Professional Liability/Risk Management Brief: Observations or Inspection of the Work
Observations or Inspection of the Work
The consensus professional service agreements published by the Engineers Joint Contract Documents Committee establish the design professional as an agent of the owner during the construction phase. The authority and duty of the design professional on behalf of the owner and the responsibilities and obligations of the contractor are clearly defined. In practice, however, the role of the design professional during the construction phase is often misunderstood by clients, contractors, and even by the design professional. Until 1961, standard contracts stated that the design professional “supervised” construction. That term was interpreted by the courts as requiring the design professional to exert control over the contractor—a responsibility for which the design professional had no authority. The design professional’s true historical role was clarified by using the term “observation.” But design professionals can provide an increased level of service beyond defined observations and can usually manage the risk of such duties. This increased level of service can assist in minimizing mistakes on the site that generate claims.
Now, during the execution of the design in the construction phase, the design professional neither supervises nor directs construction. The consensus agreement forms require the design professional to conduct site visits for observation purposes only and to perform specific and limited inspections. Although this may seem like a considerably less important role than he or she plays during the design phase, the design professional’s presence in the process has a significant impact, not only upon the client, but also upon the contractor. Some clients want their design professionals to play a more aggressive role than that specified in EJCDC contracts; they may demand that the design professional conduct intensive inspections to discover failure by the contractor to perform properly, charge the design professional with additional responsibility if the contractor does not perform properly, and insist that the design professional use whatever skills necessary to assist the contractor in executing the design properly.
Obviously, design professionals agreeing to provide more extensive site services must be capable of doing so and must be compensated for the increased risk that the greater level of service involves. The term “inspection,” for example, should not be used unless the duties and resultant fees involved in providing such inspection services are clearly identified and are understood by the client and the design professional.
While “observation” involves a scope of services that only allows for a general review of the contractor’s work to visually determine if compliance is apparent, the use of the term “inspection” clearly expands the duties to include a critical evaluation of the work. Defining the extent of such inspections is imperative. The decision to provide inspection services should be articulated to include the following:
The scope of services that constitute inspection is clearly defined.
The ability to perform the necessary services is part of the design professional’s existing capability or is a professional service that can be obtained from qualified subconsultants.
The general conditions of the construction contract provide the authority to carry out the inspection duties.
The definition of the inspection services does not cause the design professional to assume responsibility for the work of the contractor.
The design professional is properly paid for the significant increase in services and risk.
Site services are but one part of the total professional services performed. A client may mistakenly believe that the design professional has been paid to ensure that the client receives that which it is entitled to receive under the contract for construction. To that end, the client may expect the design professional to oversee the contractor to assure that proper construction is achieved and to assume responsibility if the contractor does not perform the work properly. No design professional should assume such authority or can be adequately compensated for the services and risks that such a guarantee requires.
While assuming the responsibility for proper construction is not advisable, design professionals can reduce risk to themselves and their client and minimize problems in the interpretation of the contract documents by providing more comprehensive construction phase services. While with most normal projects, the level of site involvement described in the standard documents as “observation” may be appropriate, design professionals can provide a more comprehensive scope of services, (including inspecting the work) if that duty is accurately defined and if the increase in services and risk results in an appropriate increase in fee.
© 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.
PEPP YEAC Presents Free Web Seminar for Young Engineers
Join us for this free Web seminar for some tips on what it takes to be successful in today's engineering world. Topics include:
This Web Seminar is based on the NSPE PEPP-YEAC guide that can be downloaded (free to members).
Webinar details are as follows:
WHO: Students and NSPE young engineers (35 and under)
WHEN: Thursday June 18, 12:30-1:30pm EST, 9:30-10:30 am PST
WHERE: Download registration information here
Presented by: Professional Engineers in Private Practice -Young Engineers Advisory Council. (interested in getting involved? contact Kim Granados at firstname.lastname@example.org.
Develop and hone your professional skills without leaving your workstation by participating in NSPE's upcoming and archived Web seminars. Or get a group of peers together and take over a conference room! Set aside just 60 minutes in your workday.
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Arbitration Under Attack
Ryan R. Loghry, Associate, Stites & Harbison, PLLC
The gloves are off. Legislation recently introduced in Congress contains a scathing review of arbitration, which is a dispute resolution process that is commonly used in the construction industry. Specifically, the Arbitration Fairness Act of 2009, H.R. 1020 (the "Act"), proposes to amend the current Federal Arbitration Act (9 U.S.C. § 1 et seq.) by rendering certain pre-dispute agreements to arbitrate employment, consumer, franchise, and civil rights disputes unenforceable. The Act further proposes to have the validity of agreements to arbitrate determined by a court under federal law rather than by an arbitrator.
To justify these amendments, the proposed Act states in its "Findings" that "there is no meaningful judicial review of arbitrators' decisions. With the knowledge that their rulings will not be seriously examined by a court applying current law, arbitrators enjoy near complete freedom to ignore the law and even their own rules." The proposed Act further states that "[w]hile the American civil justice system features publicly accountable decision makers who generally issue written decisions that are widely available to the public, arbitration offers none of these features."
Proponents of arbitration will certainly disagree with the proposed Act's criticism of the arbitration process. Even so, there are important differences between arbitration and litigating in the court system that must be understood by construction professionals before choosing a dispute resolution process or agreeing to one in a contract.
Ryan Loghry is a construction industry litigator with Stites & Harbison, who handles commercial construction disputes of all kinds. He has represented project owners, general contractors, subcontractors, and sureties in federal and state court, as well as in the alternative dispute resolution settings of arbitration and mediation. His practice also includes contract review and negotiations, as well as advising clients before and during projects.
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NSPE Education for You and Your Firm
NSPE now has more than 50 archived courses available online at "Shop NSPE." To help you get the most out of NSPE continuing education and to mark the milestone of 50 courses, we are offering you 50% off ALL online courses before July 1. Simply use the discount code EDU50 at "Shop NSPE" and start earning your discounted PDH credits today!
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Addressing Performance Issues in a Downsizing Scenario
Barbara H. Irwin and Cara Bobchek, HR Advisors Group, LLC
Even in good economic times, managers can find it challenging to make the time to engage in regular and effective performance evaluations with their employees. When a firm is facing economic challenges and even downsizing, as so many are today, performance evaluations may tend to sink to a lower priority. This is unfortunate, because a good performance evaluation program offers a company so many benefits—including benefits that can be leveraged to help to weather uncertain times.
The performance evaluation process gives you the regular opportunity to set goals with each of your employees and then review their progress in meeting those goals throughout the year. Although informal discussions with employees about their performance shouldn’t be limited to their annual performance review (as most firms schedule it), this time that you set aside with your employee is an important career planning opportunity for them and a management tool for you. Your performance evaluation process helps you to understand who and where your “A+” performers are, as well as what your other employees need in order to become “A+” performers, or where you may have underperformers on staff.
Leveraged properly, this knowledge helps a firm to plan such important strategies as project team assignments, business unit staffing and leadership, and continuing leadership development. In addition, it helps to identify critical training needs and resources. In turn, this helps a firm to motivate and retain a high-performing staff that is aligned in its mission.
In reality, many firms struggle with addressing performance issues, especially in difficult times. When a firm is considering or experiencing reductions in force, managers may wonder if it’s wise to set career goals and discuss performance factors with employees when the firm itself is not meeting its performance goals and may not be distributing bonuses or salary increases.
In fact, it’s imperative that a firm keep up with performance evaluations in any market condition, and especially in a challenging one. Consider the following reasons to leverage a well developed and regular performance evaluation program at your firm:
It Promotes Accountability
In our practice, we sometimes hear managers and employees complain that their company tends to keep under- or nonperforming employees on board simply because it's too awkward to confront their performance issues. These under- or nonperformers may be people who have been around for a long time, and therefore are somewhat highly compensated. They may be well-liked personally by their fellow employees, but may be resented because they are perceived not to be pulling their weight. The firm may have made efforts to counsel and retrain the nonperformer, giving him or her the opportunity to improve in their current position or transfer to another one to which they are better suited, but, as sometimes happens, it just hasn’t solved the problem. In good times or challenging times, this situation calls into question the firm’s commitment to accountability.
When a firm is forced to make a layoff, it’s natural to take that opportunity to help a nonperforming employee to move on. However, it is better for the overall success of the firm to deal with performance issues as they arise and to focus on continuous development and improvement for the staff. This continuous approach both models and promotes accountability and builds an environment of trust between managers and employees.
It’s Good for Morale
A robust performance evaluation program with consistent and fairly applied results is a morale booster for a firm. A comprehensive performance evaluation program in which the manager and employee work together to establish goals, access education and development opportunities necessary to equip the employee to achieve those goals, and then measure and discuss progress toward those goals provides the forum for candid and productive discussions and feedback provided within a consistent framework. This consistent framework should help to make performance evaluation discussions more comfortable for both managers and employees, thereby encouraging more regular and frequent informal and formal meetings on the subject.
When you demonstrate to your employees that you care about their work and their performance, they will be more likely to roll up their sleeves and do what it takes to not only do the job, but to do an exceptional job, because they connect their performance to the firm’s success and feel a personal stake in that success. In turn, the ongoing dialogue regarding performance gives each employee a realistic understanding of his or her status and goals, relieving them of the anxiety about those issues that may be born of uncertainty. That’s good for each individual—and for the collective morale of the staff.
It Benefits Your Bottom Line
Ideally, the performance evaluation program helps a firm to actively endeavor to raise every employee’s performance to the “A+” level. Certainly, a company will be better positioned as a leader in its own markets when the staff is performing at this level. It follows that the most well positioned firms may be the least likely to include reductions in force in their strategies.
Therefore, managers must understand and acknowledge the reason for an employee termination, as much as anyone would want to be able to avoid that necessity: Is the employee to be terminated based on performance or based on a downsizing strategy? In practice, no company can “afford” to leave performance issues unaddressed.
It Promotes Confidence in Management
Effective managers address performance issues in real time and approach the rare separation issues honestly in terms of termination for nonperformance or as a result of downsizing. When the process is regular, consistent, and candid, it engenders the employees’ trust in management.
Another important benefit of effective performance evaluations is that the employees who participate in the process learn by experience how to conduct these important management-employee conversations. This helps a firm to build its future leaders.
Your performance evaluation program is a high-value, low-cost management resource. If yours needs work, there are a wealth of resources available on the Web, through professional societies and HR specialists, and among your peer and partner firms. The returns to your firm are well worth the investment of time to make your performance evaluations an effective part of your firm’s everyday business, in good times and in challenging times.
HR Advisors Group, LLC is a human resources consulting firm providing customized strategic solutions to HR needs in the Architectural, Engineering, Construction industry and in Nonprofit Organizations. Their professionals have worked with domestic, multi-national and international companies as well as with Nonprofit Foundations and Associations. With extensive experience as senior-level human resources executives, they have the background to meet the needs of organizations ranging from large established companies to small emerging businesses.[ return to top ]
Meet NSPE in St.Louis
The 2009 NSPE Annual Meeting will have a new format this year. All education sessions will be held on Sunday, July 19. The day will be filled with numerous networking opportunities, opportunity to earn up to seven professional development hours on issues affecting the engineering profession and NSPE, and even lunch with a guest speaker–all for only $99!
Register today to save! Join your fellow engineers July 15–19 in St. Louis and help NSPE celebrate our 75th anniversary. Visit the NSPE Web site to learn more and to access the registration form.[ return to top ]
Solving the Timecard Challenge
Herbert M. Cannon, President of AEC Management Solutions Inc.
One of the most frustrating aspects of managing architecture or engineering firm is dealing with the timecard issue. No matter what we do, some employees are constantly behind in turning in their timecards. It is not unusual for some employees to be two, three, or even four or more weeks behind in their timecards. I am sure your firm is no exception. Over the years I have developed some simple strategies that have helped immensely in the continuing struggle for timecard compliance.
This short PowerPoint video shares some effective strategies.
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. [ return to top ]