1.

0 ABSTRACT

Conflicts of professional interest frequently arises in the work environment of an

engineer is one of the situation happened in Malaysian environment. There are a few factors who
cause the situation happened. The main parties that will involve in the conflict of interest are the
developers, contractors and consultant engineers. In order to overcome the problems, the conflict
have to be figured out and overcome the problems with optimal solution. The conflict should be
decrease as to help the company growth better.

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2.0 OBJECTIVE

1. To figure out the conflict happen among the engineers with professional.

2. To overcome the conflict between professional and the engineers.

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3.0 INTRODUCTION

Conflict always happen on our surrounding, especially in the world which is full of
sophistication and complexity. We face many kinds of conflicts in daily life which involves our
family, friends and colleagues in learning or working environment or even the boss. Everyone
has his/her opinion and interest on a certain issue or thing. When one is disagree with another
person’s point of view and interest, conflict will occur. In Malaysia’s working environment, to
work as an engineer in the related field, these conflicts can’t be avoided. However, the conflict of
professional interest is a current issue in the career of an engineer. If this type of working
environment does not improve or changed, it will bring negative effects to the employer,
employees who are working in the company and also the company’s own reputation.

A true profession is an occupation which requires skills and knowledge in a specified

field that was for the benefit of the society. A professional able to demonstrate their knowledge
and skills which they done by training and it was used to provide service which is unique and it
was used to serve the community. A professional was a person who can distinguish others from
all the occupational groups by showing their expertise in the particular area of which utilizes the
knowledge and skill which he already had. The knowledge and skills which an engineer has was
a result of training, researching and experience. Through these processes, an engineer was able to
develop more critical knowledge and professional ideas. What they learnt was tested, examined
and evaluated before they are qualified as a professional engineer. Through disciplined academic
training and experience, they will obtain a certain level of knowledge in their area of practice. It
required certain level of standards, also with rules and regulations to ensure that the person can
be called as a professional engineer.

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4.0 PROBLEM STATEMENT

Conflict occurs as a result of different opinions and interests in one from that of others.
Engineers involved themselves in the industry which is a wide, fast-growing and competitive
profession. The main parties that will involve in the conflict of interest are the developers,
contractors and consultant engineers.

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5.0 CONTENTS

5.1 The Nature Of Conflicts Of Interest:

In this section, several case studies are used as examples to show how conflict
involving professional interest arose in the working environment of an engineer and later
how they were managed and overcame.

5.2 Examples of case studies used are listed as below:

1. Case Study 1: Conflict of Interests - Services to a Village

2. Case Study 2: Competition for Engineering Employment

3. Case Study 3: Wife's investment in Project

4. Case Study 4: Ownership of Product Firm

5. Case Study 5: Stock and Land Ownership

6. Case Study 6: Use of "Free Engineering" from Manufacturer

7. Case Study 7: Related Work for Two Parties

However, there are variety of other cases which may contain major and minor difference
from the ones discussed above. It is very important to pay attention to the details as a minor
difference in context or detail may require different approach and other critical solution to be
proposed.

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5.2.1 Case Study 1: Conflict of Interests - Services to a Village

Situation:

ABC Consulting, an engineering firm, through a joint venture with another

company VB Services, has been selected as the prime consultant to provide design
services for a water and sewer development within a village. On the project in a
subconsultant capacity are XYZ Consulting and LMN Consulting. To date, ABC has been
providing the project management and support design to its subconsultants. XYZ and
LMN have been providing primary project design services.

ABC was contacted by the General Contractor on the project and requested to
provide a construction survey service proposal to them on the project. This occurred
during the Contractor's negotiations with the village to provide construction services. A
letter was issued by the village to ABC indicating a conflict might exist because ABC
appeared on the Contractor's list of subcontractors. Neither ABC, XYZ nor LMN
participated in construction negotiations for either party.

ABC sent a letter back to the village explaining the nature of the services to be
provided and agreeing that a conflict may exist and that resolution was necessary to
enable the Contractor and village to move forward with negotiations and allow the
Contractor to select another firm to provide construction services if that was what was
required.

A review by the village of the services ABC was proposing to provide for the
Contractor resulted in the village's position that a conflict did not exist. This was relayed
to ABC verbally and followed up with a letter. The issue was also discussed between
ABC's project manager and the chairman of the state engineering board.

Subsequently, XYZ sends a letter to ABC and the village indicating that it
believes that a conflict-of-interest exists.

Question:
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 Does ABC Consulting's relationship with the village and with the General
Contractor constitute a conflict-of-interests?

References:

Code II.4.a: Engineers shall disclose all known or potential conflicts of interest to
their employers or clients by promptly informing them of any business association,
interest, or other circumstances which could influence or appear to influence their
judgment or the quality of their services.

Code II.4.b: Engineers shall not accept compensation, financial or otherwise, from
more than one party for services on the same project, or for services pertaining to the
same project, unless the circumstances are fully disclosed to, and agreed to by, all
interested parties.

Code II.4.c: Engineers shall not solicit or accept financial or other valuable
consideration directly or indirectly, from contractors, their agents, or other parties in
connection with work for employers or clients for which they are responsible.

Code III.5.b: Engineers shall not accept commissions or allowances, directly or

indirectly, from contractors or other parties dealing with clients or employers of the
Engineer in connection with work for which the Engineer is responsible.

Discussion:

We interpret from the facts of the case that the contractural obligations of ABC,
XYZ and LMN to the village were complete with the preparation and delivery of contract
documents. It appears that none of the three firms had a continuing responsibility of
professional engineering services to the village during construction.

If this were not the case, and assuming that ABC retained a contractual obligation
to the village during construction, the exchange of correspondence would appear to
satisfy the requirements of the Code of Ethics - except one. XYZ has stated in writing to
the village and to ABC that it believes that a conflict-of-interest exists.

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 XYZ is more than an interested party. As primary project designers, XYZ and
LMN may have an ultimately greater stake in guarding their liability interests than does
ABC, and would find a potential for ABC's dual-master role to be highly compromising.
In this scenario we would conclude that ABC's relationship with the general contractor is
a conflict-of-interest.

What conclusion may be drawn if, on the other hand, all three consultants are
contractual free agents, as the fact suggest? The language of II.4.b. is comprehensive. It's
clause "or pertaining to the same project" preclude any necessary interpretation that the
acceptance of "compensation from more than one party on the same project" must be
concurrent rather than sequential. And, XYZ is no less an interested party to the project.
Accordingly, even though the village and ABC have concurred that a conflict does not
exist, it remains the case that XYZ, an interested party, does not agree. We retain our
conclusion that ABC's relationship with the General Contractor is a conflict-of-interest.

The Board is further of the opinion that the consultant must proceed with the
highest level of ethical interpretation in these situations, whether or not a third party
consultant is involved. From the perspective of the Village, an eventual litigious conflict
may seem highly remote, and it may be an incidental procedure to agree in writing that
no conflict exist.

Experienced consulting engineers, on the other hand, know full-well that such an
arrangement - acceptance of compensation from both the client-village and a client-
contractor on the same project - is a given scenario for conflict, regardless of the
exchange of letters that it is not.

Conclusion:

ABC consulting's relationship with the village and with the General Contractor
constitutes a conflict-of-interest.

5.2.2 Case Study 2: Competition for Engineering Employment

Situation:

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 Engineer "A" has applied for an engineering position, has been interviewed and
has been advised by the prospective employer that his application is being favorably
considered. However, he has not been employed and no commitment has been made to
him. Engineer "B" learns of the opening and, knowing that Engineer "A" is under
favorable consideration, applies to the employer for the same position. In presenting his
qualifications, Engineer "B" does not refer to Engineer "A" in any way. Engineer "A"
learns of Engineer "B's" action and alleges that he acted unethically in applying for the
position knowing that he (Engineer "A") was under favorable consideration.

Question:

Did Engineer "B" act unethically in applying for a position knowing that another
engineer was being favorably considered for the same position at that time?

References:

Code C23: "He will not directly or indirectly injure the professional reputation,
prospects or practice of another engineer. However, if he considers that an engineer is
guilty of unethical, illegal or unfair practice, he will present the information to the proper
authority for action."

Code C25: "He will not try to supplant another engineer in a particular
employment after becoming aware that definite steps have been taken toward the other's
employment."

Discussion:

Code C23, read in its entirety, clearly relates to situations which may involve
ethical or legal aspects of another engineer's background and conduct, and therefore the
reference to avoiding injury to the "prospects" of another engineer is meant only in the
ethical or legal sense. Under the facts of this case, there are no ethical or legal
implications insofar as the past conduct of Engineer "A" is concerned.

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 Code C25 would appear at first blush to restrict Engineer "B" in his action and
make his conduct unethical. We do not believe its real meaning, however, goes so far as
to prevent open and fair competition for an engineering position. In saying that an
engineer should not attempt to "supplant" another engineer in particular employment,
knowing that "definite steps" have been taken toward the other's employment, we believe
the Canon refers to two particular elements which would make such action unethical:
First, by "supplant" the Canon means a deliberate and conscious effort to bring about the
rejection of the other applicant for the position by direct or indirect steps to make the
employer believe that the engineer under consideration is not suitable or qualified.
Second, the reference to "definite steps" having been taken toward the employment of the
competing engineer means that the engineer has, in fact, been hired except for the final
technical steps which may be considered necessary by the employer, such as security
clearance, checking on references, or the drawing up of an employment contract, if one is
involved.

It would have been unethical for Engineer "B" to deliberately seek to injure the
prospects of Engineer "A" if the latter had been actually employed, except for the
administrative steps mentioned above. In the facts as stated, however, Engineer "B" only
sought to avail himself of an opportunity on his own merits and without improper
prejudice as to the rights of Engineer "A."

Conclusion:

Engineer "B" did not act unethically in applying for a position under the
circumstances stated.

5.2.3 Case Study 3: Wife's investment in Project

Situation:

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 John Doe, P.E., is the city engineer if a municipality. His duties include review of
plans and specifications prepared for developers of housing projects, and
recommendations to the city council on approval of such projects.

Doe's wife has all investment in one of the development companies operating in
the jurisdiction of the city, and plans for one of its projects were reviewed by him and
approved by the city council. His wife's investment in the project was not known to the
city officials or the public until after his review, recommendation for approval of the
project and the approval of the city council. When the fact of his wife's investment was
disclosed at a later date, Doe was requested to resign his position on the ground of
unethical conduct.

Question:

Is it ethical for John Doe to review and recommend on plans for a development in
which his wife has a financial interest?

References:

Code 8: "The Engineer will endeavor to avoid a conflict of interest with his
employer or client, but when unavoidable, the Engineer shall fully disclose the
circumstances to his employer or client."

Code 8(a): "The Engineer will inform client or employer of any business
connections, interests, or circumstances which may be deemed as influencing his
judgment or the quality of his services to his client or employer."

Discussion:

The thrust of the Code's provisions on conflict of interest may be said to be that
the Engineer must be above suspicion. He must not only personally avoid a conflict of

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interest, but must conduct himself in such a manner that there will not be any suspicion of
improper conduct.

Assuming that Doe knew of his wife's investment in the development company,
he was duty bound under both Code 8 and Code 3(a) to disclose the facts to his employer.
The employer (city council) could then determine in light of all the facts whether the
investment might, in its opinion, influence or tend to influence the judgment of the
engineer.

While the old concept that man and wife are one person has long since been
discarded, it remains a realistic fact that the financial interests of a spouse involves the
other. There is a natural tendency for a husband to be solicitous of the interests of his
mate.

Whether, in fact, Engineer Doe's judgment was influenced by his wife's

investment can be known only by him. This makes it all the more important that he
recognize the impression which might he created in the public mind. The failure to
disclose the circumstances to his employer only aggravates that possible suspicion, even
if unwarranted.

Conclusion:

It is unethical for John Doe to review and recommend on plans for a development
in which his wife has a financial interest without prior disclosure of the facts to his
employer.

5.2.4 Case 4: Ownership of Product Firm

Situation:

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 Firm A, an incorporated consulting engineering firm with five owners, offers the
usual type of consulting engineering services to the public. The owners of Firm A, acting
as individuals, organize a new and separate corporation (Company B) for the purpose of
marketing several products which are used in the construction of engineering projects.
The products are manufactured by a national company which contracts with Company B
for the dealership rights to market its products in a specified geographical area. Company
B is operated separately from Firm A by individuals other than the owners of Firm A, but
under their general direction.

Firm A specifies by name the products of Company B in its specifications for a

project which it designed, but with a provision that products of equal acceptability may
be used. The relationship between the ownership of Firm A and Company B is made
known to the owner of the project.

In a different but related situation, the principals of Firm A suggest to one of their
clients that Company B has some products that the client may wish to use in a
development, also disclosing to the client the relationship between Firm A and Company
B.

Questions:

Q. 1: Is the relationship between the engineer principals of Firm A and Company

B a violation of the Code of Ethics?

Q. 2: Is the method of operation between Firm A and Company B a violation of

the Code of Ethics?

References:

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 Code 8: "The Engineer will endeavor to avoid a conflict of interest with his
employer or client, but when unavoidable, the Engineer shall fully disclose the
circumstances to his employer or client."

Code 8(a): "The Engineer will inform his client or employer of any business
connections, interests, or circumstances which may be deemed as influencing his
judgment or the quality of his services to his client or employer."

Discussion:

The primary mandate of Code 8 is the injunction that the engineer shall endeavor
to avoid a conflict of interest. The language of the code recognizes that conflict of interest
may, under some circumstances, be unavoidable, in which case full disclosure of the facts
is required.

On the basis of the facts before us, we must conclude that the conflict of interest
between Firm A and its clients, which is inherent in the relationship between the
engineer-principals of Firm A and Company B, is avoidable.

Even though the engineer-principals of Firm A might be expected to specify only

those products or equipment which are best suited to the needs of the client without
regard to their proprietary interests in the products of Company B, there would be an
unavoidable implication that their professional judgment might have been compromised,
even if only by a subconscious process.

The engineer-principals of Firm A indicated their intention to avoid any question

of conflict by use of the "or equal" clause, but this is slight protection for the client who
may be expected to accept the judgment of the engineer with regard to a particular
product in the usual case. The same objection applies to the use of "suggestions" to the
client in favor of the products of Company B.

What we have said does not resolve all aspects of this type of conflict of interest
problem. There are many situations in which the engineer may be the owner of an interest
in a company which produces equipment or material which the engineer might specify in

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the normal course of his practice. In these situations a minimal or nominal degree of
ownership may not represent a conflict of interest sufficient to influence or raise the
inference of influence on the part of the engineer in specifying the equipment or material
which he considers best for the interests of the clients. That type of involvement is
discussed more fully in the 13th case of this year's session. Suffice it to say that when an
actual or potential conflict of interest arises of which the engineer was unaware when he
entered into his relationship with the client his immediate duty is to disclose all the facts
and circumstances to the client.

Conclusion:

Q. 1: The relationship between the engineer principals of Firm A and Company B

is a violation of the Code of Ethics.

Q. 2: The method of operation between the two organizations is a violation of the

Code of Ethics.

5.2.5 Case 5: Ownership of Product Firm

Facts:

Situation A- Engineer A is a partner in an engineering consulting firm, which is

engaged primarily in the design of electrical systems for clients. Prior to his entry into the
consulting field, Engineer A had purchased 20 shares of stock in a company which
manufactures electrical products of the type often specified by engineers. His interest in
the manufacturing company represents less than one-tenth of one percent of the total
stock outstanding.

Situation B- Engineer B is a consulting engineer engaged primarily in the design

of mechanical systems for clients. During the course of his practice he invested his
personal funds in mutual fund shares. The mutual fund, from time to time, invests in the
stock of companies which produce the type of mechanical equipment which he may
specify for his clients.

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 Situation C- Engineer C is an officer of an incorporated engineering consulting
firm which is engaged primarily in civil engineering projects for clients. Early in his life
he had acquired a tract of land by inheritance, which is an area presently being developed
for residential and industrial use. His firm has been retained to study and recommend a
water and sewer system in the general area of his land interests.

Questions:

1. May Engineer A of Situation A ethically specify the products of the electrical

company in which he holds stock?

2. May Engineer B of Situation B ethically specify the products of companies in

which the mutual fund holds shares?

3. May Engineer C of Situation C ethically design a water and sewer system in the
general area of his land interests?

References:

Code 8: "The Engineer will endeavor to avoid a conflict of interest with his
employer or client, but when unavoidable, the Engineer shall fully disclose the
circumstances to his employer or client."

Code 8(a): "The Engineer will inform his client or employer of any business
connections, interests, or circumstances which may be deemed as influencing his
judgment or the quality of his services to his client or employer."

Discussion:

This is a companion case to Case No. 69-8, in which we held it to be a violation

of the code for engineer-principals of a consulting firm to own and operate a separate
corporation for the marketing of products which the firm might specify or recommend to
a client. Our conclusion in that case was based on the injunction of Code 8 that "the
engineer will endeavor to avoid a conflict of interest," and on the "unavoidable
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implication that their professional judgment might have been compromised even if only
by a subconscious process." However, we recognized that his holding did not resolve all
conflict of interest problems with regard to minimal or nominal degrees of ownership.

In evaluating the three situations described herein, we start from the premise that
the duty of the engineer under the code is not only to avoid a clear conflict of interest,
when possible, but also to avoid the appearance of impropriety. This requires a balancing
of equities and the ethical obligation weighed against practical situations which may arise
in fact circumstances where the conflict of interest arises beyond the control of the
engineer.

In Situation A the potential or actual conflict of interest was theoretically present

when Engineer A entered the field of electrical design, but not when he acquired the
stock. The practical question, then, is whether he is ethically required to dispose of his
stock in order to be ethically able to specify the products of the company in which he has
a financial interest? If so, he may be required to suffer a financial loss depending on the
state of the market at the time of his sale. In the alternative, may Engineer A ethically
take the position that to avoid the conflict he will not specify the products of the company
in which he holds stock? On this approach he may be doing his client a disservice if he
truly believes that the products of that company are the best for the needs of the client.

It would be tempting to conclude that there is no "real" conflict of interest in this

situation because the degree of financial gain to Engineer A by the specification of the
products of the manufacturing company are so minimal in profit to him that his judgment
would not be biased. We reject this rationalization, however, because it is impossible to
define that degree of financial gain which would, in the mind of Engineer A, be so small
as to not prejudice his decision. We recognize also that there is a subconscious motivation
to support the business of a company in which a person holds a financial interest.

The situation is quite different in Situation B. Here Engineer B has no control

over the investment decisions of the mutual fund managers. The mutual fund may hold
stock in companies which produce mechanical equipment he may specify but may divest
itself of such stock at any time. In fact, the mutual fund shareowners probably do not
know from day to day or month to month the investment portfolio of the mutual fund
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unless they make special inquiry. Under these circumstances the chance of Engineer B
being influenced to prefer the products of a particular manufacturing company is so
remote that it can be disregarded.

The facts in Situation C are even more difficult of resolution. There was no
conflict of interest when Engineer C entered his practice. The conflict developed in the
normal course of his practice when it became apparent that his study and
recommendations could lead to the location of a water and sewer system which might
cause a considerable appreciation in the value of his land depending on the exact location
of certain system elements in proximity to his land. It is abundantly clear from what we
have said previously that Engineer C must make full disclosure of his personal interest to
his client before proceeding with the project. However, we do not believe that such
disclosure is enough under the code. He is required to avoid a conflict of interest. He can
avoid such a conflict under these facts by either disposing of his land holdings prior to
undertaking the commission or by declining to perform the services if it is not feasible or
desirable for him to dispose of his land at the particular time.

This is a harsh result, but so long as men are in their motivations somewhat
"lower than the angels," it is a necessary conclusion to achieve compliance with both the
letter and the spirit of the code of ethics. The real test of ethical conduct is not when
compliance with the code comports with the interests of those it is intended to govern, but
when compliance is adverse to personal interests.

Conclusion:

1. Engineer A may not ethically specify the products of the electrical company in
which he holds stock.

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 2. Engineer B may ethically specify the products of companies in which the
mutual fund holds shares.

3. Engineer C may not ethically design a water and sewer system in the general
area of his land interests.

6.0 REFERENCES

1) Brady, K. B. (2007). Managing conflicts of interest: Guidance for public entities.

60.

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2) Fleddermann, C. B. (Ed.). (2012). Engieering Ethics (4th Edition ed.): Pearson
Education Inc.

3) Ridler, J. (1998). Engineering Ethics and Philosophy - Inextricably Linked.

Engineering Dimension, 44-45.

4) Wells, P., Jones, H., & Davis, M. (Eds.). (1986). Conflict of Interest in
Engineering: Kendal/Hunt Publishing Company.

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