Unethical Act Among Contractors: Class F in Selangor'

1.0 INTRODUCTION

Contractors are the independent entity that agree to construct certain number or quantity of goods, material, equipment personnel ,or services that meet the requirement of specifications at a mutually price with a specific timeframe with another independent entity call contractee or project owner (Oxford Times). All contractors are rated Class F are Bumiputera. According to Article (160(2)) the concept of a bumiputra ethnic group in Malaysia was coined by activist Tunku Abdul Rahman. It recognized the “special position” of the Malays provided in the Federal Constitution of Malaysia, in particular Article 153. But, the constitution does not use the term “bumiputra”; it defines only “Malay” and “aborigine” (Article 160(2)).This means that the contractor is Class F Bumiputera contractors and do not need to apply for Recognition of Bumiputera. According to PKK (Pusat Khidmat Kontractor) until 26th June 2010 there are 4210 registered class F contractors in Selangor.

A country’s economic system, irrespective construction industry plays a role in, construction industry plays a substantial role in a country’s national economic system (Zantanidis & Tsiotras, 1998). Indeed, this sector is an important employer of a nation’s workforce as it employs between 2% to 10% of total workforce of most countries (Abdul Rashid & Hassan, 2005). Malaysia has gained an impressive economic growth during the last three decades (Abdul Rahman et al, 2005) and this sector has employed an estimated 798,200 workforce nationwide in 2004 (CIDB, 2006). The Malaysian Government has given a much needed boost to the country’s construction industry under the 9th Malaysian Plan where a total of 880 projects worth RM15billion is to be tendered (The Star, 2006). It should be foregrounded that the issue of poor quality in the construction sector has, nevertheless. been identified as a major concern even as far back as the mid 1980s (The Star, 2006). Generally, it is a rule that construction projects must be completed within the planned cost, scheduled time and required quality. Quality may sometimes be ignored in this industry to cut the costs or to shorten the project time (Turk, 2006). To deal with the low quality problem faced by the industry, quality management is seen as an approach to achieve the required level of quality of the end product and has been given great attention worldwide over the past three decades (Hiyassat, 2000; Berawi and Woodhead, 2005). However, there is a perception that majority of quality related issues are caused by human factor. In response to that perception, a study was performed to look into the relationship between professional ethics among participants of construction sector and the quality related issues in Malaysian construction sector. It should be noted that for this purpose of survey, contractors and clients are regarded as professions and they are required to demonstrate a high degree of professionalism in performing their task, in response to the Government’s effort who has introduced the National Integrity Plan to enhance integrity and ethics in the nation. Unethical acts of fraud, waste, abuse, and corrupt practices are what receive prominent treatment in the media worldwide. Such as inappropriate gifts, unauthorized payments, and fiscal infractions are the unethical act problems most noted.

The Conference Board in New York reported that the above issues have widespread agreement on each of these issues as being a serious concern among the leaders of the free world, including those in the United States, Canada, Japan, and Australia. Due to the increased of public awareness toward the contractor unethical acts and also decreased of public tolerance for wrong-doing, it is important for contractor to focus specifically on the question of how professional ethics should be incorporated into awareness of individual to make sure every projects should be completed as standard.

The ethical statement can describe the act was right or wrong, or act with a right or wrong which it can provide a line of distinction between good and evil of the act or the tendency of a person or at least it can develop guidelines that can be made with various moral considerations(J.L Mackie, 1971). Ethical act are very important because it use to determine the thoughts, actions and behavior of members of the organization to fulfill their responsibility and trust as an employee. It is also to create statements and coordination between the contractors as a key institution for national development. Ethical act also important to maintain and improve client confidence in the organization, 84% of FMI’s respondents said that they’ve seen an unethical act committed in the construction industry in the past year is an alarming statistic. Contractors, can take little comfort in the probability that incidence of unethical behavior is just as high in other industries these days. FMI had offer four solution and one of the solutions is to stiffer the penalties for those caught in unethical or illegal acts is the least likely to succeed. Secondly, the FMI had suggest to develop an industry-wide code of ethics which these codes of ethics need to be enforced in every country. A less formal but corollary solution would hit closer to home. Companies should place more emphasis on social responsibility in their dealings with other firms. This approach is easier said than done, of course, although a few respondents in the survey say they have walked away from projects or companies and suffered short-term consequences as a result. They did not indicate, however, that they regretted their decisions in the long term.

Training in ethical conduct is the fourth solution, and it’s the one that holds the most promise as long as it is coupled with commitment to these practices from the top ranks of any construction company. The FMI report states that unethical acts can signal a failure of management ‘to know how to get the job done the right way.’

1.2 Problem statement

Due to many issues in our country regarding construction industry that lead to the unethical act by the contractors in running the projects such as the issue on the Kuala Lumpur Middle Ring Road 2( MRR2 ), Matrade building and also the issue on the Navy Recruit Center. If this ethical issue still going on in our construction industry, it will affect our construction quality. According to the Works Minister Datuk Seri S. Samy Vellu, more than 18,000 contractors and sub-contractors were either paid late or have yet to receive payment for completed work totaling RM23.7billion since 2000. This is a very huge sum, about 14% of the allocation for development projects under the 9th Malaysia Plan. The Construction Industry Development Board (CIDB) had carried out a six-month survey on 330 contractors, in which 273 cases of payment problems involving RM877.8mil were reported. Another example for the issue in Malaysian construction industry is the Plaza Rakyat’s project. The government will issue a warning notice to the Plaza Rakyat project contractors to continue the project as early as next week, initially, and if defaults, the tender will be forfeited. Minister of Federal Territory and Welfare Commissioner, Datuk Raja Nong Chik Raja Zainal Abidin said, a notice will be given to contractors in a week or two so that they continue construction work.

1.3 AIM AND OBJECTIVES OF THE RESEARCH.

The aim of this research as far as the unethical act among contractors class F in Selangor is concerned, is to identify the effect in the construction quality. These main objectives are broken down to more specific objectives in order to better understand the topic at hand. To achieve the desired aim of the research, there are some of the objectives had been choose for this research.

Objectives for this research are:

• Assess the level of professional ethical standards and its practice in the Selangor construction industry,
• To identify the problems associated to unethical acts in construction industry
• Determine the role of professional ethics in improving quality management in construction industry.

1.4 Organization of Study

Chapter 1 introduces the research topic. It discussed about the unethical acts, definition of contractor, definition of bumiputera, issue related to unethical acts in construction industry problem statement and the objectives that initiated this study.

Chapter 2 involves the extensive review of literature relating to the relevant topic of the subject matter of research including the professional ethic and relationship between ethic and construction.

Chapter 3 discussed the methodology used in this study. It includes the developed hypothesis and data collection methods. It also includes a brief explanation on the data analysis methods.

Chapter 4 reports data analysis and findings of the survey obtained from the findings.

Chapter 5 involves detail finding and discussion on the result of survey base on the analysis.

Chapter 6 present conclusions and recommendation based on the findings of the study. Key recommendation and their future prospect have been outlined which may assist in future plans to facilitate knowledge sharing plan in school.

CHAPTER 2

LITERATURE REVIEW

2.0 Introduction

In this chapter a great extent of literature of relevant concepts are being reviewed in order to get insight of and identify variables which have impact on the objectives of this research. The researches which are done by different scholars and researches will be reviewed.

2.1 Quality In Construction Industry

Quality is a measure of excellence or a state of being free from defects, deficiencies, and significant variations, brought about by the strict and consistent adherence to measurable and verifiable standards to achieve uniformity of output that satisfies specific customer or user requirements. ISO 8402-1986 standard defines quality as “the totality of features and characteristics of a product or service that bears its ability to satisfy stated or implied needs

Since tribal chiefs, kings, and pharaohs ruled the issues of quality have already existed (Gitlow, 2005). In a project scenario, quality can be defined as meeting the legal, aesthetic (Arditi & Gunaydin, 1997) and functional requirements of a project (Berawi, 2006). Customers nowadays place more emphasis on the quality of products rather than the price which was the major concern in the past. Hence, a rapid expansion of international competition in quality has occurred (Tsiotras & Gotzamani, 1996; Abdul Rahman & Berawi, 2002). In America, the professional societies have prepared codes of ethics since before early twentieth century. These have been incorporated to a greater or lesser degree into the regulatory laws of various countries. Such as The Institution of Civil Engineers (ICE) in the UK, they have a code of ethics incorporated into its standards of conduct and as for Canadian societies of professional engineers likewise have such codes of conduct as well (Bowen, P., R. Pearl and A. Akintoye. 2007). Mainly for practical and professional use, codes of ethics are developed for supplementing the building codes and other acts of law. These ethical aspects were considered based on man’s natural morals (Darabarek & Symotink, 1999).

In terms of quality in construction industry, Turk (2006), citing Arditi & Gunaydin (1999), mentioned that ‘high quality building project’ includes factors like the design being easily understandable and applicable, conformity of design with specifications, economics of construction, ease of operation, ease of maintenance and energy efficiency. According to S. Fryer, Buro Happold, UK (2007), no matter how clever or elaborate the design of a structure is, any construction project will ultimately be judged on the quality of the finished product. Zantanidis & Tsiotras (1998) and Abdul Rahman & Berawi (2002) mentioned the expectations for quality construction projects will continue to grow rapidly as the number of affluent, educated and quality conscious customers are increasing.

With the globalization of economy, construction firms worldwide are actively engaged to achieve internationally accepted quality levels to ensure their position in the emerging international market especially in those developing economies. Thus, the need to have a proper system that ensures quality is critical, coupled with high level of attention paid to quality management in construction industry (Abdul Rahman, Berawi, et al, 2006). Scholars indicate that quality management has been adopted by many countries in their construction industry including Hong Kong (Leung et al, 1999; Au & Yu, 1999 and Tang & Kam, 1999), Singapore (Low & Omar, 1999 and Low & Yeo, 1997), Greece (Tsiotras & Gotzamani, 1996 and Zantanidis & Tsiotras, 1998), Turkey (Turk, 2006), Jordan (Hiyassat, 2000), Saudi Arabia (Bubshait & Al Atiq, 1999), Sweeden (Landin, 2000), United States (Chini & Valdez, 2003), South Africa (Rwelamilla, 1995) and Malaysia (Chew & Chai, 1996). As for Malaysia,we have the code of ethics for contractor which need to be followed by the contractors. In that code of ethic it emphasizes more about the level of professionalism, productivity, and quality. Excellence in the construction industry is very much determined by the level of efficiency, productivity, quality and professionalism in the delivery services. The delivery of construction services is connected directly or closely related integrity of the construction contractors in the performance responsibilities. This aspect has been dealt with when Construction Industry Master Plan (CIMP): 2006-2015 enacted. CIMP has given special emphasis on increasing productivity, image and professionalism in the construction industry as the strategic thrusts of this industry to greater high. For this purpose CIMP also has proposed legislation Code of ethics to further strengthen the practice of values and moral ethics among contractors in the country in implementation of construction works. Many developers were also fined for not conforming to the Housing Development Act, including not preparing reports on schedule, especially work progress reports every six months (NST, 2010). This quality in our construction industry can be improved if everybody doing their part. For every developer, starting a new housing project is a new business. So, if they understand their responsibility as a developer and follow the agreement, they must complete the projects according to the dates set. According to Michael S. Poles, the quality of the construction can be control by competence supervision. It is the duty of the contractor to complete the work covered by his or her contract, in accordance with the approved plans and specifications. The contractor must carefully study the approved plans and specifications and should plan their schedule of operations well ahead of time. If at any time it is discovered that the work which is being done is not in accordance with the approved plans and specifications, the contractor should immediately correct the work. In order to assure that the work being done is in accordance with the approved plans and specifications, the contractor must always supervise, and coordinate of all of the work that need to be completed.

2.2 Professional Ethic in Construction Industry

Profession is an occupation that requires both advanced study and mastery of a specialized body of knowledge and undertaken to promote, ensure or safeguard some matter that significantly affects others’ well being (Vee & Skitmore, 2003). Almost every profession has its codes of ethics to provide a framework for arriving at good ethical choices. Therefore, professional ethics is a system of norms to deal with both the morality and behavior of professionals in their day to day practice, and ascribes moral responsibility not to an individual, but to all professionals practicing in a particular profession. For the building and designing professions, the incalculable value of human life demands nothing less than the highest moral considerations from those who might risk it otherwise (Mason, 1998, cited in Vee & Skitmore,2003).

Professional ethics concerns the moral issues that arise because of the specialist knowledge that professionals attain, and how the use of this knowledge should be governed when providing a service to the public (Ruth Chadwick, 1998). The construction industry is a ‘perfect’ environment for ethical dilemmas, with its low price mentality, fierce competition, and paper thin margin (FMI, 2006). Jordan (2005) stated that unethical behavior is taking a growing toll on the reputation of the industry. From a survey conducted by FMI, 63% of the respondents whom are the construction players feel that construction sector is tainted by unethical conducts (FMI, 2006). Surveys conducted by researchers in Australia (Vee & Skitmore, 2003) and South Africa (Pearl et al, 2005) identified several unethical conducts and ethical dilemmas in the construction industry such as corruption, negligence, bribery, conflict of interest, bid cutting, under bidding, collusive tendering, cover pricing, frontloading, bid shopping, withdrawal of tender, and payment game. It is evident that

there exist significant areas of concern pertaining to the ethical conducts practiced by the construction professionals.

There are many other efforts taken to increase the ethical standards and integrity among the professionals in construction sectors worldwide. According to Pearl et al (2005), the regulatory professional Acts relating to the built environment professional sector in South Africa were totally overhauled in the late 1990’s and a new suite of professional Acts were promulgated in 2000 to enhance the professionalism. Meanwhile, in America, the Construction Management Association of America (CMAA) has updated its code of ethics to include a wider range of professional services as well as professional services among construction players (CMAA, 2006). A Standard of Professional Conduct to govern the ethical practices in the American civil engineering profession was published by the American Society of Civil Engineers (ASCE, 2007). On the other hand, Australia has their own codes of tendering to enhance fairness and transparency (Ray, 1997).

In Malaysia, the government is very serious about improving ethics in both public and private sector. For instance, the construction industry has introduced codes of ethics for contractors to encourage self regulation among the contractor in this sector (The Star, 2006). Stakeholders of construction projects were asked to enforce the existing code of ethics to safeguard the engineer’s good name (The Star, 2006). The Construction Industry Development Board (CIDB) of Malaysia also host integrity courses for contractors to promote the importance of integrity and plans to make the course as a pre9requisite for contractors when renewing their registration (The Star, 2006). Finally, the launching of the Construction Industry Master Plan (CIMP) by CIDB in 2004 also had in the master plan an objective to enhance professional ethics in the local construction industry (Construction Industry Master Plan 2006 – 2015). According to Housing and Local Government Minister Datuk Seri Kong Cho Ha, 1,345 developers and more than 5,000 directors of such companies involved in problematic projects have been blacklisted because they abandoned housing projects and also those that were not completed on schedule. They are not only been blacklisted, they also fined for not conforming to the Housing Development Act, including not preparing reports on schedule, especially work progress reports every six months(NST 2010).

2.3 Relationship between Professional Ethic and Quality Related Issues

Besterfield et al (2003) mentioned quality is dependent on ethical behavior, whereby quality and ethics have a common care premise which is to do right things right and it is a proven way to reduce costs, improve competitiveness, and create customer satisfaction. It is evident that low ethical standards among construction professional will lead to quality problem. These issues were highlighted in the media and received great concern of public (Fleddermann, 2004; NST, 2004; and RTM, 2006).

As an example, the ethical related case in the construction industry was the collapse of the Hyatt Regency Kansas City walkways (Fleddermann, 2004). It is a hotel project in 1970s with walkways suspended over the large atrium. With the intention to save the cost, the subcontractor for the fabrication and erection of atrium steel suggested changes in the structure and it was approved by the consulting structural engineer. During the construction, part of the atrium collapsed and the engineer came out with the report saying that the design was safe and ready to be opened for business in 1980. The tragedy happened one year after the completion of the project during a dancing party in the atrium lobby. Some of the walkways on which people were dancing collapsed onto the crowded atrium floor, leaving more than a hundred people died and almost

two hundred injuries. Investigation was then conducted by the Missouri Board of Architects, Professional Engineers and Land Surveyors reported that the original design was only marginally acceptable to the Kansas City building code where the walkways would only have had approximately 60% of the capacity required by the code. The situation was even worse in the new design proposed by the steel subcontractor and approved by the engineer. The consultant was found negligence in its investigation of the atrium collapse and places too much reliance on the subcontractor. Therefore, the engineer has been charged for negligence, incompetence, and misconduct. Both the engineer and the consultant firm lose license of practicing. This case strongly indicates that unethical behaviour will lead to quality problems and structural failures.

In Malaysia, as an example, a newly opened specialist hospital in Johor Bahru was closed due to fungi attack on the equipments and walls (RTM 2006). It was found that many of the hospital’s equipments such as oxygen piping and sewerage system are not according to the specifications. This clearly shows the poor ethics of the contractor who failed to do right things right. The contractor was given three months to rectify problems including leaking pipes, broken ceilings and faulty air conditioning ducts (NST, 2004). Another substandard quality of construction project in Malaysia is the RM238 million Middle Ring Road Two (MRR2) flyover which was closed to traffic after cracks were found in 31 pillars and structural movements were detected (The Sun, 2004). The Government engaged an independent consultant from the United Kingdom to investigate the defects. The independent consultant identified that design deficiencies and improper anchoring of the columns to the crossbeam were the main cause of the cracks (NST, 2004). Design deficiency is found to be a negligence on the design team and the repair works was then carried out at an estimated cost of RM20 million. Contractors confront dozens of issues, many of which have substantial impact on their own self or organization, as well as others involved in the project. Many decisions have a straight forward answer determined by contract language or budget. Some, however, require entering an indistinct gray zone where the contractor must use best judgment to devise a course of action. Ethical questions raised include: what happens when professional codes and regulations lag behind technological innovations; what precautions must engineers take when trying to balance the benefits, new technologies bring against risks to public safety, often associated with engineering innovation and what are engineering and corporate responsibilities to the public for failed innovation; and should he hold then payments for the benefit of his organization. Often these challenges are managed with little or no preparation or formal guidelines and sometimes with negative results. Engineering ethics is attracting interest in colleges of engineering throughout the world. Therefore, the new technology must address the human being as its central subject and has to be introduced by ethics (Cywinski, Z. 2001). The construction of the new national palace at Jalan Duta, Kuala Lumpur has doubled in a period of four years from RM400 million to RM 811 million. Contracts for the construction were awarded to three companies through direct negotiations instead of open tenders ( NST 2003). Government will focus on overcoming the problem `leakage ‘of tenders in the Ninth Malaysia Plan (RMK-9) are exploring the possibility of tightening conditions of the application to the contractor class F. Entrepreneur and Cooperative Development Minister Datuk Mohamed Khaled Nordin said the conditions were studied for class F contractor’s license applicant is to ensure that applicants undergo interview, examination, has offices and operations background of the net. The number of contractors has increased dramatically recently that 46.983 of the contractors registered with the Contractor Service Centre (PKK) in the country. Of the total, 35,544 are Class F contractors. The contractors will face intense competition in seeking jobs or contracts, and more disturbing is the number of contractors that own more than the number of contracts offered, especially from the government.

CHAPTER 3

RESEARCH METHODOLOGY

3.0 Introduction

This section describes the methodology used in conducting this research. It starts by describing the sample selection, research design, variables and hypothesis and continues with the description of the methods of data collection and data analysis. Finally, some of the limitations and key assumption of the findings are described.

Primary source were used to collect data from the sample to assess the perception of respondents toward knowledge management and knowledge sharing, the school culture and work environment, individual barriers and organization barriers toward knowledge sharing. The selected data was tested and conclusions were drawn. There are 6 procedures used in completing this study.

First, a review of literature was conducted. The review was focused on the emergence of knowledge economy and knowledge management. Then the roles of knowledge sharing were discussed. A further potential barrier toward knowledge sharing was reviewed. Variable which has affected on knowledge sharing was also discussed. The review of literature served as a frame work for the study, and offered contrasting opinions of the authors.

Second, a rough draft of the survey instrument and possible methods of testing and assessment of variables was done. A questionnaire was tested and validated before implementation reviewed for preventing any bias and avoiding errors. Questionnaire survey is the main research methodology used to achieve the research objectives. Five hundred (500) sets of questionnaires were distributed to targeted respondents in Selangor state by post ,via the internet , by hand. Targeted respondents ranging from consultant firms and contractor personnel within Selangor area .To ensure the reliability of the questionnaire survey, the sample size taken was then compared to match with the sample size recommended by Krejcie and Morgan (Sekaran, 2000: 295).

Third, a survey was implemented. Questionnaire was sent to the list of all class F contractors which registered under PKK within Selangor area.

Fourth, the result of the survey was assessed using Statistical Package for Social Science (SPSS) 15.0 software. The result were tested and presented with illustration. Scores were converted into percentage rating and presented in graphical format using excel 2003.

Fifth, the conclusion was driven from data analysis and findings. Important points were highlighted and recommendations were given.

Research Design

The research was designed to explore the unethical acts among contractors regarding the issue on the construction quality in Selangor.

The data produced from the research was then analyzed so that the following objective could be achieved.

The stated hypothesis could be tested and further recommendations could be made with regard to specific focus of this research.

To identify areas for further, and more specific areas of research

Quantitative method utilizing survey method is used for gathering information.

Variables

Variables are classified into three groups including dependent variables, moderate variables and independent variables.

Dependent Variable

Unethical act is considered as dependent variable

Independent Variable

Contractors and construction quality are considered as independent variables.

Data Collection

A comprehensive literature review and self administered questionnaire were used to provide an insight to the study. These instruments provide informative ideas on the possible issued experienced by factors affecting perception of respondents about unethical acts will effected the construction quality

The survey aimed is to target contractor class F in Selangor. The aimed was chosen because of two reasons. Firstly, there are too many contractors class F in Selangor. Secondly, the issues that involved contractor class F are more major in our construction industry and this give the author the possibility to sent the questionnaires to some contractor firm on one to one basis. The author would have preferred a larger sample of respondents to participate in the research, but due to limitation of time, this was not possible.

The survey was aimed at the contractors class F in Selangor area. Data were collected from 500 contractors selected randomly from different firm and background. Questionnaire was send through mail and respondents were given three weeks to respond before they were send back to the author.

3. 4 Research Assumptions

When conducting this study a number of assumptions have been made with regards to the literature reviewed and the respondent sample selected. These assumptions are identified as below.

The secondary data collected from various resources have been assumed to be valid and based on the research done by authors.

The secondary data has been assumed to present public interest as a whole and without any biases.

The respondents have responded to the questionnaire without any biasness and to the best of their abilities.

Instrumental Biases

In administrating the questionnaire, there has been a significant degree of biasness that was exercised by researcher. The questionnaire was developed based on the respondents. This minimizes the respondent biasness to a certain level. Various scaling methods were utilized where appropriate to minimize biasness.

Sample size

Approximately 500 contractors were randomly selected from the target population of different firms. The simple random sampling method was utilized in this situation. This was to deter any sample biasness that could have distorted the result. The respondents’ samples of contractors were surveyed in the Selangor area. The contractors who responded came from various hierarchy levels of different firms.

Scaling of Questionnaire

In order in measure the operationally defined and elements of a variable, the rating scale has been used to elicit responses with regard to the person studied. A number of rating scales techniques and measurements were utilized when administrating questionnaire involving Category scale and Likert scale. Example:

Category Scale

What is your highest educational qualification?

PHD degree Bs degree

Ms degree Diploma/STPM

Knowledge sharing is fully supported by school administrator.

Extremely disagree/ Strongly disagree/ Disagree /Agree /Strongly Agree/Extremely A