Continuing our series on the 10 Principles of Risk Management for Architects & Engineers, this article will address what to consider when defining your Scope of Services.
In previous blogs, we talked about identifying the right clients and the right projects. Then we discussed the importance of securing a comprehensive signed agreement.
In this article, we’ll be looking at Scope of Services, which might be one of the most important parts of the contract. Keep reading to learn ways to lower your risk of “scope creep” and prevent insurance claims on your projects.
4 Questions to Ask When Defining Scope of Services
The Scope of Services in a contract should be well-defined without ambiguity and should include a risk assessment. While drafting your Scope of Services, there are 4 important questions you should answer.
1. Does the scope clearly define what you do?
Yes this one is obvious, but it needs to be said. Make sure you document what specific services you will provide on the project. This should be a very detailed section of your contract.
If you feel your client is asking for work outside the agreed upon scope, then you can refer back to your written contract.
2. Does the scope give you enough time and money for each task?
Working with a timeline and a set of milestones can help guide the project from start to finish. But It is critical that the estimated timing and budget for each milestone of the project be realistic.
Avoid Delay Claims
Delays are a common dispute during design projects. A delay claim relates to a period of time for which the project has been extended or work has not been performed due to circumstances that were not anticipated when the parties entered into the contract.
A way to prevent delay claims is to have a well-estimated and thought-out timeline included in your Scope of Services. Each deliverable should have an associated timeline and budget. Have regular site visits and check-ins with your project team to make sure you remain on track.
Is this a New Service for your Firm?
When allocating time and budget to your project tasks, be sure to consider if any of the services provided are new for the firm. New services have a higher risk of unforeseen delays and costs. You may want to give yourself more time to complete these deliverables.
3. Does the scope define when you should be entitled to additional compensation?
Your Scope of Services should also define what circumstances entitle you to additional compensation.
When looking at your project, think about what potential issues may arise and the estimated additional costs. Document each additional deliverable and the estimated compensation.
Watch for Value Engineering
Keep an eye out for suggestions of value engineering or additional construction phases in the client/owner’s contract. Value engineering involves using alternative methods or materials in a design that are functionally similar but less expensive.
Design Professionals will definitely want to pay attention to language that suggests value engineering and clarify how payment will be structured for something like this.
4. Does the scope include a detailed list of services NOT to be performed?
Maybe more important than what is inside the scope is actually what is outside the scope of the project. The contract should include a detailed list of services that will NOT be performed.
A contract that skirts around this issue and attempts to avoid addressing scope of services not included is far more likely to create a problem between you and your client.
To avoid any issue with the collection of fees for additional services, make it very easy to go back to the client, look at the contract, and request additional payment.
A well-defined scope and list of services that are not to be performed will make this process so much easier. Your firm can then present the list to the client and say, “You didn’t want us to do this initially. Now, you have an option for us to do it, but we’ll need to be compensated.”
Attorney Tip: Stephen Litchfield, Founder of Litchfield Law recommends using your firm's usual scope in your contract, but adding the sentence… “In executing this Contract, Client agrees that it has reviewed and agrees to be bound by the Terms and Conditions attached to this Contract and incorporated by reference here.”
Conclusion
Architects and Engineers must clearly define Scope of Services in their contracts to minimize the risk of being sued and to ensure they are paid fairly and in a timely manner.
Clearly state timelines for project milestones, define work that requires additional compensation, and make a list of services NOT to be performed.
And make sure the Scope of Services in your next contracts answers the 4 questions above.
If you have any questions about design contract review and defining your Scope of Services, download Black Swan's FREE Contract Review Guide.
Or reach out to Zach at zwaters@blackswan-riskmanagement.com.
About Black Swan
Black Swan Risk Management was founded to keep Architects and Engineers up-to-date on Professional Liability Insurance in a Design World that is constantly changing.
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