Introduction
Approximately 70% of claims filed against A/E firms are from project owners – the person who hired you. Just because a client wants to work with your firm - doesn’t mean that's the right client for you. It's difficult to do, but somtimes the best decision is to walk away. An evaluation process is needed. Benffits - reduced liability, improved performance and proftiablity.
Root Causes of Client Claims:
- No due diligence, evaluation of the Client
- Clients unrealistic expectations
- Clients knowledge of the project and design services
- History of filing claims - cost recovery method
- Inadequate financial capability
You have control over the clients you work with. Every firm should have a due diligence process for selecting Clients and Projects including business considerations matching goals. Identifying good clients, and avoiding the bad ones is the objective. If done effectively - significantly reduces the chance of litigation.
Evaluate three (3) categories:
1. The Client
2. The Project
3. Business Considerations
The Client
Like with any good relationship – there is common behavior to look for; a big one is clear and fair communication. Approximately 1/3 of all claims are caused by incomplete communication and documentation efforts. Common traits of good clients; they communicate openly, indepth discussion of the project, project expectations, and how its fits into their overall business strategy. These clients have experienced in the project type, are knowledagable of design firms services; they listen to input, are collaborative and flexible in considering alternatives. These clients are realistic in project expectations including; schedule, budget and fees; knowledgeable of challenges and risks, and negotiate fare and balance contract agreements, including indemnity provisions.
Additional Client Questions:
- New or previous experience with this client?
- Past experience - positive or negative?
- Financial condition and business reputation?
- Previous project experience successful?
- Realistic schedule and budget?
- How will the project team be selected? Low cost or quality-based selection process?
The Project
With every Client comes a project. Essential that "current" capabilities are compared with project requirements. Review your track record, ensure success on previous type projects. If not - ensure corrections been made within the organization; i.e., practices, procedures, expertise acquired. It's critical to have the available staff including an experienced project manager (PM) for delivering quality design service. Confirm there is a well-defined scope and you can comply with the project schedule including permits and approvals.
Addition Project Questions:
- Are we familiar with the applicable regulations and technologies that will be used?
- Will our work load be strained by taking on this project?
- A project we have worked on before successfully?
- Can we comply with the schedule in completing our portion of the work?
Business Considerations
When selecting a Client and Project, allignment with business objectives is essential. Confirm the project fits with business goals and marketing plans. Consider how will team members be selected and you have a strong message differentiating your firm from competitors. Highlight the value your firms brings to the project - the worth compared to being a commodity design service.
Additional Business Questions:
- Is the selection process reasonable?
- Chances of being selected - worth time and effort?
- Future opportunities for similar projects with other clients?
- Owner willing to fund unexpected contingencies?
- Are there any special insurance requirements?
- Will our fee be adequate - can we make a profit?
- Is this the best opportunity for our firm at this time?
Conclusion
With the majority of claims being filed against A/E firms coming from Project Owners - having a due deligence evaluation process is essential. If a Client doesn’t measure up, or the Project doesn’t match your capabilities, or Business Considerations don't align - the best decision is to decline. The outcome of an effective process; reduces the chance of litigation, lowers insurance costs, and improves overall performance and profitability.