Use of Sales Organization on Basis of Stipulated Payments and Percentage of Contract Amount
Case Citations: NONE
A marketing company has contacted an engineering consulting firm offering to provide marketing consultant services for the purpose of securing work for the engineering firm from public agencies and the private commercial world. The marketing firm proposes to identify possible clients for designation by the engineering firm as potential clients of interest, and the engineering firm may also suggest potential clients for contact on its behalf by the marketing firm.
The proposed agreement calls for the engineering firm to pay the marketing firm a stipulated monthly sum for an agreed-upon number of months, plus a percentage of the total contract amount received by the engineering firm as a result of selection of the engineering firm by the client flowing from the work of the marketing firm on behalf of the engineering firm. The proposed contract stipulates that it will be made subject to the provisions of federal regulations governing permissible arrangements by firms doing business with the federal government.
1. Is it ethical for the engineering firm to solicit work by use of the commercial marketing firm?
2. Is it ethical for the engineering firm to pay a commission to the commercial marketing firm to secure work for him or her?
1. It is not ethical for the engineering firm to solicit work by use of the commercial marketing firm.
2. It is not ethical for the engineering firm to pay a commission to the commercial marketing firm to secure work for him.
*Note-This opinion is based on data submitted to the Board of Ethical Review and does not necessarily represent all of the pertinent facts when applied to a specific case. This opinion is for educational purposes only and should not be construed as expressing any opinion on the ethics of specific individuals. This opinion may be reprinted without further permission, provided that this statement is included before or after the text of the case.
Board of Ethical Review
Robert R. Evans, P.E.; James G. Johnstone, P.E.; Joseph N. Littlefield, P.E.; Donald C. Peters, P.E.; James F. Shivler, Jr., P.E.; L. W. Sprandel, P. E .; William J . Deevy, P.E., chairman.
Additional views:
The undersigned members of BER take this opportunity to express additional views on the issues described in Case 77-1, the conclusions of which were unanimously agreed to by board members present.
It should be understood by all that the BER is constrained to decide cases on the basis of the wording of the Code of Ethics then in effect. In some instances the language of the code is broad enough to require an interpretation as to its applicability in a specific situation; however, there is no doubt that a literal reading of 11 (b) makes the employment of a commercial marketing company and the payment of a commission to secure work a "per se" violation of this section of the code. Hence the unanimous opinion of BER members on Case 77-1 as described.
It is axiomatic that the principal thrust of the NSPE Code of Ethics is the advancement and protection of the public welfare. Viewed in the context of modern business practices as required by our complex society and the increasing number of U.S. firms exporting their technical expertise on a global basis, there is a serious question as to whether the present language of the code is unduly restrictive while offering at best a limited measure of protection of the public interest. There are many circumstances where it becomes desirable if not actually necessary for engineering firms to employ outside services to assist in obtaining work. Marketing firms specializing in the representation of professional engineering firms may well be controlled by qualified professionals fully aware of the proscriptions involved in the marketing of professional services, thus it appears unreasonable to assume that these firms would be unduly susceptible to improper conduct in their zeal to earn their compensation. In any event, clearly it should be the responsibility of the engineering firm to assure that the marketing group which has been authorized to represent its interests does so in a proper manner.
The payment of a "commission" based on actual sales vis-ˆ-vis a specified payment schedule or salary if a bona fide employee of the consulting firm presents a more complex issue. It is apparent that the pressures and temptations inherent in this type of financial arrangement could ". . . lead to a loss of confidence by the public in the professional nature of engineering services," as stated in a previous case. There are many engineers, however, who feel that the financial arrangement between the engineer and his employees or representatives is a business consideration not directly relevant to ethical considerations.
It would be well for the NSPE Ethical Practices Committee to review the issues raised by Case 77-1 in the light of current conditions of practice.
Robert R. Evans, P.E.; James G. Johnstone, P.E.; James F. Shivler, Jr. , P. E.
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