NSPE's Gateway to Private Practice January 2011 

Professional Liability/Risk Management Brief; Public-Private Partnerships

A public-private partnership is an arrangement between the governmental and commercial sectors to privately deliver a project or service that is traditionally provided by the public sector. This extreme form of government contracting is based on the realization that private sector innovation, technological skill, financial capability, and management expertise can generate quality public infrastructure and services in an economically efficient manner.

There are many new forms of project delivery in which the client and teams of specialists join in a common effort. Public-private partnerships for building or infrastructure projects are often considered an "impure" form of a broader “alliance contracting” category because of the limited role of the client. The risks usually are not shared, but transferred to the private sector.

Unbundling the Risk

The development of public-private partnerships is causing much concern among design firms, contractors, financial entities, and facility managers. Part of this concern is the unbundling of project risk in a way that creates challenges in understanding risks and creating systems to manage and insure these risks. For instance, unbundling the risk on a capital improvement project usually results in the private sector assuming those risks that are of a commercial nature and can be identified, appraised, and managed, leaving the residual risks to the government.

Because each project arrangement is different, the risk profiles and resultant risk allocations differ. One fundamental issue that remains constant is the value in the transfer of risk.

Absorbing Business Risk

Every design and construction endeavor has both project risk and professional or design risk. When a public-private partnership is formed, the project risk usually becomes more extensive but more manageable. The professional risk—including basic design liability—often becomes greater and spreads among the entities forming the private part of the arrangement. Expanded roles may introduce new risks, such as meeting fixed schedules and cost commitments, absorbing development and management costs, and facing reduced cash flow because the fee structures are often set up as deferred payments made during operation of the facilities.

Blurring Private Entity Exposures

The use of alternative project delivery and financing methods for public infrastructure projects blurs the common division of risks and rewards. The traditional relationship between project designer and project contractor changes significantly. The design effort in a public-private partnership is usually fully integrated into the project delivery team and often managed by the contractor or developer. Although all the parties need to share a new perspective, the design elements in particular need to be carefully managed. Design firms may find it difficult to maintain the integrity and public accountability that is associated with being licensed professionals.

Continuing Exposure of Professionals

Public-private partnerships increase business opportunities in return for assuming new or expanded responsibilities and risks. In a more entrepreneurial capacity as a developer and operator, the private entity may assume risks that the public entity never had. Third-party liability—in many cases the same risks don’t exist for a public agency—becomes important as a risk for private entities. While government agencies have limited tort exposure (usually in the form of a cap), private entities usually do not. A design firm with continuing management or maintenance responsibilities may find that its exposure is not limited in amount or time. Formal contractual agreements must clearly describe the public services to be provided and the standards to be met while providing the appropriate flexibility, incentive, and protection of profit-seeking private investors to provide improved public services and facilities. And they should assign governmental immunity to the private entity.

Construction-related engineers are rightfully at the center of public-private partnerships. The skills of design firms on these teams can provide the creative and management resources for large and complex programs, access to advanced technologies, and improvement of asset management and life-cycle cost practices.

© 2010, Victor O. Schinnerer & Co. 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 Schinnerer and CNA Professional Liability Insurance Program, commended by NSPE/PEPP since 1957.


Client Research: Myths, Mistakes & Maximizing ROI


Having conducted client/prospect studies for a variety of AEC industry firms, across multiple client sectors, I want to address three myths:

  1. Clients will feel bothered. Satisfied clients who value your firm’s services want you to succeed. They recognize that their feedback, positive or negative, is instrumental in maintaining their own satisfaction. Conversely, dissatisfied clients appreciate the opportunity to vent and provide constructive criticism. Firms conducting a client/prospect study should pave the way with an introductory letter sent by the President or CEO conveying why the study is being conducted and how the firm plans to act on the findings.
  2. A statistically significant sample size is needed to formulate robust conclusions and recommendations. One can disagree with a client’s perceptions and opinions, but they are his or her reality and they drive the client’s behavior and actions. As such, it’s dangerous to dismiss findings simply because only a few people shared that opinion. We’re not talking about a cure for cancer here. Statistical significance in not a prerequisite for formulating conclusions. Having said this, it is important that your sample size within a particular client type be large enough to gather a variety of data points. (I typically recommend at least 20 interviews per client type.)
  3. Clients will feel offended if a third party conducts the research. Some AEC leaders think that clients will wonder why their firm has outsourced the important task of eliciting information and opinions about their client relationships. They believe that this sends a message that the firm does not value the process. This could not be further from the truth! Relying on an independent, professional market researcher who is not afraid to ask tough follow-up questions sends a clear message that the firm is willing to invest the resources necessary to create a professional, nonconflicted environment for exchanging potentially sensitive information.


Three of the most common mistakes to avoid are:

  1. Employing a written survey tool instead of conducting an in-person or phone interview. Even large firms that could not conceivably interview a fraction of their clientele would be well-served to use phone/in-person interviews in addition to a written survey. While much more cost-effective, written surveys have limited data-gathering value because few individuals invest the time to provide short-answer/essay responses.
  2. Not using skilled and/or independent interviewers. This results in a lost opportunity to ask probing, timely follow-up questions that yield valuable answers.
  3. Not thinking through the entire survey process. In the rush to launch the survey, many don’t dedicate sufficient time to:

Determining ways to share survey results with the rest of the organization; and

Translating the findings into concrete strategies for improving project delivery, client development and other hot-button areas.

Maximizing ROI

  • Target prospective clients as well. Depending on your firm’s objectives for conducting the study, as many as 25–30% of your interviewees should be prospective clients. While participation rates may be lower, learning more about key targets (and what they know/how they feel about your firm) can be invaluable to future business development efforts.
  • Don’t hoard the data! Immediately share findings with the project team and make time for discussion. Then, share it with others in your firm by uploading the interview to your intranet. Doing so not only benefits future outreach and interactions with that client, but also spurs thought with other clients.
  • Circle back with the client. Depending on the size of your firm and the strategic importance of the client, the President/CEO, Client Manager/Leader, or Client Sector Leader should follow up with the client after the survey. Appropriate messaging should include an action plan: what the project team/firm plans to do in response to the findings. Where possible and practical, push for in-person meetings to address problems, leverage opportunities to influence or change perceptions, and explore unmet needs. The biggest gripe that clients who participate in these interviews have is when nothing seems to change in spite of their feedback.
  • Harvest and repackage client testimonials. Be sure to ask permission before doing so.
  • Incorporate study results into your firm’s strategic and marketing/BD plans, including:
  • Trends/drivers impacting your client base;
  • Suggested new service offerings in response to changing client needs;
  • Competitive benchmarking (i.e., your firm versus your competitors); and
  • Your firm’s strategic market position and implications on future strategy.

Perhaps most important, don’t undertake a client/prospect study if you’re not ready to listen, embrace the findings, and act on them. 


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Newly Revised Subconsultant Documents Now Available

The Engineers Joint Contract Documents Committee recently released a revised version of its Engineer-Subconsultant Documents. These subagreements are used to form contracts between an engineering firm, as prime design professional, and other professional firms or individuals, such as geotechnical engineers, surveyors, mechanical and electrical engineers, and architects. The new documents reflect current legislation, recent judicial activity, and current business practices. Design engineers, construction contractors, owners, and attorneys all provided input on the agreements.

The revised documents include:

  • E-560, Agreement Between Engineer and Land Surveyor for Professional Services;
  • E-564, Agreement Between Engineer and Geotechnical Engineer for Professional Services;
  • E-568, Agreement Between Engineer and Architect for Professional Services; and
  • E-570, Agreement Between Engineer and Consultant for Professional Services.

The 2010 edition of the EJCDC Engineer-Subconsultant documents replaces the edition published in 2006. A full list of the changes and updates may be found on www.nspe.org/ejcdc. These important changes demonstrate EJCDC’s philosophy of parties working together toward fair and balanced agreements that truly and clearly reflect the obligations of all participants. Key highlights of the changes include the following:

Expanded options for addressing the situation in which the project owner fails to pay the engineer. When the engineer and the consultant (architect, geotechnical engineer, land surveyor, or other) finalize the subagreement, they now may choose from four options for allocating or sharing the risk of owner nonpayment;

Clarification of engineer’s general obligation to pay the consultant for undisputed services, and of the consultant’s right to terminate the subagreement if it does not receive payment;

Express provisions regarding compliance with owner and contractor safety programs when on the project site; and

Inclusion of express certifications that the agreement has not been procured through bribery, fraud, or coercion. Such certifications are important for any public work or projects receiving grant funding.


NSPE members enjoy a significant discount on the cost for the documents, which can be immediately purchased and downloaded atwww.nspe.org/ejcdc/index.html.

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Synergy: HR and Finance Roundtable Registration is Now Open

Human resource directors, financial professionals, and partners from architecture, engineering, and construction firms join forces at Synergy: HR and Finance Roundtable to benchmark current activities, discuss emerging trends and issues, participate in continuing education network with peers, and share best practices. During Synergy, the two groups participate in joint sessions sharing their unique views on topics of importance to both. Topics for 2011 Synergy include: 

  • What CEO's Expect from HR and Finance Professionals
  • Ten Steps to Employee Engagement 
  • Driving Motivation
  • Compensation Trends and Analysis of Changing Economy
  • Engineering a Great Place to Work: Piece by Piece
  • Generation Next: Identifying and Cultivating Business Development Leaders 

Download the agenda

Synergy kicks off with a dinner and presentation on Wednesday, May 4, and finishes at 12:45 p.m. on Friday, May 6. 

Send an email to education@nspe.org to suggest topics for the open discussions.

A block of rooms have been reserved at the Lorien Hotel for a room rate of $209 single/double. The hotel is conveniently located at 1600 King St., Alexandria, VA.

Early Bird Registration: January 10–March 15: $495
Regular Registration: March 16–April 30: $595

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Nominate Fellow Engineers for NSPE Awards

NSPE offers several awards that have upcoming deadlines in 2011. Below are just a few of the award programs NSPE will be conducting this year.

For details, visit the NSPE Awards Web page

PEPP Award:
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.

The ACEC-NSPE QBS Awards Program was established by NSPE to recognize public agencies that make exemplary use of the QBS selection process at the state and local level.

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 profession.

Mentor of the Year Award:
The Mentor of the Year Award is given each year to the one member of NSPE who best exemplifies the ideal image of a mentor. The award may be given to an individual who has established a record of consistent outreach toward individuals in the engineering field, including engineering professionals and students, over a number of years.

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PEPP 2010-11
Executive Board

Mark Davy, P.E.
La Crosse, WI

Andrea Martinez-Graves,
Tampa, FL

Dawn Edgell, P.E.
Chicago, IL

Immediate Past Chair
Bill Clarke, P.E., F.NSPE
St. Louis, MO  

Vice Chair, Northeast Region
Randy Petersen,
Washington, DC

Vice Chair, Southeast Region
Charlotte Maddox, P.E., F.NSPE
Tampa, FL

Vice Chair, Central Region
Kent Buehrer, P.E., F.NSPE
Maumee, OH 

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

Vice Chair, Southwest Region
Chris Richard, P.E.
Lafayette, LA

Vice Chair, Western and Pacific Region 
Wes Segawa, P.E.
Hilo, HI 

Young Engineer Representative 
Carlos Gittens, P.E.
Deltona, FL
SSEC Representative
Pat Christians
Birmingham, AL

PEPP Staff
Kim Granados, CAE
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