Professional Liability/Risk Management Brief: Using Independent Reviews to Manage Exposure
The likelihood of design deliverables being released for approval or actual construction while containing negligent errors or omissions is higher than most firms would like. This is due to projects becoming more complex and design times being severely constrained. As such, more projects involve design input from a wide range of consultants and other entities. Design fees do not always compensate for the level of service that design firms feel are appropriate.
Using Project Peer Reviews
For decades, engineering and other design firms have used peer reviews. Some have used an organizational peer review where outside practitioners evaluate the business operations of a firm. Now, more design professionals, led by the structural engineering discipline, are seeing the advantages of routinely using a project peer review process.
In the past, peer reviews were often used on projects where performance was considered critical or when innovative materials or techniques were being incorporated into the design. The project peer review effort provided an evaluation of design concepts to meet performance objectives. On larger and more complex projects, reviews gave design firms and their clients increased confidence in design and in the documentation of the design through the deliverables. Now, that confidence is being provided on a wider range of projects.
The effectiveness of a project peer review is that it is performed by an independent team or individual not associated with the original design team. While a separate firm often performs the review—perhaps a firm trading review services with a peer—the reviewer can also be a separate, experienced individual or studio within the same firm. Whether the review is performed internally or externally, the key is that the assessment be conducted by an entity that did not participate in the original design and is unlikely to miss some deficiency or possible problem because of time or budget constraints.
The review assesses the likelihood that the instruments of service—the deliverables—would satisfy the client’s stated objectives and would be in conformance with good professional practice. A project peer review is not meant to shift or spread exposure for professional liability claims. The goal is to provide feedback to reduce the probability of claims and to make any filed claims easier to defend.
A key ingredient in the recipe for the successful completion of a project is a thorough and independent constructability review. On projects where the construction team is engaged during the design phase, there is a much greater chance that the design firm and client will benefit. A structured and well-documented constructability review process provides for the timely integration of construction input into project planning, design, and field operations. Clients are better served because considerations for the fabrication, installation, operability, and maintenance are addressed by representatives of the client, those responsible for construction, and other project stakeholders.
Because a constructability review should be an interactive process, the investigation should take place throughout the design process. In many instances, however, the actual construction team may not be identified until the design is nearly complete. Still, a constructability review performed by a consultant can achieve many benefits.
As more projects are delivered through a building information model rather than through two-dimensional plans and printed specifications, the incorporation of a constructability review can be an automatic procedure in the integrated design and construction process.
Meeting the Standard of Care
Every project is unique, meaning that each is an exercise of professional judgment. Modifications to the instruments of service and adjustments during construction are expected. As a result, the law does not require faultless performance from a design firm, complete and error-free deliverables, or a perfect project. Design firms are not product vendors, and neither the deliverables nor the project is required to meet product liability standards. If professional services and the projects they lead to are to meet client expectations, however, care has to be taken to minimize problems that could lead to disputes and claims. Using project peer reviews before deliverables are released and incorporating constructability reviews into the design process are two techniques with proven records of minimizing professional liability exposure.
© 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.
Recent Court Decisions and Legislative Matters Relevant 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 relevant to contract documents, which can now be found on the NSPE Web site.
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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PEPP Talk Reader Survey
Please participating in our PEPP Talk survey. Your assistance will help NSPE/PEPP to serve you even better. There are nine brief questions which should take 5 to 7 minutes of your time.
Click here to take the survey.
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ABA Forum on Construction Industry Posts Proceedings
The American Bar Association’s Forum on the Construction Industry posted contents of its 2008 fall meeting entitled “Winds of Change? The ConsensusDOCS.” Engineers will want to be aware of some of the issues with using these documents.
Particularly of concern are the limited references to Architect/Engineer throughout the documents as noted in Plenary 2: "Hey, Who's in Charge Here?" - The ConsensusDOCS Owner-Architect Agreement.
The forum mainly compared the documents to AIA documents, which is unfortunate since a large portion of engineers are using EJCDC contract documents, which are widely recognized as being fair and objective, and “heavily used in horizontal construction projects such as muicipal and utilities construction.” However, one session did focus on the EJCDC construction-related contract documents.
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Friday Forum F: Now for Something Else That's New: New Project Delivery Documents from EJCDC
The Engineers Joint Contract Documents Committee recently issued an update to its core construction-related contract forms, which are heavily used in horizontal construction projects, such as municipal and utilities construction. These 21 documents replace the previous 2002 edition and supplement over 40 other documents comprising the full EJCDC program. Our panelist presents what's new with these industry documents.
Top 10 Joint Venture Problems
Herbert M. Cannon, President of AEC Management Solutions Inc.
10. Lack of Joint Venture Experience
When it comes to your first joint venture, it seems like Murphy’s Law takes precedence. Before jumping into your first joint venture, please do yourself a big favor and talk to a trusted advisor or design firm owner that has joint venture experience. It’s a small investment of time that can save countless hours of aggravation and substantial dollars.
9. Competing Against Your JV Partners on Other Projects
Let’s say your JV has an exclusive long-term arrangement to pursue educational projects in the state of Louisiana. Eventually you will wind up competing against each other on noneducational projects or you could wind up competing against each other on educational projects outside of Louisiana. Consider the implications and how you might deal with them before the situation arises.
8. No Joint Control of the Cash
I have seen many joint venture partners get involved in disputes among the partners. When it comes to financial disputes, the JV partner with the checkbook usually wins. You can level the playing field by insisting upon a joint checking account that requires dual signatures. By this, I mean that a signature of each joint venture firm is required on every check disbursed.
7. Thinking Your JV Partner is a Good Business Person
Let’s face it, many firms that do a terrible job of managing their finances. Your partner might be one of them. Proceed with caution.
6. Failure to Recognize There is no Such Thing as Equal Partners
Chances are that one party will do a lot more than the other to earn the fee. Chances are it will be you who contributes more than 50% of the effort. Try to recognize that each party brings something different to the table — this is why we needed a JV partner to begin with. Address the level of effort and fee split before you start the project.
5. Your JV Partner Has a Conflict of Interest
Let’s assume that your partner has long-standing relationship with the client. You were brought into this project because it was too large or they required your expertise and reputation to win a major commission. Once the JV has won the project, you may have served your purpose and your partner is now more interested in their relationship with the client than maintaining JV relations, including you in the project decisions or making a profit. Address your concerns early on.
4. Thinking Your JV Partner Will Look Out for Your Interests
Refer to #7. They might not even be looking out for their own interests. You must be proactive in your JV relationship. If you are concerned about your own interests, it is up to you to take care of it.
3. Forgetting That You Now Have a Partner
In our efforts to please our clients and produce a great project, it is easy to forget that we now have a partner. Make sure that you lay down ground rules as to each party’s decision-making authority and when consultation is needed with your partner.
2. No Regular Financial Update
Usually one of the partner firms will be put in charge of the JV finances. Make sure that monthly financial statements are provided along with invoice copies and bank statements. No partner should be put in the position of asking for the information, it should be distributed every month automatically.
1. There Is No Way to End the Joint Venture
Yes, a joint venture is like a marriage. Your prenuptial agreement should spell out the specifics of how to end the joint venture. It’s a lot easier to negotiate a fair deal when both parties still like each other.
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 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!
David Conner, E.I.T., LEED AP
Title: Consulting Engineer
Been There: 2.5 years
# of employees: 7000
Previous Gigs: fast food, hardware store, city engineering department, start-up engineering consultancy, global consultancy
How did you first get into engineering? I have always been interested in contributing to society and the environment in a positive and productive manner. That can be a difficult balance to achieve. I was a biology major at the University of Kansas. My advisor recognized that I may have been more interested in a different approach than biology offered. He asked if I was more interested in identifying and tracking environmental problems or if I was more interested in fixing and preventing them. I answered, “Fixing and preventing them.” He responded with a suggestion to speak with the engineering college about civil and environmental engineering.
What’s your peak experience as an engineer so far? Design: high-level structural design on steel connections, welds, fasteners, and plates and reinforced concrete on industrial structures. Other: Opportunities for involvement and contributing in the area of my interests at my current employer, including a variety of design roles on wet infrastructure, sustainability, and marketing/development.
What do you value in the people you work with? Character, achievement, work-life balance, and investment in each other.
What do you think engineering firms need to do to attract younger generations into the engineering industry?
1. Increase salaries. One of the primary factors that is considered early in evaluating a career choice is income. The income in engineering is good, but other choices exist that are more lucrative, and some of those require less rigorous coursework and commitment, etc. These other options directly compete with engineering for the most talented workers Engineers are dedicated, smart, competent, productive individuals who provide value for their clients, companies, and always contribute to the public’s well-being in each project. However, the domestic engineering workforce is shrinking due to retirement of the Baby Boomers and because less new engineers are entering the profession. An investment will need to be made in the salaries of engineers to attract more people to the profession to meet our country’s vast engineering needs, address our infrastructure crisis, and to grow the profession in the face of a workforce leveraged with a high demand and low and declining supply.
2. Talk about the profession via word-of-mouth. Many, many people still do not realize their daily interaction and dependence on engineering products and services and the value to society and the environment that they provide. The Liquid Assets: The Story of Our Water Infrastructure documentary on PBS this fall will aid in this feat and so do other programs that are able to grab the interest of both the engineering and non-engineering audience on TV on such channels as the Discovery and History channels.
3. Engage students at all levels. In such programs as MATHCOUNTS, Bridge Building, science and engineering fairs, and other efforts, engineers have the opportunity to contribute to the education of students and help them become familiar with the profession. Anything that is well put together in an organized, understandable, and easily accessible form on the Internet is great for engaging the younger generations and promoting engineering to them. Teachers and engineers should work together to find opportunities for engineers to become involved in the classroom, providing examples and opportunities to apply engineering.
Book you can’t go a year without rereading? Engineering Reference Guide by Lindeburgh
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? Check out the new free Motivation Factors of Young Engineers Report produced by the PEPP YEAC. 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 ]
NSPE Education for You and Your Firm
NSPE Fall Online Seminars
Web seminars are a cost effective way to develop, and retain your staff. For more information on any of the following Web seminars, please visit the NSPE Education page. NSPE member price: $119.00 per session per connection
- November 5, 1:30–3:00 p.m. (Eastern)
Construction Phase Risk Management: Critical Issues in Construction Contract Administration (1.5 PDH)
Design professionals increase their value to a client and increase their protection by understanding their roles during construction and responding appropriately to the risk generating events that happen on every construction project. In this web seminar we will discuss duties and risk intrinsic in construction contract administration, planning for the project construction phase services, and typical administrative functions for construction phase services.
- November 18, 1:30–3:00 p.m. (Eastern)
How to Gain Recognition for your Projects Through Public Relations (1.5 PDH)
This session will review the basics of public relations and how it works, dispel the myths, help you identify pitch concepts for editors, digest the mistakes many make in their technical PR efforts, and detail the rules of the trade for working with the media — all from a technical firm's point of view. The presentation also will include case study examples and feedback from industry editors on how to build a successful PR program. In addition to learning how to capitalize on the power of PR, the session will also include details on how to assemble a crisis communications program — a must in today's marketplace.
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NSPE/PEPP HR RT West
Embassy Suites Frisco, Texas
Want Human Resources to be a more strategic part of your firm? The HR Roundtable is a valuable forum for human resource directors and principals of engineering firms to network, explore best practices, benchmark current activities, identify trends, and discuss emerging issues. Topics include:
Helping HR speak the language of business,
Effectively capitalizing on the mature workforce,
Employment branding to increase the ROI of recruitment and retention, and
Compensation and rewards.
Click here to download a registration form and view an agenda.
NSPE Partners to Present Three NEW Web Seminar Events!
From Soundview Executive Book Summaries
How to Outsmart the Competition
November 20, 2008 1:00 p.m. – 2:30 p.m. Eastern
Jim Champy reveals the surprising, counterintuitive lessons learned by companies that have achieved super-high growth for at least three straight years. Drawing on the strategies of some of today's best "high velocity" companies, he identifies eight powerful ways to compete in even the roughest marketplace.
Polish Your Professionalism to Get the Respect You Deserve
December 4, 2008 12:00 p.m. – 1:30 p.m. Eastern
A critical success factor for anyone's career is a professional image that helps earn people's respect. Are you dressing, speaking, and working to your best advantage?
Power Prospecting That Gets You Results
December 10, 2008 12:00 p.m. – 1:30 p.m. Eastern
Learn how to sharpen your competitive edge and close more business with the latest prospecting strategies that will get you solid results.
CLICK HERE for more information and to register for these extraordinary events.