Risky Business

By Nicholas E. Vlattas, AIA, and Deborah Marquardt

It’s hard to admit mistakes. But it would be foolish not to learn from them. As our firm has grown from a regional entity to one national and now international in scope, the learning curve has been steep at times, particularly with regard to managing large projects in faraway places.

Today’s economic climate is creating optimum conditions for increased litigation. “Claims for errors and omissions are on the rise for design professionals,” says Kathy Blanchard, vice president, CIC, RPLU, BB&T Insurance Services, Professional Liability Division.

Unrealistic expectations from clients, tighter scrutiny from insurance carriers, increased pressures on schedule and budget all have the potential to create uncomfortable circumstances. Much of this can be controlled and/or reversed with clear communication at all levels: owner, design team, contractor, consultants.

Issues of scope, time/schedule, construction costs and quality are expectations that need to be understood. This communication begins with contracts and the setting of expectations, roles and responsibilities.  ”

The simple advice I can share with architects is to make sure they do their homework before the project begins,” says Blanchard. “This includes reviewing the written contract to clearly define all scope and time-of-performance issues, and understanding the difficult ‘business risks’ the firm may be assuming that will not be covered by the firm’s professional liability insurance policy.”

 

The Design Professionals Risk Control Group of XL Insurance suggests several ways to help avoid frivolous lawsuits. We’ve added a few thoughts of our own.

 

  • Choose clients carefully, avoiding those with a long history of litigation.
  • Use well-crafted written contracts that clearly define issues like scope, schedule and costs. A good contract will acknowledge that all parties have roles and responsibilities, including the owner. And contracts with consultants should carry forward the requirements of the prime contract.
  • Know the law, particularly if you work in states outside your own. It might be wise to hire local counsel to advise you firm’s attorney on jurisdictional issues.
  • Maintain thorough project records. This may seem elementary, but many firms fall short. The DPRCG says, “Poor or nonexistent documentation is the single greatest challenge insurance claims consultants have in extricating an architectural firm from a claim.” New software tools, such as Newforma ProjectCenter, certainly have aided us in this endeavor, particularly with regard to managing complex teams on large project. Newforma helps our firm manage project communication and other documentation, including sending automated reminders about scheduled actions.  This keeps everyone informed about decisions, deadlines and changes to help achieve project goals. And there’s a record!  
  • Keep your ear to the ground, and don’t ignore rumors of an unhappy client or end user. “We need to realize that close to 80 percent of all demands/allegations against architects come directly from the firm’s client, so managing client’s expectations is vital in coordinating a successful project,” says Blanchard.
  • Do a great job and check your work. Blanchard adds, “Maintaining solid business practices throughout the project sounds basic, but in today’s environment, it can’t be overlooked. The firms that have figured this out are having good success in this economy and are protecting their businesses from unnecessary risk and liability.”

It will be interesting to see how Integrated Project Delivery changes the contract landscape. IPD is emerging as an alternate contracting method and as an opportunity to improve collaboration in the delivery of projects. A three-way contract among owner, builder and designer keeps everyone on the same page for the betterment of the project. Some key principles of IPD from the AIA task force include mutual respect, trust, benefit and reward; collaboration and innovation; early involvement of key participants and early goal definition.

Still, there is the human factor. We learned some painful contract lessons on a large, fast-paced project that encountered many of the issues mentioned above: changing and inflated scope, cost escalations driven by market prices on steel, supersized expectations and lack of funding on the part of the client; a contractor who didn’t deliver a guaranteed maximum price as required by the contract; improper communication protocols, and consultant contracts that did not reflect the requirements of the prime contract. Through mediation, with everyone accepting some share of the blame, we were able to avoid litigation.

As a result of these lessons learned we have implemented improved procedures for contract review and execution. Our future vision is improved, however, still not quite as good as our 20/20 hindsight.

Nicholas E. Vlattas, AIA, is the Chief Operations Officer for Hanbury Evans Wright Vlattas + Company.

Deborah Marquardt does public relations for Hanbury Evans. Her writing has appeared in national magazines.

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