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D4COST Software

  Doing Our Best To Avoid Claims
Time To Sharpen Up Our Practices

Arthur O'Leary, FAIA, MRIAI
 


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Some claims against design professionals are caused by plain bad luck and we sincerely hope it won’t happen to us. But most are caused by our own errors and shortcomings and those made by our staff and engineering consultants. Considering the vast volume of documentation produced for a single building or project, it is impractical to expect completely error-free documents. Also, considering the usually lengthy time span of design and construction of the average project, it is not realistic to expect flawless behavior. 
Although we may never achieve perfection, we can at least try. By being constantly alert and aware of the usual sources of errors, we might lessen their occurrence. From time to time we should stand back and take a good objective look at our operations. Even minor improvements could prevent or avoid some economically ruinous claims. 
These suggestions are not all-encompassing, but could get you started on the right track for cleaning up your act. 

Professional Standard of Care
The standard of care for design professionals requires us to conform to a level of competence that is prevalent among others of the same discipline practicing in the same community in which we work. We must do what the others do and refrain from doing what the others do not do in the same or similar circumstances. In order to do this we must know how the other architects and engineers conduct their practices. This can best be accomplished by reading the professional press, participating in continuing education, belonging to our professional societies, and taking an active part in their programs and activities. (Note 1)

Checking Our Work
Design professionals are not required to be perfect. However, this does not relieve us from the obligation to check our work because this is one of the standard systems used to discover and correct errors. Even after careful checking, there may still be errors in our work. It is important that the person assigned to do the checking is competent to do this crucial and exacting job. Checking someone else’s work is not a very thrilling or popular job, but it should not be fobbed off on the beginners in the office. The checker should be one of the most competent and one who is capable of recognizing error. 
The drawings and specifications should be checked for compliance with the client’s program and applicable building laws and regulations. The documents should also be checked to make sure that all engineering recommendations have been incorporated. The coordinated whole should finally be judged for buildability. 
An extremely important element of the checking process is to make certain that all of the sections of the drawings and specifications produced in various engineering consultant’s offices are coordinated with each other and are consistent with the architectural portions. This is time consuming but cannot be omitted. 
Use of Computers. When the drawings are produced by CAD, they are so good looking that they effectively mask poor quality design, judgment, and coordination. The drawings will be no better than the architectural or engineering ability of the technician who prepared them. The computer will not refuse inadvisable or unbuildable details. CAD drawings must be carefully and thoroughly checked by competent senior personnel. 
Specifications are usually produced by editing those of a similar previous project. They must be carefully read for content, completeness, and applicability and must be coordinated with the drawings. 
Errors, per se, are not evidence of malpractice, but failure to check the work product is. 

Reviewing Shop Drawings
Shop drawings are an essential element in ascertaining that specially fabricated work will carry out the intent of the contract documents. If failure to adequately review the shop drawings results in work that has to be redone, a claim will probably be made for an increase in contract price or time. The claim is likely to be passed on to the architect. 

Personnel
All office and field work must be done under the direct control and supervision of competent personnel. It is easy to fall into a false sense of security when the work of junior people seems to be progressing satisfactorily without day-to-day hands-on guidance. Inexperienced personnel can easily stray into areas that seasoned people would avoid or approach differently. 
The firm must have a reasonable balance between senior, middle, and junior personnel, such that all work is subject to scrutiny of the more experienced. The work product will be no better than the ability of the most senior people. 

Clients
Case histories and statistics kept by insurers of design professionals reveal that certain types of clients and work are likely to attract more claims than others. 
Recent experience indicates that condominium projects attract more than their share of lawsuits against the design professionals involved. One can deduce the principal reasons are fourfold. One, the architect’s developer-client is not the ultimate user who normally files the claim. Two, the construction is often (if not usually) economy type high-production, necessary to produce acceptable sales prices. Three, the end product is the home of the ultimate owner, unlike the typical apartment renter who is not as particular as a homeowner. Four, the condominium owners are organized in homeowners associations. As long as a few owners are interested in pursuing legal claims, the rest will join in and help finance the legal costs through nominal monthly payments into a common fund. 
Some types of institutions such as churches, hospitals, schools, museums, and libraries are governed by unpaid volunteer lay boards of directors. These clients tend to be difficult for architects, unless the directors are exceptionally well led and organized. 
Architects and engineers in the forensic field who study building failures have a special problem with repair design. The owners of buildings that need to be repaired often ask for guarantees that the repair procedure will produce perfect results. The repair designers are generally skillful and will do the best they can but cannot guarantee perfect results. This should be completely explained to the client orally and in the employment agreement. 

Meeting Budgets
Cost. Clients become very dissatisfied and resentful when costs exceed the approved budget. Some projects would not have proceeded if the client had known the final cost before starting. In some cases, extra construction costs are caused by defective or inadequate construction documents prepared by the design professionals. In such situations, the client may give serious consideration to making claims against their architect as well as withholding payments of professional fees. 
Time. Overall scheduling of a project from programming through schematics, construction documents, contract administration, and construction should be realistic and should be updated whenever necessary. Client approvals should be sought all along the way. When the client is counting on use of the project at a certain date, failure to receive it will often be very expensive. Although the contractor and owner may share in the onus of time overruns, the architect will often be asked to assume some responsibility. 
Architects must avoid being a contributing factor in schedule slippage by failure to make prompt decisions, late delivery of drawings and revisions, and taking excessive time for reviewing and approving of submittals such as shop drawings. 

Innovation
Architects’ clients feel particularly aggrieved and let down by their trusted advisors when there is a costly failure in some portion of the project. After study and research, they discover that the failure was caused by the architect having used new and untested materials or systems without the prior knowledge or consent of the client. Some architects excessively personalize their projects and feel that they have no obligation to obtain the client’s approval for innovation. Architects who wish to be at the cutting edge of design innovation sometimes fail to inform the client realistically of the risks that are inherent in trying new shapes, materials, equipment, and systems. In some cases the architect obtains permission after explaining the design objectives and all of the positive factors but without fully informing the client of the negative aspects. Effective client consent must be with a full and complete understanding of the risks. A careful architect would give such information in writing and seek written concurrence from the client. 
Innovation is sometimes cloaked in a mundane context. For example, including the name of a contractor on a bid list without a reasonable examination into the contractor’s experience, financial capacity, and references. The client would have expected that the architect would not include a contractor’s name without a reasonable background check. The same problem arises when an architect specifies the names of manufacturers of materials and equipment without adequate research into reliability, quality, suitability, warranties, and after sales service. Specifying products by name is tantamount to an architect’s recommendation. The client would rightfully assume that the architect would have more than casual knowledge of the product. 
Clients who have suffered severe economic loss from undisclosed innovations are very likely to seek financial redress from their design professionals. (Note 2)

Administration of Construction
Professional services during the construction period are a serious source of claims against design professionals. But it is also a great opportunity for lessening liability exposure by proficient contract administration. Often, familiarity of site conditions during construction will enable an architect to identify problems before it is too late to rectify them. 
Record Keeping. The architect is now required by the AIA contract to keep certain records. (B141-1997) Contractor’s Applications for Payment (B141, 2.6.3.3), Submittals supplied by the contractor (B141, 2.6.4.2), and Changes in the work (B141, 2.6.5.4). 
In addition to these contractual obligations for record keeping, the architect should also keep comprehensive records of site visits, correspondence, drawing issuance and revisions, architect’s minor changes, and weather at the site. Important dates such as starting and ending of construction and other milestones should be recorded. These records will be of immense value in defending against legal claims. 
Tracking Changes. The architect must maintain a contemporaneous record of the status of all proposed changes as they go through the process of scope description, pricing, approval or disapproval, redesign documentation, and construction. When numerous changes are in the process at one time, it is easy to lose track of the position of each. The effect on time and cost budgets and their cumulative effect, if unexpected by the client, may cause discontent and spark a claim against the architect.
Keeping the Client Informed. One of the architect’s most important duties is to advise the owner and keep the owner informed. This is specifically required by B141, 2.6.1.3. It is an owner’s basic right to know what is going on. Clients who feel that the architect is remiss in this duty are much more likely to become hostile and start thinking about legal retaliation and making the architect pay. Total and open communication with the client will lessen the incentive for litigation. (Note 3)

Sources of Claims
Claims against architects originate from three main sources: clients, contractors, and third parties. (Note 4)
Clients make legal claims against their architects for various reasons. Obviously they would be upset if their building cost escalated to pay for the architect’s errors. This is understandable. Sometimes clients are unsympathetic with their architect’s position because the architect has not treated them properly. Many times the client’s claim is simply a way of getting even. All client claims will be subject to mediation or arbitration if the AIA standard documents are used. 
Contractors will make claims against architects when imperfections in the contract documents or the architect’s contract administration activities prove costly to the contractor. Contractors in general do not want to have serious legal disputes with architects considering that they are an important source of future work. But if the amount of the claim or loss is considerable, they will sue. The contractor’s claim against an architect will be a lawsuit unless the architect and contractor are both amenable to mediation or arbitration. 
Third Party Claimants consist of purchasers, tenants, and other users of buildings and passersby who suffer injury or loss that they attribute to the architect. These claims are always in the form of a lawsuit. 

Professional Services Contracts
Agreements. No work should be done without a contract. California architects are now required by law to have a written contract with their clients or, in lieu thereof, a written statement from the client that they do not want a written agreement. 
The lack of an agreement has some very important negative effects for architects. Without an agreement there would be no provable scope of services nor amount and terms of remuneration. There would be no provision for dispute resolution or termination of the contract. The opportunities for misunderstanding and controversy are numerous. Some architects favor the use of simple letter contracts. This is not a good idea but is better than nothing. The important thing is to include anything that was discussed and agreed upon. Any legal disputes will probably be centered on topics that were left out of the letter. 
The AIA standard contracts cover most of the provisions that need to be agreed for a practical architectural services agreement. A complete discussion with the client prior to signing will bring out into the open what the architect will do and what the client is required to do. (Note 5) 
Limitation of Liability. Recognition of high-risk clients and project types does not mean that architects should necessarily avoid or totally eliminate them from their practice. A more practical course is to analyse the situation and limit your liability wherever possible. This would include a limitation of liability clause in your contract, limiting your maximum liability to the amount of your fee or some other limit within your insurance coverage. This should be discussed with your lawyer and liability insurance carrier to make sure that you are doing it properly. 
Fees and Charges. Many client dissatisfactions are based on fee disputes. In some cases this is because the billing is not clear and consistent with the written contract. All invoices should be rendered on time and strictly in accord with the contract. If the bill is not paid within a reasonable time, the best thing to do is talk to the client to find out if there is any misunderstanding. A billing adjustment to satisfy a client at this point will usually be less costly than fighting and paying lawyers later. 
In some cases, it is a good idea to review the proposed billing with the client before it is sent out. In that way, any possible dissatisfaction or impending dispute is uncovered immediately. 
Billing and Collecting Fees. Architects often find themselves in a situation of their own making. The client starts falling behind in payment of fees, yet the architect continues working and says nothing to the client. When the job is complete and the client is still in arrears, the architect tries and fails to collect. In desperation, the architect files an arbitration demand or lawsuit in hopes of collecting. The client responds with a counterclaim alleging malpractice, errors, omissions, and various other costs and damages, more than offsetting the fee delinquency. While the litigation is pending there is no chance of collecting on the account, and legal expenses start mounting. (Note 6) 
It is very dangerous to extend credit to any but the most creditworthy of clients. Your contract should allow you to stop work until such time as the account is brought up to date. (See B141-1997, 1.3.8.1) At the first sign of delinquency, one should talk to the client to find out if there is any dissatisfaction with your professional services. If so, this should be faced up to and rectified. When the client is not satisfied with your service and billings are unpaid, it is practically guaranteed that a serious legal problem is festering. 

Communications with the Client
If a design professional has damaged a client in some serious way, there is a great possibility that there will be a legal claim. Most of the time there is insurance coverage to pay the claim along with legal defence. However, the experience of most architects is that there will still be considerable expense to the firm in lost personnel hours and disruption to the business. 
Many of the claims made by clients are not for serious damages to the clients but are based simply on discontent and dissatisfaction with the architect. This is often brought on by the architect’s own lack of consideration of the client. Seemingly minor things such as missing deadlines, lateness to meetings, unavailability by telephone, failure to return emails and faxes, failure to include client requests in the building program, and failure to keep the client informed at all times. Hopefully, all of these shortcomings will not be heaped on any one client, but any few of them could infuriate a normally placid client. With this background of discontent, a real problem such as exceeding the cost or time budgets will trigger an avalanche of serious legal problems. 
The best way to keep clients happy is to treat them with respect, keep them informed, and maintain a friendly relationship.


Notes:

1. See “Professional Standard of Care for Architects and Engineers,” by Arthur F. O’Leary, FAIA, MRIAI, in Design Cost Data, May/June 01. 
2. See “The Hazards of Innovation,” by Arthur F. O’Leary, FAIA, MRIAI, in Design Cost Data, Jul/Sep 93. 
3. See “Keeping the Owner Informed,” by Arthur F. O’Leary, FAIA, MRIAI, in Design Cost Data, Jan/Mar 93. 
4. See “Owner’s and Contractor’s Legal Claims Against Architects,” Chapter 25, A Guide to Successful Construction — Effective Contract Administration, by Arthur F. O’Leary, FAIA, MRIAI, published by BNi Publications, Anaheim, California. 
5. See “Architectural Services Agreements,” Chapter 19, A Guide to Successful Construction. 
6. See “Do You Have to Earn Your Fees Twice?” by Arthur F. O’Leary, FAIA, MRIAI, in Design Cost Data, May/June 98.


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