Practice Management & Professional Conduct

Risk Management

What is risk management?

Activity directed towards the assessing mitigating and monitoring of risks

Risk Management

What is the difference between proactive & reactive?

Proactive - identify, minimise or allocated risks prior to event

Reactive - minimise consequences after risks occured

Risk Management

What are areas of risks for architects?

• CAA

• third party tort

• design and specification of materials

• code of professional conduct

• running a practice

Risk Management

What are the two types of risks and some examples of each?

Avoidable risk:

• Omissions in CAA

• Non-perfirmance of architect

• Errors / omissions in documentation

• Incorrect briefing from client and to consultants

• Failing to exercise duty of care

• Not fulfilling professional conduct

Unavoidable risks:

• Changed requirements from authorities

• Industrial delays / strikes

• Disruptive weather

• Non-perfirmance of client and builder

Risk Management

What are some activities and behaviours that should be put in place as code of conduct ‘Best Practice's in regards to: client dealings, record keeping and other legal and regulatory obligations?

Client dealings:

• Protect client privacy and confidentiality

• Protect financial details

• Manage sensitive documents with care

• Respect NDA’s

Record keeping:

• Collect and action design and project info

• Important in managing design and scope changes

• Dovetails with expections for QA & IMS

• Clients can request to see project file

Other

• Must disclose bankruptcy and criminal offences

• Practices must comply with Corporations Act

• Most not bring the profession into disrepute

Risk Management

Why should document retention be implemented?

• Commonwealth or State legislation may require it

• For technical precedence in the office

• Assist with alterations, additions or repairs if previously completed project

• Defend yours or against possible legal action

Risk Management

What are some documents that should be retained?

• Originals and copies of drawings and schedules

• Specifications

• Bills of quantity

• Submitted and stamped documents for statutory approvals

• Construction contract documents

• Signed contract documents

• ‘As-built’ drawings

• Correspondence and file notes

Insurances

What is the difference between “Costs Inclusive” and “Costs Exclusive” PI Insurance and which one is preferred?

Costs Exclusive is preferred.

The Insured does not pay the costs associated with defending, investigating, responding to, or settlement of the claim.

The insured only pays the excess of claim compensation amount.

Costs Inclusive, includes all these legal costs.

Insurances

What is the difference between PI and PL Insurance and what do they cover?

PI insurance is compulsory for Architects and Indemnifies professional against damages owed for a breach of professional duty.

• It covers civil liability , duty in contract and court.

PL insurance protects against damage or injury to a persons or property: at the office or at a situation of risk.

• It covers costs or consequences of investigation by WHS Authority, consultants and sub-consultants who work in the office, staff under contract, injuries to practices staff, employees or contract staff driving.

Insurances

What is PI Insurance and what does it cover?

PI insurance is known as claims made and notified and indemnifies you against your civil liability associated wth the provision of professional services and advice.

Claims made and notified is insurance policy in place at the time the claim is made.

E.g. Negligence - injury caused through design error, breach of contract, incorrect advice

• Breach of contract

• Breach of standard of care

• Breach of duty of care

• Failing to comply with standards

• Design exceeds budget

• Misunderstanding with client intentions

Insurances

What is PL insurances and what does it cover?

PL Insurance is occurrence based and indemnifies you against liabilities associated with running a business. Including, as an owner/occupier in place of work and/or on a worksite

• Accidental bodily harm

• Accidental property damage

Insurances

How long does legal liability last / should you keep PI Insurance?

• Breach of contract - 6 years

• Building Act - 10 years from issue of occupancy permit

Insurances

What should you do if you think there is going to be a claim against you?

Read policy:

• It sets out how architects should notify insurer

• Must comply with the obligations laid out

• Must notify PI Insurer when become aware of circumstances that may lead to claim

Insurances

What does PI Insurance not cover?

• Contractually assumed liability - difference between your Common Law liability and Contractual Liability is uninsured

• Waiver of rights - if architect does something that does not allow insurer to subrogate for them, can reduce cover to extent they have suffered

• Asbestos! - never engage asbestos consultant

• Aluminium composite panels

• Refund of professional fees

• Jurisdictional or territorial - restrictions on ‘world wide’ cover

• Prior claims and circumstances

Insurances

What other insurances should a practice have?

• Business insurance

  • Contents

  • Glass

  • Public Liability

  • General Propoerty

  • Electronic Machinery

  • Tax Audits

  • Business Interaction

• Income protection

• Works Comp.

• Maintenance Liability - employment risk

• Cyber

• Travel

• Life

Insurances

What is notification?

Architect must notify their insurer when it receives a claim or when they become aware of a circumstance which a reasonable person with an architects knowledge would consider may result in a claim

Insurances

Who is covered by PI Insurance?

• Current and past employees

• contractors working mainly at one firm

• sub-consultants

• side-jobs brung under business insurance

• estate

• heirs

• legal reps of those covered by the policy

Insurances

What should you look for in an insurance contract?

Insurance clause

Insurances

What is limit of liability?

Limit liability is the amount covered for any one claim - nominally $20mil

Insurances

What is professional business?

Whether the works carries out are architecture

Insurances

What is the retroactive date?

Date that insurance comes into affect, must have insurance before any work undertaken

Practice Management

What is profit and why do you need it?

Profit is a financial benefit that is realised when the amount of revenue gained exceeds the expenses, costs and taxes needed to sustain the service.

You need profit to:

• cover running costs

• allow for unbillable work

• Flexibility to try new things

• Allow business to function in low profit times

• Invest back into business

Practice Management

What is profitability?

Capacity of business to generate from its activities a level of profit sufficient to enable it to have a meaningful surplus after expenses

Practice Management

What are the 4 main types of conducting business as an architect, and what are the differences in relation to:

• Complexity of business structure

• Cost

• Legal obligations

• Tax obligations

• Separate legal entity

• Liability

1. Sole practicioner

2. Partnership

3. Company

4. Trust

Practice Management

What are some ongoing operational costs (overheads)?

• wages and superannuation

• Insurances

• Office expenses

• Rent

• Travel

• Utilities

• Lease payments

• Memberships and registration

• Subscriptions and book

• Accounting and legal expenses

• Training and compliance expenses

Practice Management

How much cash should you always have on hand and allow for when calculating fees?

3 months worth

Practice Management

What are the key considerations when calculating fees?

• Thoroughly understand overheads and running costs

• Allow for unbillable work

• Establish realistic profit margin

• Ensure good time management

• Combine fees with other practices and previous projects

Practice Management

What is a business plan, why is it important and why do CPD?

A business plan establishes

• why a practice exists

• its vision and ethos

• Outlines goals

• How to achieve and how not to achieve

• KPI’s to measure performance

CPD’s

• Develop employers

• Mandatory for registration

• reinforces professionalism

• Demonstrates to client, architect is acting in their best interests

Practice Management

How would you execute projects well?

• clear, open and consistent communications

• Consistent record keeping

• Clear lines of reporting and responsibilities

• QA processes

Practice Managment

What is an office manual & how should it be used?

• Office manual - in house document describing policies, standard office procedures, authorities of people in practice & expected standards of documents.

• It should work in parallel with office management system & be accessible to all staff.

• Standard drawings / names / numbers etc.

Practice Management

What are some quality control activities that can be done to reduce risk arising from working drawings?

• complete, accurate & organised documentation

• Review all WD’s thoroughly

• Implement QC procedures - checklists

• Ensure documents & specification align

• ensure drawings are coordinated with consultants

Practice Management

Who should the consequences of avoidable & unavoidable risks lie with?

Avoidable - lies with responsible party

Unavoidable - lies with party best able to deal with risk

Practice Management

What are some ways you can manage risk within a practice?

• CPD

• Have insurance!!

• Communications with client, consultants, contractors, authorities

• Clear contracts of engagement

• Ensure client understands brief

• Advise client of risks - no surprises

• Capture all variations in writing - confirm

• Supervise inexperienced staff

• Confirm everything in writing

• Ensure projects well managed, budgeting

• Refuse commission where client request differs from good practice

• Take file notes

Practice Management

If you were a sole practitioner, where would you go for advice?

• AIA

• Solicitor

• APBSA

• Accountant

• Friends and family

• Peers

• Acumen

• Insurance Broker

Practice Management

Do you need to be registered to start your own practice?

Sole Practitioner: Yes

Partnership & Company: Min half directors / partners must be registered

Practice Management

What responsibilities do you need to understand when employing staff?

1. Tax requirements

2. Superannuation payments

3. Workers Comp. Insurance

4. Copyright / moral rights agreement

5. Other: Take care of the humans

• Know Architect’s Award and employment standards - Fairwork Aus

• WHS

• Obtain advice if unclear on employment obligations

• employee wellbeing

• Culture of office

Practice Management

Who do you need to get advice from when establishing your own business?

• APBSA - ensure business registration

• insurance broker

• Accountant

• Solicitor / lawyer

• Business / financial planner

• Property agent

• Marketing / graphic designer

Practice Management

What office procedures do you need to establish?

• Work!

• Business plan - including overheads, charge-out rates, profit

(office management system)

• Office manuals

• Timesheets

• Standard letters and templates

• OHS

• Employment contracts

• Insurances

• Registration requirements

• Establish company with ASIC - ACN

• Ensure you and employees have ABN

Consultants

What should be considered when engaging consultants with regard to the client?

Client brief and experience will determine:

• When/how architect advises client on need to engage consultants

• How consultants will be selected

• How they will be engaged

What management processes will be followed

Consultants

What should architects consider with regard to selection criteria?

• Agree selection criteria with client early

• Agree selection criteria with existing consultants

• Advise consultants of criteria prior to submission

• Remember some aspects of submissions can be negotiated

Consultants

What is a consultant?

An independent consulting professional whose specialist knowledge and skill are beyond that of an architect and is required in some aspects of bringing about a building.

Consultants

What is the responsibility of the primary consultant?

Direct and coordinate the work of specialist consultants even if they are not directly engaging them.

Consultants

What are different types of consultants?

• Designing components

• Providing advice required in project

• Specialist consultants developed in particular field

Consultants

• What are some consultants you need for a project?

• cost consultant

• Structural engineer

• Civil engineer

• Electrical engineer

• Mechanical engineer

• Hydraulic engineer

• Certifier

• Planner

• ESD Consultant

• First Nations consultant

• Acoustic engineer

• Traffic engineer

• Landscape

• Heritage

• Ecology

• DDA / access

• Lift

• Interior

• Fire

Consultants

What is some selection criteria of selecting consultants?

• Level of experience and areas of expertise

• established working relationships

• previous performance (and from recommendations from other architects)

• working methodologies

• innovative fees and other costs

• staff availability and current workload

• specific individuals assigned to projects and input from seniors

• QA systems and processes

• empathy with architects design

• PI and insurances

• conditions of engagement

Consultants

What are the two main types of consultant engagement?

Secondary - client engages and enters into contract with consultant

Sub-consultant - architect enters into contract with consultant and pays them & takes responsibility for their work

Consultants

What form of engagement is preferred and why?

Secondary architect doesn’t engage, pay or take responsibility for their work.

Consultants

What are the 3 forms of secondary consultant engagement?

1. Client appoints and pays

2. Client appoint and pays consultants on direction of architect

3. Client authorises architect to appoint and client pays or architect pays and reimbursed by client

Consultants

What are the pros of sub-consultants?

• Client only has to deal with one entity

• Architects role as head consultant - solidifies

Consultants

What are some common consultant shortfalls?

• lack of design / innovation

• Lack of options / cost benefits

• Want final architectural drawings rather than iterations

• Too much changing of old documents

• Cost of design

• Attitude of close enough = good enough

• Uncoordinated and incomplete work

• Less experienced staff

• Poor time performance

• Direct instructions to client

Consultants

How can you manage consultant performance?

• put processes in place early!

• Communications - invites to meetings

• Establish and publish programs - milestones

• Invoices - check and approve or reject immediately

• Protocols - entire consultant team, sharing of information, meetings, collaborations of 3D BIM /

Consultants

What are the ways to reduce risks with consultant engagement?

1. Competency - in house feedback register, references, keep records

2. Check insurances - PI, PL and workers comp. - check name, date and value - if any gap architect will take risk!

3. Define agreement with consultant - scope, program, fees, amount PI

4. Engage sub-consultant - ensure always on back-to-back terms - send them your CAA, get lawyer or insurer to check, be aware of consultant formed contracts. Cannot pay when paid must pay asap when receive invoice

Cost Control

What is a cost plus procurement method contract?

ABIC Cost Plus Contract - ABIC C P - 2014 C Commercial Cost Plus

• contractor and client agree rate of preliminaries and margin as % value of trade works

• contractor tenders each trade package in open book manner and upon recommendation to principal provides packages with trade cost and preliminaries / margins

• Contract sum builds up

• Scope, time and cost not really known and developed during construction

• Fast tracked method and builder part of project team

• Risks - scope not defined, neither is cost and time

• Builder has no incentive to be efficient

• Builder may be assessor - less quality

• Who ever administrators will have to thoroughly understand documents to evaluate costs claimed

Cost Control

Is the architect required to set a budget?

Yes, it is an architecs role to set a budget even if the client has one. You must always ask for one atbthebstart to determine if it is realistic. This will help calculate fees. But must inform client if not realistic.

Cost Control

What are some methods for determining a budget?

• Square metre rates

• QS / builder

• Using industry info and databases

• Ones own experience - previous projects

• Architects role to advise client which is preferred method for the project

Cost Control

What are some things you should discuss with your client in regards to money?

• Don't be afraid to talk about money

• Ask repeatedly if they understand what's happening

• If client is unrealistic, architect must say so

• Architect responsible for things they say and what they should have said

• E.g. point out risks of lump sum contract and advise how existing building needs more contingency

Cost Control

What are some other money issues to be aware of?

• Method of procurement

• Approach to tendering

• Tender assessment

• Variations

• Program issues

• Progress certification and retention

Cost Control

How is a novated D/C contract different?

The existing design team is “novated" or transferred to the D/C contractor under the same terms as with client.

Cost Control

As an architect, what should you be aware of in a novated D/C contract?

• Architect’s role is NOT to administer construction contract or direct on the quality of works

• Should not certify payments to contractor or have PC - as have conflict of interest

• Role is clarified in novation deed

• Common to prepare monthly reports

• Additional and new risks to architect - consider how compensated for : including detail and documentation expectations, disagreeing on extent of documentation, add time reviewing substitutions, consultant coordination expectation including reporting

Cost Control

What is the difference between managing contractor and construction management contracts?

Cm - AS4916 2002 (contruction management)

Cm - AS4917 2003 (CM Trade contract)

Managing contractor

• Is where ECI contractor prices construction works at agreed point and engaging all subcontractors and responsible for all their work

Contruction management

• Is where client engages subcontractors and ECI contractor simply manages their work and not responsible for it

Cost Control

What are the benefits of ECI Procurement?

• Fast tracked method

• Builder forms part of project team possibly allowing for more innovative and efficient construction

• Early start with early trades tendered first

Cost Control

What are the risks of ECI Procurement methods?

• Larger contingency required for more variations

• Pace of building can get ahead of documenting

• Less time for design and doc, leads to less innovative outcomes and potential for more errors

• Tendering on minimal documents can lead to re:documentation or increased costs

• Less environmentally considered

• Documents may be less coordinated between consultants

Cost Control

What are the risks to the architect with an ECI Procurement methods and how should these be mitigated?

Increase fees to compensate for:

• Overlapping stages - Increased resources required

• Documenting in trade packages in condensed time period - less time to review

• Documentation disjointed, requiring more coordination

• Sourcing materials with approved lead times

• More senior staff required

Cost Control

What is PPP and BOOT?

• where bidding consortium bundles design construction, finance and operational services into single contract with government client or public stakeholder, capital costs are transferred to operational costs

• Consortium funds, builds, owns and operates project with agreed lease for fixed period.

Cost Control

What are some benefits and risks for PPP and BOOT?

Benefits:

• Transfers development risk off public book

• Access to private sector innovation

• Can be faster and more efficient

Risks:

• Complex to structure and negotiate

• Lack of public / private views aligning

• Can lead to cost and time overruns

Cost Control

What is an architect’s standard of care with regard to budgets?

• architect’s require degrees of proficiency in estimating budgets

• Service includes forecast of CoW in all phases

• Where estimating is beyond the skill of the architect, must engage a QS

Cost Control

What are some things to look out for when monitoring the budget?

• scope creep

• Changes to building industry/climate

• Building material costs can fluctuate

Cost Control

What are some typical percentages of the cost of works of authority, consultant, architect fees and contingency for a project?

Authority fees - 2%

Consultant fees - 5%

Architect fees - 10%

Design no Construction Contingency - 20%

Cost Control

What is alliancing and what are the benefits and risks?

• consortium come together outlining joint risks and rewards

• Aimed at mutually beneficial relationships

• Benefits - shared risks and rewards

• Risks - complex to structure and negotiate

• Architect mat have to act outside their traditional role

Cost Control

What is early contractor involvement (ECI)?

• contract separates buildings preliminaries, profit and overheads from trade cost OR cost of works to allow them to be tendered separately

• Design remains underway - sketch drawings used to tender preliminaries and margins

• Trade component of preliminary estimate is provisional sum

• Documented in trade in open book manner with contractors added pre-determined margin

• Progressively drawing down on PC sum

• When documents are complete, residual of PC sum wither credited or variation

• Administered as traditional lump sum

Cost Control

What are the benefits and risks of a D/C contract?

Benefits

• Client can engage one party for design and construction for one price

• Client can determine design of important aspects and leave the rest up to the builder

• Fast tracked method, shortened project duration, start construction earlier

• Integration of design into built form

Risks

• Builder controls time, cost, quality - quality may suffer

• Consultancy team not there to assess and monitor works

• Little assurance client will get expected end product

• Scope issues aligned with performance documentation rather than detail documentation

• Builder able to tailor design to fit the price

• Variations can be higher for D/C contracts