Professional Liability/Risk Management Brief: Submittal Review
By Richard B. Garber, Vice President A/E/C Risk Management Services, Victor O. Schinnerer & Company Inc.
During a construction project, shop drawings provide needed communication. Shop drawings can provide an opportunity for the construction team to use their knowledge of particular disciplines in determining optimum final design details, but the review process also creates risk.
Shop Drawings Are Not Contract Documents
Shop drawings are meant to communicate the contractor’s interpretation of the requirements set out in the contract documents. They are descriptive technical submissions to show compliance with contractual requirements of specific items the contractor intends to include in the work, as well as how the items interface with other project elements.
Most shop drawings provisions state that approval of a contractor’s submission does not negate the contractor’s obligation to strictly conform to the contract documents. Thus, if the shop drawings contain a deviation from the contract requirements, approval of the shop drawings by a design firm acting as the client’s agent will not change the contract documents and constitute acceptance of the deviation.
Documents Should Define System
The general conditions of the construction contract should require the contractor to provide a schedule for submittals that incorporates the required time for review and resubmittal, if necessary. Since this schedule affects the services of the design firm, the firm must approve the schedule. Consensus industry documents also require that the submittal schedule be prepared in conjunction with the construction schedule so that submittals are made in logical sequence and in a timely manner to allow for review when called for by the construction schedule. A submittal log that tracks as-planned and actual submittal dates is a powerful project management tool that can be used to mitigate a design firm’s exposure to delay damage claims from the contractor.
Contractors Should Be Held to Requirements
Managing the risks intrinsic in the shop drawing review process requires the contractor’s exacting discharge of the contract for construction and the design firm’s diligent performance of the duties in the professional services agreement. The contractor must coordinate and check the shop drawings submitted by specialty contractors to ensure proper interfacing and compatibility with the overall project. Specialty contractors are obligated to prepare and furnish shop drawings to the prime contractor that reflect intended compliance with the contract plans and specifications.
As the construction industry begins its migration to digital practice and building information modeling, the purpose, procedure, and responsibility for shop drawings have been questioned. While the need for shop drawings will not disappear, the requirements placed on the contractor and the system used by the design firm may change. What will not change is the design firm's need to execute responsibilities in a professional manner and require that the contractor obey the terms of the construction contract.
Classic Advice Still Relevant Today
Schinnerer’s risk management information from 1976 about shop drawing review is still relevant today:
Rarely has a professional liability claim resulted from the design professional’s approval of shop drawings when the design professional exercised reasonable care in processing and approving them and insisted that others meet their contract obligations in connection with submitting shop drawings.
Victor O. Schinnerer & Company Inc. is managing underwriter for the CNA/Schinnerer Professional Liability Insurance Program, commended by NSPE/PEPP since 1957.
Top 10 Items to Include in Your Contracts — A Profit Perspective
Herbert M. Cannon, President of AEC Management Solutions Inc.
10. Be Sure to Have a Well Designed Scope of Work
Including a specific scope of work in your contract can save a great deal of aggravation and money. If we don't have a clear scope of work in the contract, the only way I can see of performing this work is on an hourly basis with no upset limit. Even then we need to have a written understanding with our client as to our ultimate goal.
9. Propose a Fixed Fee for Your Reimbursable Expenses
While it won't work for every project or client, receiving a fixed fee for reimbursable expenses has the potential of producing a substantial profit. When firms are working on a familiar project type for a good client, I have seen fixed fees produce a 30%+ profit. Of course you need to price it properly and make every effort to keep your costs in check, but it is worth the effort. Think of the time saved on copying, collating, and invoicing alone! The client also benefits by having price certainty for their project.
8. Include a Contract Termination Date in the Contract
All good things must come to an end, including contracts. By putting a reasonable contract termination date, you reinforce the project schedule and set up the case for invoicing hourly for any services beyond the termination date.
7. Limitation of Liability
Include a limit of liability clause in your contract. The amount should be limited to the amount of your fee. Why should we have unlimited liability to the client when we are receiving a $5,000 fee? You won't always be able to get it included, but give it a try.
6. Royalty Clause
Many firms are worried about ownership of documents but pay little or no attention to their intellectual property rights. I personally couldn't care less who owns the paper documents but I do care a great deal about someone reusing my ideas as presented in the documents. For this, I want to get paid a royalty. Include a royalty clause in the contract to compensate you for your ideas and guarantee you a consulting roll in any reuse or adaptation.
5. Payment is Not Contingent Upon 3rd Party Reimbursement
I am not necessarily talking about being a sub-consultant to the prime. I have experienced some unfortunate situations when working for a not- for-profit. After the work was performed I was then told they needed to apply for a grant or do fundraising before we could get paid. Of course, they acted surprised that I wasn't aware of this. Be careful when doing work for non-profits, many of them have no problem spending your money to further their cause.
4. Include a Schedule of Deliverables
Yes in item number ten I talked about a carefully defined scope, but I am getting much more specific. Include a drawing list and schedule of other specific items they will receive. It avoids confusion by the client as to what they will get.
3. Define What is NOT Included in the Scope of Work
This is particularly important when dealing with the nonprofessional consumer of A/E service. By nonprofessional, I mean those clients or institutions that are not regularly involved in design and construction projects. For example, they might expect that a professional rendering or landscape design is included in your base fee. I have also had the experience of an experienced developer claiming that professional renderings are always included in basic services. Let's not go down that road and layout in detail what is not included in basic services.
Be sure to ask for a retainer on every project. How do you get a retainer? You ask for it! Especially with a new client or one you have had a bad experience with. There is no commitment from the client until they write a check. If you don't have the nerve to ask for a retainer, have one of your junior project managers ask, they don't know any better. More about this in a future issue of my newsletter.
1. Right to Stop Work for Nonpayment
What a radical thought! Let's include a clause that says if the client doesn't pay within 60 days, we have the right to stop work and withhold all work produced to date. I know that many of you will say that we already have this right or we can't stop working in construction. Well to this I say there is no reason that I know of to legitimately keep this right out of the contract. If the client objects to this clause, proceed with the project at your own financial risk. Do I want to stop work? No. But I do want to use this clause to force a face-to-face meeting in which we resolve the nonpayment issues. If they won't agree to the meeting, I stop working until the issue is resolved.
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.
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NeXt Generation of Leaders
Some baby boomers will retire (not all, we hear!), leaving a leadership shortage. PEPP is talking with the future generation of leaders and listening for ways to attract younger generations to the profession—and retain them. Each month PEPP Talk will profile a young engineer who exemplifies what is in the pipeline for leadership. Take a moment to get to know them, hear what they are saying, and apply that knowledge to your staff and coworkers.
Eric West, P.E.
Title: Corporate Associate
Company: Parkhill, Smith, & Cooper, Inc.
Been There: almost 10 years
Number of employees: 230+
How did you first get into engineering? I always loved to design, and I had a very analytical mind, but I didn't know what engineers did. When I went to college, I wanted to major in architecture, started a dual degree program with civil engineering, and quickly realized my home was in engineering.
If you weren’t an engineer you’d be…. a musician (singer/songwriter)...and I still have dreams...
What’s your peak experience as an engineer so far? Getting licensed. Watching my first project being completed (constructed) is a close second.
What do you think engineering firms need to do to attract younger generations into the engineering industry? Communicate how much fun it is to do this for a living. The coming generations will care much more about having a rewarding, fulfilling career and doing something productive with their lives. Engineering is the perfect field to do both.
What does leadership mean to you? Being willing to take the first step towards something, away from something, in risk, in love, etc.
Leaders you admire? Abraham Lincoln, two of my uncles, and Jesus of Nazareth.
Football or baseball? Both, but for different reasons. Football is tremendous action, always something to watch, and never slows down.
Web site you can’t go a day without visiting? ESPN.com
Something readers would be surprised to learn about you? I've appeard in Sports Illustrated, twice. Once in "Faces in the Crowd" in 1981, and then last year in a follow up on "Former Faces".
You wake up tomorrow as CEO of your firm — what's the first thing you'd change? I would make sure everyone was having fun (not being silly), and it would start with me.
How do you strike a work/life balance? By embracing the idea that work is a part of my life, but certainly not the only part. I prefer to call it "Life Balance," because everything in life interacts with the other parts. Family, work, community, spirtuality, are all part of what makes up "me," and none of those are independent pieces. How I choose to spend my time, energy, and finances are decisions made by looking at the whole of my life, not any one aspect.
Are you a young engineer interested in getting more involved in NSPE? Interested in being profiled? Contact Kim Granados.
Are you a baby boomer trying to understand the Generation X, and then the Millenials? View the free 2 part PEPP Council of Principals video on Leadership and the Emerging Generations. Or purchase the Future Leader Focus report of survey results from HR Advisors Group.
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NSPE Education for You and Your Firm
NSPE ETHICS FORUM: Public Safety - Public Welfare
Session 1: March 12, 12:30–1:30 p.m. (E.D.T.) 1.5 PDHs
Session 2: April 16, 12:30–1:30 p.m. (E.D.T.) 1.5 PDHs
Session 3: May 14, 12:30–1:30 p.m. (E.D.T.) 1.5 PDHs
Forum Series Registration: NSPE & SAME members: $119.00 each session, $325.00 for the series. Nonmembers: $149.00 each session, $425.00 for the series. Click here for the registration form (Microsoft Word document)
Construction Claims Roadmap to BIM 2008 Audioconferences
Contractor Implementation: Industry Consultants Discuss Considerations and Best Practices for Contractors, CMs and Design Builders Ready to Take the Plunge. Shared or separate models; from the designer, design/builder and contractor perspectives. Technology tools and investments. Management strategies.
Contractors on the Forefront: Three Contractors Reveal Their BIM Successes and Failures
BIM Risk Factors: Divergent Views of Risks by Owners, Designers and Contractors; Determining Where The Risks Are, Contract Language Considerations and Adapting BIM to Current Contract Delivery Methods. BIM has the potential to reduce risks and costs throughout the entire facility life cycle; this session will discuss how the owner, A/E and contractor currently perceive shifts in responsibilities, risks and costs.
Special NSPE member prices
$149 a site each session
$193 for session plus CD
$171 for CD only.
$596 for a CD of all 5 sessions.
PDH certificates will be sent on request. Click here for more information and to register. For more information contact Patti Wysocki.
March 11, 1:30–3:00 p.m. (E.D.T.)
Performance Incentive Programs & Monitoring
Download registration form.
April 9-11, Alexandria, VA
2008 PEPP Human Resource Directors' Roundtable
ALMOST SOLD OUT!!!
June 12-14, Alexandria, VA
2008 PEPP CFO Roundtable
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PEPP Awards Deadlines
The PEPP Award is given annually to an individual who has made an outstanding contribution to the advancement and recognition of the role of private practice in serving the public interest. All nominations are due by April 30.
PEPP Professional Development Award
The PEPP Professional Development Award is presented to employers who exhibit exceptional career development initiatives and employment practices that advance the engineering professions. Nominations are due by April 30.
The ACEC-NSPE QBS Award recognizes public agencies and private sector entities that make exemplary use of the QBS selection process at the state and local level. Deadline for nominations is April 30.
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Free Generational Leadership Presentation Available
At their most recent meeting in January, the PEPP Council of Principals hosted a presentation on Generational Leadership. Led by Jeff Van Kooten of the Center for Generational Studies, the group defined the various generations and looked at some of the challenges facing working together.
The wo part web seminar on Generational Leadership can be found under "Free Webinars" on the PEPP Council of Principals Web page.
Part 1 - Takes a look at the generations in currently in the work place
Part 2 - Continues taking a look at the generations and the impact of today's emerging leaders.
Click here to watch today!
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