Professional Liability/Risk Management: Client selected Consultants
When a professional agrees to provide services for a client,
that professional takes the same level of responsibility for the service
whether the service is performed directly by the professional or by a
subconsultant. The legal concept of vicarious liability is the imposition of
liability on one party, in this case the prime professional, for the conduct of
another party, the subconsultant, based solely on the relationship between the
The legal system strives for efficiency: Holding one party vicariously
responsible for the acts of another eliminates the need to apportion fault.
This concept extends to the negligence of a subconsultant providing services
through a prime consultant.
For various reasons, a client may want specific consultants
as part of the professional service team. Indeed, clients should have the right
to select specific consultants; if they do, they should have the obligation to
contract separately for the services of consultants. When a client demands a
specific interprofessional consultant, a prudent design professional will use
one of two risk management techniques:
Negotiate the use of
subconsultants for whom the prime professional is willing to take
Require an arrangement for
the consultants or specialty service providers to contract directly with
the client so the prime professional is not vicariously liable for their
The latter arrangement may necessitate greater coordination
of the independent services of the client-selected consultants. The prime
professional’s coordination of the documentation requires careful attention,
and this service should be appropriately compensated. Because the prime design
professional does not have authority over the independent consultants’
services, the prime design professional should not be held responsible for
their accuracy. In an arrangement where the client is contracting directly with
individual consultants, each should be acknowledged as being able to rely on
the technical sufficiency and timely delivery of documents and services
furnished by the others.
Moreover, it would be appropriate for the client to agree to
indemnify the prime design professional for any costs resulting from the
negligence of the independent consultants. There are significant risks for a
prime design professional when the client contracts separately for the services
of consultants. If the client insists on separate consultants or the use of
specific consultants by the prime design professional, the client should
acknowledge that the prime design professional should not be held responsible
for the adequacy of their services. The prime design professional should be
paid for providing a review of the information by other consultants, which
should be generally limited to conformance with design concepts.
If a firm has professional liability insurance, its policy
usually defends it against allegations of its negligence and pays on its behalf
if the firm or its employees are found to have performed professional services
in a negligent manner and caused harm. The CNA/Schinnerer professional
liability insurance program does provide coverage for the vicarious liability
of the insured firm for the negligence of its consultants, but does not defend
or pay on the behalf of the consultants. Some other professional liability
insurance policies will not cover such vicarious liability.
Because a prime professional is always responsible for the
actions—including negligence—of those providing services through the prime
design professional, care should be taken to select interprofessional
consultants who are qualified and capable of providing their services, who are
insured or otherwise have the financial strength to stand behind their
professional and contractual commitments, and who do not attempt to shift risk
to the prime design professional by unreasonably limiting their liability
either through their contract with the prime design professional or because of
their lack of insurance coverage or assets to support an indemnity provision.
© 2011, 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.
Engineering Firm Certifications: A Barrier to Mobility in Some States
Craig Musselman, P.E., F.NSPE
In recent years, tremendous strides have been made in engineering licensure
in the U.S. to promote mobility and expedited comity licensure for individual
PE licenses. In many states, a PE who meets the definition of a Model Law
Engineer, and has an up to date “Council Record” through the National Council of Examiners
for Engineering and Surveying, can obtain a license in a new state in less than
a week. This is all well and good, and works like a charm, but only if that
engineer’s firm can also meet that state’s requirement for firm certifications
in a similar time frame.
That same level of progress has not been made in all states with respect to
firm certifications, of which there are two types. In many states, the PE board
issues a certificate of authorization, of various names in different states,
authorizing the firm to provide engineering services. In some states there is a
requirement for the firm to be “registered” in various fashions with the
Secretary of State or the State Department of the Treasury. The types of approvals
by state as reported by the state PE board are listed by NCEES here and here.
These certifications are required in many states for valid statutory reasons,
for instance, to assure that taxes are paid and/or to provide a local agent,
thus assuring that the venue for dispute resolution is in that state and not in
federal or another state court. Many states require that firms offering
engineering services have at least one full-time professional engineer in each
office in the state to preclude plan-stamping of non-PEs’ work by part-time
Some in the engineering profession believe that mobility of engineering firms
is an issue that primarily affects large engineering firms. That isn’t the
case. Firm certifications, which serve as barriers to mobility, actually are
more of a problem for small firms, which make up the vast majority of
consulting engineering firms in the U.S., than for large firms. Larger firms
have administrative personnel who keep track of certifications and renewals in
all states where the firms practice or might practice. Small firms (less than
100) can’t reasonably do that. Because they also need to react quickly,
typically within 30 days when a project presents itself through an RFP in a
state where the firm has not practiced in the past, it can be difficult for
small firms to meet state requirements in time.
The licensing board survey provided online by NCEES indicates the time it
takes, reported by each board, for a firm to obtain required
certifications to practice. The following states indicate that it takes 30 days
or more to obtain firm certifications: Connecticut, Delaware, Illinois,
Mississippi, North Carolina, Ohio, and Rhode Island. In those states, the
opportunity to respond to an RFP has come and gone before a firm can obtain a
certification. I suspect that things don’t always work as fast as indicated on
that table in other states. If any of you reading this have any experiences of
being delayed awaiting firm certifications, leave a comment below.
The other mobility barrier related to firm certifications is state requirements
for the ownership of firms that are authorized to practice in their state. The
ownership requirements for each state are indicated here. Most states either have no ownership requirements, or
reasonably require that at least one principal of the firm be licensed in that
state. There are two very significant exceptions.
In Michigan, two-thirds of the out-of-state firm’s principals need to be
licensed as professional engineers, architects, or surveyors in Michigan for
the firm to be able to do business there. For a firm with 10, or 50, or 1,000
professional engineers proposing to do one or two projects in Michigan, this is
a significant barrier. It would make no sense to have two-thirds of principals
licensed to deal with one or several projects.
New York’s barriers are also formidable. New York requires that 100% of
principals be licensed professional engineers. New York Governor Andrew Cuomo
recently signed legislation to ease this to 75%, but I understand that the new
bill pertains only to new firms based in New York. Firms based in other states
still have to meet the 100% requirement. Many engineering firms have surveyors,
geologists, construction inspectors, or marketing/human resources/management
staff who are part owners along with professional engineers. For such firms to
practice in New York, they need to set up a separate corporation meeting New
York State’s ownership requirements—even to do one project in the state.
Mobility of professional engineers and of engineering firms is in the public
interest. A number of years ago, a member of a PE board in a large northeastern
state asked me why his state should be concerned with whether or not engineers
from other states could practice there in a reasonable amount of time. Why make
it easier for out-of-state firms? I responded, “Let’s say, there was a rare air
quality problem experienced in a ventilation system in your state that had only
been addressed previously by an engineer who happened to practice in Seattle.
You would want that engineer’s input as soon as possible.” That PE board member
said, “I get it.” Again, mobility is in the public interest.
The information reported herein indicates that firm certifications do not
function as a barrier in most states.
State societies of NSPE, and state PE boards, should review their firm
certification requirements and assure that certifications can be obtained
quickly, in less than two weeks. That is in the public interest.
Editorial input on this item was provided by Bernard R. Berson, P.E.,
F.NSPE, and L. Robert Smith, P.E., F.NSPE.
The author is a Fellow of NSPE and ACEC, a Distinguished Member of ASCE, a
Board Certified Environmental Engineer, the Chair of the NSPE Licensure and
Qualifications for Practice Committee, and a member of the ABET Board of
Directors. The opinions expressed herein are his own and do not reflect the
views of any of these organizations.
Check out other blogs at www.nspe.org.
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NSPE Achieves Repeal of Burdensome Withholding Tax
The U.S. House of Representatives this month voted in favor of final passage of H.R. 674, which would repeal a requirement that federal, state, and certain local governments withhold as tax 3% of all payments made to government contractors. Note: H.R. 674 was later signed into law by President Obama on 11/21/11.
The requirement would have caused cash flow problems for engineering firms, whose profit margins are often less than 3%, and cost professional engineers the vital funds they need to conduct business.
Since the tax law’s passage in 2006, NSPE has been working with the Government Withholding Relief Coalition and the U.S. Chamber of Commerce to repeal the withholding mandate. NSPE also sent a letter to House Ways and Means Committee Chairman Dave Camp (R-MI-4) in support of the repeal.
In addition to NSPE’s advocacy of H.R. 674, NSPE members responded to an NSPE Legislative Action Center alert asking them to contact their senators in support of the bill. Your grassroots efforts helped build a critical mass of opinion that ensured the bill passed the Senate, ultimately enabling its success.
Read NSPE’s blog on the repeal here.
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NeXt Generation of Leaders
Name: Daniel Gilbert, P.E.
Title: Senior Associate, Project Manager
Company: Stantec Consulting Services Inc.
Been There: (# of
# of employees: 11,000+
Previous Gigs: AST Environmental, Inc. (Civil Engineer)
How did you first get
into engineering? I worked for a
small engineering and surveying firm in my home town in high school and
college. It was during this employment
that I became interested in engineering.
If you weren’t an
engineer you’d be ….Project Manager, I love to manage large complex
projects with many moving parts, stakeholders and disciplines.
What’s your peak
experience as an engineer so far?
Serving as Project Manager for the renovation of several concrete
overflow dams on the Kentucky River.
What do you value in
the people you work with? I value
many of the qualities that our project team members exhibit. Above all, the qualities that I revere the
most are a hard work ethic, honesty, loyalty and ability/skill.
What do you think
engineering firms need to do to attract younger generations into the
engineering industry? Engineering
firms need to challenge younger generations, provide opportunities for growth,
and be open to generational approaches.
What does leadership
mean to you? Leadership means many
things to me. These include: the ability
to motivate team members, communicate effectively, lead by example, exhibit
compassion, trust and honesty.
Leaders you admire? My grandfather was a great leader and someone
I have emulated throughout my career. In
addition, Stantec has many great leaders that serve as great examples.
Football or baseball? Basketball – UK Basketball through and
through. GO CATS!
Sneakers or flip
flops? Both – depending on the
Favorite cereal? Frosted Flakes.
would be surprised to learn about you? I am a member in a local Toastmasters club that meets weekly where we
practice/hone our communication skills.
You wake up tomorrow
as CEO of your firm – what’s the first thing you’d change? Before I changed anything, I would review
several of our company policies/initiatives related to staff development,
mentoring and bottom up communication.
Finish this sentence:
In 10 years, I will have…worked diligently toward my long-term professional
and personal goals. As part of this
effort I will have contributed professionally to local, state and national
organizations that benefit my profession.
I will have continued to develop and sharpen my skills as an engineer
and manager in my profession.
Book you can’t go a
year without rereading? There is not
a book I re-read every year, but look to identify books that may help me
develop myself into a better engineer, manager and professional.
Facebook or LinkedIn? Both.
How do you strike a
work/life balance? This is difficult
for most career motivated individuals. I
accomplish this by setting monthly and annual goals/objectives for myself. This allows me to set both professional
goals, but also to set personal goals outside of my career. A review of these goals at the end of each
month while I plan the following month keeps these efforts fresh in my
mind. In addition, I use a wheel of life
to gauge my work/life balance quarterly.
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Become a PEPP Sustaining Firm
Become a 2012 PEPP Sustaining Firm and ensure your firm is listed in PEPP’s online searchable directory. 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.
As a 2012 PEPP Sustaining Firm, you will receive 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 approx. 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, monthly e-newsletter NSPE Update, Web banners, and Job Board postings.
Your options to participate include the following (*Price reflects 10% discount for payments received by 10/31/11).
Bronze Level $170 Listing only. Includes listing and link to firm’s Web site and e-mail address.
Silver Level $240 Listing plus Facebook and Twitter. Includes Bronze level package plus companies can provide a non-self-promotional tip of the day (250 words or less) to be featured on the NSPE Facebook page and Twitter page, with a direct link to your firm’s Web site and/or social media platform. E-mail tip (.gif or .jpg file, up to 10KB) to email@example.com (703-684-2833).
Gold Level $575 PEPP Featured Firm package. Includes Silver level package plus complimentary registration ($495 value) to the 2012 Synergy HR & Finance Roundtable in Alexandria, VA.
Please complete the form 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.
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