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What does it say – What does it mean

What does it say – What does it mean

What you meant, and what I understand, may be two different things.

When problem cases approach litigation, there might be thousands of emails, drawings, text messages and file notes that have to be understood – several years later – by someone who was not involved in the project.

If your documents cannot be understood, that may be to your disadvantage.

If your directions or opinions are conditional on other information, that other information may not necessarily be available to that later someone.

Never assume that your intentions and understanding of the documentation is shared by others:

MAKE THINGS CLEAR!

Selecting Professional Indemnity Cover

Selecting Professional Indemnity Cover

When deciding what limit to take, you should consider:

• Type of work undertaken. Commercial, Residential, Govt
• Size of client and ability to fund litigation against you.
• Value of the projects undertaken.
• Complexity of the projects undertaken.
• Size of your practice – the number of staff and the amount of project work.
• Contractual obligations that specify a limit of indemnity and period of time

Remember that you could be the subject of more than one claim during a policy year and the potential accumulation of claims losses should be part of your consideration when selecting an indemnity limit, not just the limitation of liability under a single project engagement.

Quotations for higher levels of indemnity beyond your existing limit can be provided at any time during the insurance period. The pricing difference to increase your cover may not be as much as you think, so we encourage you to get a quote for a higher limit.

The policy provides one reinstatement of the Limit of Indemnity i.e. the indemnity limit you choose is for any one claim and twice that limit will be available for all claims in the insurance year (subject to any sub limits and policy conditions). Example: $1,000,000 any one claim during the period of insurance up to $2,000,000 in total for all claims during the period of insurance.

Reliance on, and co-ordination of trade and consultant advice

Reliance on, and co-ordination of trade and consultant advice

Several claims have revolved around whether the architect was prudent or competent in applying the advice from others. A claim based on co-ordination issues is also likely to involve the architect. The corollary is that an architect is expected to have the competence to recognise when specialist input is required, and to communicate that need to the client.

In general terms an architect is not expected to be an expert in all things, but because the architect’s documentation usually co-ordinates the input of others, the architect is required to exhibit prudence and competence in that task. The level of skill required is that of a competent architect engaged on a similar project: it is not necessary to “second guess”, nor to take responsibility for the inputs of others.

Sources of information from “others” includes – but is not limited to – technical data from trade suppliers, input from specialist consultants (eg engineers), local body records and requirements, and the owners/clients/users. The limitations of such inputs are that the information may be of a generalist nature applicable to all projects; based on only a partial (and perhaps evolving) knowledge of project requirements; focussed only on the interests of the particular author or product; incompatible with associated construction elements; wrong, inadequate or inaccurate; require a level of accuracy or project resources beyond the usual; or some combination of any and all of these circumstances!

Examples from claims where this reliance and co-ordination has created a liability:

• The allocation of responsibility for co-ordination needs to be clearly acknowledged. To what extent does it fall to the project manager, or the architect, or is within the scope of other specialist consultants? Who is observing the contract (and to what level)? Who is administering it? Examples: geotech advice via structural engineer to architect or PM; QS input in relation to design constraints; PM/client instructions to design team; separate contractors versus sub-contractors or nominated subcontractors.

• Wind and corrosion zones affect weathering details and fixing requirements: those shown on the TA maps may not be appropriate to a specific site, or for a particular feature of the building.

• Minimum deck or roof falls permitted by trade data or building code compliance may not be appropriate. Consider (at least): moisture held by wind-blown detritus; substrate or structural deflection; applied finishes (perhaps tiling); construction tolerances; penetrations; perimeter detailing; expected level of installation workmanship; post-construction foot traffic; expected level of maintenance; faith in the likely performance of the product; possible heavy short-term weather events…..

• Standard details: Suppliers provide these to copy/paste into drawings but it is still necessary for the architect to be satisfied they are suitable. If it is necessary to “tweak” them to suit the project, they are no longer “standard” and may not fit within the compliance statements offered by the supplier. Similarly the details in the NZBC Acceptable Solutions.

• Certificates, Appraisals, Codemarks, warranties and guarantees: What will happen if these are required but not provided? Are they current, relevant, enforceable, applicable or worth anything? We have had claims where such things have been withdrawn or expired before (or soon after) design but before the product failed; others where the product was covered but not its installation; others where overseas documentation was not appropriate for NZ. Where such documents are subject to ongoing maintenance, that needs to be known to those responsible for it.

• Design-build: the integration and coordination of façade panel systems, roof sandwich panel systems, window assemblies and other elements may be dependent on preliminary information which may create later difficulties. Whilst the detailing of each element may work, mixing and matching them might not, and may prevent the issue of a completion statement. It is by no means unknown for design-build proposals to be withdrawn or substituted. Or unrealistic. These constraints need to be acknowledged ahead of time so that they can be resolved in the usual course of business, instead of being a problem later on.

• Dimensional tolerances: Where the installation of one item is dependent on another there is a need to accommodate variances and construction requirements. Structural deflections are a reality, as are dimensional deviations, moisture-induced movement and long-term creep. A well-considered design should be easier to build and continue to function as expected.

• The owner’s understandings of boundary positions, covenants and cross leases, relationships with neighbours, or applicable workplace/usage regulations may be inadequate or wrong. Where these are critical to the project, the architect needs to have the proper legal or surveying advice.

• When the architect’s conception of a suitable design/material/detail is supplanted by the client’s specific direction, it needs to be on record that the responsibility for that design decision lies with the client not the architect. Better still if the architect’s objection is made known along with the reasons for it. A similar situation may apply with project managers, other consultants, and to substitutions by the builder.

• When project documentation proceeds on the basis of outline information provided by a specialist consultant, it should be reviewed before work is done on site, and signed off on completion by that consultant. (Fire engineering is a typical example). If that is not done, there is a good chance the architect will become embroiled in the later shortcomings.

The short point is that the architect should not blindly accept and incorporate inputs by others, but in each case consider whether it is reasonable to do so. The role includes seeking clarification, weighing priorities where there are competing or conflicting issues, alerting others to their responsibilities, and refining the project parameters where necessary. To be blunt, it also requires good records to cover your backside if things go wrong!

Project Cost Management – Not Snakes and Ladders

Project Cost Management – Not Snakes and Ladders

Recent claim notifications relating to the architect’s alleged failure to manage their client’s reasonable expectations as to project cost estimates include those which have been dealt with as an NZRAB complaint. NZRAB’s Code of Ethics identifies professional negligence as an ethical infringement: their decisions relating to project construction cost estimation, and the cost awards attached to them, provide some precedents.

The background relates specifically to residential projects, and those that proceeded in reliance on a client-appointed QS for budget estimation purposes; or on the architect’s notional square meterage rate; or on a builder’s cost estimate.

Part way through in some cases, or nearing the end of project documentation in others, the client’s QS or builder’s estimate identified a likely construction cost which significantly exceeded the client’s expectation as to project cost by 50 – 80%.

In Snakes and Ladders, we sometimes encounter “go back to start”, but this is not always possible in architectural services. The client may have already paid for some design fees, various consultants and a Resource Consent application. The architect may also have outstanding documentation invoices to recover from a disgruntled client.

A standard PI insurance policy does not respond to fee recovery claims. The architect may be contractually entitled to their early design-stage fees, but in the event of cost over-run, there may be a conflict over their entitlement to the construction documentation fee. The client will naturally plead that had they known the true construction cost in a timely manner, they would not have proceeded with the project and accordingly have saved themselves that expense. In effect, the architect proceeded without the client’s fully informed consent.

Not only will the architect face difficulties in collecting fees, there may be a potential claim against them for recovery of documentation fees and alleged negligence in project cost estimation. Whilst the PI cover may respond to some or all of this, it will also trigger the need for payment of the excess on that policy.

If there is doubt about reliance on cost estimations, it may be prudent for the architect to obtain (and meet the cost of) a cost opinion from a QS, whether or not it is disclosed to the client. This legitimate business expense would be preferable to the potential adverse alternative.

If it was only so easy.

Architects have a duty to keep their client informed about the nature and quantum of project cost estimates for contractual and ethical reasons, but equally for their own commercial protection. In such circumstances, a little ink is better than a good memory.

Private Jobs

Private Jobs

Architects are often asked by friends and family to undertake ‘private work’ (also known as PJs – private jobs), usually at a discounted rate. In these circumstances, it is important to notify all parties affected (including the employer) of the situation and risks involved, including a possible lack of any PI cover.

Where these projects are relatively small scale and for immediate family members, this is often overlooked or tolerated by some firms. But regardless, this approach does carry some potential risk to the company should something go wrong. It would be prudent for firms to clarify their position about private work with all employees. Note that larger, more prudent, member firms expressly exclude employees from using company equipment, time or property for private work.

Basically, private work undertaken by individuals employed as an architect or graduate by an architectural company using company equipment/ computer/ e-mail accounts/ etc during normal company time risks exposing the employer being joined in any subsequent litigation. In a recent case, the issue was far more serious, involving a non-residential project of significant value with the employee found to have misled the employer as to the project status.

Practice Survival

Practice Survival by Barry Dacombe

Introduction:

The prospect of a Covid-induced recession means that many practices, big and small, will be concerned about the future of the practice as well as the future of the staff and contractors they employ. Getting a clear picture of this future is not at all simple.

Having experienced a number of past adverse trading conditions myself, I thought I might jot down a few notes recalling what actions we took during those times and how we planned a way forward that might be helpful to share it among those practitioners who are struggling to come to terms with the current situation.

I don’t profess to be an expert in this area of business advice so don’t treat this as expert advice. Your own accountant would be the proper source for such advice, but it helps to be prepared with good knowledge about your practice before you go there.

The plan:

As Richard Harris advised in his 2020 NZIA webinar “Managing Practice Through Challenging Times” (available to NZIA members on the NZIA website under “….resources/seminar-resources”), “you must have a plan, by failing to plan, you plan to fail”. Many practices will, or should be, incorporated companies and as such the directors of such companies have particular duties under the Companies Act 1993 (reprinted 2020). Avoiding reckless trading is one of those duties.


A plan needs to be based on the best information you can get at the time.

Simply stated, you need to do your best assessment of the projects you have been commissioned to perform, assess the likely income you will receive from performing them, apply some risk mitigation factors, assess your likely expenses (excluding staff wages for now) and see how much of the cake is left to be distributed among you and your staff.

The following factors and comments will be of help.

Income assessment:

Practice income comes from professional fees on projects able to be earned and then paid by clients in a timely manner.
Interrogate your project list to identify only the projects that have a realistic chance of proceeding and will result in income. This is not as difficult as it sounds but it does have to be done with rigour.

Apply a risk factor to account for possible delays, delays in getting paid and project default.

Place this income on a time graph extending initially for the next 3 months and then six months, nine months and twelve months.

Expenses:

Prepare a budget of expenses for both fixed expenses (rent, outgoings, insurances, IT support and software licences, etc) and variable expenses such as telephones, stationery and GST returns.

Deals:

There are some concessions and support packages available from government which are entering the play so keep eyes and ears open to take advantage of them.

Speak to your landlord about rental payments and check your lease which may have concessions which apply if you have been shut out of your premises.

Also look at your own expenses as these will reduce, perhaps significantly, for both you and your staff if in lockdown.

Look at your projects, and if short of work, look at offering a cost recovery concession to those clients that may progress them at a lesser initial cost.

Stayin’ alive:

The resulting gross profit/time graph will establish how much money is available to fund the practice. How this is allocated among staff and principal(s) is up to you!

Passive Fire Design – Problems, Risks, References

Passive Fire Design – Problems, Risks, References

Passive fire protection includes fire rated walls, fire doors, fire collars, and intumescent coatings/sealants.

See also separate article “Passive Fire Design – Intumescent paint systems”

The Problems

Smoke can be forced under pressure through any gaps in passive fire construction. While most of these gaps are associated with cable and duct penetrations through fire walls, even the walls themselves have been found to be incorrectly built. These issues require design, inspection, and follow-up in the course of new work; and in alteration projects have the potential to create budget blow-outs for the unexpected remediation of existing work.

Problems arising out of the design of Passive Fire Protection have included budget blow-outs because it has been only “generically described” and inadequately allowed for under a Provisional Sum; where the scope of work has not been clarified by a specific schedule of requirements for penetrations; where intumescent coatings have been compromised by affixed framing for linings; where compliance verification has not been provided sufficient for the issue of a building consent; and where the co-ordination of the fire design information with the architectural documentation has been lacking, or misunderstood.

Problems arising out of the construction observation role have arisen out of failure to obtain timely verification of fire door compliance; failure to inspect work in detail; reliance on a representative inspection (or contractor’s declaration) to inform overall compliance; lack of co-ordination between the services consultants and others in respect of penetrations; inability to inspect in detail because of the intermittent nature of observation versus the ongoing construction; and a misunderstanding of the role of the Fire Engineer in respect of site observation.

Risk Management

If a fire engineer is engaged to provide a Fire Design Report, the other consultants are required to design and document in accordance with it and to provide verification of that. Where verification is beyond a standard solution provided by a supplier/installer or product data sheets, it will require to be reviewed by the fire engineer.

Don’t assume that because a fire engineer has been engaged, they will also provide passive fire protection advice. Fire engineering is a different discipline to passive fire protection, but many fire engineering design practices also offer passive fire protection advice.

If your client commissions a fire engineer, their scope should include input into any non-standard design situations, and a site observation role. Even if this requires a significant increase in the fire engineers’ scope of work, it is appropriate that the verification of fire compliance should lie with the consultant best placed to deal with it.

Some Building Consent Authorities have recently been asking for a ‘coordination statement’ from the Fire Design Report author to confirm that they have reviewed all Architectural, HVAC Mechanical, Lighting and Hydraulics documentation and verify compliance with the Report. This is a matter for the fire engineer, not the architect.

As part of the pre-design information gathering for existing buildings, consider a building survey to check fire stopping and other passive fire protection, including fire doors.


Passive fire constructions and fire-stopping situations should be detailed and/or scheduled based on the performance requirements of the Fire Design Report. This might be done by the fire engineer, or a passive fire protection designer, or the architect. If the latter, and you are unsure of any aspect of that report or how to meet its requirements, seek advice and input from the manufacturers of the systems or the fire engineer.

Work with reputable suppliers/manufacturers to check that your details are acceptable; get the input of the passive fire protection designer for non-standard situations.

Where there are acoustic performance requirements, workshop the design of these constructions with your acoustic and fire engineers. Site observation includes a review of the construction of passive fire elements. If you have not been engaged for that work, make that clear in your terms of engagement.

The relationship role between fire engineer and architect must be clearly and unambiguously recorded and adhered to. There should be no gaps in their respective oversight roles which could be exposed in any subsequent judicial inquiry into the cause and nature of a building fire resulting in loss of property and life. This is probably seen as being a statutory duty of care obligation for the building owner and their professional consultants under the HSAWA.

Reliance on a contractor’s and/or sub-contractors’ producer statement (PS-3 Construction) is not a guarantee that the works have been correctly completed.

Useful References

• In January 2019 Auckland City Council issued a position statement “AC1825 Auckland Council position statement for acceptance of fire stopping”. This is a useful document even if you aren’t working on Auckland City projects.

https://www.aucklandcouncil.govt.nz/building-and-consents/understanding-building-consents-process/ask-for-guidance/Documents/ac1825-position-statement-fire-stopping.pdf

• Fire Protection Association of NZ website:

http://www.fireprotection.org.nz/home

• In September 2011 IPENZ issued Practice Note 22 which set out guidelines for documenting fire safety designs because of a concern about poor such documentation. It’s worth familiarising yourself with this document if you regularly work with fire engineers.

https://www.building.govt.nz/assets/Uploads/building-code-compliance/c-protection-from-fire/Fire-safety-design-guidelines/pn22-documenting-fire-safety-designs.pdf

• In August 2019 The NZ Society of Fire Protection Engineers issued a draft of a proposed guide for Fire Engineering Construction Monitoring.

• ‘Build’ Magazine Issue 171, pages 39 to 60.

https://www.buildmagazine.org.nz/issues/show/action-on-passive-fire-protection

• BRANZ Guide to Passive Fire Protection in Buildings.

https://www.branz.co.nz/pubs/passive-fire-protection/

How Long to Keep Documents

How Long to Keep Documents

The warm fuzzies induced by the 10 year longstop on liability under the Building Act have been under threat from cases brought to Court. So far, so good. But it would be unwise to biff out everything related to a project as soon as the longstop is reached.

Although it has long been the case that joinder of third parties under WHRS cases can stretch that 10 years, there is a possibility of some legal drift towards that situation being extended more generally. If faced with a claim, defence may be dependent on the documents you hold. Consistent with our past articles on this issue, and more particularly for residential observation records, Communique suggests a 12 year holding period is prudent.

Get your fees and scope agreement agreed and signed

Get your fees and scope agreement agreed and signed

Terms of engagement and fee arrangements should be clearly documented and signed by BOTH parties (or at least by the client), preferably (for NZIA members) using one of the standard NZIA Agreements for Architects Services.

NZRAB ethics now require this, and failure to attend to it exposes architects to the possibility of a complaint to NZRAB, quite possibly as leverage for the client to renegotiate services or fees, or to open the door for a wider claim.

The agreement should have the terms of engagement, scope of work, and the basis for calculating fees clearly spelt out. Any variations to the standard terms, or specific provisions and additional services should be clearly identified: if that is done by way of a covering letter, then that letter should be referenced within the standard terms.

Clarity about what is NOT included may be more important than what is included!

Very often, the scope and circumstances of the project are vague at the time the architect is instructed and only become clear after initial design input. The original version of the agreement should reflect that possibility, and as the project evolves, the agreement should be reviewed and updated or augmented if the scope of work, or the client identity, or the “chain of command”, or the contractor procurement process changes.

Perhaps, once signed, the agreement might be filed away and never mentioned again; but if it is not clear, or not signed, or not updated to reflect the circumstances, it may be interpreted against you in the event of a dispute.

The time spent in attending to this agreement could save a whole lot of grief!

Slowing down? An action list for Smaller Firms

Slowing down? An action list for Smaller Firms

The “Round Tuit”, as most of us know, is a vast repository of issues and items that await attention when there is nothing else to do. A slow down in work load may mean it’s time to open up the Round Tuit file.

Annual accounts:

You may not enjoy sorting them out, but this is the perfect opportunity to get them done and dusted before “real” work demands your attention.

Housework:

Unless you are fully digital, there is probably a lot of out-of date paper lying around the office. If you are fully digital, you can build up a huge volume of “stuff” which needs to be sifted and biffed as for the paperwork below.

• Go through all those old trade publications and biff out anything that is out of date, but KEEP information that you might have relied on for a project in the last 11 years and which you might need to refer to if that project goes sour. Maybe file it (or copy it) in the jobfile? Some old trade information may be more relevant than newer stuff, but that is rare.
• Sketch plans of completed projects are only useful for sentimental reflection or to provide good ideas for future work. Otherwise, biff them.
• Draft working drawings, if not used for construction, have no reason to live.
• Contract documents (professional services and construction) should be kept for 11 years.
• Voluminous files relating to contract administration older than 11 years have no use except to remind you of how much work you need to allow for in future fee quotes, and the processes required to do the work. Once you have recorded that information, biff them.
• Keep all your fee calculations, associated time-cost records, and correspondence relating to fee negotiations (unless re-reading them causes too much pain!). They are a valuable resource.
• Likewise, keep all your financial records (and time-cost records) for as long as they might be useful as a base for future business management.
• Miscellaneous files of correspondence relating to work done 11 years or more ago may have value as “intellectual capital” for you to refer to in future similar projects. But the chances are that less than 10% of the paper is useful and that anyway you won’t look at it. Biff the 90% – at least.
• If a project is under the 11 years (based on 10 year longstop plus a bit of leeway), and it is likely to be problematic, the more you keep, the better prepared you will be to fight the good fight if that becomes necessary. But that information will be much more useful if it is organised: put effort into getting it in order. A quick review of it along the way may help you identify and prioritise preparation for the worst case scenario.

Finding stuff:

• Make sure that all your information and documents is properly dated, and coded with the job (or task) reference, so that it can be found later.
• Re-organise your physical office to allocate things to better advantage.
• Information which cannot be easily accessed is of limited use. Let’s face it, for most of us, even our “library” is only referred to very rarely, and it might be easier to look it up on the web instead.
• Digital information may be even more critical in this respect: NOW is the time to make sure that every email (in and out) is coded to the job reference or task. Likewise all other documents and files. That your computer folder structure is coherent, consistent, and intuitive. That any incoming staff member can understand what is where; and that if you are hauled into a stoush at some unknown time in the future, non-architects can navigate your files without a PhD.

Future planning:

• If you are betwixt and between paper and digital processes, this is the perfect time to structure this transition.
• Now is the time to identify new skills that you can build for a better future.
• The Covid19 lockdown may be the beginning of a new way of working.
• Do a SWOT analysis on how you have coped thus far, and how you might leverage it into the future.