the Executive Director, AACE International.
Each recommended change and/or correction shall have full consideration by the AACE
International Ethics Committee. The Chair of the Ethics Committee shall provide a full response
to the submitter and all other affected parties.
6
Administrative Management of the AACE International Canons of Ethics:
The Chair, appointed annually by the President, is responsible to the President and Board of
Directors for administrative management of the Canons of Ethics.
Changes and Approval of Changes to the AACE International Canons of Ethics are made
as follows:
Minor administrative corrections and/or changes will be coordinated between the Chair of the
AACE International Ethics Committee and the Executive Director. Suggestions considered to
have merit will be forwarded, with a recommendation, to the Executive Board of the Board of
Directors. The Executive Board will formulate their recommendation for action by the Board of
Directors. Resulting action will be implemented by the Executive Director/CEO.
Significant and/or major changes to the AACE International Canons of Ethics will be
coordinated between the Chair of the AACE International Ethics Committee and the Executive
Director. Suggestions considered to have merit will be forwarded, with a recommendation, to
the Executive Board of the Board of Directors. The Executive Committee will make a
determination if the proposal shall be presented for public comment or may direct the proposal to
the Board of Directors for action. Proposals recommended for public comment will be broadly
presented to AACE International Membership for comment over a thirty-day period. All
comments will be evaluated with responses to the submitter. The proposed change to the Canons
of Ethics will be resubmitted, with comments received. The Executive will formulate their
recommendation for action by the Board of Directors. Resulting action will be implemented by
the Executive Director/CEO.
Publication and maintenance of the current edition of Canons of Ethics:
The Executive Director/CEO is responsible to publication and maintenance of the AACE
International Canons of Ethics.
7
For the exclusive use of R. THOMPSON, 2020.
W14244
DAVID STERN’S DECISION
Kaitlin Thanasse wrote this case under the supervision of Professor John Haywood-Farmer solely to provide material for class
discussion. The authors do not intend to illustrate either effective or ineffective handling of a managerial situation. The authors may
have disguised certain names and other identifying information to protect confidentiality.
This publication may not be transmitted, photocopied, digitized or otherwise reproduced in any form or by any means without the
permission of the copyright holder. Reproduction of this material is not covered under authorization by any reproduction rights
organization. To order copies or request permission to reproduce materials, contact Ivey Publishing, Ivey Business School, Western
University, London, Ontario, Canada, N6G 0N1; (t) 519.661.3208; (e) cases@ivey.ca; www.iveycases.com.
Copyright © 2014, Richard Ivey School of Business Foundation
Version: 2015-03-06
At 6:05 a.m. on May 8, 2013, Golden Horseshoe Constructors’ (GHC’s) head office in Mississauga,
Ontario, was understandably empty and very quiet when David Stern, P. Eng., vice-president of
purchasing, settled in at his desk. Stern was reviewing bids for an upcoming condominium project and
had to decide which window and door installation firm 1 to recommend for that portion of the job. GHC’s
president, Robert Smithson, was expecting Stern’s decision first thing that morning. Just a day earlier,
Smithson had strongly suggested that the work be given to Monyash Doors and Windows, a firm that had
not submitted the lowest bid. In practice, all else being equal, the firm with the lowest priced bid would
win the contract. Stern was unsure how to proceed with the request and which of the four bids he should
recommend.
INDUSTRY
2
Canada’s construction industry, worth some $280 billion in 2012, was relatively mature and displayed
cycles that lagged about two to three years behind that of the economy as a whole. Since 2006, the
compounded annual growth rate of construction spending had averaged 2.56 per cent (in constant (2002)
dollars). A distinct drop in activity occurred in 2009 and a rebound in 2010. Growth in the industry was
expected to continue. From 2013 to 2016, growth was forecast to continue at 1.46 per cent per year.
Growth rates varied considerably by province and by the category of construction (residential buildings,
37.8 per cent of total construction spending; commercial buildings, 9.4 per cent; industrial buildings, 2.6
per cent; institutional buildings, 6.3 per cent; and engineering construction, 43.9 per cent). Despite the
growth of residential construction in and around Toronto, growth in Ontario had been particularly slow
compared to that in other provinces and was expected to continue to be so.
1
Despite their different functions, because of their structural similarities, doors and windows are usually treated as being
equivalent during installation.
2
The numerical data in this section originated in Statistics Canada and are reported by Reed Construction, which is
responsible for the 2013 to 2016 forecasts. See www.dcnonl.com/images/canadata/canconforecasts091013.pdf, accessed
April, 2014.
This document is authorized for use only by RICHARD THOMPSON in 2020.
For the exclusive use of R. THOMPSON, 2020.
Page 2
9B14D007
Although there was a trend towards consolidation, the industry was highly fragmented. Many individual
professional engineers began their own firms, outpacing the rate of acquisitions.
PROFESSIONAL ENGINEERING IN ONTARIO
3
In Canada, engineering and other professions came under provincial legislation. In Ontario, the relevant
law was the Professional Engineers Act, which effectively delegated the responsibility to regulate the
profession and the conduct of its members to Professional Engineers Ontario (PEO), which had been
established in 1922. PEO served a role similar to that of other professional bodies such as the College of
Physicians and Surgeons of Ontario, the Law Society of Upper Canada and the Canadian Institute of
Chartered Accountants. PEO was responsible for licensing and disciplining engineers and companies that
provided engineering services. 4 Its principal objective was to regulate the practice of professional
engineering and to govern its members in order to serve and protect the public interest. To meet this goal,
it tried to ensure that only properly qualified individuals were licensed and practised engineering.
Licensed professional engineers and organizations with a Certificate of Authorization from PEO could
issue qualified opinions signified by the use of the designation “Professional Engineer” (P. Eng.) after
their name. It was illegal for unlicensed individuals or unauthorized companies to used P. Eng. or similar
designations that might lead to the belief that they were qualified to practise professional engineering.
Through its licensing standards, PEO attempted to ensure that all professional engineers appreciated the
importance of doing work that was not only technically competent but also based on sound professional
ethics. Towards this end, PEO had established a code of ethics (see Exhibit 1).
To become a professional engineer, individuals had to complete a baccalaureate degree from a qualified
engineering school, demonstrate 48 months of verified and accepted engineering work experience and
pass the professional practice exam set by PEO. Upon successful completion of these three requirements,
engineers were deemed professional and able to take the P. Eng. title.
Of PEO’s 26 committees, three were devoted to violations of the Professional Engineering Act. The
complaints committee investigated and considered complaints against the professional conduct of PEO
members. Depending on the outcome of these deliberations, the discipline committee might hold
hearings concerning the complaint. Exhibit 2 shows some of the grounds the discipline committee might
consider. Finally, the enforcement committee advised PEO on matters regarding enforcement of the
Professional Engineers Act against those deemed to be practising engineering without a licence.
Individuals or firms who failed to follow the rules and standards could be fined, charged criminally and/or
have their licence and right to use the P. Eng. title suspended or revoked.
THE DESIGN AND CONSTRUCTION PROCESS
Property owners typically initiated new construction or repairs. The typical project had two phases that
might overlap: design and construction. The relatively few owners with their own resources dedicated to
new construction often did a large portion of the work themselves, supplemented by hired design and
3
Much of the material in this section was taken from PEO’s website, www.peo.on.ca, accessed April 2014.
The Professional Engineers Act (see www.e-laws.gov.on.ca/html/statutes/english/elaws_statutes_90p28_e.htm, accessed
April 2014) defined the practice of professional engineering as: “any act of planning, designing, composing, evaluating,
advising, reporting, directing or supervising that requires the application of engineering principles and concerns the
safeguarding of life, health, property, economic interests, the public welfare or the environment, or the managing of any such
act.” It also defined a professional engineer as: “a person who holds a licence or a temporary licence.”
4
This document is authorized for use only by RICHARD THOMPSON in 2020.
For the exclusive use of R. THOMPSON, 2020.
Page 3
9B14D007
engineering consultants as needed. These professionals might include architects, and mechanical,
electrical, civil and structural engineers. Most owners had no prior experience or had insufficient
resources to manage the project; thus, typically they hired a project manager 5 (PM) to act as the owner’s
representative in hiring the required expertise and managing costs and deadlines. The PM could be
independent or also serve in another role; for example, architects often served as PMs as well as doing the
architectural work. Although construction projects were usually treated as a single entity, in some cases,
they were treated as two, with two completely separate groups of managers and workers.
When the design process was complete, the PM began looking for a general contractor to build the
structure. Once this firm was selected, the general contractor then hired sub-contractors to complete the
individual components, such as drywall, windows or tile. Upon completion of these individual
components, the building was finished and ready for use. Exhibit 3 shows a simplified summary of the
process. There was considerable variation between projects, and often, the owner effectively had a veto
over many decisions. The time required for the various steps and for the project as a whole varied
considerably, depending on such variables as complexity, political sensitivity, design creep and cash flow.
The PM typically started the search for suitable builders by issuing a request for proposal (RFP). In some
cases, bids would be accepted only from invited suppliers; in other cases, bidding was open. The PM did
not want too many potential bidders because it would subsequently take considerable time and effort to
winnow the list down to a manageable short list. In addition, responsible PMs did not want to burden too
many potential suppliers with the expense of preparing bids, most of which would not be accepted. On
the other hand, the PM wanted enough bids to make the process credible. Consequently, setting the
specifications for qualified bidders was an important task.
The PM provided potential bidders with the drawings for the project, the estimated budget and the desired
schedule. Potential bidders reviewed the RFP in detail and submitted their bid of the cost to the owner for
that particular service, normally including a profit margin for the bidder. There were three types of
contracts: fixed-price, cost plus, or time and materials. The bid in fixed-price (or lump sum) contracts
encompassed all aspects of the job; traditionally, they were used for jobs with clear scopes and defined
schedules. Fixed-price bids could include labour, benefits for early completion and/or penalties for late
completion. Cost-plus contracts included only the base work; anything over and above the stated
contract, including the supplier’s profit margin, would be billed at an extra cost. The structure of typical
cost-plus contracts included: cost plus a fixed percentage, cost plus a fixed fee, cost plus up to a
guaranteed maximum price, and cost plus with guaranteed maximum price and bonus contract. Time and
materials contracts involved the owner establishing an hourly rate to pay the bidding firm; these contracts
were used primarily for projects with poorly defined scopes and timelines.
The type of contract could be left open to the bidders or specified by the PM in advance. There were
distinct advantages to the PM if all bids took the same form. Extremely important features of any RFP
were the deadline for submission and rules regarding communication with potential bidders during the
bidding process. Normally, bidders would know how many competitors they had and possibly their
identity. The bidding process had been stable in the construction industry for decades and normally took
between three and six weeks.
Although PMs could use a variety of criteria to choose the winning bid, the lowest price always
represented a major factor. Other major factors included the expected quality of work, adherence to costs
and schedules, reliability and communication; they were assessed through past engagements and referrals.
5
In the context of this case, the PM could be the owner or an individual or firm hired by the owner to manage one or more
aspects of the project.
This document is authorized for use only by RICHARD THOMPSON in 2020.
For the exclusive use of R. THOMPSON, 2020.
Page 4
9B14D007
Issuers of offers to tender for projects often tried to remove as many of the non-financial variables as
possible by providing detailed specifications for the project.
RELEVANT SUPREME COURT OF CANADA RULINGS
Like most areas of Canadian society, construction was ruled by federal and provincial common law,
based on precedents established in previous cases. One landmark case, R. v. Ron Engineering and
Construction (Eastern) Ltd., 6 decided in 1981, was a leading decision on the law of tendering for
contracts. In response to a request for proposal by the owner on part of a construction project, Ron
Engineering submitted a bid of almost $2,750,000 along with a $150,000 deposit, which it would lose
should it withdraw its bid or fail to submit an executed agreement within a week. When the bids were
opened, Ron Engineering was the lowest bidder by over $630,000. Ron Engineering then discovered that
it had made an error of some $750,000 in calculating its bid price and asked the owner to be allowed to
withdraw its bid without penalty. The owner subsequently asked Ron Engineering to enter the project
agreement under the terms specified in the firm’s bid, which Ron Engineering refused to do, following
which the owner awarded the contract to another firm and kept Ron Engineering’s deposit. Ron
Engineering sued to recover the deposit; the owner countersued to cover the expenses incurred in having
to go with another bidder. The case proceeded through the courts, ultimately arriving at the Supreme
Court of Canada.
In its ruling, the Supreme Court dismissed Ron Engineering’s claim. It ruled that tendering was itself a
contract that, once entered by submission of a bid, had legal force. If the bid were accepted, both the
owner and the bidder were obliged by the bidding contract to enter the construction contract. Effectively,
this and other rulings emphasized that bidding contracts required owners to deal fairly and equally with
all bidders and not to change or allow changes to the rules to the tender after the request for proposal had
been initiated.
In 2001, the case Naylor Group Inc. v. Ellis-Don Construction Ltd. 7 shed light on the contractual
relationships between subcontractors and the construction companies. Ellis-Don, one of GHC’s major
competitors, intended to bid for a project for a Toronto-area hospital and asked Naylor to bid on the
project’s electrical work. Naylor volunteered the information that its workers were not affiliated with the
International Brotherhood of Electrical Workers (IBEW). Ellis-Don assured Naylor that there would be
no objection on that account. Ellis-Don had been in dispute over bargaining rights with IBEW for some
30 years; at the time of Ellis-Don’s bid, the dispute was before the Ontario Labour Relations Board
(OLRB). Naylor’s low bid ($5.54 million 8) for the electrical work became an integral part of Ellis-Don’s
$38-million bid for the project. After OLRB ruled in IBEW’s favour, Ellis-Don was awarded the project.
The contract specified that Ellis-Don hire Naylor. Ellis-Don offered the work to Naylor if the firm allied
itself with IBEW. Naylor refused; Ellis-Don consequently informed Naylor that it could not enter a
subcontract agreement with the firm. Ellis-Don then shopped Naylor’s bid around to other firms and
subsequently awarded the electrical work to an IBEW-affiliated supplier for exactly the same amount as
Naylor had bid. Naylor then sued Ellis-Don for breach of contract. The case proceeded through the
courts, ultimately arriving at the Supreme Court of Canada.
6
See scc-csc.lexum.com/scc-csc/scc-csc/en/item/2504/index.do, accessed April 2014, for the Supreme Court’s judgment.
This case uses the spelling “Ellis-Don” consistent with the use in the Supreme Court documents. In 2013, the company was
known as “EllisDon.”
7
See: scc-csc.lexum.com/scc-csc/scc-csc/en/item/1897/index.do, accessed April 2014, for the Supreme Court’s judgment.
8
This figure was some $410,000 lower that the next lowest bid.
This document is authorized for use only by RICHARD THOMPSON in 2020.
For the exclusive use of R. THOMPSON, 2020.
Page 5
9B14D007
The Supreme Court ruled that general contractors have legal obligations to the lowest bidders to perform
the contract and awarded Naylor damages of $365,000 plus costs.
GOLDEN HORSESHOE CONSTRUCTORS
Founded in the 1950s, GHC was a regional construction company located in Ontario’s populous Golden
Horseshoe area. 9 Unlike engineering consulting firms, construction companies did not operate as
professional service firms; however, many employed engineers and performed engineering work. GHC
competed for construction and renovation of office buildings, retail shopping centres, education facilities,
entertainment complexes, public spaces, health-care institutions, hotels and residential structures to which
it offered four different services: general contracting, construction management, design/build and preconstruction. At any given time, GHC typically was working on eight or nine projects, ranging along
time lines from pre-construction to building. The firm employed over 150 people, including
administrative staff, engineers and general labourers. The engineers and administrative staff were paid
fixed salaries, whereas labourers were paid hourly wages.
DAVID STERN
David Stern graduated from a Canadian university engineering program in 1983. While in school, he had
had several co-op placements, all in construction-related positions. Following graduation, Stern worked
for three years for a smaller general contractor, during which time he qualified as a professional engineer
and then joined GHC as a site engineer. Over the years, he also served as a superintendant/project
manager and as an estimator before being promoted to his current role. In 2002, he received Gold Seal
certification from the Canadian Construction Association.10 Stern had developed key contacts within the
industry and had successfully completed many projects.
Stern managed lists of bidders, reviewed submitted bids and handled approvals for all of GHC’s projects.
Exhibit 4 shows excerpts from his job description. Stern had to consider all sub-contractors necessary for
the job and evaluated their bids against each other according to GHC’s bidding guidelines (see Exhibit
5).
THE NORTH YORK CONDOMINIUM PROJECT
GHC was managing a condominium project in North York, a burgeoning area in the north end of
Toronto. It was about to close the tendering for the project; window and door installation was the last
component to be decided. Construction on the job was due to start later in the autumn of 2013. GHC
estimated that the window and door installation portion of the project was worth $4.1 million. Because
the project’s drawings and timeline were essentially complete, GHC was looking for offers that were
9
The unofficially defined Golden Horseshoe region extended westward from the communities east of Toronto to the western
end of Lake Ontario and then eastward onto the Niagara Peninsula. It included several communities north of those along
the lake.
10
The Canadian Construction Association’s (CCA) vision is to build Canada with ethics, skills and responsibility, and its
mission is to be the national voice for the Canadian construction industry. Unlike PEO, CCA does not regulate a profession.
Of the 1.27 million Canadians employed in construction, some 17,000 are CCA members. CCA promotes technical
excellence and education. It certifies qualified members through its Gold Seal Certification program, which it describes as:
“a comprehensive certification program that demonstrates expertise, industry commitment and ensures that practitioners are
ready to meet the demands of construction projects across the country.” More information can be found at the CCA website,
www.cca-acc.com/en/about-cca, accessed April, 2014.
This document is authorized for use only by RICHARD THOMPSON in 2020.
For the exclusive use of R. THOMPSON, 2020.
Page 6
9B14D007
fixed-price, and that requirement had been specified in the request for proposal guidelines. After going
through the tenders, Stern had created a short list of four competitors: Baslow Doors and Windows; Bodo
Windows of Canada; Calver Windows, Doors & Siding; and Monyash Doors and Windows. Exhibit 6
shows the final bids from these firms.
Bodo Windows of Canada
Bodo was a window installation contractor with over 50 years of industry experience. The company had
worked on major projects in the downtown core, including several large entertainment buildings. Bodo
had bonding capabilities and insurance, and it had close ties to the Workplace Safety and Insurance Board
(WSIB). The firm had completed large-scale projects in public spaces; equipment, network and computer
facilities; and offices. Bodo had worked with GHC in the past; its performance had been satisfactory and
on budget. However, that job had been performed in 2002.
Monyash Doors and Windows
Monyash was founded in 1986. Each of the four principals had 20 years experience in the industry.
Monyash had previously completed projects in the residential, commercial, institutional and industrial
sectors, and it specialized in installation of windows and doors. The firm had not worked with GHC in
the past two years, but one of the owners knew Smithson very well and spoke with him regularly.
Baslow Doors and Windows
Founded in 1998, Baslow Doors and Windows was a relatively new window and door installation service
provider with a scattered history. The firm had worked on jobs from $1-million office spaces to $100million casinos. Although Baslow had never worked with GHC, a key contact at a rival window and door
installer with which Stern was familiar had taken over as head of operations at Baslow, giving the firm
some credibility.
Calver Windows, Doors & Siding
Calver was a subsidiary of Construction Mirabel Ltee, a multi-faceted subcontracting company from
Montreal, Quebec, with offerings in drywall, insulation, painting and plaster, on top of its concentrated
window and door installation business. The firm had recently bought Calver, a Toronto window installer
with a staff of 10 people, and was now aggressively trying to expand in Ontario. Although Calver had not
previously worked with GHC, based on the reputation of its newly acquired business, GHC had invited it
to bid.
SMITHSON’S PHONE MESSAGE
On May 7, 2013, when Stern returned from dinner with some clients, he noticed he had received a
voicemail message from his boss, Robert Smithson. It said:
Hey David, it’s Robert. It’s about 7:30 at night on Tuesday. Sorry for calling so late. I just got
off the phone with George over at Monyash. He told me they submitted a bid for the North York
This document is authorized for use only by RICHARD THOMPSON in 2020.
For the exclusive use of R. THOMPSON, 2020.
Page 7
9B14D007
condo project. I looked at the bid summary and noticed they weren’t low, but I think it’s time we
gave them a job. I’d like to work with them more, so why not now? Let me know how it goes
tomorrow morning. See you in the office. Bye.
As Stern turned off his phone, he felt confused and conflicted. He had been leaning towards giving the
job to the lowest bidder, Bodo, but now his direct superior was suggesting something else. It was unusual
for Smithson to become involved with a tendering decision; Stern was normally given autonomy in the
decision-making process. Stern risked straining his relationship with his boss if he selected someone else,
but he was torn about what constituted the right decision. GHC’s request for bids stated that the low
bidder might not necessarily win. Normally, that caveat applied to bidders where a significant difference
in quality between the lowest and second lowest bid was expected. Stern was not convinced that, in this
case, the quality would differ enough to justify potential lawsuits in selecting the more expensive bid.
“I’d better get in early,” he thought to himself.
CONCLUSION
Stern knew he had only a few hours before the rest of the office — and, more importantly, Smithson —
arrived at work. The decision as to which window and door installation subcontractor would win the
condominium bid was important, but so were Stern’s future work prospects. He did not want to upset
Smithson, but he was unsure how the decision would reflect on him, a professional engineer. His
ultimate decision needed to consider which bidder was right for the job, his relationship with Smithson,
his relationships with the subcontractors and what the engineering profession expected of him.
This document is authorized for use only by RICHARD THOMPSON in 2020.
For the exclusive use of R. THOMPSON, 2020.
Page 8
9B14D007
EXHIBIT 1: PEO’S CODE OF ETHICS
Practitioners are bound as an obligation of their licence to practise professional engineering [so as] to comply with
the code of ethics given [below]. The code of ethics is a set of principles and rules that describe the kinds of
professional conduct that are considered appropriate or inappropriate by the profession. Practitioners must apply
these rules in governing all their professional assignments. Decisions and choices made by practitioners must reflect
the values and principles set out in the code.
1. It is the duty of a practitioner to the public, to the practitioner’s employer, to the practitioner’s clients, to other
members of the practitioner’s profession, and to the practitioner to act at all times with,
i. fairness and loyalty to the practitioner’s associates, employers, clients, subordinates and employees,
ii. fidelity to public needs,
iii. devotion to high ideals of personal honour and professional integrity,
iv. knowledge of developments in the area of professional engineering relevant to any services that are
undertaken, and
v. competence in the performance of any professional engineering services that are undertaken.
2. A practitioner shall,
i. regard the practitioner’s duty to public welfare as paramount,
ii. endeavour at all times to enhance the public regard for the practitioner’s profession by extending the
public knowledge thereof and discouraging untrue, unfair or exaggerated statements with respect to
professional engineering,
iii. not express publicly, or while the practitioner is serving as a witness before a court, commission or other
tribunal, opinions on professional engineering matters that are not founded on adequate knowledge and
honest conviction,
iv. endeavour to keep the practitioner’s licence, temporary licence, provisional licence, limited licence or
certificate of authorization, as the case may be, permanently displayed in the practitioner’s place of
business.
3. A practitioner shall act in professional engineering matters for each employer as a faithful agent or trustee and
shall regard as confidential information obtained by the practitioner as to the business affairs, technical methods
or processes of an employer and avoid or disclose a conflict of interest that might influence the practitioner’s
actions or judgment.
4. A practitioner must disclose immediately to the practitioner’s client any interest, direct or indirect, that might be
construed as prejudicial in any way to the professional judgment of the practitioner in rendering service to the
client.
5. A practitioner who is an employee-engineer and is contracting in the practitioner’s own name to perform
professional engineering work for other than the practitioner’s employer, must provide the practitioner’s client
with a written statement of the nature of the practitioner’s status as an employee and the attendant limitations on
the practitioner’s services to the client, must satisfy the practitioner that the work will not conflict with the
practitioner’s duty to the practitioner’s employer, and must inform the practitioner’s employer of the work.
6. A practitioner must co-operate in working with other professionals engaged on a project.
This document is authorized for use only by RICHARD THOMPSON in 2020.
For the exclusive use of R. THOMPSON, 2020.
Page 9
9B14D007
EXHIBIT 1 (CONTINUED)
7. A practitioner shall,
i. act towards other practitioners with courtesy and good faith,
ii. not accept an engagement to review the work of another practitioner for the same employer except with the
knowledge of the other practitioner or except where the connection of the other practitioner with the work has
been terminated,
iii. not maliciously injure the reputation or business of another practitioner,
iv. not attempt to gain an advantage over other practitioners by paying or accepting a commission in securing
professional engineering work, and
v. give proper credit for engineering work, uphold the principle of adequate compensation for engineering
work, provide opportunity for professional development and advancement of the practitioner’s associates and
subordinates, and extend the effectiveness of the profession through the interchange of engineering
information and experience.
8. A practitioner shall maintain the honour and integrity of the practitioner’s profession and without fear or favour
expose before the proper tribunals unprofessional, dishonest or unethical conduct by any other practitioner.
Source: www.peo.on.ca, accessed April 2014.
This document is authorized for use only by RICHARD THOMPSON in 2020.
For the exclusive use of R. THOMPSON, 2020.
Page 10
9B14D007
EXHIBIT 2: PEO’S CODE OF PRACTICE
Practitioners should be familiar with all aspects of the Professional Engineers Act and its regulations. The sections
provided in this guideline have particular relevance to professional practice. Section 27 of the Professional Engineers
Act gives the Discipline Committee the authority to hear and determine allegations of professional misconduct or
incompetence against a practitioner. The following section of O. Reg. 941/90 identifies those actions or omissions by
a practitioner that can be used as the grounds for a discipline case by the association.
(1) In this section,
“Harassment” means engaging in a course of vexatious comment or conduct that is known or ought reasonably
to be known as unwelcome and that might reasonably be regarded as interfering in a professional engineering
relationship;
“Negligence” means an act or an omission in the carrying out of the work of a practitioner that constitutes a
failure to maintain the standards that a reasonable and prudent practitioner would maintain in the
circumstances.
(2). For the purposes of the Act and this Regulation, “professional misconduct” means,
(a) negligence,
(b) failure to make reasonable provision for the safeguarding of life, health or property of a person who may be
affected by the work for which the practitioner is responsible,
(c) failure to act to correct or report a situation that the practitioner believes may endanger the safety or the
welfare of the public,
(d) failure to make responsible provision for complying with applicable statutes, regulations, standards, codes,
by-laws and rules in connection with work being undertaken by or under the responsibility of the practitioner,
(e) signing or sealing a final drawing, specification, plan, report or other document not actually prepared or
checked by the practitioner,
(f) failure of a practitioner to present clearly to the practitioner’s employer the consequences to be expected
from a deviation proposed in work, if the professional engineering judgment of the practitioner is overruled
by non-technical authority in cases where the practitioner is responsible for the technical adequacy of
professional engineering work,
(g) breach of the Act or regulations, other than an action that is solely a breach of the code of ethics,
(h) undertaking work the practitioner is not competent to perform by virtue of the practitioner’s training and
experience,
(i) failure to make prompt, voluntary and complete disclosure of an interest, direct or indirect, that might in any
way be, or be construed as, prejudicial to the professional judgment of the practitioner in rendering service to
the public, to an employer or to a client, and in particular, without limiting the generality of the foregoing,
carrying out any of the following acts without making such a prior disclosure:
i. Accepting compensation in any form for a particular service from more than one party.
ii. Submitting a tender or acting as a contractor in respect of work upon which the practitioner may be
performing as a professional engineer.
iii. Participating in the supply of material or equipment to be used by the employer or client of the
practitioner.
iv. Contracting in the practitioner’s own right to perform professional engineering services for other than the
practitioner’s employer.
v. Expressing opinions or making statements concerning matters within the practice of professional
engineering of public interest where the opinions or statements are inspired or paid for by other interests,
(j) conduct or an act relevant to the practice of professional engineering that, having regard to all the
circumstances, would reasonably be regarded by the engineering profession as disgraceful, dishonourable
or unprofessional,
(k) failure by a practitioner to abide by the terms, conditions or limitations of the practitioner’s licence,
provisional licence, limited licence, temporary licence or certificate,
(l) failure to supply documents or information requested by an investigator acting under section 33 of the Act,
(m) permitting, counselling or assisting a person who is not a practitioner to engage in the practice of
professional engineering except as provided for in the Act or the regulations,
(n) harassment.
Source: www.peo.on.ca, accessed April 2014. Also available at www.e-laws.gov.on.ca/html/regs/english/elaws_regs_900941,
accessed June 2014. The relevant section in this second source is Section 72.
This document is authorized for use only by RICHARD THOMPSON in 2020.
For the exclusive use of R. THOMPSON, 2020.
Page 11
9B14D007
EXHIBIT 3: CONSTRUCTION INDUSTRY PROCESS FLOW CHART
Owner
(Without PM
Resources)
Owner (With
PM Resources)
Architect
Other
Engineering
Consultants
Project
Manager
Other
Engineering
Consultants
General
Contractor
General
Contractor
Sub Trades
Contractors
Sub Trades
Contractors
EXHIBIT 4: EXCERPTS FROM JOB DESCRIPTION OF THE VICE-PRESIDENT PURCHASING
Risk
management
Oversees the establishment of and monitors procedures and systems for effective control
of all purchasing and contracts for the Company. Possesses strong grasp of changing
market and financial conditions. Makes good decisions based upon a mixture of analysis,
wisdom, experience and judgment; most of his/her solutions and suggestions turn out to be
correct and accurate when judged over time; sought out by others for advice and solutions.
Business
acumen
Knows how the business works; knowledgeable in current and possible future policies,
practices, trends, technology, and information affecting the business and organization;
knows the competition; is aware of how strategies and tactics work in the marketplace.
Strategic
agility
Sees ahead clearly; can anticipate future consequences and trends accurately; has broad
knowledge and perspective; is future oriented; can articulately paint credible pictures and
visions of possibilities and likelihoods; can create competitive and breakthrough strategies
and plans.
Planning
Accurately scopes out length and difficulty of tasks and projects; sets objectives and goals;
breaks down work into the process steps; develops schedules and task/people assignments;
anticipates and adjusts for problems and roadblocks; measures performance against goals;
evaluates results.
Source: Company files.
This document is authorized for use only by RICHARD THOMPSON in 2020.
For the exclusive use of R. THOMPSON, 2020.
Page 12
9B14D007
EXHIBIT 5: EXCERPTS FROM GHC’S BIDDING GUIDELINES
Condominium Building
North York
INSTRUCTIONS TO
BIDDERS
BID PACKAGE NO. 1 – Windows & Doors
Date: April 20th, 2013
1. Award
The Construction Manager/Contractor and the Owner reserve the right to reject any or all bids. The
lowest bid will not necessarily be accepted. The invitation to bid does not constitute an offer by the
Construction Manager/Contractor to enter into a subcontract. The Subcontract form will be CCA-1, 2013
with Supplementary General Conditions. Contract award is contingent upon approval by the Owner with
respect to the allowable budget.
2. Bid Acceptance
It shall be understood by all Bidders, that the Bid shall be valid and subject to acceptance by the
Construction Manager/Contractor and the Owner, and that no adjustments shall be made to the Bid
amounts for a period of up to and including sixty (60) days from the date of closing of the Bid.
The Construction Manager/Contractor and Owner reserve the right to determine the successful bidder by
any combination of base bid, requested alternate prices, voluntary alternate prices and adherence to CM
schedule provided in the tender. The Construction Manager/Contractor and the Owner are not obligated to
select the Bid with the lowest price and may cancel a Bid prior to award without liability.
The successful bidder shall be required to enter into a formal subcontract with GHC acting as the
Construction Manager/Contractor, which will include the terms and conditions of the Instructions to
Bidders, and Bid Form and all other documents.
Source: Company files.
This document is authorized for use only by RICHARD THOMPSON in 2020.
For the exclusive use of R. THOMPSON, 2020.
Page 13
9B14D007
EXHIBIT 6: DOOR AND WINDOW INSTALLATION BIDS FOR GHC’S NORTH YORK CONDOMINUM
PROJECT
Baslow Doors and Windows
$4,100,000
Qualification: gauge measurements are not
standard
Bodo Windows of Canada
3,950,000
Qualification: window heights are not standard
and seem not to match some specifications in
the main hall design
Calver Windows, Doors & Siding
4,150,000
Excludes scaffolding
Monyash Doors and Windows
4,050,000
Source: Company files.
This document is authorized for use only by RICHARD THOMPSON in 2020.
DUE DATE
DESCRIPTION
This assignment is the analysis of the Richard Ivey School of Business Foundation (“Ivey
Publishing”) “David Stern’s Decision” case study via a set of predetermined questions.
REQUIREMENTS
You are to review the attached Ivey Publishing Case Study No. W14244 “David Stern’s
Decision” (attached as a separate file) as follows:
At 6:06 AM on My 8, 2013, Golden Horseshoe Contractors (CHC’s) head office in Mississauga,
Ontario, Canada, was understandable empty and very quiet when David Stern, P.Eng., VicePresident of Purchasing, settled at his desk. Stern was reviewing bids for an upcoming
condominium project and had to decide which window and door installation firm to recommend
for that portion of the job. GHC’s President, Robert Smithson, was expecting Stern’s decision
first thing that morning. Just a day earlier, Smithson had strongly suggested that the work be
given to Monyash Doors and Windows, a firm that had not submitted the lowest bid. In practice,
all else being equal, the firm with the lowest priced bid would win the contract. Stern was
unsure how to proceed with the request and which of the four bids he should recommend.
Based on your review and analysis of this case study, prepare a response to the following
questions:
1. Review the attached American Association of Cost Engineers (AACE International)
Canons of Ethics (“Code of Ethics”). What is included? What is excluded? How is
the “Code” enforced? Does the “Code” give you faith in the trustworthiness of the
profession and its practitioners? Would you recommend any changes to the code?
Think about these questions from various points of view: A prospective
professional, a professional (junior and senior), a manager of a firm in the
profession, the executive director of the profession, a client, a member of the public.
(Approximately 1½ to 2- pages)
2. As David Stern, which door and window installation supplier would you choose?
Why? Justify your selection. (Approximately 1-page)
3. How would you present your choice to Robert Smithson? (Approximately 1-page)
4. As Robert Smithson, assume you have received a recommendation from David
Stern to accept Bodo’s bid. What would you do, and how would you do it? Why?
Explain your actions. (Approximately 1-page)
5. Assume that Stern and GHC chose Monyash. As a member of PEO’s complaints
committee, how would you respond to a complaint against David Stern and GHC
for this choice? Why? (Approximately 1-page)
Note: It is best to use the questions as headings and an outline to your work.
EVALUATION
Criteria for the individual portion of the assignment will include elements such as:
Completion of all aspects of the assignment.
Depth of analysis (covering the major course aspects and case study issues).
Writing clarity, organization, conciseness, and grammar.
SUBMISSION
The case study assignment is to be typewritten. Begin each question on a new page.
Purchase answer to see full
attachment