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Rea it are How to deal with unrealistic contract expectations f you allow a client to enter into a project with unrealistic expectations, there’ a good Chance that somewhere along the line those expectations will go unmet. But be careful: In today’s litigious society, that’s sometimes al ie takes to land your fm in court. “The only thing you need for a claim is a disappointed client,” says Karen Erger, vice piesilentand direcaraf practice mac Teansgenicts at Lockton Companies in Kansas City, Mo. “The specific circumstances of each case differ, but that isappointment is often at the heart of the claim.” >> SEPTENAER/ OCTOBER 20:4 ENGINEERINGINC. Af ee es ‘Though the industry often talks about “client expectations of perfection,” the bar doesnt need to be anywhere near that high for a client to file a claim, Clients only need to prove that they were just fied in expecting better than standard performance from your firm-—based on contract language, written statements or oral representations. IF the complaint is justified, the consequences can be dev. astating for a firm because professional liability insurance policies will not pro- vide coverage. “The policy will cover you if you fail to meet the industry standard of care, bue ic won cover you if you assume a higher duty,” says Erger against things that they knove are going to happen, and they know that no project will be perfec.” Tnsurers don’t insure Unrealistic Expectations Clients often expect perfection from engi neers because they don't understand the nature of theie work. “Professional services are not goods, They're not pencils that are manufac- tured over and over again, and—under the law—are impliedly warranted to be perfec.” says Brger. "A designer’ services ae comparable to those ofa doctor. They choose a course of treatment, and the patient or client is involved in making the solution happen. The law doest require engineers to guarantee perfect desig.” ‘A second factor is the stark contrast berween the designer and the contractor “In general, the general contractors guarantee and warranty their work,” says Christine Drage of the law firm Weil 8 Drage. “Cli ents dontt understand why general contractors guar antee their work but the engineers don't guarantee their services. She says client expecta tions have been “an issue in every case I've handled lover the past 21 years.” The solution seems sim- ple enough: Tamp down unrealistic expectations with a dose of straight talk, But ies not always chat easy, says Mace Richards, Client expectations have been “an issue in every case I've handled over the past 21 years.” sie ace WEIL & DRAGE vice president and corpo: rate secretary at Strand Associates in Madison, Wis, “To a certain extent, we've created this prob- lem for ourselves. I's not intentional, but as engi neets our inherent nacure is to serve clients as best we can, and we never want (o feel like were leting the dient down.” Janice Marsters, chair of the ACEC Risk Man- agement Commirtee and a senior environmental engineer at Kennedy/Jenks Consultants in Honolulu, agrees. “I's hard for firms to tell potential clients thar theie work might not be per- fect,” she says. “Who wants to have that conversation at the start of the project? Firms need to make sure their clients have realistic expectations, though. In seal- ig, you're fulfilling your role as a trusted adviser to the cent.” trouble.” KAREN ERGER: Reasonable Contract Language Firs can take steps co set proper client expectations, but the frst sep should bbe to ensure thatthe firm is legally pro- tected by negotiating appropriate contract, Client-provided contracts tend to be one-sided, I's not unusual for project owners co shift risk onto the engineer. “ve seen contracts that make the engi- eer responsible for all dlamages or losses related to the project hat are not the cient’ soe ful,” sys Richards says he’s reviewed contracts ¢ would have required * firm to guarantee that the projet would be delivered without change orders and with no additional costs.” The most important risk management contract language for engincers is the standard of care clause, which stipulates the level of performance to which the engineering firma is eld, ‘The lates version of the “Facts are more persuasive and won't get you into Engineers Joint Contract Documents Come “standard of care” docu- ment reads: “The stan- dard of care for all pro- fessional engineering and related services performed or furnished by Engineer under this Agreement will be the care and skill ordinarily used by mem- bets of che subject profes- sion practicing under simi- lar cizcumstances at the same time and in the sume locality. Engineer makes rho warranties, express of implied, under this Agroo- ment or otherwise, in connection with any services performed or furnished by Engineer Most client contracts do not contain such a clear-cut statemens. That’ why Drage recommends that firms “cut and paste clauses from the design industry standard agreements. Ic is really impor- tant to get the good clauses you need into your contract,” she says LOCKTON COMPANIES ven if you do manage co get the right standard of cate language into the con- tract, you'te not necessarily out of the woods. Firms should also serub contracts of words and phrases that could elevate the level of services beyond the custom- ary standard of care, such as promises to perform services to a “heightened level of performance” or promises to provide “experts as part ofthe team.” Strategies and Tactics A reasonable conteact provides a solid foundation upon which to build a suc- cessful client relationship and manage expectations. Here are six other steps fiems can take: Pick Your Clients. At Strand Associates, Richards says the firm strives to avoid projects where the competition is based ‘on price because the interests of the firm and the owner wont necessarily align, ‘We look for folks who really under- stand the process, understand the role of the consultant,” he says. “They're looking to work through a problem in a reason: able manner rather than litigating. They understand that risk should be borne by the party most able to manage it.” 42 eNHEERING INC. sEPTENBER/ ocTORER 2014 Educate the Client. Those “good” ents can be tough co find. Your fim could end up negotiating with corporate lawyers or managers who don't have a ‘consteuction background. “They often have no understanding ‘of who beats the risk or of the industry standard of care," says Richards, “In that instance, it falls on us eo educate them.” Al Rabasca, director of industry relations for the Design Professional Unit of XL Insurance, says firms should explain to the client why transfer- ring risk onto the desigéer isa mistake. “The client ‘must understand that the design professional doesnt hhave the coverage for what theyte demanding, nor do they personally have the financial ability to pay for ic themselves.” he explains “In essence, che client is tying to transfer an unin- surable riske onto an unvi- able party, so even if they get the engineer to agree, it’s really juse a Pyrthic victory.” Have the Talk. Ics important early on in the proces to sit down with the elient and explain project realities. "Clients need to understand the con- cept of standard of care, why your work can’t be perfect, why you ae reluctant to take on cee tain terms, and how those terms might hurt chem i the long run,” says Marsters Richards recommends breaking this news as arly as posible. "We ry to doit the fist sme we get into the agreement or scope nego- tiations,” he says. “Thae's when the cone is se.” Clean Up Marketing Materials. In some court “The stronger paper trail that you have, the marketing materials or agreements that you are the best, thar you are che experts in your field, then the expectation will bbe one of perfection, and there willbe far less tolerance for the customary changes and mistakes that happen on every single project,” says Drage. “You do not want to find yourself in litigation against a lawyer arguing that you were supposed to be bet- ter than everyone els in the industry and therefore every RFI, change ordet, error or omission is tantamount to negligent While the law allows some degree of “pulfery” in marketing to ut a service provider or even a product in a good light, says Rabasea, “engi- neering firms can't afford to make statements about their professional services that are beyond reality and ‘may heighten the standard ofa.” For example, says Marsters,“ fri may claim that a LEED building will save energy and result in more prodsctive employees cases an engineering fis better positioned Bat how can that frm pos marketing materials have you will be.” sibly guarantee that some- y Y been interpreted to elevate YOuNE ones employees are going the standard of care. ieee to be happier, or that the “When you represent in 44 boneen ne. sepreuaeR /ocroBER 2014 building will be oper- ated and maintained in a way that saves energy?” ‘When it comes to marketing materials, its best o stick tothe fects “Say things like "Our fim has designed 5,000 bridges’ rather than “We are an ‘expert in bridge design," says Erger. “Facts are more persuasive and work get you into trouble.” Institute Processes. Several processes can help keep your firm out of teouble. “Document the entire project from beginning to end,” Rabasca says. “The stronger paper tral that you have, the beter positioned you will be. Ie starts with the contract. Have the client initial the key clauses. Document the discus- sions. These steps cant stop them from suing you, but they give you the ammu- nition to defend yoursel£ ‘At Strand, says Richards, “We have our risk managers review proposal language and agreement language. We review our marketing materials as if they would be incorporated into the contract.” Richards also recommends training staff “on ways to communicate with dl ‘ents and manage expectations.” Be Willing to Say No. If clients refuse to budge after all efforts to educate them and allocate csk based on who can best manage it, “You need ro just walk away," Rabasca says. “IF you'ze having this problem at the scart, imagine how they're going to be by the middle of the project. In the 2014 ACEC Professional Liabil ity Survey (Engineering Inc. July/August 2014), 40 percene of participating firms said they sometimes ruen down work due to liability concerns. The swo mose fiequent concerns ciced were the contract (67 percent) and high risk (54 percent) “There are cercainly times when the risk co the firm is so much greater than the rewards you could expect,” says Erget. “in those instances, you would be well advised to walle away” For more on client expectations, please visie che Risk Management webpage of the ACEC website ar wwwacec.org! risk-management. ‘Gey Donohue ACEC selon communications writer. He can be reached 1 gdonobue accor

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