Mark and I covered the first two cornerstones, risk identification and evaluation and allocating risk by contract, in the last two podcasts. And today, we will discuss the third cornerstone, QC and documentation. If you haven't listened to the first two podcasts of this series, you might just want to check them out.
Communication and documentation really is the heart of effective risk management for design professionals for a number of reasons, beginning with the fact that A&E, architects and engineers PL professional liability insurance, is a long tail exposure, unlike auto liability, when you know if you have a car accident, what the extent of the damages are and so forth in a relatively short period of time, that's not the case with professional liability.
Whatever you and your staff are working on today, and you get dragged into some dispute and you go through mediation, arbitration, and/or litigation, it can be months, if not years, from today. And so you really don't want to be in a situation where you are relying on the anecdotal testimony of a former employee. You want to have good documentation, and that will go a long way and something we will be talking about.
Another reason why documentation is so important is that most claims against design professionals are due to unmet expectations. And it is the design professionals responsibility to educate their clients and effectively communicate when it comes to the standard of care and so on. And then also, keep in mind that anything you say can and will be used against you. And also, the standard of care of a plaintiff attorney is to sue everyone and the nearest railroad.
And also, last but not least, because you have never deleted an email in your life. So just some good reasons why we should really be thinking about communication and documentation and managing professional liability risk. So the importance of effective documentation and communication really, again, cannot be overstated. And communication is really a major challenge for any business, but especially so for the design professional.
Just consider the different parties the consultant will have to work with, including other consultants, the various clients, and contractors of all types of communications and documentation a consultant must manage throughout this process. Think about contracts and proposals and plans and specs and general correspondences, submittals, not to mention advertising and marketing materials, including websites, their field notes, and meeting minutes, and emails, texting, social media, and now AI. So again, a lot to consider when it comes to a topic that we're going to be talking about today on QC and documentation, and a good time for me to bring in my special guest, Mr. Mark Blankenship. Hey, Mark, how goes it?
MARK BLANKENSHIP: Very well, Dan. Glad to be here.
DAN BUELOW: It's glad to have you back, Mark. As Director of Risk Management for our Willis A&E group, Mark is responsible for advocating on behalf and supporting our clients when it comes to claims, contracts, and education. And Mark has over 30 years of experience working with design professionals as a senior claims manager back in the day with DPIC, and also as a senior underwriter with Liberty Mutual, and of course, as a broker with us here at Willis A&E. So Mark brings a great perspective when it comes to this topic here, and we're glad we have them here. So Mark, let me start here with the topic here, again, this third cornerstone of effective risk management for the design professionals, titled QC and documentation. What are the elements of a QA/QC program and why are they essential for the design firm?
MARK BLANKENSHIP: Well, let's start by talking about QA and QC and what that means. Quality assurance generally refers to steps that we take before commencing the design, to make sure that we're going to produce the best design we can. This would include your project guidelines, this would include your continuing education efforts, and this would include your information management systems. And these are all part of your QA system.
The QC, or Quality Control, could be thought of as processes that we engage in during the design and after the design to check to make sure that we are producing a design that conforms with the professional standard of care. And documentation, I think, overlaps both of these elements, both in establishing the expectations, and then documenting that we fulfilled those expectations as the design and construction progresses.
DAN BUELOW: OK. Then so what are the key components then of documenting the basis of design, and how does this practice benefit the overall project execution?
MARK BLANKENSHIP: We need to establish the basis of design to establish expectations. We want to document client decisions. For instance, with regard to sustainability objectives, the standard of care. Now says that we'll at least consider sustainable design. And I would propose that we offer a design that exceeds code as an alternative, one that is maybe more flood resistant or fire resistant or wind resistant. Let the clients science tell us that they want the cheapest, if that's what they want, one that is minimally code compliant.
And therefore, we've established our duty and created a record that we offered the better, more expensive, but more resilient design. And this is an effort to establish the old I told you so defense in the event that there is a project failure later. We want to document warnings. For instance, if the client decides they want to do the project as a fast track, well, then we're going to have some contingencies or change orders. We might have a lot of them.
I would normally expect that we would see 3% to 5% change orders as a percentage of construction costs on average difficulty new out of the ground construction. If this is a renovation, I want to set the expectation somewhere between more than 10% to 15%. If it's fast track, it could be 25%. If the client wants to do something that you think is going to diminish the quality or the durability of the project, and this typically occurs in a value engineering exercise, let's give the Warning that we think it's not going to give the client the life expectancy or the performance that they are hoping for.
We want to document conversations and significant events. We want to document, document, document. Because life in real estate where the three rules of success are location, location, location, in the litigation game, our three rules of success are documentation, documentation, and documentation.
DAN BUELOW: Yes. And you as you touched on, in communicating, working with your client, we know this-- one of the emerging risks here that firms are dealing with certainly relates to climate change. And as you mentioned, your client may go with the less resilient design, and you want to somehow memorialize that discussion and what your position is on that. And this brings that whole concept of informed consent, right?
MARK BLANKENSHIP: Mhm. And a few more comments on documenting the basis of design. We want to document the available data and identify any additional data that's needed. One thing that I see in contracts that bothers me is when owners say that there is no warranty attached to the information that they give to the design professional, and that the design professional cannot reasonably rely on that information. I find that enormously frustrating. We need the right to rely on information provided by the owner, or else we should go ahead and retain the services of those subconsultants ourselves. We need to identify the available utilities, the program requirements, equipment requirements, and discuss design alternatives.
DAN BUELOW: But back to this discussion on communication and documentation and informed consent, you see a lot of contracts. Do you feel that there should be wider use of this informed consent in the agreements themselves and/or follow up documentation communication?
MARK BLANKENSHIP: I would like to see that, and I think it would benefit design professionals if there was more documented conversation regarding achieving sustainability or resilience goals. Because we live in an era of increasing frequency and severity of storms, of weather events that we've not experienced before, be it wildfires, be it windstorms, floods, hurricanes, all of these things are happening with increasing frequency and severity.
And we have seen lawsuits filed against engineers that have been allowed to proceed by the courts where everybody agrees, the civil engineer met code. But it's alleged that the civil engineer was the smartest guy in the room, so he should have anticipated the 500-year flood event and insisted on a higher level of design.
DAN BUELOW: So Mark, I'm going to have you go back with me to the old DPIC days, and there was the lessons in liabilities. So this was a question 30 years ago. And true or false, Mark, design professionals tend to over educate their clients as to their professional duties and responsibilities? What do you say to that?
MARK BLANKENSHIP: It was false then, and it's still false today.
DAN BUELOW: Sad, but true. Yeah.
MARK BLANKENSHIP: It is sad, but true. And we frequently see owners enter into projects expecting no change orders. And it's just not a realistic expectation. So the question is, how do you present this? And the analogy I like to use is, we're not building a car in a factory where we've worked out every step and performed at 10,000 times before. Your project is unique. It's never been done before. And with this uniqueness comes a degree of uncertainty. And we will have to work some things out in the field. It's like building your car in a garage instead of a factory. We're just going to-- we don't have every step planned out. It's not feasible to detail every last screw and bolt, and we're going to have to work some stuff out in the field.
DAN BUELOW: Yeah, and I would add a couple points to that. I think this is so important, but it really is the responsibility of the design professional to educate their clients is what to-- as to what the standard of care is and what it is not, and to never really overestimate the client's knowledge of the design services you intend to provide. And you need to explain what these services you will be performing are, and to document what services you will not perform.
And to communicate clearly as to the standard of care, because we'll ask this question back to another question of the DPIC days 30 years ago. But true or false, the standard of care of a design professional is perfection? Well, we all that's false, right? But I would always ask, well, what if we asked that same question to a room full of your prospective and/or current clients, would they all get that right? And so again, it really is the responsibility of the design professional. And back to this point that we've stressed before, is that really, a significant percentage, if not the vast majority of claims, against design professionals are not rooted actually in design error. They are rooted into these nontechnical areas. And that's this kind of communication. Documentation is a big part of that.
And so again, discover your client's expectations relative to the project, address any unrealistic expectations, discuss your scope and so on. And Mark, you were going on a bit about how important it is to address in the event that there's value engineering or proposed change orders or so forth. Often, the worst response would be a tacit response. We really want to memorialize, if you don't agree with that value engineering or these proposed changes to the scope or anything certainly that's outside your contract terms, you need to sound off, right?
MARK BLANKENSHIP: I would say that's true. I mean, a recurring theme in claims is, there was a value engineering change that didn't work out. I remember one in particular, it was an agricultural building. And so it was only going to hold corn. This was not really high standards in play here. And in the beginning, we put forth a design that was great. The owner said, can you make it cheaper? So we reduced the size of the foundations. The owner said, I like it. Can you make it even cheaper? And we did. We reduced the foundations again.
And then guess what happened, they loaded the building with corn and the walls buckled out. And so that became a million claim. It somewhat reminds me of the scene from the movie Shrek, where the king sends the knights to slay the dragon and rescue the damsel in distress. And he says, some of you may die, but that's a risk that I'm willing to take.
DAN BUELOW: OK, so Mark, the fourth cornerstone that we will be doing and discussing in our next podcast is on CA as a risk management tool. Let's talk a little bit about CA and the importance of effective communication and documentation practices to mitigate risk. And so what are the goals of constructability review and how can involving personnel with extensive construction knowledge early in the design process improve project outcomes?
MARK BLANKENSHIP: Well, basically, we expect that the contractor is going to have some input into how this project gets built, and so it would be better to integrate the contractor's input earlier in the design process rather than later. Because another recurring theme in claims is, there were changes to the project, but the changes were not thoroughly integrated throughout the project, and some implications were overlooked.
So we would ideally document a constructability review process, integrate input from the contractor into the project design. And a design charrette is particularly valuable in projects seeking LEED certification. Because if you are seeking LEED certification, there are going to be some LEED points that will have to be achieved by the contractor and documented by the contractor.
But our constructability goals generally are to verify that the project can be constructed using standard construction methods, materials, and techniques, that the plans and specifications provide the contractor with clear and concise information that can be utilized to prepare a competitive and cost effective bid, and that the work, when constructed, will result in a project that can be maintained in a cost-effective manner by the owner over the life of the project.
So to accomplish this, we want to involve personnel with extensive construction knowledge early in the design effort. We want to keep the group as small as possible while providing the necessary expertise. So we focus on critical project issues. Ideally, we would do this on site, if possible. We would distribute an agenda and use checklists as part of this process.
DAN BUELOW: Talk to us a little bit about documenting site visits and observations. I've got a few notes here as far as, OK, there's work observed documenting unsafe conditions and so on. It really is important for every member of the design firm. That's certainly that's going out on the site. And we're going to hit this pretty good in our next podcast, won't we? But those are important considerations, aren't they?
MARK BLANKENSHIP: Well, I think it's interesting to note then that the statistics from the insurance industry show us that firms that perform construction contract administration services have a better claim result than those that don't. This despite the fact that when we visit the site, we are potentially exposing ourselves to claims that you observed an unsafe site condition and didn't give a warning, and thereby contributed to causing an accident. So what that tells us is that when design professionals are at the site reviewing, observing, and rejecting nonconforming work, they're protecting the owner against defects in construction and thereby protecting themselves against claims.
DAN BUELOW: Right. And to the point where there's very good actuarial data that will support that. And that's why when we fill out these applications as design professionals, all the carriers will typically ask, what percentage of your practice are you actually providing CA or observing the work? To your point, observing that things are progressing in general conformance with their plans and specs, that's a good thing. They want to see a high percentage on that.
We get into the 3 and 300 foot rule, which I want to talk a little more, at our next on our next podcast. But it is something that's important when it comes to photographs and what you're doing out there since it is part of this whole discussion. Talk to us a little bit about that. We've seen situations where design professionals love to take photographs, and they'll sit on these things, and they'll-- and then through discovery, it can sometimes be used against them.
MARK BLANKENSHIP: Yeah. The issue that we've encountered on multiple occasions is, the design professional takes a picture showing an unsafe condition. And even though their contract said they had no responsibility for detection or remediation of unsafe conditions, this is introduced as evidence that, oh, you knew, you saw, and therefore, you should have done or said something. And so this tends to create evidence that can be used against us. So what we want to photograph is work that's been completed. We don't want to show temporary conditions, open trenches, ladders and scaffolding, or people, because this just tends to create evidence that can be used against us later.
DAN BUELOW: And that's the 3 or 300 foot rule. You're saying, hey, make it very specific, 3 feet from what you're trying to take a picture of or so far back, leave your wide angle lens at home. And to your point, we'll talk at the end here a little bit about document retention, but you don't have to hang on to everything. You can't spoil anything if there's ever a claim or an issue or what have you. You got to be very careful of that. But of your practice, as far as what you retain or not retain, I think, is something to consider in all of this.
And then one last point I'd like to make always on this topic is that we'll often have a design professional and their staff that will be at project meetings, and then a conversation or discussion will come out during that meeting around site safety and/or construction means or methods. And then these minutes will come out, often produced by a third party. And if you read those minutes, it's not clear what the role of the design professional was during that discussion.
And it might very well be worth your while to send out an email back to reply all and. That hey, by the way, concerning subparagraph what specific to this discussion on job site safety and construction means or methods, our firm did not participate in this discussion as per the agreement. This is the sole responsibility of the general contractor. These, again, good follow up documentation practices that we think as a standard as a practice can certainly benefit the firm if and when something happens on the site.
MARK BLANKENSHIP: I would agree with that.
DAN BUELOW: So Mark, on this change order subject here, what are the common causes of change orders identified, and what strategies are suggested for managing these effectively would you suggest?
MARK BLANKENSHIP: Well, sure, Dan. What I would recommend to everybody is, go on Amazon and buy the book The Contractor's Guide to Change Orders by Michael Civitello. It makes for some scintillating bedtime reading. But there's a chapter in there called prospecting for change orders. And what it suggests is that the contractor review the specifications and look for discrepancies. A lot of specifications today have been built up over time. They're not necessarily uniformly integrated with all the project objectives. And so the contractor will be looking for discrepancies there. Are they outdated? Are there access issues on the site? Or when you build the project, is there adequate access to all of the maintenance points? Are the intents clearly specified.
Our good friend, Jeff Coleman, recommends that every project-- every condo project have a specification saying that all water will be weeped and vented outward from the building, because he's seen so many water penetration cases. They'll look for lack of coordination. Coordination has improved in the age of BIM. Now we can do 3D clash detection with software. But historically, the number one source of change orders was a clash between sanitary piping and ductwork. They'll look for incomplete design. This could be in the omission category.
Owner changes, those are always good for a change order. Is there new information that might affect the product selection? The contractor might suggest changes that he would view as improvements in time or cost. And are there legal restrictions in terms of code issues? So these are all potential sources of change orders. And I think the answer is, there needs to be peer review in the firm of the design before it gets released.
This is a possible use case for AI today too. There are programs that will review for code compliance and other issues. So that's a possible strategy that we have going forward. But really, this is the QC part that we're checking the design to make sure that it is complete and that there are not errors or omissions in those plans.
Time is required to do it right. One best practice I saw adopted by an architect was to insist on one week lead time from his subconsultants. In other words, he always wanted a week to review his subconsultant documents before having to release them. To do that integration, to have that coordination meeting. And I remember a long time ago meeting with one of the major MEP firms here in Chicago, and I asked the principal what he thought was the hallmark of the best architects. And he said, Mark, it's the one who comes to my office for coordination meetings. We all have enhanced video capabilities today. But I think the theme of that still is true, that coordination is an essential part of a good design.
DAN BUELOW: So, Mark, we had a pretty in-depth discussion on the topic of contractual issues during our last podcast, and this topic of effective communication and documentation really is a big part of contract formation. Talk to me about the importance of negotiating and the whole management process and contract formation in order to mitigate risk and ensuring project success. We talked about, if you recall, of course, the whole discussion around using that contract as a vehicle to establish an expectations, getting your staff up to speed on what the unique aspects of that are. But again, the importance of communication and documentation and contracts.
MARK BLANKENSHIP: Well, the importance of the contract is that it establishes the expectations and defines performance parameters, both with regard to the standard of care and to timeliness of performance. I like the AIA definition of the standard of care, which says that the architect will perform as expeditiously as is consistent with sound professional practices and the orderly progress of the work. And I would compare this to a time is of the essence agreement, which means if you're one day late with your deliverables, you're in breach of contract. Now, this forces us to rush, and that can lead to making bad decisions.
Likewise with the standard of performance. We have the legal obligation to meet the generally accepted standard of care. A lot of times, owners, lawyers like to increase that standard thinking that they're doing their client a favor. And they might say that you'll perform the standard of a nationally recognized firm, or that you will comply with all codes and laws in effect at a federal state level.
So these have the effect of increasing the professional standard of care, probably beyond what you have insurance coverage for. So that's my main concern. But also potentially setting unattainable goals, especially if you're agreeing to perform to the highest standard of care. Because if you open your Black's Law Dictionary and you look up highest standard of care, that means the highest standard ever achieved at any time. And so that's a really difficult mark to hit on a daily basis.
DAN BUELOW: So on that topic of contracts too, and we spoke about this at that last podcast. But again, I think it's so important for the staff, the project team that's working on a project to be certainly in the loop, if you will, as far as what's unique about that given in contract. And we joke a little bit about, but I think it really is a good practice, is to have a dramatic reading of every contract with the project team so that they at least understand clearly what the scope is in order to help manage scope creep and so on.
And they're also aware, if you will, of the-- all your staff of the importance of words. We've talked about in the past programs about these red flag words where guarantee, warranty, insurer. And they're not only very important in your contract, they're very important in all forms of communication. So be careful what you certainly put in your field notes and marketing materials and certainly social media, as well as texts and emails.
And you can't have a conversation these days about documentation and communication without having a conversation a little bit about emails, right, Mark? And so we've seen some interesting emails over the course of 20 plus years doing this, and I always come back to the one where it's one email from one principal to another. And this came out in the light of day at a trial where they blew up, and the plaintiff has this where it says, boy, Bob, we sure screwed up on this one. Not a good-- not good, as you would say, for the home team to have that in your file.
So not only do you not want to say that in email, but be careful of taking responsibility or blame when it comes to that. So I'm just going to-- when it comes to emails, it's important to realize that you've never deleted an email in your life, that these emails are discoverable and retrievable. And in a court of law, they can certainly be used against you. Your voice mails are now being transcribed into emails, and it really is probably the best way to manage this, is to have a conversation with your staff on the importance of what and how they manage their communications. And to treat this as a business. And I think that's, keep your emails short. Keep them sweet. Keep them positive and succinct to the project and the communications that you're trying to get across. So we've talked a lot about that. We also have talked about texting, right, Mark?
MARK BLANKENSHIP: That's right. And the advice is generally, try to refrain from texting with your client about substantive matters regarding the project, unless you want to produce unit phone, your personal phone in discovery in the event of litigation. There's a couple of issues here. First is, is that communication ever going to make it into the project file? And unless you have some software that's going to assist you with that process, the answer is probably not. So that's a bad fact to start with.
And then the second reason, like I said, is if there is a lawsuit, there will be a discovery request. And discovery requests are very broad. The plaintiff will ask for all files and records relative to the project, be they in paper or electronic form. And there's very little that we can hold back based on privilege. It could be-- primarily, it's going to be attorney client privilege. We can also argue that the request is burdensome, but that's a fairly weak argument. And as I mentioned, if you've been communicating with your client via text message, now your phone, your personal phone, is subject to that electronic discovery request, and the plaintiff gets to root around in your text messages, which I don't think you want. We certainly don't want.
DAN BUELOW: Great points. And again, you really do need to have these conversations with all levels and all members of your staff. And you might have three generations or so working together in a firm, and they all view and think about communications very differently. And your younger folks may very well be out on the job site snapping pictures and loading them into their social media.
And you may have an NDA on that very project, of which you've just violated. So without talking about this unwittingly, you may find yourself and some of your staff in a situation where you're creating exposures for your firm. So continue to talk about these things. It cannot be overstated. And again, on this, we talked a little bit about marketing materials also, Mark. Courts will allow a certain level of puffery, but we've also seen marketing materials become exhibit A against a design professional, haven't we?
MARK BLANKENSHIP: Yes, we have literally exhibit A. Plaintiff begins his case with, we'd like to direct you to the website for this firm where they promise to deliver projects on time and on budget. And yet this project was neither of those things. So yes, that's been used against us.
DAN BUELOW: So, Mark, winding down this discussion, let's talk about document retention. All right. I've got all this great documentation. And again, it is so important to have this documentation to be able to tell your story in the future. And being mindful of that emails is a double edged sword and this and that. But let's assume you have done a good job with that. You have good documentation. How long do I keep what I have, and what do I keep?
MARK BLANKENSHIP: Wow. OK. So that's a great question, and the answer is it varies by state. But my recommendation would be to identify the statutes of repose and limitations in the state where the project is located in. Keep relevant documents for that period plus one year, because a lawsuit could be filed on the last day of the statutes of repose, and you don't really receive notice of it for a couple of months.
As for as to what to save, I would say, generally, more is better than less. We certainly want to save the plans. We want to save the correspondence and any warnings that we've been given. What I do not recommend saving though is redline documents. I have never, in a claim scenario, seen any benefit from producing redline documents that occurred prior to final design. However, both at the beginning of my career and again recently, I have seen plaintiffs use redline documents to impeach our witness. And the way they do it is this. They put up the Red Line documents, and they say, oh, look, I see you caught this error and that error and that one. Now tell me about the errors that you didn't catch. And so that's been used to impeach the credibility of our witness.
DAN BUELOW: Excellent. Well, Mark, great discussion on this topic. This concludes our discussion on QC and documentation, which, again, is a third of the four cornerstones of managing design professional risk. I want to thank my very special guest, Mr. Mark Blankenship. Thank you, Mark.
MARK BLANKENSHIP: Thank you, Dan.
DAN BUELOW: Always a pleasure. And Mark and I will be back to discuss the fourth and final cornerstone, which is CA, as a risk management tool. Again, this program is brought to you by Willis A&E, the center of excellence for WTW, exclusively dedicated to providing insurance and risk management solutions to design professionals in North America. Thanks for joining me for another episode of Talk to Me About A&E. I'm Dan Buelow, and I will talk to you soon.
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Disclaimer
WTW hopes you found the general information provided in this publication informative and helpful. The information contained herein is not intended to constitute legal or other professional advice and should not be relied upon in lieu of consultation with your own legal advisors. In the event you would like more information regarding your insurance coverage, please do not hesitate to reach out to us. In North America, WTW offers insurance products through licensed entities, including Willis Towers Watson Northeast, Inc. (in the United States) and Willis Canada Inc. (in Canada).
