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Construction ethics.

Have you ever met a general contractor who did not claim to be ethical and honest? Yet they can always identify other general contractors in their market who are less than ethical. So, which is it? Are general contractors trustworthy?

Construction industry ethics has increasingly come under fire. Investigative journalists reveal "shark" contractors feeding on trusting people. Opinion polls list building contractors near the bottom of the public's trust.

I'll share my perspective on Arkansas construction ethics, focusing on commercial general contractors whose job site signs you most often see and who most likely built the buildings where you work, worship or recreate.

I'm proud of the old-line Arkansas contractors. Compared with other construction markets in the United States, the level of ethics practiced in Arkansas is superb. In most large cities, construction is a dog-eat-dog business where the growth industry is job site construction lawsuits. Why is Arkansas different?

The state's construction market is something of an island - immune to ethics practiced by big-city "shark" contractors. The Arkansas market has been relatively stable in terms of workload. We haven't endured the dramatic downturns that cause contractors to scratch and claw for survival.

I believe Arkansas construction ethics are dictated by the senior managers of the established general contractors. Sure, we all compete for projects in an industry where supply outstrips demand. However, there is a great amount of respect among the dominant contractors and a fierce pride in our standards of ethics. Many are second-generation firms that still practice the old-fashioned integrity of their founders, where a person's word was more important than monetary gain and contracts were based on handshakes and trust.

Arkansas architects and engineers deserve credit. They, too, are dominated by established and professional firms and steer their clients to ethical contractors.

But I worry about the future of the Arkansas construction industry. The world is shrinking, new competitors are entering the market and some of the established general contractors are dying off. Increasingly, purchasers of construction services, both owners and contractors, adhere to a variant of the Golden Rule: He who has the gold makes the rules.

Bid Shopping

A typical building program is largely constructed by specialty contractors (e.g. mechanical, electrical, roofing) employed by the general contractor. The GC purchases those services and manages job site production. Thus, specialty contractors are lower on the food chain and suffer most from what we consider unethical bid shopping practices.

It's sometimes difficult for purchasers of construction services, and the general public, to understand why bid shopping is "fool's gold." A building program is not a commodity, the same as buying a bucket of bolts. You don't get something for nothing.

Bid shopping has polarized the construction industry, most notably in the major construction markets. There are general contractors serving the public-sector market (where price alone determines contract award) who make bid shopping an art form. It doesn't take brains to shop bids, just a willingness to bloody your hands.

At the other pole are professional GCs with a high degree of purchasing ethics. They cater primarily to the private sector, where "building value and service" are given considerable weight.

I believe purchasers of construction services are better served by professional general contractors who buy smart and work hard but who do not engage in bid shopping. Bid shopping general contractors are like shooting stars: They blaze for a brief moment, then disappear. Their job sites are like a pack of snarling dogs, as subcontractors scrap over change orders. Schedule delays and poor workmanship are the norm.

In 1990 the Arkansas chapters of four industry trade groups joined together, to produce a statement of "Ethics of Fair Bidding for Construction." This state-meat provides guidelines for purchasing construction services and has received national circulation. You can receive a copy by contacting the local chapter of the Associated General Contractors, the American Subcontractors Association, the Associated Builders and Contractors, or the American Society of Professional Estimators.

The quality of Arkansas buildings and the performance of the state's general contractors and specialty contractors deserve accolades.

Dan Nabholz is chief executive officer of Nabholz Construction Corp., based in Conway. The 48-year-old firm is ranked as the 148th largest general contractor in the country.
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Author:Nabholz, Dan
Publication:Arkansas Business
Date:Mar 17, 1997
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