SCENARIO An engineer contacts ASCE’s ethics hotline for help with a question. His firm is engaged in contract negotiations with a prospective client who is concerned about the impact delays might have on the prospective client’s business and financial needs. To alleviate those concerns, the prospective client has proposed a payment plan that includes a series of financial incentives and disincentives based on the ability of the engineer’s firm to meet deadlines for critical milestones.
Under the terms of the arrangement, the firm’s compensation would be reduced by a certain amount for each day that completion of a project milestone falls short of the expected deadline and increased for each day that milestones are achieved ahead of schedule.
While the engineer’s firm is eager to secure this otherwise enticing piece of business, the engineer has never encountered a contract with payments contingent upon the timing of his services. He has contacted ASCE to seek confirmation that it would not be unethical for him to accept an agreement on such terms.
QUESTION Would the member’s acceptance of a contract with payment amounts contingent upon the dates of completion for project milestones violate the ASCE Code of Ethics?
DISCUSSION At the time this question was posed to ASCE’s ethics hotline, Guideline c under Fundamental Canon 5 under the prior Code of Ethics read: “Engineers may request, propose, or accept professional commissions on a contingent basis only under circumstances in which their professional judgments would not be compromised.”
While the placement of this guideline under the canon on unfair competition might seem to suggest concern about the impact of such arrangements on the engineering marketplace, this guideline’s emphasis on engineering judgment makes clear that its true focus is the effect of contingency fees on an engineer’s adherence to other ethical principles — including the commitment to preserve public safety, render objective and truthful service, and act with integrity (as expressed in the old code’s Fundamental Canons 1, 3, and 6).
With this in mind, an analysis of how the engineer’s concern fares under the prior Code of Ethics begins by examining what types of contingency fees are most likely to impede an engineer’s commitment to safety, truthfulness, and integrity. One clear example of a compromising fee structure would be a payment based on reaching a predetermined engineering conclusion, such as delivery of a favorable feasibility study or quality-control report.
Similarly, a contingency fee might be ethically questionable if it rewards or penalizes an engineer based on the outcome of the engineer’s professional judgment, for example, an engineer reviewing storm damage claims who receives a cut of the insurer’s savings from denied or reduced claims.
Lastly, a contingency fee might raise concerns if it ties the amount of compensation too closely to the client’s financial interests, as might be the case for an expert witness whose payment is set as a percentage of the plaintiff’s recovery.
In contrast to these examples, the contingency fee described by the ASCE member does not represent any clear threat to the engineer’s objectivity. While the scheme of incentives and disincentives might certainly affect decisions such as the allocation of time and resources to the project, the contingency fee is neutral as to the engineering aspects of the performance; there is nothing in the arrangement that is inherently designed to influence the member’s truthful application of his engineering knowledge, judgment, or analysis.
Based on this analysis, the advice from ASCE’s hotline was that this transaction was not the type of contingency fee contemplated in Guideline c of Canon 5, meaning the code would not preclude him from accepting a contract of this nature.
Perhaps the most visible change in the new Code of Ethics, approved by ASCE’s Board of Direction in October 2020, is its dramatic reduction in size. At roughly 700 words, the new code is less than one-third the length of its prior iteration. Designed to serve as a leaner, more readable guide for engineering professionals, the new code forgoes the prior code’s model of listing specific instructions for specific conditions in favor of high-level, more broadly applicable principles.
One casualty of this streamlined new code is the prior code’s language on contingency fees. In fact, the new Code of Ethics makes no reference to engineering fees of any sort. In its place is the simple guidance from Section 4a that engineers “act as faithful agents of their clients and employers with integrity and professionalism.”
The phrase “with integrity and professionalism” was inserted by the code’s drafters to set a boundary on the ethical duty to serve as “faithful agents;” it signifies that engineers cannot practice blind loyalty to clients or employers but must instead balance that duty against higher obligations to society and the profession.
With nothing in the new code that directly addresses contingency fees, it is fair to question whether the advice given to the member in this case would change when viewed under the current code. One possible school of thought is that nothing has changed; despite the lack of express language, contingency fees still create the same concerns about their effect on an engineer’s ability to render service to clients and employers with integrity and professionalism.
A more probable reading, however, is that the new code reflects a change in emphasis from the ethical rightness of any particular fee structure to the behavior of the engineer operating under those terms. It goes without saying that an engineer’s judgment can be compromised under any contractual arrangement and, conversely, that an engineer can act ethically even under threat of significant financial loss.
Under the current code, therefore, an engineer who is tempted to cut corners on safety must be mindful of Section 1a’s obligation to “first and foremost, protect the health, safety, and welfare of the public.” A professional asked to prepare a misleading or untruthful report should be guided by Section 1c’s directive to “express professional opinions truthfully and only when founded on adequate knowledge and honest conviction.”
And a member pressured to take part in fraudulent or unlawful behavior must heed Section 3a’s instruction to “uphold the honor, integrity, and dignity of the profession.” Whether the pressures in such a case arose from a contingency fee or some other incentive is largely immaterial to the engineer’s duty to adhere to the ethical principles of safety, objectivity, and integrity.
Accordingly, if a similar question were brought to ASCE’s ethics hotline today, the advice given would note that contingency payments are not precluded by the current Code of Ethics. Instead, the member would be encouraged to examine his own level of comfort with the payment terms. If the engineer was confident that the fee structure would not impact his ability to perform services with integrity and professionalism, then it would be ethically clear for him to proceed.
If instead he believed the arrangement might place an unmanageable level of pressure on his performance, then the wiser course of action would be to decline this arrangement.
This article first appeared in the May/June 2021 issue of Civil Engineering.