Engineering Inc. - January/February 2015 - (Page 38)

Risk Management BY G L E N R . M A N G O L D A N D C H A R L E S W. KO P P L I N Don't Be Part of the 40 Percent: Write a Detailed Scope of Services Among the small firms that reported professional liability insurance claims over the last year, 40 percent identified contract language, including scope of services, as a cause of the claim. Those findings come from ACEC's 2014 Professional Liability Insurance (PLI) Survey of Member Firms. A smaller percentage of large firms also indicated that contract language contributed to insurance claims. Whether your firm is large or small, it is important to ensure the scope of services within any contract contains sufficient detail. A well-written scope of services significantly diminishes the chance of a contract-related professional liability claim. The four elements of a typical agreement are: scope of services, terms and conditions, time schedule and compensation. In a clientdrafted agreement, it can be difficult to make changes to the terms and conditions. The time schedule and compensation are based on the scope of services. The design professional should take control of and write the scope of services, because the designer has a better understanding of the scope than the client, and he or she knows how to tailor services to meet the client's needs. An initial discussion with the client regarding the client's needs and expectations should serve as the basis for the scope. A checklist of all the firm's potential services is a good tool to use in the client meeting. Another tool to consider is a matrix of the firm's services. In addition to the services, the matrix can include columns designating the services to be performed by the firm, services to be performed for additional compensation, services provided by the client and services not provided by the client. There may also be circumstances when it is desirable to indicate when certain services are excluded. If the firm does not have the expertise or if it deems that performing certain services would carry an unreasonable amount of risk, it should indicate that those services are excluded. By indicating what services are included, available for additional compensation, provided by the client and excluded, the design professional greatly reduces the chances for any misunderstandings regarding responsibility for performing the services, and whether those services are included in the agreed-upon compensation. The description of the scope of services should be detailed and well defined, using plain language. Avoid jargon that is not easily understood. Remember, if a dispute goes to a court of law, nontechnical people will sit on the jury that determines whether the client exceeded the scope of services. Avoid also the use of broad language and words such as "all," "complete" and "any." Examples of this include: "the design professional will provide all necessary services"; "the construction documents will be complete"; and "the design professional will provide any required services." However, broad language may be appropriate when describing information provided by the client. Examples of this include: "the client will provide all available 38 ENGINEERING INC. JANUARY / FEBRUARY 2015 information on the existing structure"; "the client's list of project requirements is complete"; and "any requests by the client for the design professional to evaluate any contractor-requested substitutions will be done so as an additional service for additional compensation." The design professional may assist the client in obtaining regulatory permits and approvals. However, the designer should not agree to obtain them. If the design professional agrees to obtain a regulatory permit or approval and the agency does not grant it through no fault of the design professional, he or she will find themselves in default of their contract. The scope of services should also include a detailed description of the project, including the size and location. If the project is on only a portion of the client's site, the portion of the property included in the project should be described in detail. It is also valuable to include any assumptions that were made when the scope of services was developed. That way, if at of small firms a later date there are significant changes to the identified contract project, the design professional has established language, including a basis to ask for additional compensation and scope of services, time to complete the project. as a cause of Once the scope of services is clearly defined, professional do not neutralize its power by going beyond liability insurance it. Too many examples of design professionals claims. "just trying to help" end badly, especially Source: ACEC 2014 when the scope is exceeded without the Professional Liability Insurance Survey of design professional receiving any additional compensation for providing additional services Member Firms and taking additional risks. Unmet client expectations are the genesis of many lawsuits against design professionals. By following these steps, design professionals can minimize the chances of finding themselves at the center of a lawsuit due to contract language with a poorly written scope of services. 40% Glen R. Mangold is the managing director of the Architects/Engineers program for Markel Corporation, a leading provider of professional liability insurance. He has more than 23 years' experience in the insurance industry. He can be reached at Charles W. Kopplin 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 The material in this article is provided for informational purposes only and is not to be regarded as a substitute for technical, legal or other professional advice. The reader seeking such advice is encouraged to confer with an appropriate professional consultant or attorney.

Table of Contents for the Digital Edition of Engineering Inc. - January/February 2015

Engineering Inc. - January/February 2015
From Acec to You
Legislative Action
Market Watch
The Business Case for Diversity
Closing the Gender Gap
Market Stability Keeping Pli Prices Low
2015 Legislative Scorecard
Made to Market
2014 Fall Conference Highlights
2015 Annual Convention Preview
Risk Management
Business Insights
Members in the News
Mergers and Acquisitions

Engineering Inc. - January/February 2015