NSPE's Gateway to Private Practice January 2007 

Top 10 Reasons to Switch CPA Firms
Herbert M. Cannon, president of AEC Management Solutions Inc.

1. Their Biggest Claim to Fame is "You were never audited"
The fact is their preparation of your return has little effect on whether you are audited. Yes, they must prepare it accurately and honestly — but their job is not to work for the Internal Revenue Service and discourage legitimate tax strategies and deductions. Even though an audit is a pain in the neck — I would actually prefer to have an accountant who represented me in an audit with no change in my tax liability.

2. Their Second Biggest Claim to Fame is They Went to College with the Founder
It is great to be loyal to your friends — but this is business. You owe it to yourself to speak with other CPA firms to see how they can help you develop strategies to minimize your tax liability, protect your assets and increase your retirement benefits.

3. Their Fees Seem to Increase in Proportion to Your Profits
It is sad to see how much some of my clients are being charged by their CPA firm for substandard to average work. Many accountants see your financial success as a reason to charge higher fees for their services.

4. They are not Proactive in Saving you Tax Dollars
They never offer advice on how you can take advantage of tax favored retirement plans, savings plans or personal benefits. They simply fill out your tax return, prepare your financial statements and send you a bill.

5. They are Unable (or Unwilling) to Explain Things in a Way you Understand
Some accountants are terribly poor communicators and can’t explain anything — even to other accountants. Others seem to use the industry jargon as a way of keeping their clients in the dark and making themselves seem all that more valuable.

6. They Always Put You on Extension
Your information is ready by the end of January, but for some reason your tax return is always put on extension and filed 6 months after the original due date. This is an indication that you are not an important client to them. Find an accountant who is willing to file your taxes on time.

7. They Have a Large Personal Tax Return Practice for Non-Business Owners
This is usually an indication that they are more geared to the consumer market rather than the business market. You deserve an accounting firm that is dedicated to the business market.

8. They Love to Tell You Why You Can’t do it
No matter what you suggest, from saving taxes to buying a building to acquiring another firm, their knee-jerk reaction is to tell you why you can’t do it. Most accountants are risk adverse to a fault and bask in the glory of telling their clients why they can’t do something. They somehow think that this is serving your best interests. The problem is that I already know why I can’t do it. What I am really looking for is a creative strategy to help me do it anyway.

9. They Have Been Your Accountant for More than Five Years
Your company has probably grown tremendously over the last five years and so has your need for quality advice. The accountant that could serve a 5 person firm may not meet the needs of a 20 person firm. The accountant that could serve a 100 person firm may not be qualified to serve a 300 person firm.

10. They Have Zero to Few Other A/E Clients
Yes. We are special and so is our industry. We deserve the services of an accounting firm that specializes in the A/E industry.

Herbert M. Cannon, president of AEC Management Solutions Inc. and publisher of AEC Managing Partner Newsletter, is a management consultant, seminar provider, and speaker exclusive to the A/E industry. He is available to speak at company meetings and conferences. For more information, contact Herb via e-mail . Or visit his Web site. 



In Search of Contract Experts

  • Are you detail oriented?
  • Are you using EJCDC contract documents?
  • Do you work with contracts day in and day out?
  • Do the terms "Pay if Paid" or "Pay when Paid" stir your blood?

If the answers to the above are yes — PEPP has an opening for you to make a difference using those skills!

The Engineers Joint Contract Documents Committee (EJCDC) sponsored by PEPP, along with ACEC, ASCE, and AGC,  is looking for participants to act as non voting observers to EJCDC.  Observers attend up to three meetings a year and can serve on EJCDC document subcommittees to make changes to the actual contracts being used by the industry.

If you are interested in learning more about EJCDC and this opportunity contact Kim Granados.

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Professional Liability/Risk Management Brief
Richard B. Garber, Vice President A/E/C Risk Management Services, Victor O. Schinnerer & Company, Inc.

Change Orders

The use of change orders is a basic element of the design and construction process because changes are a virtual certainty on all construction projects. Yet change orders are a continuing source of disputes and can disrupt the orderly completion of a project. If the processing of change orders is to go smoothly, all parties must recognize their proper roles.

Define the Process
The construction contract needs to define the change order process. On a design-bid-build project, the construction contract is between the client and contractor. A change order is a modification to that contract, and the client and contractor must approve all changes. Therefore, the design professional has no inherent power to make changes to the construction contract. The agency relationship, however, normally grants the design professional the power to interpret the contract documents and to make minor changes that do not affect the construction cost or the time to perform the work.
Involve the Design Professional
The realities of construction have led to a common practice whereby the client is allowed to direct the contractor to perform changes to the contract even before the costs of such changes are negotiated. Normally, however, the contract documents require that all three parties—the client, contractor, and design professional—sign a change order before the contract is changed. Even though the design professional is not a contractual party, the design professional signs the change order because the client is entitled to the advice of the design professional before taking action that affects the work. And since the changes may affect public health, safety, and welfare, the changes require the approval of the design professional.

The details of the proposed change—usually drawings and specifications—should be submitted in advance to the client with enough data so that the client can make an informed decision. The cost of a change order is not just the time and cost for construction. The client must be aware of the preparation time and compensation to the design professional.
Include a Contingency
At times, the design professional is asked via contract to assume responsibility for the costs of all changes. Provision of a contingency budget by the client for a reasonable level of change orders is prudent. The shifting of all responsibility above that contingency to the design professional, regardless of negligence and irrespective of whether the cost is to restore harm or add value to the project, is inappropriate and in excess of the design professional’s normal legal liability.
Define the Design Professional’s Responsibility
Absent a contractual provision to the contrary, the design professional is responsible for any increased cost a change order causes the client if required because of the design professional’s negligence. This does not mean that the design professional is responsible for the “betterment” of the project costs resulting from differing site conditions, government-required changes, or client-requested modifications during construction, nor does it mean that incremental costs of change orders are the responsibility of the design professional. A sample contractual provision might read as follows:

The design professional is responsible for the reasonable costs of a change order directly associated with negligent errors or omissions on the part of the design professional, less the increased value to the client created by such change order.
Strictly following a rational change order procedure and documenting the decision process can assist in reducing the potential change orders have for generating unnecessary misunderstandings, conflicts, and costs.

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Join PEPP at a Council of Principals Session, February 23, Tampa FL

The PEPP Council of Principals — PEPP's program to provide the tools, information and support needed to become a successful leader and principal in private practice — is holding a 4 hour education session on Friday, February 23 from 12 to 5 p.m., including lunch, at the Wyndham Westshore hotel in Tampa, FL.

Sessions are currently scheduled oncommunications best practices in your firm, discussion on young engineers in the workplace, generational issues, and open discussion on the topics you most need and want to discuss.

To attend, contact Kim Granados.

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NSPE Offers Hot Construction Web seminars

February 21 12:30 — 2:00 EST
Green Building — Where's the ROI and Marketing Advantage
Gary J. Saulson, Head of Corporate Real Estate, PNC Financial Services

March 21 12:30 — 2:00 EST
Brownfields Sites — Grants and Incentives to Cleanup and Redevelop
John A. Sartor, P.E., P.P., Senior Vice President, Paulus, Sokaloski, and Sartor, LCC (PS&S)

April 18 12:30 — 2:00 EST
Through the Roof — Escalating Construction Costs
Michael Kennedy, Principal, Stantec Consulting Inc.

For more information on these topics, the sessions and the speakers visit the PEC Web site.

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Take the 2007 Milton F. Lunch Ethics Contest Challenge

All current NSPE individual members, NSPE state societies, and NSPE chapters (including student chapters) are invited to participate in the 2007 NSPE Milton F. Lunch Ethics Contest. Here's your opportunity to match your wits with experienced PEs and engineering students throughout the country!

Contestants are encouraged to analyze the facts of a real situation involving the ethical obligations of a professional engineer as a member of the United States military. Contestants must develop discussion and conclusions about the ethics of the engineer in the case using the format of the NSPE Board of Ethical Review. Entries must be 750 words or less and must be received at NSPE Headquarters by April 20.

The winning entry will receive a certificate, recognition in PE Magazine, and an award of $1,000 ($500 to the NSPE state society or NSPE chapter and $500 divided among the authors), provided by the NSPE Educational Foundation.

Judges will decide the winner based on quality of the entry in form and presentation; demonstration of understanding of the implications concerning ethical or unethical behavior; and comprehensive analysis of the case and arguments supporting your conclusions.

The contest is named for NSPE’s former general counsel, who played a key role in the founding of the NSPE Board of Ethical Review.

Please visit the "Ethics" section of the NSPE Web site.

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Professional Liability Insurance Resource Published

Engineers and engineering firms now have an updated resource on professional liability insurance carriers and the coverage they provide. In the December issue of PE magazine, readers will find the 2006 Directory of Professional Liability Insurance Providers and selected responses from the annual survey of insurance providers.

The directory and survey are produced annually by the Professional Liability Committee of the Professional Engineers in Private Practice, the American Council of Engineering Companies, and the American Institute of Architects.

In an accompanying article on trends in professional liability rates, Professional Liability Committee member Neil Van Dyke, P.E., wrote: "Even though most carriers predicted that premium rates will be flat to lower next year, insurers are continuing to focus on more stringent underwriting of the risks for each of their potential insureds. That means that if you are a high risk due to poor claims history, or you work in a high risk sector such as condominiums/multifamily, you could continue to see higher rate increases or difficulty in finding coverage."

The directory and complete survey can be found on the NSPE Web site.

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Companies Compete for National New Product Award Honors

The 2007 NSPE New Product Awards program is now inviting entries for exemplary new products that demonstrate the innovative use of engineering principles and provide overall benefits to society through February 15.

Now in its 25th year, the program was developed and is coordinated by NSPE’s Professional Engineers in Industry in an effort to recognize new and improved products that stimulate the life and growth of the U.S.

Any new product, machine, process, or material that has been developed or manufactured only in the U.S. may be entered provided that it was first placed on the market between 2002 and 2006. Entries are judged on annual sales and economic impact, innovative use of engineering principles, and improved function.

For further information and nomination forms, contact Erin Garcia.

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Contact the PEPP Executive Board

Steve Theno, P.E.
Anchorage, AK
Immediate Past Chair
Larry Britt, P.E.
Oxford, MS
Kevin Skibiski, P.E., F.NSPE
Springfield, MO
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, P.E.
La Crosse, WI

Vice Chair, North Central Region 
Kevin Nelson, P.E.

Vice Chair, Southwest Region
Eric West, P.E.
Midland, TX
Vice Chair, Western and Pacific Region
Steven Dyrnes, P.E.
Portland, OR
Young Engineer Representative
Dawn Edgell, P.E.
Chicago, IL
SSEC Representative
Pat Christians
Birmingham, AL

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


PEPP Homepage

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