NSPE's Gateway to Private Practice August 2008 

Professional Liability/Risk Management Brief: Incorporation by Reference


Incorporation by Reference

The inclusion of the specifics of one document—a contract, reference publication, or information source—into another can be accomplished without republishing the information or appending the document. It is done by incorporating the cited information by reference to the document in which it is contained. Incorporation by reference simplifies documents such as professional service agreements. But the process can also lead to misunderstandings, claims, and significant losses.

Referring to Legal or Technical Information

Professional service agreements and the instruments of service they lead to often incorporate information on codes, standards, and regulations from legal or technical publications or other sources. The contract may require the design firm to perform in accordance with certain referenced constraints. Firms must be appropriately familiar with the referenced standards or constraints, and contracts should clearly state the version, edition, or date of the standards or constraints in question.
In preparing drawings and specifications, it is customary for a design firm to refer to standard specifications, manuals, and codes of technical societies to amplify the description of materials, equipment, systems, standards, or quality. By doing so, there is no intention to revise or supersede the terms of the contract documents. The edition or version of the material incorporated by reference should be specified. Usually it will be what is in effect at the time of the issuance of the documents, or it could be as of the date of the agreement.

Creating Flow-Down Provisions

Design leading to construction is usually a team activity, and interprofessional service agreements are common. The prime design firm—the one with the contract for services directly with the client—usually wants the requirements it has assumed by contract also to be assumed by any lower tier service provider. Therefore, many of the requirements of the prime service agreement are incorporated by reference into interprofessional agreements. Too often, a lower-tier design provider agrees to the incorporation of requirements into the subcontract that force the subcontracted provider to abide by the terms of the prime contract without a full understanding the incorporated provisions. That can lead to responsibility without knowledge and liability without control. A lower-tier professional can agree to be bound to the same extent as the prime except as indicated through deletions or modifications to the scope or terms and conditions of the referenced prime agreement, but that professional must take care to familiarize himself with the applicable provisions just as with any other contractual requirement.

Assuming Responsibilities in an Unknown Construction Contract

In design contracts for projects leading to construction, the design firm’s obligations are usually negotiated first. But a subsequent construction contract may purport to assign to the firm duties and responsibilities never intended and often without commensurate authority or compensation. When a prime design firm’s contract incorporates terms and conditions from the client’s contract with a construction contractor, it should be clear that duties cannot be created in conflict with the original professional service agreement. The authority of a design firm stated in the general conditions of a construction contract must be consistent with the terms and conditions of the original client–design professional agreement.


© 2008, Victor O. Schinnerer & Company, Inc. Statements concerning legal matters should be understood to be general observations based solely on our experience as risk consultants and may not be relied upon as legal advice, which we are not authorized to provide. All such matters should be reviewed with a qualified advisor. Victor O. Schinnerer & Company Inc. is managing underwriter for the CNA/Schinnerer Professional Liability Insurance Program, commended by NSPE/PEPP since 1957.

Schinnerer Publishes Technology Risks White Paper

Design firms have seen their internal management practices and project delivery procedures change significantly because of their escalating reliance on software and digital communication and production devices. While Victor O. Schinnerer and Company Inc. has been working to identify risks, clarify existing coverage, and develop new insurance products to assist firms in their risk management efforts, not all technology-based exposures are within the scope of professional liability insurance or other standard insurance policies. Schinnerer has now published Insuring Technology Risks in a Professional Environment to help firms understand the range of technology exposures and the methods to mitigate their risks.

Many firms have incorporated technological advances into their operations. Some, however, have not fully understood the business and professional exposures intrinsic in digital practice. Other firms have been hesitant to pursue the commercial and technical advantages emerging or now available because of their apprehensions—often unfounded—about increases in their professional liability exposure and business risk.

Firms have unprecedented opportunities to increase their profitability, level of service, status in the marketplace, and support for their clients and the public good through enhanced construction-related professional services. But they need to recognize how digital practice might change their risk profile and act to properly manage and insure their exposures.  

For more information, download Insuring Technology Risks in a Professional Environment.

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NSPE Education for You and Your Firm

September 11–12 8:30 a.m.–4:30 p.m.
Las Vegas, NV
14 Professional Development Hours (PDHs)
This comprehensive program teaches the concepts and tools of effective project management for architects, engineers, owners' representatives, facilities managers, and government agency executives. Participants will learn how project managers can help to market projects, control design costs, and effectively manage the project team. The course is designed for project managers, principals, staff, and future leaders. Participants will learn approaches they can immediately apply in their own organizations.

Green Building Best Practices 2008
Maximizing Value While Reducing Risk
NSPE Members have the opportunity to participate in these Web seminars at reduced rates.  Click here for more information and to register. 
14 Professional Development Hours (PDHs)
August 20, 2008
Legal and Risk Considerations
Construction attorneys Bryan Jackson and Mike Cathcart from Allen Matkins Leck Gamble Mallory & Natsis LLP along with William Broz, PE of CTG Forensics LLP. discuss the major risks associated with green building – capital (design/build cost and schedule), operational(operation costs), and reputational (failure to achieve certification) – as well as emerging risks such as ownership, regulatory, and casualty. Much is at stake, including loss of financial incentives, occupancy delays, future marketability, and reputation, for starters. Risks affect all parties – owner, designer, contractor, and CM – and are best dealt with at contract formation.

 Complete Green Building Best Practices Series 
 (Includes all CDs of all four events,
 giving you flexibility to listen at your convenience)
 Session Attendence Only
 Session Attendence and CD
 Session CD Only (Pre-event discounted price)

Questions:  Contact Kim Granados, NSPE Director, Professional Practice 703-684-2857

HR RT West
November 12–14
Embassy Suites Frisco, Texas

Online, prerecorded sessions are available at a low member price of $89.00, including:
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Recent Court Decisions and Legislative Matters Relevant to Contract Documents


Recent Court Decisions of Relevance to Contract Documents

Engineers Joint Contract Documents Committee General Counsel Hugh Anderson of the law firm Akerman Senterfitt Wickwire Gavin prepares and discusses a summary of recent court decisions of relevance to contract documents, which can now be found on the NSPE Web site.


Significant Legal and Legislative Activities

Arthur Schwartz, NSPE deputy executive director and general counsel prepares a summary of significant legal and legislative activities to provide information to the Engineers Joint Contract Documents Committee as they revise documents.

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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 plans to profile a young engineer who exemplifies what is in the pipeline for leadership — that is when these young engineers aren’t too busy!



Aaron C. Thrush, P.E.
Maumee, Ohio

Age: 29

Title: Transportation Engineer

Company: The Mannik & Smith Group, Inc.

Been There: Approaching one year

# of employees: 200+

Previous Gigs: Seven years with SSOE Inc., Coop/ Internships with Lucas County Engineer and Bostleman Corporation Inc.

How did you first get into engineering? One of my fond childhood memories is of crisp fall Saturday afternoons watching college football and the weekly edition of “This Old House”. My dad and I made a routine of this and to this day, I enjoy (although less often) catching up on the most recent home restoration in progress. For a time in high school, this spawned curiosity in an architecture career, but after several semesters of intro high school architecture classes, I came to find my interest was less with the art of a building’s function and form and more with the science behind structures and systems. As I explored college, structural engineering caught my eye and led me into a civil engineering path.

If you weren’t an engineer you’d be …. I suppose it would be something in finance – perhaps an analyst. My comfort with numbers and natural affinity for details couples with amazement for the societal influence of financial markets. Since undergrad I’ve developed a hobby-like interest for all things finance and may yet pursue an MBA to supplement my engineering experience.

What’s your peak experience as an engineer so far? Thus far my peak experience has come in several forms. My first project with key responsibilities was as lead engineer for traffic and roadway improvements to support a nearly $100 million shopping center redevelopment; it will always be a career milestone to me. Besides being my first key role, it also helped reshape the premier shopping venue of my hometown affirming to me how rewarding engineering is. Serving as chair of the NW Ohio “Engineer-For-A-Day” program for several years, introducing high school students to our profession, has been fulfilling and kept my awareness keen for our need to promote engineering and its value in society. Professionally, I’ll never forget the satisfaction in obtaining my PE license, knowing the study and dedication behind it and the resulting long-term career benefit. Lastly, this past year I was overwhelmed with our engineering community’s kindness and humbled in receiving the 2008 NW Ohio Young Engineer of the Year Award.

What do you value in the people you work with? A dedication to always strive for excellence in the quality of technical expertise and services provided to clients or society and a similar commitment to honest and sincere communication in any circumstance. Genuine friendship and a sense of humor are a plus.

What do you think engineering firms need to do to attract younger generations into the engineering industry? Continue to improve our connectivity, visibility, and image to achieve a public relations and societal role makeover. Our professional societies and organizations have made great strides in this direction, but as individuals in the profession we must all take it upon ourselves to better promote our vital role in not only the technical advancement of society but its leadership as well.

What does leadership mean to you? To both communicate and personify unwavering conviction and loyalty to personal morals, professional ethics, and fundamental technical principals while exhibiting continuous forethought for how to adapt and apply these constants in an ever-changing environment.

Football or baseball? Baseball will always be my first love.

Favorite cereal? Wheaties (for a healthy choice) or Cocoa Pebbles (for sheer enjoyment).

Web site you can’t go a day without visiting? The Web is more function than fun to me – Google.

Something readers would be surprised to learn about you? I’m under 30, but not into MySpace or Facebook.

You wake up tomorrow as CEO of your firm – what’s the first thing you’d change? The natural tendency of most people (our firm or others, engineers or otherwise) to become entrenched in the solutions or methods they’ve always used. Excluding constants, more than ever I feel engineers and firms must be more adaptive than we realize in an ever-changing environment.

Book you can’t go a year without rereading? The Bible.

How do you strike a work/life balance? I try to integrate activities of work/life rather than compartmentalize them where they always compete. This requires that I take every opportunity to capitalize on our increased opportunity for work mobility and technology so I can maximize use of my time.


Are you a young engineer interested in getting more involved in NSPE?  Interested in being profiled? Know of a young engineer we should profile? Contact Kim Granados.

Are you a baby boomer trying to understand the Generation X and then the Millenials? View the free two-part PEPP Council of Principals video on Leadership and the Emerging Generations. Or purchase the Future Leader Focus report.[ return to top ]


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PEPP 2008 CFO & HR Roundtable



PEPP 2008-09 Executive Board

Randy Rakoczynski, P.E., F.NSPE 
Buffalo, NY

Bill Clarke, P.E., F.NSPE
St. Louis, MO

Andrea Martinez-Graves, P.E.
Tampa, FL

Immediate Past Chair
Kevin Skibiski, P.E., P.L.S., F.NSPE
Brookline, MO

Vice Chair, Northeast Region
Randy Petersen, P.E., F.NSPE
Washington, DC

Vice Chair, Southeast Region
Dan Dawson, P.E., P.L.S. 
Wilmington, NC

Vice Chair, Central Region
Mark Davy, P.E.
La Crosse, WI

Vice Chair, North Central Region 
Karen Stelling, P.E.
Kansas City, MO

Vice Chair, Southwest Region
Eric West, P.E.
Midland, TX

Vice Chair, Western and Pacific Region
Michael Hardy, P.E.
Salem, OR

Young Engineer Representative
Richard Delp, P.E.
Oreland, PA

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


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