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There are two important concepts in regard to the relationship between risk and value. First, as Mr. Butters states, in order to manage risk, you must be able to quantify it. I would like to hear some comments from others who have posted here as to what thier perception of those risks are when transfering models to contractors. First listing them, then perhaps attempting to quantify them. It might make for a very productive conversation. The second concept is that of placing the risk with the party most capable of mitigating it. This is an important concept because when properly assigned, the risk is actually reduced, and thus, the cost that can be assigned to that risk can also be reduced. The reduction in this "risk premium" is essentially found money. It is waste that can be eliminated from the system. For example, if the architect were determined to be the best party to manage the risk of liability associated with the utilization of a BIM model on a project, and the use of the BIM model created a, lets say 5% reduction in project costs, then the architect would have a right to claim some adequate portion of that savings for agreeing to manage that risk. The architect, however, would have to quantify that risk and manage it accordingly such that a reasonable profit could be made. That is a new skill set, but also a new revenue stream. This is business, and its good business because everyone wins. To date, the only business rationale I have seen to architect's use of BIM are 1) because it is fun and interesting, 2) because they can claim it as a marketing differentiator, and 3) because it justifies the earlier collection of fees, which can have some positive impact on cash flow and some increase in the internal rate of return on a project. Not enough justification if you ask me. It needs to directly drive profitability to be viable. -------------------------------------------
Alan Burcope AIA, MBA, LEED AP
VP Project Development
HBE Corporation
Saint Louis MO
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Show Original Message
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Original Message:
Sent: 08-13-2011 12:09
From: Frederick Butters
Subject: giving cad file to contractors
I suppose one could take the view that to much legal objection causes a project to suffer. However, in the converse, not enough causes the Architect to suffer (and I can't object to strenuously I suppose since that is what keeps me in business). My point is simply that to manage a risk, one must understand the risk. Risk management is predicated on the concept of reducing the overall risk. Indemnification agreements don't work to that end - they don't reduce risk - they simply shift the consequences of that risk elsewhere (or at least that is generally what they seek to do - as I mentioned earlier their effectiveness at accomplishing that task is in many circumstances more than a little questionable).
Simply put, one has not managed the risk by requesting an indemnification agreement. While that step may offer some legal arguments that aren't otherwise available, the Architect still retains all of the risk - he or she simply has the legal right (at least in theory - practice may be another matter) to transfer the consequences and effects of that risk to another. It is easy to put to much faith in those sorts of devices instead of addressing the underlying risk per se.
Mr. Burcope on the other hand suggests a sound approach. Look at it as a marketing opportunity. Educate the Owner and the Contractor and demonstrate 1) that your files are of value to both the Contractor and the Owner; and 2) that you ought be compensated properly for that value. At their core every professional is an educator first, then a risk taker. We educate clients so they can make informed choices. In that context, we assume the risks inherent in the services we render in exchange for proper compensation. No one would ever hire a professional who assumes no risk - because they confer no value. However, a professional can and should be properly compensated for assuming the risk.
Getting an indemnification agreement is fine, but simply giving up manipuable document files in exchange for one is not really appropriate risk management. Capitalizing on the opportunity that the request to provide those files to extend education regarding the project and the service, to establish the proposition that all A/E services are of value, and to secure reasonable compensation in exchange for the service provided, is. The better relationships that are engendered as a consequence are likewise.
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Frederick Butters FAIA, Esq.
Attorney
Southfield MI
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Original Message:
Sent: 08-10-2011 08:20
From: Kerry Hogue
Subject: giving cad file to contractors
The problem with this too much legal objection is that the project suffers. The risks are managable. Our firm is as conservative and risk adverse as any out there, and we have found a way to be cooperative and team players without absorbing undue risk. If you want to compete in this marketplace, find a way to be team players, coorperate, look out for the best interests of the client, and provide the electronic files.
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Kerry Hogue AIA
HKS, Inc.
Dallas TX
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