APPLIEDSCIENCE450

ProfessionalEngineeringPractice
ConflictsofInterestandSelfInterest
W.ScottDunbarPhD,PEng

Todaystopics
Conflictofinterest thedefinition
someexamples
whatAPEGBCandotherprofessionalassociationshavetosay
aboutconflictsofinterest

Theroleofselfinterestinconflictsofinterest
selfinterestinaction
automaticversuscontrolledmentalprocesses

Theeffectofdisclosureofaconflictofinterest
Aproblemtothinkabout
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ConflictofInterest
Asituationinwhichaprofessionalhasaspecialinterestthat
influencestheobjectiveexerciseofprofessionalduties
Aprofessional

Special
interest

Professional
duties
symbolforaCoI
3

ConflictofInterest
A more precise definition of a conflict of interest:
A conflict of interest is a situation in which some person P (whether an individual or
corporate body) stands in a certain relation to one or more decisions. On the standard view,
P has a conflict of interest if, and only if,
1) P is in a relationship with another requiring P to exercise judgment in the other's behalf,
and
2) P has a (special) interest tending to interfere with the proper exercise of judgment in
that relationship.
The kind of exercise of judgment required for a conflict of interest must involve P's having
considerable latitude and discretion in acting on behalf of the other party. The kind of
"interest" that satisfies condition 2 is any influence, loyalty, concern, emotion, or other
feature of a situation tending to make P's judgment (in that situation) less reliable than it
would normally be, short of P becoming incompetent.
Source: Davis M and Stark A, 2001. Conflict of Interest in the Professions. Oxford University
Press
4

Theusualspecialinterests
Selfinterest

job
careergoals
financial
reputation

Financialrelationshipswithfamilyorfriends
Loyaltytoagroup
Emotionalconnection
Anythingthatrendersaprofessionalsjudgementless
reliablethanitwouldbeotherwise
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Professionalduties
Dutyofcareandstandardofcare
Maintainconfidentiality
Impartiality
e.g.,indecisions,evaluations,anddesignchoices

Fiduciaryduties
dutyarisingoutofspecialrelationshipoftrust

Thirdpartieswhomayrelyonyouradviceorjudgment

ItisimportanttoavoidCoIs
Engineersareemployedfortheirexpertiseandskill
Adviceandjudgmentmustbereliable manymaydepend
onitandtrusttheengineertomakeunbiaseddecisions
Theusualresults:
Damagetoreputation,career,futurebusiness
Damagetoworkcolleaguesorcompany
Damagetotheprofession
Criminalandcivilchargesinsomeextremecases
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Aconflictofinterestisnot...
A conflicting interest:
Janelikesherengineeringjob,butalsolikestoplaysocceranddrinkfoamy
brownfluids;shecannotdecidewhichshewantstodo.
NotaCoI evenifprofessionalobligationsareinvolved

Conflicting legitimate obligations:

Emilydesignswidgets.Shehasanobligationtothepublictomakesafe
widgets,butshealsohasanobligationtoheremployertoensurethatthe
widgetsaremanufacturedatthelowestpossiblecost.
Theseobligationsshouldnotbeinconflict

An ethical dilemma or conflict:

Honestyversushonestycausingharmoraconflictbetweenprofessional
dutiesandpersonalmorals
Thisyouhavetosortoutyourself:Whatsparamounttoyou?
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Typesofconflictofinterest
Looks,smellsandfeelslikeone itisone

actual

Asetofevents

actual

potential
Hmmm

apparent
Areasonableperson

Whatkinditisreallydoesntmatter theyareallbadnews.
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COI:Scenario1
John is an engineer working for JayCo. For the past 50 years, John's
family has owned Bolts R Us, a company that makes bolts. JayCo
needs to purchase 500,000 bolts for a large construction project.
John recommends that JayCo purchase the bolts from Bolts R Us and
because of this, John's shares in Bolts R Us increase by 15%.
DoesJohnhaveaconflictofinterest?
It would be difficult for John to argue that his recommendation was not affected
by the possibility of a financial gain. If not an actual COI, its close to it.

10

COI:Scenario2
John is an engineer working for JayCo. For the past 50 years, his
fiance's family has owned Bolts R Us, a company that makes bolts.
JayCo needs to purchase 500,000 bolts for a large construction
project. His fiance could gain financially (and so could John) if he
recommends that JayCo purchase the bolts from Bolts R Us.
DoesJohnhaveaconflictofinterest?
Being in a personal relationship with his fiance means there already is a potential
CoI. If John is not the person in JayCo who recommends bolts, at least an apparent
CoI remains. Perception is everything.
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COI:Scenario3
John is an engineer working for JayCo. For the past 50 years, John's
family has owned Bolts R Us, a company that makes bolts. Ten years
ago, John had a fight with his family and has not spoken to them
since. John owns no stock in the bolt company. JayCo needs to
purchase 500,000 bolts for a large construction project.
DoesJohnhaveaconflictofinterest?
More subtle, but the assumption is that John has forgotten all the bad feelings
and would be objective about ordering bolts from his familys company. If not, ?
Its an apparent CoI.
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Whatisthis?
Companies A and B are competitors bidding on a development
project. Each forms a joint venture with Engineering Company C to
prepare their bids.
IsCinaconflictofinterest?Ifso,whatkind?
A
ACBid

B
C

BCBid

possibleconflict:ACBC
Bit of potential and apparent CoI. If methods and costs are the same in both bids,
then perhaps there is no problem. However, this is unlikely since A and B may
want to build the project differently.
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Andthis?
Engineering company EE is designing manufacturing plants for two
companies X and Y that compete in the same market. The same
people in EE will be working on both design projects.
Whatisthis?
Again this is somewhere between an apparent and potential CoI but if X and Y
knowingly engage EE to do the design, it is a conflicting legitimate obligation. EE
should not allow the same people to work on the two projects.

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Whatisthis?Andthis?
What is this?
This is a joint venture between either A and C or B and C. Can costs and methods really be the same for
both A and B? If so, then there may not be a problem. However, suppose A wants to build things in a
different way. Then what?
Also, can C really be impartial in such a situation and provide objective advice to both parties?
And this?
This is two different projects being designed by one company (EE) for two competing firms. Care must
be taken that no proprietary information leaks from X to Y.
The situation could become an actual CoI if EE accepts favorable treatment from either X or Y. For
example, suppose the contract between X and EE provides financial incentives to EE to accelerate the
design work in order that X can get to market faster. Then EEs judgment could become biased.
These two cases illustrate how difficult it can be to determine what kind of CoI you are dealing with. As
stated before, the kind of CoI really doesnt matter because its the perception that counts.
Really no reasonable company in in the position of A, B, C, X, Y, or EE would deliberately get involved in
such situations unless they were crazy.
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Thisisverycommon
Company X is asked to provide a feasibility study for an industrial
project, including preliminary design, cost estimates, and economic
analyses. If the feasibility study is favorable, X knows that it may be
asked to bid on the final design and/or construction management.
WhatshouldXdo?
X should take either the feasibility study or the possibility of bidding on the
project, not both. Because X knows they will be asked to bid on the final design,
they may be inclined to favorably bias the feasibility study, or at least there may
be a perception that they will be biased. Such perceptions are not good.
Sometimes these situations are unavoidable because the available talent and
experience is limited to a few companies.
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WhatAPEGBCsaysaboutCoIs
APEGBC Code of Ethics, Item 4:
[Professional Engineers and Geoscientists shall:]
Act as faithful agents of their clients or employers, maintain
confidentiality and avoid conflicts of interest but, where such
conflict arises, fully disclose the circumstances without delay to the
employer or client.

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WhatotherprofessionssayaboutCoIs
BC Medical Association (only this):
Avoid promoting, as a member of the medical profession, any service (except
your own) or product for personal gain.

BC Association of Social Workers (item 7):

A social worker who engages in another profession, occupation, affiliation or
calling shall not allow these outside interests to affect the social work
relationship with the client professional judgment, independence and/or
competence.

Law Society of British Columbia

has lots to say about COIs
http://www.lawsociety.bc.ca/publications_forms/handbook/handbook_toc.html
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CoIs arecausedby
thebattlebetween
Selfinterest
or
Groupinterest

Interestsof
others

Letslookatselfinterest
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CoIs arecausedby

Heres an extreme example:

Extreme Utilitarianism: To achieve the greatest good for the greatest number, donate all
salary and assets to the poor.
This could be an overestimation of the benefits. Who is the poor? However, the main
point is that it is in major conflict with selfinterest so no one does it.

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Benefitsandcostsdependonobserver
Ifevaluationofbenefitsandcostsisdonebythesame
personorgroup conflict
Forproponents:
Benefits Costs
Foropponents:
Benefits Costs
Inmostcasesthisisselfinterestatwork.
21

TheFordPinto early70s

Bu_tuglycar(butcheap)

Butwithalittlework

IntroducedtocompetewithJapanesecars
Weighedlessthan2000lbs,cost$2000
Fordetailsofthisstory:
http://www.motherjones.com/news/feature/1977/09/dowie.html
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TheFordPinto 197172
Boltsonthedifferentialhousingwere
veryclosetothegastank
Gastankdesignviolatedsafety
standards
During20mphcrashtests,thetank
ruptured,fireoftenresulted
Afix:rubberbarrierormovethetank.
Costestimate:$11percar
Source:http://www.motherjones.com/news/feature/1977/09/dowie.html
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TheFordPinto 19721979
Severaldeathsduetofirescausedbyrearendcollisions
ofPinto
FiftylawsuitsfiledagainstFord majoritysuccessful
J.C.Echold directorofsafetyforForddefendedFord
gastankdesigndecisionswithcost/benefitanalysis

24

TheutilitariancalculusofJ.C.Echold
Costs

Benefits

Sales

11 million cars
1.5millionlighttrucks

Savings

180burndeaths
180seriousburns
2,100burnedvehicles

Unit costs

$11 per car

$15 per truck

Unit costs

$200,000perdeath
$67,000perinjury
$700pervehicle

Total costs

11 M $11
+ 1.5 M $15
= $137 M

Total benefits 180 $200,000

+180 $67,000
+2100 $700
=$49.15M

Conflict
Estimatesofdeaths,injuriesanddamagebasedonstatisticalstudies
Source: http://www.motherjones.com/news/feature/1977/09/death.html

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Andin1971alifewasworth
Future productivity losses
Direct
Indirect

$132,000
$41,300

Medical costs
Hospital
Other

$700
$425

Property damage

$1,500

Insurance administration

$4,700

Legal and court

$3,000

Employer losses

$1,000

Victims pain and suffering

$10,000

Funeral

$900

Assets (lost consumption)

$5,000

Miscellaneous accident cost

Source:
USNationalHighwayTraffic
SafetyAdministration

$200
Total

$200,275
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Incontext
The calculation was done as part of a submission by Ford to NHTSA
to request reconsideration of proposed standards related to fuel
systems to prevent fires in the event of rollover and rearend impact.
Nevertheless,
the conflict between selfinterest and the interests of others is
present and it weakens any argument Ford would be making for
reconsideration of the standard.
If they made such an argument, they would be in an apparent CoI, at
least.

27

Incontext
The memo in which this calculation was done was said to show Fords mentality about its
tort liability it is cheaper to absorb the costs of tort judgments rather than to make safety
modifications to the Pinto. However, the memo was prepared for submission to the US
National Highway Traffic Safety Administration (NHTSA) as part of a request from Ford that
NHTSA reconsider a proposed change of standards related to fuel systems to prevent fires
in the event of rollover and rearend impact. Also, the estimate of the value of life was
made by NHTSA, not Ford.
See Schwartz, G. T., 1991. The myth of the Ford Pinto case. Rutgers Law Review, 43, 1013
1068. (available on course web site)

28

Theoutcome
June9,1978thecompanyrecalled1.5millionPintos
costoffix:$1percar
Improvementstotankdesignfinallyappearedin1979
model

29

Sourcesofselfinterest
Automaticmentalprocesses
Automaticprocessesleadtolatentbiases:
selfperception
implicitprejudice
favoritismofgroup

Actuallyverypervasive,butoftendismissed
Originsareprimal,theprimitivelizardbraindealtonly
withsurvival,ausefulselfinterest
Theydomakelifeinteresting
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AutomaticandControlledMentalProcesses
Automatic Processes

Fast(parallelprocessing)
Effortless
Involuntary
Notaccessibletointrospection

Controlled Processes

Slow(serialprocessing)
Effortful
Voluntary
Accessibletointrospection

Vision is an automatic process. It is impossible to choose not to see if

your eyes are open.
The sources of selfinterest are inscrutable automatic processes. Try
to explain the processes by which your feelings about yourself,
someone else or something arose.
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AutomaticandControlledMentalProcesses
Vision involves numerous parallel processese.g., edge and pattern recognition and
retrieval of information from memory. Vision is also largely unaccompanied by any feeling
of subjective effort, and does not detract from other similar processes (e.g., it is equally
easy to speak with ones eyes open or shut, and likewise equally easy to see when one is or
is not talking). Vision is also involuntary; except by blocking ones visual field, it is
impossible to choose not to see.
The cognitive processes that give rise to vision are also almost totally inscrutable. Most
people, if asked to explain how it is that they can see whatever is in their visual field,
would have a great deal of trouble answering the question. For example, people are
generally not able to offer articulate insight into how their brains solve visual problems
such as depth perception or face recognition.
Moore, D. A. and Loewenstein, G., 2004. Selfinterest, automaticity, and the psychology of
conflict of interest, Social Justice Research, 17(2), 189202 (available on course web site)

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Whattheseprocessesdo
Controlled
processes

Professional
duties

Automatic
processes

Selfinterest

i.e.,youhavetothink tobeethicalandunderstandyour
professionalduties

33

Wheredotheseprocesseshappen?
Automaticprocessesin
thelimbicsystem

Thelizard
brain

Controlledprocesses in
thefrontallobes

Thethinkingpartof
thebrain
34

Wheredotheseprocesseshappen?

The limbic system is the first part of the brain to develop in human, ape, and reptile
embryos. It is believed to be the primal form of the brain in humans. It developed to
manage 'fight' or 'flight' reactions necessary for survival. It supports a variety of functions
including emotion, behavior and long term memory. (The amygdala is known to play a role
in emotional processing.) Some structures of the limbic system are closely associated with
the sense of smell, another sense needed for survival.
The frontal lobes evolved in humans as social systems became more complex. Their role is
to plan complex cognitive behaviors such as differentiate among conflicting thoughts,
determine good and bad, better and best, same and different, future consequences of
current activities, i.e., it is a source of controlled mental processes. The frontal lobes also
play an important part in retaining longer term memories which are not taskbased. These
are often memories associated with emotions derived from input from the brain's limbic
system. The frontal lobe modifies those emotions to generally fit socially acceptable norms.
So one part of the brain works to ensure the survival of its owner in the event of threats
while another part works to ensure its owner can survive in the social system in which
he/she lives.
35

ConflictofProcesses
Decision

Automatic
Processes

Controlled
Processes

Usuallyprocessesworktogetherin
decisionmaking,butconflictis
possibleleadingtobias
36

Theproblemofautomaticprocessing
Automaticprocessingdoneunconsciously
its influence on decisionmaking is difficult to
eliminate or correct and so
selfinterest often prevails even if conscious effort is
made to be ethical and professional
Conflictsofinterestareinevitable

37

Theproblemofautomaticprocessing

Automatic processing is a survival mechanism if you had to think about everything, you
wouldnt have time to respond to threats, for example.
Mapping the Mind by Rita Carter (2000):
where [conscious] thought conflicts with emotions, the latter is designed by the
neural circuitry in our brains to win.

38

Howautomaticareyou?
Betmoneythatyouwilldrawaredjellybeanfromacan
Pickacan quickly

100jellybeans

10jellybeans

7redones

1redone

39

Howautomaticareyou?
Although subjects reported that they knew that the objective probability was higher in
the jar on the right, they nevertheless were more likely to bet on the jar on the left.
The controlled system conformed to the rules of probability while the more automatic
experiential system was swayed by the raw number of red beans in the jar on the left.
Reference:
DenesRaj, V., and Epstein, S., 1994. Conflict between intuitive and rational processing:
When people behave against their better judgment. Journal of Personality and Social
Psychology, 66(5): 819829. (available on course web site)

40

Very readable discussion of

the way automatic processes
help us survive, but also
cause us to make incorrect
decisions.

41

Theeffectofcognitiveload
Theprefrontalcortexhaslowcapacityandsothebrainisalways
tryingtoshifttaskstoautomatic
Increased
cognitiveload

Fullcortex

Moreautomatic
processing
42

Theeffectofselfperceptionandacceptance
Selfperception
ethical
deserving
competent

behaviors

Comfortablewith
behaviors

Automatic
processing

Acceptanceby
others
43

Theeffectofselfperceptionandacceptance
It is logically impossible to be objective about oneself because the only way one
experiences the world is through ones own senses. Also it is selfdeceiving to think one can
be objective about the effects of ones actions because the best one can do is imagine
these effects from ones own perspective.
Itiseasytoacceptanactionacceptedbyothers.

44

Example:KurzweilAppliedIntelligence
Manufacturerofvoicerecognitiondevices
Salesrepsallowedtopostunsignedsalesafewdaysin
advancetomeetsalesandfinancialtargets
anacceptedpracticetreatedasethical

Dealsnevermadefinal.Auditorsbeganchecking,found
discrepancies
BernardBradstreet,CEOattrial:
nailingdownthedetailsofthesalestooklongerthan
expected

45

Example:KurzweilAppliedIntelligence
This is not a conflict of interest case, but it does illustrate how acceptance by peers can lead
to an automatic acceptance of behavior.
See Maremont, M., 1996, September 16. Anatomy of a fraud. Business Week, pp. 9094.
(available on course web site)

46

Theeffectoflatentbiases
Age
Gender
Race
Sexuality

Automatic
feelings

Nationality
Weight
TrytheImplicitAssociationtest
https://implicit.harvard.edu/implicit/langchoice/canada.html
47

Latentbiasesareeverywhere
Criminologicalstudiesfocusonstreetcrimeand
delinquency
Resultisracistandclassiststereotypes

Windowsvs Androidvs Linuxvs iOS vs BB10:

BiastoWindowsis(was?)becauseofmarketdomination

NorthAmericanengineersaremorefreethinkingand
flexiblethanengineersfromothercountries
Demonstrablyfalse

Welldressed,articulate mustbeaniceperson
Lotsofcounterexamples
48

Thisisverycommon again
Company X is asked to provide a feasibility study for an industrial
project, including preliminary design, cost estimates, and economic
analyses. If the feasibility study is favorable, X knows that it may be
asked to bid on the final design and/or construction management.
WhatshouldXdo?
Feasibility studies are expensive so that the owner would only spend the money if
there was a good chance the project was indeed feasible. If this is the perception
before the study begins, how can the owner be sure that it does not lead to latent
biases (e.g., similar to acceptance) that would favor the feasibility?

49

SoifyouseeaCoI coming
Trytoavoidit
Discloseittoallconcerned
APEGBCcodeofethics,item4

Recuse disqualifyyourselffromanydecisions

50

Whataboutdisclosure?
Itisassumedthatwithdisclosure
Theprofessionalisfreeoflatentbiasortheeffectsof
selfinterest
ClientwillunderstandtheCoI andbeableto
discriminatebiasedfromunbiasedadvice
But
IstheeffectoftheCoI onaprofessionalsjudgmentany
lessasaresultofdisclosure?
Doestheclientreallyhavetheabilitytodiscriminate
goodandbadadvice?
51

Experimentsandevidencesuggestthat
professionalswhodiscloseaCoI
willknowtheiradvicemaybediscountedandmay
thereforeexaggerateorspeaklouder
becomelesswaryofselfinterestaffectingadvicesince
theymayfeeldisclosuregivesthemamorallicenceto
saywhattheywantandtheclientwillunderstand
andthatclientsofconflictedprofessionals
donotknowwhattodowithdisclosureormaynot
understandtheseverityoftheconflict
donotdiscountadviceasmuchastheyshould
52

Experimentsandevidencesuggestthat
The client may not have the ability to critically assess advice given by the conflicted
professional. In fact, the client hired the professional for his/her expertise.
See Cain et al, 2005. The dirt on coming clean: perverse effects of disclosing conflicts of
interest. Journal of Legal Studies, 34, 125 (available on course web site)
This paper describes an interesting experiment. One group of people (estimators) were
asked to look at several jars of coins from a distance and estimate the value of the coins in
each jar. The more accurate their estimates, the more they were paid. Another group of
people (advisors) were allowed to get closer to the jars and give the estimators advice. The
advisors, however, were paid according to how high the estimators' guesses were. So the
advisors had an incentive to give misleading advice. Not surprisingly, when the estimators
listened to the advisors their guesses were higher. The remarkable thing was that even
when the estimators were told that the advisors had a conflict of interest they didn't care.
They continued to guess higher, as though the advice were honest and unbiased. Full
disclosure didn't make them any more skeptical.
53

Andthis again
Engineering company EE is designing manufacturing plants for two
companies X and Y that compete in the same market. The same
people in EE will be working on both design projects.
Whatisthis?
Even if EE discloses the situation and it is accepted by X and Y, how can EE be sure
it will have no effect on their design decisions or choices made for either
manufacturing plant?
EE should have different people working on each project.

54

Questionsconsultingcompanieshavetoask
beforeanewcontractissigned:
Are there records of previous contracts to help identify potential
conflicts with new work being considered?
big company, big database, complex search algorithms

Does anyone know what to do if they or someone within the firm

is in a conflict?
For example, the company may not have worked for a competitor of a new
client, but a current employee may have.

Who is responsible for contacting clients to report a conflict?

55

Summary
Conflictsofinterestshouldbeavoided
actual,potential,andapparent allbad
sometimeshardtorecognize

Conflictsofinterestareinevitabledueto
automaticvs controlledmentalprocesses
latentbiases

DisclosureofCOIdoesnoteliminateormitigateCOI
makesitmoredifficulttomaintaintheperceptionof
objectivity
56

Heresaquestion
Subject to legislated restrictions, lawyers are allowed to
charge contingency fees in personal injury cases. This
means that their fees for legal work are related to the
amount of the damages award (e.g., a percentage).
Should engineers be allowed to charge contingency fees?
For example, should the fee be related to the benefits of
the engineers work to the client?

57