AIA's Stalled Projects Database
Unless you’ve dropped out of society for awhile, you’ve no doubt heard about the ongoing stagnation of the construction market. Projects have either stalled or are abandoned at the drawing table, and thousands upon thousands of workers are still unemployed. According to AGC, while the employment rate for construction workers recently hit a two-year high, overall the construction industry’s unemployment rate is roughly double the national rate for all other markets.
Task Orders that Contain Onerous Terms
from the desk of Nahom Gebre
Design firms often have long-term clients that engage their services from time to time on different projects. These clients often execute a master services agreement with the design firm and then use task orders to parcel out the work to their consultant as needed. A lot of time and effort is spent on negotiating the master services agreement. However, to allow the client flexibility to craft the task order to the specific needs of the particular project, the master services agreement often states that the terms of the task order have precedence over the terms of the master services agreement. We have seen situations where the important protections of the master services agreement that have been painstakingly negotiated have been effectively eviscerated by task orders that have onerous terms and conditions. It is crucial that design firms carefully scrutinize the terms and conditions of the task order, and take the time to negotiate those terms that shift too much risk to the design firm.
Land/Site Development Claims
Land/site development claims can be risky for civil engineers and land surveyors. The average indemnity payment of a site development claim from 2001 to 2010 was more than $108,000. The following is an example of a site development claim:
A civil engineer provided design services for a residential subdivision. His responsibilities included grading and storm drain design, a parcel map, and design of surface improvements, including a parking area. The issue in this claim was a geo-grid retaining wall system that moved and cracked because of a deep-seated, ancient landslide below the wall. The civil engineer showed the horizontal and vertical location of the wall, but he did not design the wall, provide structural calculations, or stake the location of the wall.
Schinnerer Releases New Iowa Claims Study
In our new claims study, we provide an analysis of claims against Iowa-based constructed-related professional service firms insured by the Schinnerer and CNA program. This study illustrates the cost and effort spent by firms in defending themselves against claims. In our analysis, we examined two major factors that affect the exposure of firms in Iowa, as well as in the rest of the U.S. The two factors are the length of time between the completion of services and the filing of a claim, and the percentage of claims that resulted in payment by the Schinnerer and CNA program on behalf of policyholders. Our study reveals the fact that most claims are meritless, yet drive up operating costs for design firms and insurance costs for insurers, which in turn drive up design costs to clients.
Access the claims study here. (Access is limited to policyholders only.)
Florida Design Firms Need to Understand Their Legal Protections
Recently we have seen governmental agencies in Florida requiring professional service firms to accept broad contractual defense and indemnity obligations. This is a trend we are seeing across the U.S. state and local governments as they appear to be attempting to insulate themselves and their political leaders from any project risk. But design firms in Florida have protection from such uninsurable and unmanageable exposures—as long as they understand and enforce Florida law.