Canadian Consulting Engineer

Consultants letting contracts go by the wayside

July 12, 2010
By Canadian Consulting Engineer

Too many consulting engineers are still doing work for clients without having formal contracts with them, acco...

Too many consulting engineers are still doing work for clients without having formal contracts with them, according to reports from the insurance company ENCON Group at the annual summit of the Association of Consulting Engineers – Canada (ACEC) on June 24.
Derek Holloway, senior vice-president with ENCON, said that 70% of the professional liability claims against consulting engineers are from clients, and 40% of those claims relate to projects that don’t have contracts.
The problem, then, for the insurer and lawyers defending the consulting engineer, is that they can’t verify what the scope of work was.
Holloway also explained that in 63% of claims cases, the consulting engineer ends up paying only the defence costs — not the damages. In other words, the consultant is not found to be liable, but was embroiled in the litigation simply by being a player in the construction project.
Not surprisingly, then, ENCON is pushing hard for consultants to have contracts with their client “even on small projects,” Holloway suggested that consultants use the new ACEC 31, Guide to the Engineering Agreement Between Client and Engineer.”
Steve Panciuk, P.Eng., vice-president at ENCON, who co-presented with Derek Holloway, said that one in 10 professional liability policies produce a claim in any given year, and noted that insurance premiums are the third largest cost for consulting engineers after salaries and rent.
In a push to reduce the amount of claims being brought against consultants, ENCON is launching a new online training tool. The e-Learning Centre is intended to train people in good project management practices and includes interactive screens, scenarios, and a quiz. Special sections are included for Quebec participants. Panciuk played a demonstration of the e-Learning tool for the conference participants.
In a “Potpourri” of other comments, Holloway said that the insurance company will probably be forced to raise its rates again in order to keep the professional liability program viable. He recalled that back in 1999 the same situation occurred and competing companies left the field and would not provide professional liability coverage.
He noted that consulting firms have enjoyed double-digit growth in fees in the last decade, but now those revenues are “steady.” 
Holloway also said that while public-private projects have declined since the world economic crisis and decline of financial markets, he expects  to see them starting to come back, as is happening already with P3 projects such as a large new hospital at McGill University. He noted that in these projects, governments hope to transfer risks to the private sector.
He said green buildings can be “dangerous ground” if a consultant makes a guarantee of LEED certification, and the rush to have zero-energy buildings might create problems because the new technologies are not being adequately tested.



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