ConstructionPro Week, Volume: 2 - Issue: 25 - 06/21/2013

Are Design Professionals Functioning as Unlicensed Contractors?

By Bruce Jervis

 

The role of design professionals has evolved considerably in recent decades. This is particularly true during the construction phase of the project. In a recent Arkansas case, a licensed professional engineer was sanctioned for acting as a general contractor without possessing the necessary state contractor license.

 

The state contractor licensing statute expressly exempts activities “customarily furnished by architects and engineers.” In this case, the project owner had turned over complete control to the engineer, including selection of trade contractors, negotiation of prices and approval of payment disbursements.

 

The state Contractor’s Licensing Board determined that the engineer’s role exceeded the customary activities of a design professional. The engineer had been functioning as a general contractor without possessing the necessary contractor license. An appellate court upheld this determination.

 

But were these activities really inconsistent with the role of a design professional? And isn’t the standard of “customarily furnished” inherently vague and ever-changing? Are licensing statutes in need of modernization to reflect today’s industry practices? I invite your comments.

 

COMMENTS

It sounds to me as though the engineer was functioning as an Owner's Representative, in addition to his duties as the PE and Project Engineer. I respectfully submit that the Court may have misunderstood the standing of the engineer as an appointed representative of the Owner. An Owner's representative has whatever authority the Owner bestows, and no license or accreditation is required. The Owner's representative may be his six year-old daughter, if he so desires. The authority of an Owner's Representative is subject only to the terms of the contractual agreements. I doubt that the Court can constitutionally interfere with delegation of the Owner's authority.
Posted by: HENRY CHAMBERLAIN - Friday, June 21, 2013 10:48 AM


I completely agree that the current statutes needs to be reviewed. There is such a lack of understanding of the services being provided by design professionals in the first place. FYI-As part of the Illinois Architectural Practice architects can provide construction management services.

So how many cases are our there where the contractors have acted as the design professional?
Posted by: Mike Elliott, AIA - Friday, June 21, 2013 10:57 AM


The actions of the PE in this case is the normal practice of an Architect or a Engineer in determining the low bidder for a project or for reviewing of bids during a value engineering of a project. He is the Owner representative and looking out for the best interest of his client the Owner. He is not doing any actual construction and in that case no need to be licensed as a contractor. This is the normal practice of an Architect or an Engineer on most projects in Pennsylvania.
Posted by: D. GLENN SNYDER, PE - Friday, June 21, 2013 11:03 AM


I agree with Henry and Mike.

When the owner places this responsibility on the Architect or Engineer, they are selecting contractors with the owner. The actual work being performed is by the selected contractors.

Have you seen the Architect or Engineer actually performing the intended work or only overseeing the work and conformance with the contract documents.
Posted by: Arthur Hayhurst, AIA - Friday, June 21, 2013 11:10 AM


It mostly (legally) depends on whether it was the Owner who signed the construction contracts. If the Engineer was, then it is clearly illegal if he didn't have a GC license.

The other issue would be the scale of the construction - if it is beyond local limits requiring a GC license to contract for the work (and specific prohibitions against the Owner completing their own work), then you also have technical legal issues. If at least one of the subcontracts had a GC license (and pulled the permit as GC of Record), then this structural proposition would also allow the professional to manage the construction for the Owner.

There are many different scenarios for a design professional to manage the construction for an Owner without a GC license - but for it to work (for everyone) the insurance needs to be set up properly as well, or everyone is at greater risk.

And there is nothing to prevent architects or engineers from being the prime on a Design / Build if properly structured and insured.
Posted by: Eric Davidson - Friday, June 21, 2013 11:16 AM


I totally agree that this is the normal scope of an Owner's Rep. If anything this indicates how Contractors (CMs especially) have spread their scope and come to take on roles that once were outside their remit. the questions should often be, Is the contractor functioning as a design professional? Architects and engineers have brought on this situation, to some extent, by giving too much credence to contractors, handing over a lot of responsibility and failing to produce complete documents. But now with the emphasis on teamwork, integrated design and the like the lines do indeed probably need to be widened. Looks like the law has to catch up.
Posted by: Dean Sherwin, LEED AP - Friday, June 21, 2013 11:20 AM


It interests me that the State Contractor Licensing board issued the sanction. The information given does not explain who filed the complaint and what specifically actions the A/E did violated what part of the law. All the regulations presumably have some public interest at their heart, the synopsis did not comment on the harm to the public. For example, did the A/E put his capital at risk and then invoiced the ultimate owner. I am suspecting something more substantial occurred (control of means and methods?)but is not divulged in the synopsis.
Posted by: david greulich - Friday, June 21, 2013 11:32 AM


I am a mechanical project manager currently working on a project where the architect is working as the construction project general contractor/manager, believe me, they should stay in the business they know best and leave the contracting business to the people who do it for a living.In forty-five years in the business I have never seen a building where the mechanical contractor and the electrician has not had the opportunity to install the underground piping services prior to the general contractor installing the interior wall foundations. They talk coordnation but don't seem to know how to carry it out. Also the first project where everything down to the flagpole is a separate contract. Worried about the rest of the project.
Posted by: b. halderman - Friday, June 21, 2013 11:51 AM


While the comments thusfar have merit, I fear they may be out of context to the facts. I submit that Mr. Jervis hasn't provided sufficient information to permit one to develop an informed opinion. Bruce: can you share a link to the Owner-Engineer Agreement ? Is there a separate Owner-Owner's Rep Agreement ? Who are the parties to the construction contract - Owner to sub-contractor or Engineer to sub-contractor ? If the local building official issued a permit - to whom ? Did one of the parties allege it was a GC ? Was the Engineer serving as a Construction Manager ? The decision of the AK Contractor Licensing Board will become clearer once the documents it used in its decision are available to us all.
Posted by: Don Scheible - Friday, June 21, 2013 11:57 AM


As indicated in Mr. Chamberlain and Mr. Snyder comments, the Architect, Engineer, CM, PM, or any other entity assigned as the Owner Representative exercises authority on behalf of the owner as stipulated in the contract agreement. We may not have all the information regarding the noted Arkansas case. If there is express language in the contract (or a state or local law for that matter) requiring that any or all trades, equipment purchases, permits, etc. be procured by the GC, then that would be the basis for the court ruling in favor of GC. Otherwise different trades could be selected by the Owner (or his representative)to perform certain tasks as separate contracts.
Posted by: Rouzbeh Salim, PE, CCM - Friday, June 21, 2013 12:07 PM


Sounds like the the Engineer could easily become a lincensed contractor if he is going to continue functioning in the discribed capacity.
Posted by: Thomas Kwasny, PE, LEED AP BD+C - Friday, June 21, 2013 1:29 PM


I think its has something to do with State Taxes. Not all States do require contractors to pay taxes although most collect taxes in addition to the cost paid for design services. There are many design/build firms acting as both designers and builders. We have done both Design-Build as an entity in our State primarily for taxes purposes.
Posted by: Patrick Roy - Friday, June 21, 2013 2:15 PM


Some facts are definitely missing. The salient point, to me, is that the engineer selected the subs and negotiated the various contracts on behalf of the owner. In my opinion this is clearly outside the bounds of a typical engineer's scope of work and experience. I have many questions Since the sanction originated with the GC board my feeling is that a GC not awarded the job, or just wanting to make some trouble, filed the complaint. Based on the few facts presented I'm inclined to agree with the sanction. I approve pay requests and look in on the GC's work frequently. Since I represent the owner I have no relationship with the subs and my correspondence goes through the GC. Any more involvement on my part gets dangerously close to means and methods and contractual issues that will make the GC board sanction look like a walk in the park. My instinct is telling me that the owner pressured the engineer into acting as the de-facto GC to cut his costs. The other GC's heard about this and, understandably, took action to protect their interests.
Posted by: Greg Robinson - Monday, June 24, 2013 8:39 AM


The prior comments are on point in identifying the ever morphing nature of project delivery systems. It is not just an A & E isssue but also CM's who continue to be seen as violaters of traditional GC roles under the guise of owner's reps (they draft contracts on behalf of the owners (and are not attorneys), descope items required by code (they are not architects) and often interfere with inspector activities. This being driven by the litigionness nature of construction and the ongoing loss of experienced professionals due to retirements and the economy. License boards need to keep up to date with these changes. It is still a "buyer beware" environment with boards trying to protect buyers of services from themselves.
Posted by: James V. Vitale, AIA - Monday, June 24, 2013 1:37 PM


They all have brought this upon themselves and sold out each of their professions as A/E's and GC's so they could hav e better control and a bigger piece of the construction pie. HGow many GC's actually know anything ab ut getting on a bacfhoe or hoising heavy construction equipment. They have subed out every aspect of construction, then appointed desk jockies and computer wizes to get it all coordinated, when they still make it mandatory that the responsibility for coordination is up to the subs they hire or who are low bidders.

It all worked a lot better for everyone when there were individual primes and the A/E made them get along on the site. Now a days, you have to search through the specs to find out who is responsible for what and generally it is the A/E and the CM that is responsible for nothing, including producing a decent set of design documents int he first place.
Posted by: J. Sheedy - Monday, June 24, 2013 1:59 PM


 









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