Professional Liability/Risk Management Brief: Relying on Client Provided Information
Most professional services involve the use of information furnished by the client and, normally, compiled by another party. The information’s extent and accuracy have significant influence on the quality of the subsequent professional services. The right to rely on the client’s information should be clearly established in the professional services contract—if not, there could be an assumed obligation by the professional to verify the accuracy of information before using it.
Reviewing or Verifying Information
Increasingly, clients are denying the right of professionals to rely on client-provided information. Many are shifting responsibility for verifying accuracy and relevance to professionals by contract. Often, professionals providing design recommendations or other services have no control over the source or substance of project-related information or the ability to assess the competence with which it was prepared, making verification difficult.
There is a professional duty to evaluate information provided by the client or others. If, in the professional’s opinion, the information may be incomplete or incorrect, the professional should notify the client. There should not be an absolute contractual obligation to verify the information. If there is, all of the liability exposure that comes with a project will be assumed by the professional, regardless of whether the source of a problem is the negligence of others. Typically, the fee is not increased to account for the increased liability.
Avoiding Services Outside of Expertise
At times, a client may not meet contractual requirements to furnish information necessary to perform the professional’s services. Often, the professional gratuitously provides such information, which may range from specifying insurance requirements for the construction contract to assessing the legal or financial ramifications of a project. A firm holding itself out as having the necessary skill and competence to practice a profession other than the one for which it is qualified and licensed assumes responsibility for any consequences.
Relying on Information from the Client’s Consultants
A professional service firm should be entitled to rely upon information provided by a client—including the technical sufficiency and timely delivery of documents and services furnished by the client’s consultants. Although a prime professional may have responsibility for coordination of information, there should be no responsibility for services provided by the client’s other consultants. A prime firm should not be required to review or verify information provided by the client or the designs and computations provided by the client’s consultants for accuracy or compliance with applicable laws, statutes, ordinances, building codes, rules, and regulations.
Protecting from Harm
If a firm is forced into coordinating the independent services of others, the professional’s role and limitations should be carefully explained in the agreement with the client. When the client provides information or performs services, the professional firm should be indemnified against claims, damages, losses, and expenses arising out of the services on which it must rely. A contractual provision that would clarify the rights and duties of the firm would address the following:
The client agrees to defend and indemnify the firm for any delays, costs, losses, or damages caused by false, inaccurate, or non-compliant information provided by the client or the client’s consultants.
© 2009, 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.
EJCDC Publishes 2008 Edition of Owner-Engineer Agreement
EJCDC publishes standard contract documents that are used for the design and construction of public and private infrastructure projects throughout the U.S. NSPE is a sponsoring organization of EJCDC along with the American Council of Engineering Companies,the American Society of Civil Engineers, and the Associated General Contractors of America. The EJCDC documents are drafted with the active participation of representatives of the four sponsoring organizations (engineers and contractors), together with public owners; risk managers; professional liability insurers; surety and insurance experts; construction lawyers; various professional societies; and construction managers. The EJCDC documents are principally intended for use on public and private infrastructure projects designed by engineers, including water and wastewater treatment and conveyance facilities; utility work; solid waste handling and disposal facilities; highway, bridge, and other transit projects; production, power, and processing facilities; site development work; environmental remediation projects; street, curb, and gutter work; tunneling and excavating projects; and similar applications.
The 2008 edition of EJCDC E-500 maintains the solid base of terms and conditions found in prior editions of this flagship document, while making carefully considered changes that enhance clarity and reflect current design and construction-phase engineering practices. Highlights of the 2008 EJCDC E-500 are the following:
- Safety: EJCDC has revised the Agreement to provide that the Owner must inform Engineer of specific safety requirements that Engineer must follow at the project site. In most cases Engineer's compliance with Owner's and construction contractor's safety rules will be a basic included service. If a safety requirement is added after the effective date of the Agreement, and is more extensive than typically required, then compliance will be treated as an additional service.
- Owner's Policies and Procedures: The new E-500 clarifies that to the extent that the Owner has policies or procedures that apply to the professional services to be rendered by Engineer (for example, required procedures for drafting and organizing specifications or for reviewing contractor payment applications), such policies and procedures are to be provided to Engineer prior to entry into the Agreement. This will allow the parties to account in the pricing of Engineer's services for any costs associated with compliance with the policies and procedures. E-500 also notes that Engineer is required to comply with such policies and procedures only to the extent that doing so is not contrary to professional practice requirements.
- Insurance: Because most design engineers do not provide insurance advice as part of their professional practices, the EJCDC documents provide that as between the Owner and Engineer, the Owner (presumably through its risk managers, attorneys, brokers, and other insurance advisers) must take responsibility for making insurance decisions such as setting required policy limits—see EJCDC C-051, Engineer's Letter to Owner Requesting Instructions Concerning Bonds and Insurance. EJCDC has therefore added a provision to E-500 emphasizing that Engineer's services do not include providing insurance or bonding advice to Owner, or enforcing insurance-related requirements of the Owner's construction contract. Also, the new edition lists the insurance coverages that Owner must require from the construction contractor (workers’ comp, commercial general liability, property damage, and motor vehicle damage), rather than merely cross-referencing the requirements set out in the EJCDC standard construction general conditions (EJCDC C-700).
- Indemnification: Project owners typically require that engineers contractually indemnify the owner with respect to negligence that results in personal injury or damage to the property of others. It is less common for owners to provide the same indemnification to the engineer, often for public or corporate policy reasons, or based on the position that an owner’s less active role in the design and construction reduces the call for such an indemnification. To be consistent with common practice, EJCDC has structured its indemnification provisions such that the Engineer’s indemnification of Owner is a standard clause, and the Owner’s indemnification of Engineer is an option that may be selected when appropriate for a particular project.
- Definitions: The previous edition of E-500 incorporated many standard definitions from the EJCDC construction general conditions (EJCDC C- 700) by reference. The 2008 edition contains the actual definitions, so the user does not need to refer to a second document to confirm a definition.
- Certification against Corrupt and Collusive Practices: As part of an international initiative to improve procurement practices, the 2008 E-500 requires Engineer to certify that it has not engaged in corrupt, fraudulent, collusive, or coercive practices with respect to obtaining the contract. Other EJCDC documents contain similar requirements with respect to construction procurement.
- Contested Invoices: The new document requires that if Owner contests an invoice from Engineer and withholds payment of all or a portion of the invoiced amount, then Owner promptly must inform Engineer of the specific basis for doing so.
- Review of Substitution Requests and Submittals: The Engineer’s basic services are expanded to include the review of routine substitution and “or equal” requests made during the bidding process, if such requests are allowed by the instructions to bidders. The 2008 E-500 further provides
that if it is necessary for Engineer to conduct an excessive number of substitution or "or-equal” requests (whether submitted during the contractor selection process, or during the construction process), or review a shop drawing submittal more than three times, then the excess reviews will be treated as an additional engineering service.
- Rejection of Defective Work: The previous edition of E-500 required the Engineer to identify defective work and recommend to the Owner that Owner reject the defective work. Recognizing common construction practice, as described in current and past EJCDC standard general conditions, and the common expectation of the Owner that the Engineer is the party best positioned to identify and administer the rejection of defective work, the 2008 edition provides the Engineer with the authority to reject defective work directly and further clarifies the standards under which work would be deemed defective.
- Mediation: If a dispute between Owner and Engineer is mediated, the mediation process is expressly noted to be confidential and must be conducted within 120 days.
- Additional Services: Reorganization of the scope of services sections to clarify which services are basic included responsibilities and which are additional services and thus entitled to compensation under the specific provisions for additional services. The modifications should allow for better pricing and budgeting for all parties.
- Estimated Engineering Costs: Expanded discussion of Owner’s options when compensation for engineering services is estimated, not fixed, and costs approach the estimate prior to completion of services.
Beginning in 2009, EJCDC will also issue revised editions of its other professional services documents, including the standard master agreement (EJCDC E-505, Agreement between Owner and Engineer for Professional Services, Task Order Edition), the short form (EJCDC E-520), and various professional services subagreements, as well as a narrative guide to using the EJCDC Engineering Series documents.[ return to top ]
NSPE Education for You and Your Firm
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Tips and Strategies to Pass the FE/PE Exam
March 4, and April 21 Noon – 1:00 p.m. (Eastern)
Speaker: Dennis Dahlquist, P.E.
Description: Whether you’re preparing for the FE exam or the PE exam, you’ll need a game plan for success. Participants will discover strategies that many people have found useful in preparing for and taking these exams.
Business Management Series
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Proposal Do’s and Don’ts (1.0 PDH)
March 10, Noon – 1:00 p.m. (Eastern)
Speaker: Kimberly Kayler, Founder & President, Constructive Communication, Inc.
Description: This program will help you review your proposal efforts—from a go/no go decision-making process to a review of what to include and not include in a proposal. The content also includes information about formatting and proposal layout design, common mistakes, language blunders, and other useful tips that participants can put to use immediately in their day-to-day marketing efforts.
Controlling Project Design Costs (1.0 PDH)
March 24, 1:00 p.m. – 2:00 p.m. (Eastern)
Speaker: Howard Birnberg, Executive Director, Association for Project Managers
Description: This “nuts and bolts” program teaches the concepts and tools of effective project management for architects, engineers, owners’ representatives, facilities managers, and government agency executives. Participants will leave with a general understanding of how project managers can help to market projects, control design costs, and effectively manage the project team.
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Career Development Series
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Engineering New Leaders—What Happens When You've Earned a Seat at the Table (1.0 PDH)
February 19, 12:30 p.m. – 1:30 p.m. (Eastern)
Speaker: Michael Lindblom, Partner, The Rainmaker Group
Description: It happens in engineering, as in many professions: Highly successful and technically proficient team members are promoted to “management.” And, as what happens in many professions, it fails to work. Why? Learn the answer this question and many others and come away with a better understanding of how to make it work.
Recruitment and Selection During Uncertain Times—Developing a Successful Strategy as a Candidate (1.0 PDH)
February 26, Noon – 1:00 p.m. (Eastern)
Speaker: Barbara Irwin, Principal, HR Advisors Group LLC
Description: Participants attending this session will discover the importance of networking and how to identify leads in searching for a position. Assessing your skills, desires, and talent and well as reviewing the interviewing and selection process will be discussed during this hour-long session.
Succession Planning—Planning for Success in Your Organization (1.0 PDH)
April 2, 12:30 p.m. – 1:30 p.m. (Eastern)
Speaker: Michael Lindblom, Partner, The Rainmaker Group
Description: “People are the most important asset of an organization.” This is something we hear all the time. Yet, many organizations have more comprehensive succession plans for their computers and office equipment than they do for their people!
Overcoming Your Strengths (1.0 PDH)
April 14, 12:30 p.m. – 1:30 p.m. (Eastern)
Speaker: Dan Ryan, Senior Consultant, The Human Capital Group
Description: Self awareness is the first step in becoming a better leader. This awareness leads each of us to learn our strengths and developmental opportunities. Most of our effort is typically spent in leveraging our strengths as well as improving our developmental needs, but we sometimes need to restrain our strengths to keep them from becoming overused. This Web seminar will help you learn more about how to identify strengths as well as developmental needs and will then focus upon how to regulate our strengths to keep them from becoming overused.
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Green Issues/Sustainability Series
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The Hidden Risks of Green Construction: Why Moisture and Mold Problems are Likely (1.0 PDH)
February 24, 12:30 p.m. – 1:30 p.m. (Eastern)
Speaker: George H. DuBose, CGC, Vice President, Building Consulting Services, Liberty Building Forensics Group
Description: With green building concepts becoming the new “standard of care” in the design and construction community, this seminar will identify the specific high-risk components, offer practical solutions to avoiding these problems, and identify tools and techniques to reduce the risks of innovative designs and green buildings. Quiz provided at the end.
Shaping the Future of Engineering: Challenges and Opportunities in a Time of Rapid Change (1.0 PDH)
March 31, 1:00 p.m. – 2:00 p.m. (Eastern)
Speakers: Michael Simpson, P.E., Senior Engineer, City of Los Angeles, and Paul Horton, Director of Sustainability, David Evans and Associates
Description: Learn how the “Green Movement” is influencing the engineering world. We are delving into new territory and entering a carbon-constrained world. The guiding principles shaping engineering through 2020 and trends leading to the tipping point towards a low-carbon economy will be discussed. Participants will also learn how Los Angeles is leading the charge toward a prosperous, low-carbon economy. Quiz provided at the end.
Don't Let Green Design Cause Red Ink (1.0 PDH)
April 28, 12:30 p.m. – 1:30 p.m. (Eastern)
Speaker: Nahom Gebre, P.E., Risk Management Attorney, Victor O. Schinnerer & Co.
Description: Engineers must respond to society’s need for projects that meet present needs without compromising the ability of future generations to meet their own needs. But with increasing public emphasis on green design, engineers face significant exposures that challenge their professionalism and profitability. This session focuses on a realistic appraisal of emerging risks and discusses skills to manage them. Quiz provided at the end.
A Sustainable Approach to Planning and Design (1.0 PDH)
May 13, 1:00 p.m. – 2:00 p.m. (Eastern)
Speakers: Michael Simpson, P.E., Senior Engineer, City of Los Angeles Department of Public Works; Paul Horton, Director of Sustainability, David Evans and Associates Inc.
Description: Have you been wondering how to make your projects more sustainable? Have your clients been asking for more sustainable planning and design? Paul Horton will provide an overview of the critical elements necessary to achieve a higher level of sustainability in projects. While we won't be able to make every project super green, we should nonetheless have a clear strategy (or approach) and a set of tools to allow us to make meaningful sustainable advances or improvements based on the specific situation and the current client conditions. Michael Simpson will discuss how the Los Angeles Unified School District practices integrating sustainability into new school construction. This presentation outlines a logical, sequential "approach" to integrating sustainability into projects. Quiz provided at the end.
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This three-part series will cover engineering ethics topics as they relate to economic, professional, and competitive challenges. Quizzes will be provided at the end of each session for those who need them to meet continuing education requirements.
Speakers: Arthur E. Schwartz, Esq., NSPE Deputy Executive Director and General Counsel; William Lhota, President and CEO, Central Ohio Transit Authority and Director for the National Institute of Engineering Ethics
Download registration information.
Ethics Forum (Part 1)
Meeting Ethical Challenges in Difficult Times—Staying True to Client Expectations and the Public Interest (1.0 PDH)
March 18, 12:30 p.m. – 1:30 p.m. (Eastern)
Ethics Forum (Part 2)
Meeting Ethical Challenges in Difficult Times—Promoting an Ethical Workplace in an Economic Storm (1.0 PDH)
April 22, Noon – 1:00 p.m. (Eastern)
Ethics Forum (Part 3)
Meeting Ethical Challenges in Difficult Times—Keeping Financing and Marketing on Course in a Downturn (1.0 PDH)
May 6, Noon – 1:00 p.m. (Eastern)
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NSPE has put together an impressive series of Web seminars that will help professional engineers to expand their knowledge base and fulfill state registration board PDH requirements for PE license renewal.
Pricing is per site — the more individuals at a site, the lower your per person cost.
Individual session pricing is available for all Web seminars; series pricing is available for Ethics Forum and Green Issues/Sustainability. Contact email@example.com for special series pricing for the Career Development, Business Management, or Licensure series or for multiple locations.
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Get 10% Off Your 2009 PEPP Sustaining Firm Listing
Dear PEPP Supporter:
Your support is needed for the efforts of the Professional Engineers in Private Practice (PEPP) as we strive to promote the hard-earned Professional Engineer (PE) designation and enhance the image of the PE in private practice. We are asking you to become a 2009 PEPP Sustaining Firm.
As a 2009 PEPP Sustaining Firm, you will also link more business to your future while receiving the following benefits:
Online Exposure: You’ll be included in a searchable directory that includes a complete description of your firm’s specialties. NSPE’s Web site receives more than 75,000 user sessions per month. Let owners and other customers and partners find you! All PEPP Sustaining Firms are listed at: www.nspe.org/PEPP/Supporters
Recognition: Listing in an issue of NSPE’s PE magazine (circulation is over 40,000) and in PEPP Talk, a monthly electronic newsletter sent to more than 11,000 PEPP members.
Valuable Discounts: 25% discount on ads in PE magazine, NSPE Update, Web banners, and job board postings.
Your options to participate include the following (*Price reflects 10% discount for payments received by 3/1/09):
Bronze Level $121* (regularly $135) Listing only. Includes listing and link to firm’s Web site and e-mail address.
Silver Level $180* (regularly $200) Listing plus Logo. Includes Bronze level package plus firm logo/banner graphics. E-mail your firm’s logo (.gif or .jpg file, up to 10KB) to firstname.lastname@example.org (703-684-2884).
Gold Level $517* (regularly $575) PEPP Featured Firm package. Includes Silver level package plus complimentary registration to the 2009 Human Resource Directors’ Roundtable/Chief Financial Officers Roundtable (April 29–May 2, 2009 in Baltimore).
Please complete the forms at www.nspe.org/PEPP/Supporters and MAIL or FAX them back today! Your participation will not only help you reach potential clients and partners, it will also provide valuable support for our industry and profession. Please visit www.nspe.org/PEPP for a complete list of PEPP programs. Thank you for your continuing support of NSPE/PEPP.
Randolph Rakoczynski, P.E.
2008-09 PEPP Chairman
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NSPE and Engineers Week Launch Million Hour Campaign
NSPE and Engineers Week launch Million Hour Initiative.
The goal? To reach one million hours of outreach in science, technology, engineering, and math (STEM) education by December 2009.
Log in to track your hours!
The site allows engineers to track of all their volunteer hours over the course of the year and provides a great way to look back on all outreach efforts.
Let’s show the world the engineering community’s collective strength in protecting the health, safety, and welfare of the public AND encourage future generations by showing how exciting and amazing engineering can be!
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Thriving in an Economic Meltdown
Wayne Kurzen presented a NSPE Web seminar ’Thriving in the Economic Meltdown.” To purchase the recorded Web event, please visit the NSPE Education Web page.
The current economic conditions have brought a whole new level of “stress” to today’s entrepreneur. Business as usual will probably not work. The following is a list of considerations for surviving and even thriving in a recessionary economy.
1. Cut “financial drag.” Methodically cut unnecessary expenses. Cut your overhead. Now is a time to look at every item on your profit and loss statement and ask the hard question — Can we cut this without hurting our top line? During good times, we get pretty sloppy with our expenses. Involve your team in this line-by-line discussion. Some companies assign every line item to an individual on the team. But don’t cut marketing (see below).
You cannot manage what you do not measure. If your financials — your profit and loss, balance sheet, and cash flow statements — are not current, accurate, and relevant, now is the time to get your books in order.
Review your financials often. Review your financials at least once per month and cash flow statement weekly.
2. Get rid of your “C” players. Top performing companies always have an “A” team. In fact, if you carry “C” players on your team, it is unlikely that you will ever rise to the top. The motto in hiring and firing should be “slow to hire and quick to fire.“However, much of the time business owners do the opposite! If you have been hanging on to your marginal performers, now is the time to free them. The question to ask yourself is this: “Would I enthusiastically hire this person today?” If you cannot answer “yes” you probably do not have an “A” player. There are “A” players available because many have been let go or fear their company won’t be around in the future…they are ready to move. Now is the time to create your “A” team. Leading employee productivity companies, like the Container Store, believe that one “A” player is worth three “C” players. The Container Store pays more per hour than the competition, but their overall payroll expense is less.
3. Expand your business. Acquire your competitors or expand your product or service. Perhaps, you need to expand your reach or change your target customer. If you have been involved in residential construction, you may want to expand your target reach into commercial or add more to your service department — one person’s nightmare is another person’s once-in-a-lifetime opportunity.
Be on the lookout for struggling businesses that compliment your business…there are some great bargains! And you may not need cash or a loan to get them. NOTE: Buying a distressed business is just like buying distressed propert; you can often find a great deal that is a win-win. Perhaps you offer to takeover a struggling business and pay nothing but to offer the owner a job. You get a customer list, their equipment, possible licensing, and someone to run that part of the business for you. The seller escapes struggling and possible bankruptcy. It is a win-win.
Look at not only acquiring competitors, but also look at expanding your product line. For example, if you are an electrical contractor, look at adding other complimentary products like low-voltage or security systems to your total product offering. Also consider acquiring minority-owned businesses, thus increasing your opportunity to bid on government contracts.
4. Expand your “sandbox.” Consider increasing the size of your geographic boundaries. This may involve going somewhere where your product is still in demand. For example, if you are a contractor in Florida, you may have to go to another state for awhile.
5. Increase quality of workmanship. Avoid the temptation to cut quality. As you compete for business with less business available, the last thing you want to cut is quality. Think value, value, value.
6. Measure employee productivity. Know your revenue/profit per employee. It is a proven fact that people perform at a higher level when they know their performance is being measured. Establish a “key performance indicator” for every employee. Measure revenue/profit per employee is one of the easiest metrics to monitor. Consider putting Global Positioning Systems in your vehicles. GPS has become a relatively inexpensive tool, and it has proven to increases productivity…both from a scheduling and individual performance standpoint.
7. Know your “uncommon offering.” During economic downturns, price does become a bigger factor. But still, do your best to compete on “value” not price. The mastermind behind the initial Southwest Airlines marketing, Bob Bloom, defines “uncommon offering” as the “WHAT” you offer. It represents both the tangible benefit of your product or service and the emotional experience you will deliver to your customer. What is it like doing business with you that makes you better than your competition? Are you more reliable, flexible, responsive, and cutting-edge?
8. Don’t cut marketing. Expand it! Six studies conducted by the research firm of Meldrum & Fewsmith showed conclusively that advertising aggressively during recessions not only Increases sales but increases profits. This fact has held true for all post-World War II recessions studied by the American Business Press. Marketing does not have to be expensive. Some of the best marketing is free marketing! You will get more business from referrals, publications, and other unconventional methods with a system and a very low budget. It’s also very important during this time to keep a balanced marketing portfolio. Don’t invest in just one or two strategies.
9. Get on the phone. Get personally involved in calling all of your current customers. Let them know that you are not only still in business, but that you are aggressively seeking their business. Bestselling author and top business guru, Tom Peters says, “Work the damn phones...Keep working the damn phones...Show up…Keep showing up.” There is less business out there, so go after it. Build and reinforce your relationships. Talk about your “uncommon offering.” The squeaky wheel gets the oil.
10. Share the pain. Involve your team, set the example. If everyone needs to take a temporary cut in pay, take one yourself. But do not keep “C” players on the payroll. Remember, you are running a business, not a rehab center.
11. Work on yourself. Bestselling author John Maxwell says a business will never outgrow the owner. Educate yourself…learn, learn, learn. It’s not the one who works the hardest, but the one who works the smartest that ultimately wins. Do what you need to do to “get the edge” in your industry.
12. Hire a coach. Nearly all of the most successful people in any area have a coach or coaches. Whether it is Tiger Woods or a time-proven and experienced CEO, coaching improves performance by providing insights and ideas, serving as a sounding board, helping define goals with clarity, and providing accountability to execute proven ideas.
Wayne Kurzen is a platinum master business coach with ActionCOACH. He has been selected among 1,000 worldwide action coaches as North America Coach of the Year (in his category). He is also one of 70 gazelles growth coaches worldwide and qualified to teach the “best practices ” of the leading mid-sized business in the world. He is an affiliate member of IEC and specializes in helping owners of electrical contractors grow profits and have more personal away from the business.[ return to top ]
2009 Milton F. Lunch Ethics Contest
NSPE’s Board of Ethical Review is furnishing you with a real fact situation regarding the ethical obligations of an electrical engineer when a developer decides not to include a protective steel mesh in homes to be built in order to mitigate the occupants’ exposure to interior levels of low-frequency electromagnetic fields (EMF). Given the facts, you are asked a question about the ethics of the engineer. Contestants are encouraged to read and discuss the facts of the case and answer to the question. Then contestants are to develop discussions and conclusions using the format of the NSPE Board of Ethical Review.
All entries must be received by Friday, April 17, 2009. Phone: 703-684-2840
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The winning entry will receive an award of $1,000 ($500 to the NSPE state society or NSPE chapter and $500 divided among the authors) provided by NSPE and the NSPE Educational Foundation, a certificate, and recognition in PE magazine, as well as other external media outlets.
For details visit the NSPE Web site.