Ethics dilemma 2

This scenario, centring on collaboration between the public and private sectors in infrastructure projects, is taken from a set of four scenarios on teaching ethics contributed by Alison Dempsey (University of British Columbia). It looks at the issues that can arise when processes are not truly transparent and diverse interests may have come into conflict.

As part of a strategy for increasing public trust and confidence in public sector institutions and processes, and addressing the so-called democratic deficit, the government has made a public commitment to strengthening relationships with its stakeholders through consultation, partnerships and collaborative processes. The objective is to build alignment around a common purpose to guide and influence how the government fulfils its mandate from policy development and implementation through to public servants’ activities and interactions with stakeholders.

This commitment is particularly relevant to your department, which has extensive interaction with communities regarding infrastructure and services. This includes public meetings and consultations with stakeholders to anticipate, identify and resolve issues and concerns, and facilitating partnerships, alliances and multi-stakeholder task forces.

Community development pilot project

An area in the northern part of the region is seeing rapid growth and the certain prospect of significant, ongoing development stemming from a major industrial project. The region has made a capped financial commitment over four years specifically to address the development and infrastructure needs for the area.

With this commitment it became essential to establish priorities to address the area’s rapidly expanding development and infrastructure needs. Given the context, this was identified as an ideal opportunity to pilot the government’s consultative community development process. If successful, it would be the model for future large scale development projects. This led to your involvement in the formation and facilitation of a multi-stakeholder working group and the substantial effort, time and not inconsiderable expense, committed to this pilot process.

The working group

The group was comprised of largely self-selected representatives from government, business and the communities adjacent to and/or most closely affected by the rapid development and expansion in the area. Whilst their interests were diverse and often not fully aligned, there was clear commitment to achieving a viable, sustainable community and to avoiding the pitfalls that have befallen others.

This commitment created a level of trust and willingness to collaborate, and enabled the group to address some challenging issues and key concerns.

In particular, representatives from business worked hard throughout the process to counter perceptions that they might have greater influence over the outcomes, or with the government. This helped to create a sense of ‘ownership’ of the process by the group’s other members, and lessen the perception of potential conflict of interest. This was a particularly valuable outcome for the government, in view of the decision to pursue the public/private partnership (P3) approach to a number of key infrastructure projects.

Most of the organisations in the working group also made public commitments to operating with integrity vis à vis stakeholders. This formed a basis for seeking consensus around the best practicable approaches and outcomes for all of those affected by the changes.

The P3 approach

A P3 is a partnership between the public and private sectors where there is a sharing of risk, responsibility, and reward, and where there is a net benefit to the public…[The] partnership is [established] for some combination of design, construction, financing, operation and/or maintenance of public infrastructure which may rely on user fees or alternate sources of revenue to cover all or part of the related costs.

— British Columbia Ministry of Science, Competition and Enterprise

The use of P3s continues to be a controversial and often contentious issue in many jurisdictions.

Reasons for P3 – delivery within a shorter timeframe than a purely public funded project (thus minimising the period during which communities lack key facilities) and availability of private investment to help bear some of the costs.

Reasons against P3 – public money being ‘handed over’ to private companies who could then enjoy guaranteed profits with little or no risk. In other jurisdictions, taxpayers were left to bear the cost when contractors failed to deliver.

Private sector perception is similarly mixed, with business having little interest in participating unless clear political commitment, transparent and equitable bidding processes, and emphasis on delivering value for money with increased legitimate competition are present.

Working group recommendation and selection

The working group had various reactions to using the P3 approach. However, just prior to your being seconded to another department for eight months, consensus was reached and a recommendation for a public tender process for an initial P3 project was made.

You have now returned to take over from a colleague. In your absence, a local entrepreneur, with numerous interests in the area including a construction company, won the contract. This individual was an active participant in the working group as a representative of local business, contributing his time, as well as donating substantial administrative support – for example, agendas, e-mailing list and meeting space. During the process he developed strong ties with the other members of the group and, by extension, with the communities in the area who became aware, and were supportive, of his intention to submit a bid.

When the successful bid was announced publicly, much was made of the fact that the partnership would be locally based and not ‘some anonymous entity from outside the area’ which would lack commitment to the communities in the region. This went a long way to alleviating the public mistrust of P3s and appeared to smooth the way for the other P3s planned for the other priority infrastructure projects.

One of your first tasks is to review the contract terms on risk sharing. A combination of extreme weather and supply chain issues have resulted in delays and the seemingly inevitable cost overruns. You need to identify who is on the hook.

One of the challenges with P3 is that each case seems to be different, and there are very few standardised elements, such as explicit rules governing substance, process, fixed application period and deadline for bids. Whilst this is understandable – there are still relatively few precedents and P3s are still regarded as a bit of a moving target – it does introduce uncertainty and, in your mind, an uncomfortable amount of latitude.

Reviewing the contract terms in this instance, you notice the winning bid undercut the others by a quite substantial margin. You know it is not uncommon for a company to take a ‘hit’ on one project if other work might follow. It may be an opportunity to develop new capabilities, but you feel uncomfortable with any lack of transparency over fees in this highly public context. Strangely, there is no record of such concerns being raised nor the obvious question asked about whether the numbers were pitched to win the work rather than reflect the true costs.

As you fear, to keep the bid low, there are provisions for delays. Other sources of cost overrun are minimal, with the consequence that incremental add-ons to cover shortfalls (ie between the contracted amount and the actual cost) will fall to the government.

You are very concerned about the prospect of a government subsidy to cover any shortfall. This is the most frequent basis for criticism of P3 projects, and well chronicled as the negative experience in other jurisdictions. With reluctant acceptance for P3 within the community, it is just the thing to rekindle scepticism and undermine the success of the other P3 based projects in the pipeline.

The dilemmas you face are as follow:

• you will have to report that additional public money is needed to cover the cost overruns and shortfalls on this P3 project
• you will be asked why those overruns were not provided for in the original contract and why these costs are not going to be at least shared by the contractor

The ensuing discussions will almost certainly raise the questions you had regarding the low bid and one of at least three possible scenarios:

1. The selection process was not sufficiently robust. This will reflect badly on the government and likely spark questions from the unsuccessful bidders and the community more widely.
2. The selection process was somehow biased or influenced in favour of this bid. This will open up concerns over ethical conduct and integrity, fairness, and misuse of public funds.
3. The decision, while open to question on a strictly financial assessment, may have incorporated qualitative factors (for example, perception of greater commitment to the community, local investment etc), many of which appeared in the recommendation tabled by the working group. This goes to the extent, and proper exercise, of discretion.

The issues

Your initial reaction to the low bid is mostly supposition influenced by all the adverse commentary you have read on P3s. You are also perhaps overly sensitive, since it was initially your recommendation that the group consider P3s based on what appeared to be a compelling potential benefit.

Leaving aside the current shortfall issues, from an outcomes standpoint, the bid selection could be considered successful for a number of reasons:

• the approach taken enables a larger number of projects to proceed in a shorter timeframe to meet the increasingly critical needs of the communities and avoids having to choose between equally valid, but ultimately, competing interests
• the working group’s support for the P3 was key to gaining more broad based support within local communities
• the fact that a local contractor was successful further appeased a community sceptical about this approach and resistant to the idea of outside private interests receiving public funding

The other bids came in higher, so when all is said and done the cost differential might end up negligible, and, had the weather and supplier delays not arisen, there would have been clear savings. Again, from a purely outcomes perspective there may be little quantitative benefit in unravelling the process at this point, particularly over what may well be turn out to be undue concern about possible missteps along the way.

Going back to the regional funding commitment, increased costs on this project will adversely affect the funds available for the other P3s, given the region’s capped overall funding commitment to infrastructure development for the area.

Regardless of whether actual bias and/or undue influence in awarding the contract to this one bid were proved, you are concerned about the public’s lasting perception of the bid selection process, access, fairness of competition, and prudent use of public funds in this time of limited trust in government.

The problem with the outcomes approach is that it may hide a tainted process. You are very conscious that whilst a controversial result can be defended if the process leading to it can stand up to scrutiny, such a result from a tainted process is indefensible.

The stakeholder aspect

The pilot is being profiled (internally and externally) as a successful engagement model for the policy of consultation and collaboration with stakeholders throughout a community development process. Since the recommendation to proceed with the P3 approach came out of this policy, any negative association is potentially damaging from a government public relations perspective.

You have remained in contact with some of the working group. Any suggestion that the process was abused poses a risk to the trust established within the working group as well as to progress toward a framework for collaborative community engagement.

There are challenges for the whole stakeholder consultation process. Building a strong relationship with the community provides a good foundation for success. Better lines of communication exist to work through difficulties. Those participating may also be privy to information not widely distributed.

In this current case, the question is raised of whether there is a need to identify and exclude individuals with specific vested interests – even when their input is invaluable to developing the best outcomes. The problem is is that everyone has a vested interest – something at stake. As soon as you start to restrict those with whom you engage, the integrity and democratic nature of the process is at risk.

If called to account, you are more comfortable defending the fact that there were no criteria for participating in the working group than defending an exclusion process. Those who stepped forward and were willing to commit the time participated; others had their chance but chose not to.

Take 15 to 20 minutes to consider the following:

1. If you withhold your concerns about the low bid and limit your report solely to the fact that based on the contract the government will have to pick up the shortfall, you avoid many of the deeper issues. The difficulty is that the foundations of your job are based on serving the public’s interest. Can you say you best served that interest, if your decision to withhold information causes additional public expenditure that might be avoided or mitigated?
2. Is keeping quiet about the underlying issues unethical? Is this approach no better than a cover up? What are the risks if it does not stand up to scrutiny at some point in the future?
3. What actions will you take and what are the risks/repercussions to you, and to others involved?
4. Is it your responsibility to make decisions at this stage that will influence the direction? Are you willing to be accountable for any judgement calls this might entail? If not, whom beyond those individuals necessary to implement your plan of action will you inform? How much detail can/will you need to provide?
5. What investigation, if any, will you undertake to identify those responsible for the bid selection? While it may be expedient to know at whose feet to lay blame if the matter comes under public scrutiny, is it the right approach?
   If you avoid someone getting blamed, and possibly also help the project, that must count for something. Yes?
6. Where do your loyalties lie – and do they conflict with the ethical approach?
7. Does some of the group have more at stake depending on the different approaches you might take? Should these have a greater influence on your decision and if so, how do you avoid the possible perception of a conflict of interest?

Things to consider before you decide what to do:

1. As project manager, you need to be very careful how and what you do with the information. You need to take decisive, timely action, but it does not alter the fact that you want to resolve as many issues as possible in your own mind and then decide on the approach you will take.
2. As someone who is seen as a leader, you are very conscious of the need to set the standard. But you know that a decision is strongest (and most easily defended if something goes wrong) if the decision making process is clear, ethical, takes account of all available information, and involves a discussion with others to explore different perspectives. Can you accomplish this?
3. Finding proactive, ethical ways to deal with people or to implement a fair and transparent procedure is how ethical principles come alive in practice.

Last Modified: 30 June 2010