Pro-bono work and PJs
Pro-bono jobs are done without a fee. Or perhaps at some concessional fee such as meeting basic costs but not time and labour. Do not assume that because you are gifting your skills and resources, those that might make a claim against you will take an equally charitable approach. Your responsibilities are the same, and the other risks remain the same, regardless of whether fees are paid or not.
“PJs” (private jobs) are a time-honoured way that employees widen their experience or carry out work for friends and family. An employee acting in the “normal course of their employment” would generally be protected by the employer’s PI cover: that would exclude PJs. An employee doing work on their own account will be carrying the risk, and it is up to them whether they are insured or not.
But the problem is that in the event of a claim, the employer – even if unaware of the project – is likely to be in the claimant’s cross-hairs. Employers should deal with these matters in their staff terms of engagement. Written consent of the directors should be a precondition for staff to engage in related business interests, and all subsequent arrangements should be in writing: a congenial/collegial chat is not sufficient.
The employer, if allowing staff to carry out PJs, should:
Remind such staff of the risks of carrying out professional work without the protection of insurance; and of the necessity to meet the requirements of the NZRAB Code of Ethics.
Insist that the client is made aware that the practice is not involved in the project – perhaps by drafting a letter to the client – and should keep a written copy of that communication.
Make clear that there must be no use of office reputation and/or intellectual property, materials, addresses, details, resources, staff, or management.
Confirm that using your firm in any way comes as a cost to the firm which could either be classed as stealing or employee benefit, as may be agreed (or not).
Watch out for watermarks on prints, email signatures, digital files, timesheet records, etc..
Require that any and all communications in respect of the project should be through a job-specific email address, and not refer to or be recorded in or be part of the office system.
The better course of action may be to encourage the employee to bring the project into the office, along with whatever arrangements might be required in respect of fee-sharing or rewards, including the level of responsibility within the firm for that job. The firm still needs to take care in monitoring actions and communications between employee and client: there is the likelihood some will be “informal” and outside usual office circumstances.
Cyber Cover
Cyber Cover
In the last renewal – November 2021 – some smaller practices were having difficulty in meeting the criteria for cyber cover because they were not undertaking the appropriate security processes in their systems. Covid, and the increase in working from home, has provided increased scope for opportunistic cyber-crime, and Aon has an Australian U-Tube clip which makes useful viewing (if you can cope with the background music!): https://www.youtube.com/watch?v=ZjDT1UOPTwQ&t=3s
In reviewing your own systems, the following questions cropped and copied from the last PI renewal form may suggest actions to think about:
- Are all computer systems, mobile devices and websites firewalled or have intrusion prevention systems on them?
- How often are protections and procedures updated? Daily ? – Weekly ?
Does the Practice or Entity:
- Use firewalls to prevent unauthorised access connections from external networks and computers systems to internal networks?
- Use anti-virus protection and procedures on all desktops, e-mail systems and mission critical servers to protect against viruses, worms, spyware and other malware?
- Have physical security controls in place to prohibit and detect unauthorised access to their computer system and data centre?
- Have access controls in place (e.g. passwords) for employees and other users to deny access to sensitive data on computer systems
- Have backup and recovery procedures for all data and IT systems
- Have any domiciled operations or derive revenue from USA, Canada, UK, Europe or Australia?
Has the Practice or Entity sustained a single loss or losses, or suffered from any cyber breaches (including, but not limited to data loss, network intrusion or hack attack including telephone hacking), or been subjected to any fines in the last three years, for which this proposed insurance may be relevant?
Communications: Put It In Writing! (Or A Picture).
Communications: Put It In Writing! (Or A Picture).
High in the list of reasons for claims are:
- Inadequate ongoing communication between architect/client/contractor
- Inadequate confirmation of contract performance
- Partial, absent, or inadequately recorded observation role.
We offer a few basic comments below: they are focussed on these three issues and on risk management, and are by no means comprehensive.
- Engagement: As soon as it is reasonable to do so, communicate to the client your understanding of the project, your role in it, and the fees and terms applicable. Review this on an ongoing basis throughout the contract, update as required, and promptly confirm changes when it appears necessary to do so.
- Design Brief: Agree and record in writing, updated as the project progresses through typical stages of design and documentation. Wherever possible, the design brief and later instructions should establish priorities: information without context is inadequate. For alteration work and where the client is familiar with the building, the Design Brief might be confirmed by a sketch plan with accompanying notes, but for new work it may be risky to rely on approval of the concept drawings as establishing the brief.
- Action notes: Requirements for action must confirm who is to take action and when.
- Client communication: Clients (and their lawyers) usually understand words better than architectural drawings: be sure that their requirements are understood, recorded and confirmed by them. And they will change, in which case the change also needs to be dated and confirmed.
- Milestones: At each point at which the project reaches a milestone, confirm with the client before moving to the next stage, and inform them of the consequences of having to backtrack or change direction.
- Progress reports: We know that design is an iterative process. If it was not, then we could start the detailing on day one of our engagement. Each step of the way is likely to throw up conflicts and reconsideration of priorities: that is not wrong, it is part of the process. Clients need to be reminded of that, and kept abreast of progress, and of the way the changes are evolving, why, and the need for their ongoing involvement and decision-making.
- Site & meetings records: Keep a record of all project meetings and site visits regardless of whose duty it is to formally do so. Take plenty of photos. These notes and photos will be your first line of defence in the event of future litigation claims. Record at least the date, those present, the scope and purpose of the event, the work in hand completed or about to start, actions required of the architect and others; and, if relevant, weather conditions, defects remediation, Health and Safety issues and general workmanship observations.
- Observation v contract administration: They are not the same. You may be engaged for one or the other, or both, or neither. Whatever the case there should be a clear definition of what your scope of work is and what it does not include. Changes to that scope should be recorded, preferably with reasons and a note to the client confirming the consequences.
- Periodic site visits: If engaged for an Observation/ Contract Administration Role, then site visits on a periodic fashion as agreed at the start of the project should be undertaken, (perhaps weekly or fortnightly) depending on the scale and complexity of the project. Site Observation by the Architect may also be required at key phases and to review a sample of critical work. This task requires methodical care, attention, and careful record-keeping.
- Concealed work: Generally, the Architect is liable for works which they could have reasonably been expected to have observed during their time on site assuming the necessary access is available. Where work has been completed but unable to be inspected, there is an assumption that it has been carried out to the contract requirements. But where “what can be seen” suggests that concealed work is unacceptable, the Architect cannot ignore the inference and should follow up.
- Limited Observation: Does such a thing exist? This is dangerous territory: there are many claims where the Architect understood that they were only required to look at “this” but (several years later, with faded memories and unclear records) the claimant’s lawyer has asserted that any professional on site for whatever reason could not have failed to notice and take action on “that”. Be very afraid.
- Supervision: Periodic observation is not continuous site management/ quality control/ site supervision and is not a substitute for nor a guarantor of the contractor’s responsibility to carry out the contract as required by it. The contractor is required to seek timely clarification of gaps ambiguities or errors in the documentation, or apparent conflicts with building code requirements, when and if necessary.
- Defective work: The Architect is entitled to expect the inspected works are representative of all work of a similar nature on site, including type, spacing, fixing, quality of installation and finish. Defective or inappropriately installed materials or finishes are not acceptable. Substituted materials are only acceptable if approved in writing by the Architect. All works are assumed to be plumb and level or sloped as required in accordance with the contract requirements without the Architect having to necessarily confirm, measure or verify independently.
- Warranties and guarantees: If a warranty or guarantee is called for, there needs to be a process for obtaining confirmation that it is put in place. Think carefully about what they are called for, what they might cover (materials and workmanship may be two very different things), and what responsibility you may have (if any) in the level of benefit they provide and how they are obtained as required by the contract. It is not your responsibility to “vet” them, but the client will not be impressed if they turn out to be useless or unenforceable. Your client needs to understand that warranties and guarantees can vary over time, are dependent on regular (or defined) maintenance, and can vary between similar products.
- Completion: The Architect is entitled to assume that warranties will be provided where called for in the contract, and that on completion the project will be properly maintained.
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!
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.
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