NSPE's Gateway to Private Practice October 2005 

Did You Miss the Indemnification and Risk Allocation Seminar?

On October 18, PEPP sponsored a seminar entitled Indemnification and Risk Allocation—Reaping the Benefits of the EJCDC Contract Documents, as follow up to last year's six sessions on EJCDC documents and the beginning of many PEPP or PEPP/Council of Principals education sessions you can participate in from your desk.

Barbara Sable, an attorney with Ames & Gough Inc., named four general rules for contracting and managing projects:

  • Assign each responsibility to only one party. Co-responsibility often leads to either duplicating of efforts or, even worse, overlooking certain details because each party thought the other would handle them;
  • Assign each responsibility to the party most capable of fulfilling it. Recognize that this may mean, for example, the party with the relevant experience, appropriate skill, available time, or ability to insure the risk;
  • Assign each responsibility with the authority to carry it out. For example, if we are working on a traditional design-bid-build project and there is a responsibility in your firm’s contract with the owner, then that responsibility should be reflected as an authority to carry it out in the contractor’s contract with the owner. In other words, the contracts should be coordinated so that each party understands the responsibilities and respects the authorities of the other parties; and
  • Establish reasonable and realistic expectations. Look out for the red-flag words that may indicate that the expectations are either unreasonable or unrealistic.

Sable discussed how EJCDC contract documents, by doing the above, can help limit your liability and allocate your risk. She explained that EJCDC contract documents help by

  • presenting an ordered scope of work;
  • identifying and clarifying relationships among the parties;
  • allocating responsibility and risk;
  • confirming understanding in writing;
  • clarifying the owners responsibilities; and
  • addressing dispute resolution.

Missed the presentation? Stay alert for future notice of when the recording of the presentation will be available. The 2004 sessions, Using and Understanding Construction Contract Documents and Using and Understanding Engineering Services Agreements are still available and relevant. To view the recorded seminars, visit C2Ed's Web site.

EJCDC contract documents are multi-use, easily downloadable, peer created, and reviewed documents in Microsoft Word. The standard contract documents are balanced and fair, created for the benefit of all parties involved in engineering design and construction projects.


You are the Voice of the PE

NSPE's new Legislative Action Center encourages political participation by connecting NSPE members to their elected officials. This grassroots Web site allows members to educate themselves on salient legislative issues and take action by contacting their elected officials. The Web site can also be accessed through the Government Relations Web site. State-specific grassroots Web sites administered by each state society are also in the works.

The site features

  • current information on legislation affecting engineers and NSPE’s position on the legislation;
  • voting records and scorecards;
  • a means of contacting federal, state, and local elected officials; federal and state agencies; and national and regional media organizations;
  • a means of identifying an individual’s federal, state, and local elected officials;
  • information on elected officials and candidates for office;
  • voter registration forms, information on registering to vote, and election dates; and
  • e-mail alerts that can be tailored to users’ geographic regions and interests.

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Continuing Education Offers Last-Minute PDHs

NSPE is offering many new and popular online Web seminars for professional engineers to obtain their continuing education units before the year’s end.

NSPE Fall 2005 Ethics Forum: You Be the Judge
November 2 and December 7 12:30 – 1:30 p.m. E.S.T

The NSPE Ethics Forum is an opportunity to learn more about engineering ethics and professional practice issues. The fall 2005 series topics include conflict of interest and public health and safety.

Each seminar offers one PDH. For more information and to register, visit C2Ed's Web site.

NSPE and SAME members: $149 each session
Nonmembers: $189 each session

Interviewing Skills—What Works? What Doesn't?
RESCHEDULED November 16 1:30 – 3:00 p.m. E.S.T.

Are you being asked to interview candidates for positions with your department or organization? Do you fumble over questions or struggle with how to find out if the candidate will have the right skill set for the job or fit the culture of your organization? Do you want some advice and feedback on what works during the interviewing process—both from the interviewer's perspective and the interviewee's perspective?

To sign up, fax in this registration form.

NSPE and SAME members: $149
Nonmember: $189

The TRIAD System That Makes Everyone a Winner!
November 17 2:00 – 3:30 p.m. E.S.T.

This seminar is for everyone who has experienced misunderstandings and preconceived ideas about how the major players in the construction industry work—owner, engineer, and constructor, and wonder if there are better ways.

The presentation and lessons will cover issues and ideas central to the TRIAD. The course includes current information and best practices related to each of these areas: 1) Changes in work, 2) Construction during operation vs. Operation during construction, 3) Preventing an upset condition, 4) Partnering, 5) Firm but fair resolutions, and 6) Proactive initiatives.

To sign up, fax in this registration form.

NSPE and SAME members: $149
Nonmember: $189

Three seminars NOW Available On Demand!
Did you miss these three great seminars at the NSPE 2005 Annual Meeting? They are now available on-demand 24/7. For more information, visit C2Ed's
Web site.

Developing Trust & Commitment in Project Teams
Presenter: Robert Newbold
$69.95 1.5 PDH

Dispute Avoidance and Resolution
Presented by the American Arbitration Association
Panelists: Joseph Broz, Robert Byman, Esq., Charles Lewis, Esq., Robert Maitlin, Esq., and Stanley Sklar, Esq.
$69.95 1.5 PDH

Process Safety Management
Presenter: Bruce K. Vaughen, Ph.D., P.E.
$69.95 1.5 PDH

For more information, visit the NSPE's Education Web site.

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When PE Negligence Costs the Engineer Extra Cash
By Milton Lunch, former NSPE general counsel, consultant on A/E legal matters

In providing professional services to a client, an engineer undertakes to perform that service without negligence, in accordance with the standard of care (defined as the degree of care that a prudent person would exercise in the same or similar circumstances).

At the same time, it is recognized that this test is not always met; at times the professional may indeed be found to have been negligent, and to have caused damage to the owner.

How is the extent and nature of such damages to be measured? The basic principle of the law of damages says that the damaged party should be "made whole"—that is, the owner should be compensated for the loss caused by the failure of the professional. However, the owner should not expect to be compensated for more than the actual damage.

That principle is expressed as the doctrine of "betterment," sometimes called the doctrine of "added value." The concept of betterment is defined in Black's Law Dictionary as

"An improvement put upon a property which enhances its value more than mere replacement, maintenance, or repairs. The improvement may be either temporary or permanent. Also applied to denote the additional value which a property acquires in consequence of some public improvement, as laying out or widening a street."

Imagine, for example, that a design firm fails to include return air grilles in its plans and specifications. When the omission is discovered after the construction has been completed, it is necessary to provide the missing items and make changes in the physical condition of the wall to install the missing air grilles.

Under the betterment concept, the design firm is liable for the additional cost of installing the missing air grilles. But the owner is responsible for their actual cost because the owner would have been obliged to pay for the air grilles had they been properly stipulated in the original plans and specifications and thereby a part of the construction bids.

On the other hand, if the omission had been discovered prior to bids being opened, an addendum would have been issued and the cost of the missing items would have been in the original bid price. Under this basic principle, if the defect is one that can be corrected or cured without additional cost to the owner, there has been no actual damage to the owner. But, if the correction requires additional construction costs to achieve the proper result as originally intended, the design firm is responsible for those additional costs.

Here's another example of the betterment or value added rule: If a roof has to be replaced after three years due to initial defects in the design, and the roof was intended or warranted for five years, the owner is only entitled to the pro rata loss of a new roof. This application of the rule confirms the basic principle that the owner be "made whole," but is not entitled to something for which he did not pay.

An actual case best illustrates this legal issue: A design firm specified a particular wall paneling for a building. After it was installed, it was discovered that the paneling did not meet the local building code. Local authorities required that it be removed and replaced with acceptable paneling, which was more expensive. The building owner claimed the design firm should pay for the costs involved for the purchase and installation of the previous paneling, as well as for the purchase and installation of the more expensive paneling.

In a subsequent legal proceeding, the court ruled that the design firm had to pay for the costs, installation, and removal of the paneling first specified, as well as the additional costs for the placement of new paneling, but it was not required to pay the costs of purchasing the more expensive paneling. The court said

"The owner should not receive, without paying more than it originally had to pay for the [original paneling], a windfall in the firm of the more expensive paneling and the extra labor costs required by its more difficult installation merely because the [design professional] initially failed to specify it."

To view more For the Client articles, visit NSPE's Web site.

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Contact the PEPP Executive Board

Larry Britt, P.E.
Oxford, MS
Immediate Past Chair
Fred Palmerton, P.E.
Springfield, MO
Steve Theno, P.E.
Anchorage, AK
Pete Koval, P.E.
Syracuse, NY
Vice Chair, Northeast Region
Randy Rakoczynski, P.E.
Buffalo, NY
Vice Chair, Southeast Region
Dan Dawson, P.E.
Wilmington, NC
Vice Chair, Central Region
Mark Davy
La Crosse, WI
Vice Chair, North Central Region
Kevin Skibiski, P.E.
Springfield, MO
Vice Chair, Southwest Region
Mark Martin, P.E.
Fayetteville, AR
Vice Chair, Western and Pacific Region
Steven Dyrnes, P.E.
Portland, OR
Young Engineer Representative
Eric West, P.E.
Midland, TX
SSEC Representative
Pat Christians
Birmingham, AL

PEPP Staff
Kim Granados
1420 King Street
Alexandria, VA 22314
tel: 703-684-2857
fax: 703-836-4875

PEPP Executive Board July 2005
top l-r (Davy, Rakoczynski, Koval, Dawson, Skibiski, Palmerton, Theno)
bottom l-r (Britt, Granados, West, Christians, Dyrnes)
missing (Martin)

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Victor O. Schinnerer & Company Inc. provides a good reference for contracts and the allocation of risk.

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