Is That a Go or No/Go? 

Approximately 70% of claims filed against design firms comes from the person who hired you, the project owner. Just because a client wants to hire your firm - doesn’t mean that’s the right client for you. Sometimes the best decision you can make is walking away from a bad client. Great care is needed when selecting clients and projects – and in return will dramatically reduce the chance of working on a problematic, unprofitable project that routinely leads to litigation. 

Due Diligence

Every firm should have a due diligence process, a Go No/Go for selecting clients and projects that aligns with business objectives. Identifying good clients and avoiding the bad ones significantly reduces the chance of litigation. Picking the right clients also improve profitability – your firms bottom line. 

Go No/Go Categories:

• The Client
• The Project
• Business Considerations  

The Client 

Based on an extensive review of claims data, the following are the root causes of client claims:

• No upfront due diligence of the client
• Client’s unrealistic project expectations
• Client’s lack of project knowledge and services  
• History of filing claims
• Use design firms insurance as a cost recovery asset
• Inadequate financial capability for completing the project and paying for services 
   

Like with any good relationship – there is common behavior you look for, and clear and fair communication is a big one. Approximately one-third of all claims against design firms are caused by incomplete communication. Common communication behavior of good clients; 

• In-depth discussion of the project
• Identifies realistic project expectations
• Explains how the project fits into their business strategy
• Outlines their project experience and knowledge of design firms services
• They are collaborative and flexible in considering alternatives
• Knowledgeable of the challenges and risks
• Negotiate fare and balance contract agreements 

Sample Client Questions:

• New or previous experience with this client?
• Previous client, was the project successful, profitably?
• Current financial condition and business reputation?
• Is the schedule and budget realistic?
• Previous experience on this project type?
• What is their claim history?
• What other design firms have they worked with?  
   

With the client comes a project. Evaluating the project requirements compared to your firms’ capabilities is the first step. Evaluate your track record on the project type and ensure you have the staff including an experienced project manager (PM) available. Confirm there is a well-defined scope of services and you can comply with the project schedule including permits and approvals. 

Sample Project Questions:

• Are we familiar with all the applicable laws, regulations and technologies?
• Do we have the experienced and staff available?
• Are we sure our work load will not be strained taking on this project?
• Project type and region we’ve worked on before successfully?
• Can we comply with the schedule for completing our portion of the work?

A number of firms only evaluate clients and projects and do not consider business considerations in the process. The priority is ensuring the project fits with your business goals and objectives. Consider how design firms will be selected and your chances of being selected. It done correctly, not cut and paste from similar projects, a great deal of time and effort goes into proposal. Ensure you have a strong message differentiating your firm from competitors. Insurance requirements and contract terms are also important considerations. 

Conclusion

Based on a majority of claims filed against design firms are from project owners, it’s important that before taking on any project, a Go No/Go due diligence process is conducted. If a client doesn’t measure up, the project doesn’t match your capabilities, or business goals, the best decision you can make is decline. Choosing the right clients and projects helps to ensure project success, preventing unnecessary losses, litigation and improves profitability.