Re RISK

All construction projects involve unknowns and, hence, risk. For instance, I’ve never known a project without a change order. For everyone on the project, including the design team, understanding the potential risks, and having effective strategies to manage them is a critical part of project success. This begs the question “How can architects better manage risk?” The answer requires an understanding of the potential risks that architects face, their impacts, and strategies for managing, and hopefully minimizing, these risks.

In my 30 years as a practicing attorney specializing in construction-related matters, the common risk types are: (1) client communication; (2) performance standards, also known as the “Standard of Care”; and (3) sustainability concerns/making representations regarding the “Work.”

Client communication is often the number one cause of all problems. So how does one manage this? One of the tools is your contract—you can use it to clearly tell your client what you are (and are not) going to do (this is your scope of services), how your fee is structured (when Basic Services begin and end, e.g., time limits, listing exclusions, and additional services), and your schedule (including commentary on how outside forces can influence your ability to adhere to a schedule). I’ve seen many contracts where, quite frankly, very little attention was given to the scope of services, and this resulted in a fight, i.e., lawsuit, over whose responsibility it was to provide the disputed service. Construction administration (CA) services is one of the areas that is most ripe for this risk because the owner assumes that the architect is somehow a guarantor of good work by the contractor. If the architect’s CA services are not clearly defined, the architect can unfortunately be held to an unreasonable standard.

With regard to performance standards (how we know if you did a “good job”), the good news for architects in Texas is that the Standard of Care is set by state law—Texas Civil Practice & Remedies Code §130.0021(a) for private projects and Texas Local Government Code §271.904(d) for public/government projects. Any other standard is void, so resist attempts by clients to insert words like “accurate,” “complete,” “best skill and attention,” and “duty of trust and confidence” into your contract as each of these erodes the statutory Standard of Care and should be deleted. Even an obligation to “comply with all applicable laws, codes, and standards” is not as vanilla as it may seem because you will still be using your professional judgment in many cases to determine how code, etc., applies to your design. Accordingly, I often recommend using a statement similar to the following: “Architect’s services shall, in accordance with the Standard of Care, account for all codes, standards, and laws then in effect.”

Finally, when addressing sustainability concerns and making representations regarding the “Work” be clear about what you can and cannot promise. For example, you cannot promise that the Work will achieve any particular standard, or be of a particular quality, or satisfy any particular regulation, law, code, or standard, etc. Whether the Work meets any particular regulation, law, code, or standard, etc., is the responsibility of the contractor, not the architect. Also, be aware when you get the infamous “Architect’s Consent” from a client’s bank. Banks are notorious for asking architects to warrant the quality of the Work on a project—do not do this.

Other than having the best contract possible, what are some strategies you can adopt for risk mitigation?

One strategy is project/client assessment. Know your limits. It’s okay to say no if it’s not in your wheelhouse. It’s okay to say no if it’s too much for you right now. Don’t take on more projects than you can handle. Know your team. Assemble the right subject-matter experts. Be wary of newcomers and their impact overall on a project—chemistry is a real thing. If a client insists that you hire a particular subconsultant, consider having that subconsultant contract directly with your client instead of with you. Know your client. It’s okay to say no if it’s not a good fit—trust your instincts and walk away if it doesn’t feel right.

We already addressed the contract as a communication hedge against risk and discussed the typical areas—scope, budget, and schedule—but be sure to discuss other risk-shifting clauses with a qualified professional. Examples of these clauses include indemnity, damages waivers/limitations, and copyright licenses, also known as “Instruments of Service.”

Even something as simple as your fee is a risk management tool. Your fee should fit your risk. Your fee should fit your site visits—don’t shortcut CA to save on fee.

The importance of open and regular communication during a project should not be understated. Don’t ignore complaints. Seek first to understand—sometimes the thing isn’t the thing. Be clear and realistic in your communications (again, don’t overpromise or be quick to judge). Most importantly—don’t hit “send” on that email unless you are okay with it being public later. Electronic communications never die and are routinely used against the sender in lawsuits. In short, your response to problems, which are as inevitable as change orders, will increase or decrease your risk—it really is your game to lose. When in doubt, follow the saying “If you see something, say something” and stick to the known facts (if you don’t know, find out and then report). 

In closing, I share a version of a proverb published by Benjamin Franklin in The Way to Wealth (1758) and revised by James Baldwin in “The Horseshoe Nails” (1912):

“For the want of a nail the shoe was lost;

For the want of a shoe the horse was lost;

For the want of a horse the rider was lost;

For the want of a rider the battle was lost;

For the want of a battle the kingdom was lost;—

And all for the want of a horseshoe nail.”

During World War II, this verse was framed and hung on the wall of the Anglo-American Supply Headquarters in London to remind everyone of the importance of seemingly trivial repair parts and inventory replenishment. As Benjamin Franklin wrote, “A little neglect may breed great mischief.” The same holds true for your risk management strategy—for want of ________ [defined scope/fee, Standard of Care, clear communication, etc.] the project may be lost…