For years, lawyers and insurance brokers have provided limiting advice to architects and engineers.
The Limiting Advice To Engineers & Architects
Together, we have put architects and engineers in a tiny little box. We advise architects and engineers to stay far away from the means and methods of construction. To not make promises about the outcome of the project. To give no warranties. No assurances about schedule. And to not guarantee construction costs. These are just a few examples. The list goes on and on…
The Negative Impact on Designers
So what is the fallout of this on architects and engineers? It is profound.
Together, our advice has kept designers from participating in available profit centers. From taking a more hands-on role during construction. From ensuring their design intent comes to fruition. From taking a leading role in value engineering, and helping to steer sensible changes in the field during construction. These are just a few examples of how design professionals have ceded important project roles to contractors.
The Negative Impact on Owners and Developers
None of this benefits their project owner and real estate developer clients.
Sure, nobody understands cost and constructability like contractors. I love contractors. They are important. But when it comes to weighing difficult tradeoffs of cost and quality, architects and engineers are arguably better equipped to give sound advice. Often, designers have the more longstanding relationship with the owner and developer clients. Most would welcome a more “hands-on” role from their architects and engineers. Yet, design professionals allow themselves to be pushed aside. To price a design scope of services, to hope the design does not take more hours than anticipated to produce, and to participate in none of the project upside or profits.
Underpaid Architects and Engineers
This dynamic is part of why architects and engineers are comparatively underpaid. Yes, many designers make good livings. I do not mean to minimize that. But we require a high level of education, training, licensure, and registration from architects and engineers. We expect designers to resolve many technical challenges and judgment calls, with elegance and grace. Being a design professional is difficult. Among those in design and construction, the notion that architects and engineers are comparatively underpaid is not particularly controversial.
What’s With the Limiting Advice Anyway?
Why do lawyers and insurance brokers give design professionals this limiting advice?
The answer is simple: to avoid architect and engineer liability.
I know, because I’m one of those lawyers. I am often guilty of giving “limiting” advice to architects and engineers
And I am not feeling particularly apologetic about it, either.
The Limiting Advice Can Be Good Advice
Now, I frequently negotiate contracts on behalf of architects and engineers. I am acutely aware of how important professional liability insurance is to designers.
One goal – when I represent design professionals in contract negotiations – is trying to avoid contract terms which could tend expose the architects and engineers to uninsurable risks.
Why do I give this advice? Because most architects and engineers are not sitting atop piles of money. Much of their revenue goes to payroll. Fees are collected one month, and they are often paid out the next month in salary.
Without professional liability insurance, most designers would have no ability to compensate project owners and developers from design malpractice. This is bad for everyone. Architects. Engineers. Project owners. And real estate developers.
I do not mean to minimize the importance of the “limiting advice” given by lawyers and insurance brokers to design professionals. From doing the usual things that design firms are told to do. Carefully define the standard of care. Make no warranties or guarantees. Only accept “defense” obligations if they are carefully and narrowly defined. And so on…
I have given this advice for my entire career as a lawyer for architects and engineers. I expect to continue offer this advice until the end. Until someone gives me a gold watch and turns out the lights. I am not advocating for major change within traditional design activities.
Let’s Get Creative, Architects and Engineers
I am, however, advocating for a better and more fulsome perspective.
For a bigger picture look at the roles of architects and engineers – and how they might be able to make design and construction better for everyone – if they are more creative about how to put their skills to work.
Here is the blinding flash of the obvious: the “limiting advice” given by lawyers and insurance brokers to architects and engineers does not always apply. It only applies to those design professionals who are operating as designers, as architects and engineers, while delivering professional services.
Nothing prevents design professionals from creating intelligent corporate structures and contractual relationships to accept more construction risk. The existing “design firm” can be protected by its related companies, by its sister companies. These corporate entities can take on certain types of construction-related risks. The kind of risk I would never advise true “design-only” firms to accept.
If all of these companies are owed by the same designers, in the same percentages, their architect and engineer owners can realize great benefits. That way there is no dispute over which company takes profits and losses.
This might surprise most, but using sister companies to manage design and construction risk has the potential to greatly reduce the design firm’s liability exposure. I know it sounds unlikely. But most claims arise during the construction phase. And if the “construction risk” corporate affiliate is onsite during the construction phase, the related design firm need not be present for typical construction adminsitration.
That is huge. If the design firm is sued for a construction phase problem, like an injury or property damage, the attorney will have a piece of paper to show a judge stating that the design firm was not present, as its scope of services conclude after it completed the construction documents.
This means the design firm might be quickly dismissed from the lawsuit, potentially sparing the design firm from having to fund its significant dollar professional liability insurance deductible. There are creative ways to seek profits while still minimizing designers’ liability exposure.
And, those attorneys and insurance brokers who dispense limiting advice to architects and engineers cannot complain. The design firm does only traditional design professional tasks, and follows all the “usual” advice about standard of care, no warranties, avoid defense obligation, etc.
Do not Try This at Home!
Now, this is much more complicated in practice than as described above. There are literally dozens and dozens of decisions to make and issues to resolve before owners of architecture and engineering firms can “venture out” into the world of construction risk. There are lots of ways to get into trouble. Tax trouble. Corporate trouble. Insurance trouble. Liability trouble. Professional licensure and registration trouble. And other trouble.
I know, because I help design firms solve these problems. I help architects and engineers achieve greater profits, without creating undue risk to their existing professional design firms, by playing a more central role in building what they design.
Now, this is not appropriate for every architect or engineer, or every professional services firm. And I can think of many project types where it would be ill-advised for architects and engineers to take a more leading role in constructing their designs. None of this is for the faint of heart.
And none of this is legal advice for you. When I help architecture and engineering firms solve these puzzles, it takes a fair amount of effort. I spend a lot of time on the phone with their owners, insurers, bookkeepers, CPAs, project managers, and contractor teammates. In other words, don’t try this at home – not without experienced design and construction counsel.
Design Professionals Can Lead Design-Build Teams
However, in difficult economic times, I do believe that design professionals should get creative. To think about how to pursue new profit centers. To think outside-the-box to keep their staff busy.
I think more architects and engineers should consider whether it makes sense to take a leading role on design-build projects.
To build up their design-build capabilities with thoughtful contracts and corporate structures. To lead design-build teams.
To enter into design-build contracts with project owners and real estate developers, and to subcontract the construction work out to the design firm’s trusted contractor teammates.
In other words, to reclaim the mantle of Master Builder.
Designer-led design-build has many advantages for architects and engineers, but the fall into four basic categories: (1) additional profits, (2) control over construction, (3) reduced liability, and (4) marketing advantages.
To learn more, please check out this video entitled Why Are Architects and Engineers Scared to Build What they Design? and Architect-Led Design-Build: A PRACTICAL Business Plan. If you are intrigued, please contact us to learn more!
Or check out my mentor’s designer-led design build website. He is the #1 authority on the subject.
And don’t let us attorneys and insurance brokers who provide limiting advice to architects and engineers get you down!
This guy looks like the creative-type who can design without overlooking cost and constructibility!
This publication is prepared for the general information of friends of Baker Law Group LLC in Illinois. It is not legal advice for you, or legal advice regarding any specific matter. Jeremy S. Baker is licensed to practice law only in Illinois. Under rules applicable to the professional conduct of attorneys in various jurisdictions, it may be considered attorney advertising material. Prior results do not guarantee a similar outcome.
