Engineering Inc - January/February 2012 - (Page 28)

Risk Management By C h a r l e s W. Ko p p l i n a n d G l e n r . M a n G o l d From Suspension to Resurrection: Y What every engineer should know about restarting a suspended project our client just called to tell you to suspend work on a project. You’re devastated because you have six employees dedicated to the project and $35,000 in outstanding invoices. You ask yourself, “Why is this happening? How should I handle it?” There are many reasons outside a design professional’s control that can prompt a client to suspend or terminate design services. Projects often are suspended during an economic downturn. The client may no longer be able to secure financing, or the market for their project might have dried up. There could be a regulatory holdup—a governing agency might be unwilling or unable to issue the necessary permits for the project to proceed. The two-week shutdown of Minnesota’s state government in July 2011 suspended all activities except “essential services,” which also stopped all inspections and permit reviews. A natural disaster can make proceeding with a planned project undesirable or impossible for months. In the event that your firm receives a notice of suspension or termination, your first step should be to review your contract to verify your responsibilities and rights. Your next step should be to stop work and, if possible, reassign the staff to other projects. Then, bill for your services per the terms of your agreement and expect that the client will pay, according to those terms. Start It Up Again With some luck, you might eventually get a call from the client asking you to resurrect its project. The client will want to know how soon you can start and when can you can finish the design. You’ll be tempted to begin right away. But your better judgment will soon take over. You’ll realize you need to update the plan for managing the project and clarify the steps required to restart it. Before resuming work on a suspended project, make sure to: • Review project objectives and scope, design criteria and construction budget • Verify compliance with new regulations or building codes • Consider whether computer models need updating • Revisit costs and schedules It’s important to review project objectives with the client to ensure they are still valid. The size of the project might have increased or decreased, or the construction budget might have changed. Even if it has not changed, can the project realistically be built for the same price? The ENR 20 City Cost Index for the first nine months of 2011 reported a 5.6 percent increase in building materials year-over-year, including a 7.8 percent increase in steel. Such changes could significantly impact costs. Be aware that the project will, regardless, incur additional costs, because you will have to establish where you were in the design process when the project was suspended. If the project was suspended during a project phase, such as construction document development, you’ll need to dedicate additional time and 28 ENGINEERING INC. jaNuaRy / fEbRuaRy 2012 resources to establishing where in the process you were when the work was stopped. Despite these changes, be aware that the client might ask you to complete the project for the compensation agreed to in the initial contract. That’s probably not realistic. Several factors can affect compensation for resuming a suspended project. Be sure to include any costs associated with: • Staff remobilization • Project scope or design criteria changes • Building code revisions or updated studies or reports • Electronic project model updates due to revisions or updates in computer software • Staff compensation or firm overhead changes • Insurance requirements changes After establishing what it will likely cost to complete the project, you’ll need to negotiate the new scope, schedule and compensation with the client. Redefining the scope, establishing the revised project schedule and construction budget, identifying areas that will require additional work, and outlining the tasks required for project completion should prepare you to negotiate a fair and equitable client agreement. 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. Glen R. Mangold, CPCU, is the managing director of the Architects/ Engineers program for Markel Corporation, a provider of professional liability insurance. He has more than 23 years’ experience in the insurance industry. He can be reached at gmangold@MarkelCorp.com. andreW harrer/BlooMBerG via Getty iMaGes

Table of Contents for the Digital Edition of Engineering Inc - January/February 2012

Engineering Inc. - January/February 2012
Contents
From ACEC to You
News and Notes
Legislative Action
A Capitol Investment
A Brighter Light
Professional Liability Insurance Survey of Carriers
2012 Annual Convention Preview
Business Insights
Risk Management
Members in the News
Mergers and Acquisitions

Engineering Inc - January/February 2012