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Legal and Ethical Concerns in Construction Industry

The construction industry, just like most other industries, relies on adherence to ethical and legal guidelines to thrive. The interaction and operations of contractors, developers, and partners are regulated across different states to ensure they adhere to the set ethical standards. Unethical activities in the construction industry predispose workers and future residents to life-threatening risks. One such occurrence in the construction industry in Florida is the Florida condo complex. Therefore, ethical considerations in building and construction projects are meant to ensure the safety of construction workers, occupants of the structures, and the general public. The construction industry, however, records some of the highest ethical and legal issues in the united states. The high rates of unethical activities in the construction industry may be attributed to the vast amounts of revenue generated by most projects. This makes it an enticing target for fraudulent contractors and managers. The competitive nature of the construction industry has also been associated with increasing cases of unethical activities. Studies indicate that many construction professionals have been involved in or encountered corrupt practices. This paper will review common ethical concerns in the construction industry and outline recommendations for actions that contractors and subcontractors should take against unethical activities based on the information provided in the presented scenario.

Ethical issues in the construction industry may assume several forms that may be classified into licensing issues, bid shopping, unreliable contractors, bribery, payment issues, construction claims, and safety issues, among others. Unethical practices may also occur across different levels, including the government, business, and the individual level. The construction management association of America (CMAA) stipulates the obligations of the professionals, the clients, and the public to ensure that building projects are conducted with maximum adherence to the code of ethics. Over the past several decades, significant highlights in the construction industry have involved a long history of severe losses and damages due to unethical practices in construction projects. Studies on some of these construction disasters indicate that most construction professionals were aware of the ethical misconduct involved in the building, legal, and business processes. The information provided in the excerpt presents several ethical issues experienced in the construction industry.

During the bidding procedure, bid rigging happens. It entails any category of price fixing or collusion between many potential contractors and subcontractors. This type of construction fraud happens when agreements are granted through competitive bidding. When bidders help organize ahead of time, or if the bidding is muddied in a certain way, it diminishes the entire procedure and is illegal. If people maintain the existing occurrences, know that bid-rigging strategies frequently entail public officials. A competitive bidding procedure aims for the holder to receive the most significant at best possible price. Bid rigging in any form undermines this result. They usually artificially raise the contractor’s profitability and the expense to the holder. In the particular instance of a publicly funded entity, renovation costs would reduce spending on other district objectives.

Bid rigging is prohibited in the United States. It is an example of anti-competitive behavior which infringes the Sherman Act (Hovenkamp, 2005). The Department of Justice enforces this 1980 legislation, and breaches are criminal offenses jailable by penalties of up to $100 million for companies and charges of up to $1 million or ten years in jail for people. Despite the lack of a formal documented contract to collude, the Department of Justice can penalize an individual or organization for bid rigging. They can instead rely on specific findings like proof of suspicious bid trends, travel and expenditure reviews, phone records, and corporate diary entries.

The first issue is the employment of an unlicensed construction manager. Licensure is a process that ensures construction professionals have attained the necessary knowledge and are experienced to make decisions and offer services in a construction project (Marson et al.,2010). There are several types of licenses required from contractors and construction companies. Although these license requirements vary across different states, most construction projects will require certification or licensure before the construction is permitted. Contractor and construction permits and licensure are guaranteed to assure prospective clients of the credibility and qualification of the entity’s ability to conduct the project safely and ethically. Contractor and manager licensure also represents the individual’s compliance with ethical considerations and local building regulations. For instance, in the case presented, the New Tork developer’s move to hire an unlicensed construction manager is against the ethical requirement.

In the united states and most other countries, contractors and construction companies must obtain licenses and permits from the local construction authorities. This implies that licenses and permits from one state may not be used to certify a contractor or construction project in a different state. However, a few states allow the transfer of permits or certification under specified conditions. For instance, in California, contractors are only required to obtain local licensure or permits if the subject project cost exceeds $500. New York requires contractors and construction managers to carry licenses only in specified cities.

The developer’s intention to retain the design professionals from New York to oversee the construction project in the state of Florida is also an unethical practice. Many states issue general requirements, whereas others need licenses concerning the specialty or type of construction project. For instance, roofers, drywallers, and electricians may be required to obtain licenses or permits from industry associations to operate within the specified jurisdiction. The associations involved in the construction specialties often ensure the qualification of construction professionals through examinations in their specialties. Licensure is, therefore, an assuring method of ensuring that contractors are equipped with the knowledge and attain the ethical standards for construction projects. The developer should check the law provisions concerning construction projects in Florida.

Contractor adherence and monitoring are critical for building owners and facility managers because non-compliant contractors can introduce a company to liability and fiscal risk. These risks significantly rise if contractors do not accomplish the required safety coaching (Okoye et al.,2016), which can lead to accidents which outcome are injuries or even death. Contractors bear a great deal of accountability. If they are not compliant, the individual or company that recruited them takes the utmost responsibility. All companies should be licensed and dependable, convey the necessary insurance, pay their subcontractors legally, and help safeguard their recruiter or organization from unnecessary liability by adhering to contractor regulatory requirements.

Without good contractor planning and supervising, organizations risk hiring contractors who do not retain a relatively secure work environment, are not current on the latest safety restrictions, do not carry sufficient liability insurance, are not knowledgeable in the specific nature of the work they are performing and do not achieve satisfactorily, code-compliant (Jha & Iyer, 2006). All of these challenges may pose a threat to the facility’s personnel. Contractors who obey laws and have sufficient insurance can aid a company economically and legally. This protects not only the organization but also the guests and other employees on the site. If construction attempts do not go as planned, compliant contractors ought to be able to accept liability and enforce quick recourse on the group’s behalf.

The lawful ramifications of failing to employ a licensed contractor immediately fall on the employer. Employers are eventually responsible if the contractors do not keep a safe location, are not in adherence to specifically risky initiatives, or underperform in paying their subcontractors’ wages. Insurance plans and potential repercussions will be deferred and fall back on the employer. As an owner or managers, they are responsible for ensuring the safety of all people in the facilities, such as workers, customers, subcontractors, and guests. If legal action is taken due to noncompliance by the contractors, the organization must bear the strain of this responsibility.

Contractors should be familiar with the health and safety requisites required to retain their job and work locations up to standards. Health and safety training helps to avoid lawsuits, poor craftsmanship, and additional costs. Non-compliant contractors jeopardize the agreement tasks. If your contractor is not qualified to do the job, you may be held legally responsible for any problems resulting from poor achievement. Noncompliance can also result in poor work quality, causing a higher cost to perform a task comfortably.

Contractors should be familiar with the health and safety regulations required to maintain their tasks and work locations up to specification. (Akanmu et al.,2014) Health and security instruction assists in avoiding lawsuits, poor artistry, and additional costs. Non-compliant builders jeopardize the work under the agreement. If your contractor is unfit for the job, you may be held accountable for any problems resulting from poor achievement. Non – compliance can also result in poor worker performance, which increases the cost of completing work securely.

In everyday daily existence and industry, ethics plays a role in our choices. Workplace ethics are essential for sustainable livelihood at work, hiring procedures, employee treatment, and worker compensation. While much of this will be done directly from state regulations or laws governing these topics, a business with good moral standards would prioritize these as guidelines, not just as a mandatory mandate. Doing the right thing is equated with ethics, and ethical practices are no exception.

Consequently, sound workplace principles are frequently linked with integrity and dependability. Ethical strategies are satisfying in much more aspects than one, as the corporation benefits from a reputation for being an honest corporation. A corporation that regards its employees well will have higher staff engagement levels than a corporation that does not practice appropriate workplace intervention. Workers will also praise the industry, and word-of-mouth hiring will result in more applications, whereas businesses with questionable morals will eventually receive fewer recommendations. Though not presently required, numerous construction businesses choose to create a code of conduct on their own. This is a collection of fundamentals that a company agrees to follow and is linked to the industry’s ethics and principles. Guidelines for a suitable place of work behavior and behaviors deemed misconduct are two instances of ethics in building projects that a company may choose to integrate into its code of conduct and, therefore, not tolerated in the workplace.

A code of behavior for a construction firm indicates that the corporation values good place of work practices and values. Organizations that accept these actions should be regarded as heading above and beyond what is needed to advocate for ethical business procedures, even though it is not a legal requirement. A code of conduct for a construction firm will typically revolve around a core set of sound principles or beliefs. Integrity, decency, kindness, equity, and respect are frequently mentioned. This is what the firm values and expects from its employees and what it encourages to prospective customers. Implementing this type of code of conduct is what will assist a corporation stand out and earn a reputation for being socially responsible. Construction businesses that commit to implementing ethics in their procedures will stand out against contenders in a company known for unethical behavior. Training can help to raise understanding of what constitutes fraudulent or unethical behavior.

Several factors promote unethical behaviors in the construction industry from the standpoint of the client/owner, unlawful acts, pressure on the project manager, and delays. Payment methods and corruption are also important aspects that influence unethical procedures. Whereas underbidding, bid cutting, bid shopping, and bid rigging are significant contributors to unethical procedures from the contractor’s perspective, lack of guidance, surveillance, and accepting bribes from contractors are identified to be motivating factors for unethical behavior in the building sector from the consultant’s perspective. There is rising consent within and outside of the construction industry of how corruption and other fraudulent activities are widespread. Ethics concerns in construction companies should be regarded as necessary; this will help to dispel the notion that such concerns are unimportant to the construction sector. There are two claims for the implication that professional, ethical problems in the contemporary universe are not primarily due to a lack of information. The first is that in the informal conversation among victims of unethical behavior and professional actors, the alleged specialist rarely requires the firm role that there are no expert ethical obligations.

Construction ethics assessments and theories have been proposed to investigate how the construction industry handles ethical behaviors. People in the construction industry, such as architects, consultants even managers, have encountered unethical behavior. Therefore, the industry needs to put more effort into minimizing unethical behavior. Construction workers engage in investments with unethical contractors since they do not have an option. Many employees recognize that the contractor is ethical or unethical after the task has already been initiated. It is clear that most companies do not prioritize construction ethics, which ends up ruining their reputation. The connection between owners, general contractors, and subcontractors is one issue that presents a risk in the construction field. Subcontractors at the lesser tiers of the industry believe they are exposed to unethical actions more than any other group. In most cases, vendors hold back transactions for subcontractors despite receiving payment on time, causing a schism among them.

Another concern that the sector is dealing with is bid shopping. This usually happens when the solicited bids are disclosed to persuade the contractors to lower their rates. This generates a division between the owners and the construction companies since what the contractor sees as unethical is not seen as such by the owners. The organization should be ready to avoid this problem by consulting on delivery methods such as design-build and projects. To mitigate unethical behavior, all parties involved’s relationships should be reinforced to work as a team. The concern of reverse auctions is highly contentious in the construction field. Some see this as another form of bid shopping, while others, such as the owners, see it as beneficial. This ought to be thoroughly investigated to resolve the challenges of dishonesty.

Another issue that jeopardizes construction ethics is overbilling. Subcontractors may believe that the companies and contractors withholding funds are causing problems (Shah & Alotaibi, 2018). Numerous experts in this sector recommend contractors, particularly subcontractors, to underbid the initiative even if they obtain finances on time. This is because if they do not unbalance the bid, the distinction between the cash given out and the money gained in a venture could be massive and thus go unremarked, even though most accounting processes do not detect this error. In this situation, they may discover financing workforce and other costs while not being paid on time.

Unethical attitude in the construction sector also impacts the cost of construction initiatives (Foster, 2020). This is primarily due to funds being lost throughout the task due to unethical conduct, which would have significantly improved the business ‘ reputation. Organizations that want to enhance their ethical policies should start at the pinnacle with well-defined concepts supported by top management. Policies also must be implemented with a perception in mind, with incentives offered to individuals who do not violate the code of ethics and punitive for morally wrong practices. Most importantly, there is no guard from price fixing. The Justice Department’s documentation asserts that conducting it, even for a good reason, like trying to develop reasonable pricing, is improper. Most importantly, there is no guard from price fixing. The Justice Department’s documentation asserts that conducting it, even for a good reason, like trying to develop reasonable pricing, is improper.

Construction fraud appears to be more prevalent than in other sectors. A typical project will have numerous project participants and numerous moving parts (Graafland & Liedekerke, 2011). All construction funding and the overall payment process are in disarray. Besides, interaction and transparency are virtually non-existent on many construction sites. Furthermore, unrestricted aspects of fraud can occur at any point throughout a construction task. However, detecting fraud or developing efficacious methods of minimizing it is unattainable without recognizing the most prevalent kinds of fraud and how to recognize them before they become late.

Preventive measures based on several approaches and interventions of unethical behavior identified by respondents regarding profitability ought to increase employee benefits and, if possible, offer additional shares from the overall profit, as these will keep them satisfied in terms of financial aspects. A fair evaluation of workers will change their behavior and enhance their ethical standards, allowing them to remain ethical throughout their professional procedures. Bid rigging is a never-ending battle. One way to prohibit market deception is to encourage a diversified bidding stream. This ensures that the bidding construction companies effectively compete and submit marketable bids. The bid procurement unit ought to be trained about the possibility of bid rigging and be on the lookout for red flags that suggest bid rigging is taking place. They should maintain reliable communication with all bidders throughout the procedure to ensure that information is as straightforward as possible.


Akanmu, A., Anumba, C., & Messner, J. (2014). A critical review of approaches to integrating virtual models and the physical construction. International Journal of Construction Management14(4), 267-282.

Foster, S. R. (2020). Management Strategies for Improving Construction Industry Ethics (Doctoral dissertation, Walden University).

Graafland, J., & Liedekerke, L. V. (2011). Construction fraud. In European Business Ethics Casebook (pp. 159-177). Springer, Dordrecht.

Hovenkamp, H. (2005). Exclusion and Sherman Act. U. Chi. L. Rev.72, 147.

Jha, K. N., & Iyer, K. C. (2006). Critical factors are affecting quality performance in construction projects. Total Quality Management and Business Excellence17(9), 1155-1170.

Marson, S. M., DeAngelis, D., & Mittal, N. (2010). The Association of Social Work Boards’ licensure examinations: A review of reliability and validity processes. Research on Social Work Practice20(1), 87-99.

Okoye, P. U., Ezeokonkwo, J. U., & Ezeokoli, F. O. (2016). Building construction workers’ health and safety knowledge and compliance on site. Journal of Safety Engineering5(1), 17-26.

Shah, R. K., & Alotaibi, M. (2018). A study of unethical practices in the construction industry and potential preventive measures. Journal of Advanced College of Engineering and Management3, 55-77.


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