Engineering Inc - July/August 2017 - 44

GUESTCOLUMN

You Can't Choose Family...But, You Can
(and Should) Choose Clients and Projects Wisely
BY GLEN R. MANGOLD AND CHARLES W. KOPPLIN

t is something firms do all the time: Choose a client and a
project and then pursue them.
However, that seemingly simple process has some not
so simple implications for firms: Client and project selection is a contributing factor in 21 percent of professional
liability claims for all firms according to ACEC's recently
completed 2017 Professional Liability Survey. (That number increases to 31 percent for firms with gross revenues
exceeding $20 million).
To reduce professional liability claims, firms should create specific criteria for how they select clients and projects. Objectively
evaluating clients and projects to determine if they are a good
fit for the firm can ultimately improve a firm's bottom line by
minimizing risk and increasing their financial success.
First, establish criteria for client selection. Examining the
firm's history with the client is a good place to start: Has the
firm worked successfully with the client in the past? Is the client
a good prospect according to the firm's marketing and strategic
plans? If the firm has not previously considered the client or the
client offers little chance for repeat business, then does that client really align with the firm's strategic goals? Has the firm been
asked to submit a proposal for a project it has been following
since its inception or did the firm only learn about the project
when it received the request for a proposal?
However, successful project history with the client is not the
only thing that matters-payment history is just as important.
All things being equal, the client that pays an invoice in 30 days
is preferable to one that takes more than 90 days to pay. Many
firms have found themselves better off after they fired a client
that did not promptly pay their invoices.
Criteria should also include a look at the sector in which
the client does business. For example, school boards, church
building committees, condominium associations and real estate
developers come with their own set of risks. Association boards
and committees may be without a group leader or could have
competing interests with ever-changing agendas. Condominium
liabilities include poor and deferred maintenance by the owners
with some condominium developers more focused on cutting
costs than project quality. With homeowners, the firm is often
dealing with consumers unfamiliar with the design and construction process.
But the criteria to be considered is not limited to clients and
projects. Firms have their own in-house issues to contend with
when deciding to pursue a project or client. Workload can be
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JULY / AUGUST 2017

the biggest one of all:
Will staff be available
to complete the project
within the required
Glen R. Mangold
Charles W. Kopplin
time frame? If a project
requires major shifting of the firm's staff or extensive overtime
to meet the project deadline, it can put the firm in a precarious
situation.
The technical capabilities required for the project can also derail
plans. If the firm's capabilities are limited, teaming with another
firm can bolster their technical expertise. It can be dangerous if
the firm's technical capabilities are inadequate or if the firm is
going after a project in an area where it has no experience.
A low-bid selection process will not offer the benefits of a qualifications-based system. Do not be fooled into thinking providing
a low-bid will lead to more work when the client realizes how
good it is to work with your firm. Unless a firm is set up to do low
cost work, it will never be successful being the low bidder.
When it comes to concerns about project funding and costs,
a defined set of parameters can prevent a firm from making a
financial misstep.
When project financing is in doubt, having an established
threshold-such as the firm will proceed with caution when
there is less than 60 percent chance of the project being fully
funded-can be helpful in the decision making process.
Additionally, the competition for the project should be
researched, including the firm's hit rate when going up against
those firms. A low hit rate should make a firm realize its time
would be better spent on other prospects. If the odds of being
short-listed are high, it could be a good project to pursue. However, if the costs to go after the project are high compared with
the anticipated profits, a firm should think twice before spending its marketing dollars.
Ultimately, by developing objective criteria for client and project selection-and following them-a firm will more effectively
manage its risks and increase its chances of being professionally
and financially successful. n
Glen R. Mangold, CPCU, has held leadership roles with the longest
running architect/engineer insurance programs, has participated
on panels and led numerous risk management presentations to A/E
firms. He has more than 30 years' experience in the insurance industry. He can be reached at glen.r.mangold@gmail.com. Charles W. Kopplin, P.E., FACEC, has more than 40 years' experience as a consulting
engineer, including 14 years as the risk manager for an ENR Top 500
Design Firm. He can be reached at cw.kopplin@gmail.com.

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