NSPE's Gateway to Private Practice November 2011 

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 two parties.

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 responsibility, or

  • 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 actions.

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 professional engineers.

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.

Age:  33                               

Title:  Senior Associate, Project Manager             

Company:  Stantec Consulting Services Inc.

Been There: (# of years):  5

# 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 occasion. 

Favorite cereal?  Frosted Flakes.

Something readers 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 jcoleman@nspe.org (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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PEPP 2010-11
Executive Board

Andrea Martinez-Graves
Tampa, FL

Dawn Edgell
Chair Elect
Aurora, IL

Mark Davy
Past Chair
La Crosse, WI

Eric West
Midland, TX

Aaron Thrush
Maumee, OH

Charlotte Anne Maddox
Vice Chair
Tampa, FL

Chris Richard
Vice Chair
Lafayette, LA

Karen Stelling
Vice Chair
Kansas City, MO



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