AEC Best Practices in Risk Management

In a year that’s been anything but predictable, many architecture, engineering and construction (AEC) firms are adapting their strategies to improve project delivery and reduce risk. Many firms are exploring best practices in risk mitigation to better manage project delays, shutdowns and restarts and to discover new ways of working together.

According to the Deltek Clarity A&E Industry Study, 35% of last year’s projects were behind schedule and 30% were not on budget. From a schedule delay due to weather conditions, to the wrong materials being shipped to the jobsite, it may not always been clear who is responsible for the financial impact of these risks. And sometimes unforeseen challenges result in court time and legal fees.

Record keeping is vital to risk mitigation. Records can prove compliance, avoid potential penalties and fees, and inform business decisions. Tracking critical contract documents not only keeps the project team on the same page, but also helps protect from 'he said, she said' disputes. However, what once worked 30 years ago isn’t as effective in today's digital environment, according to William M. Mattes, Attorney at Law with Dinsmore & Shohl LLP, “If you don’t have the documentation… it’s going to cost 100 times what it would have cost for you to put that document, or series of documents, into an electronic file folder so that you have it when the need comes up.”

Many AEC firms continue to manage their projects via paper documents and this introduces significant risk as 7.5% of all paper documents get lost, according to Record Storage Systems and 25% of poorly-filed documents will never be located (Gartner). Accurate document management is essential to keep firms safe and avoid potential disputes and litigation.

In a recent poll during the Risk Management: Protecting Your Firm Against Disputes and Litigation webinar, 64% of participants answered that they had an issue come up this year where they had to reference a document that’s hidden away in a file cabinet at their office. With so many employees working remotely, this presents an additional complexity. Are your teams able to access important project documents from wherever they are working?  

Most AEC firms are using email and network folders to share information, as well as outdated tools, like CDs, portable storage devices, or FTP sites. With so many ways of collecting and sharing information, it becomes increasingly difficult to ensure what’s sent is the latest version of a document. “Version management is at the heart of decent document control,” says Nick Nieder, Product Director, Deltek Project Information Management (PIM). “Unless you know that the piece of information you have in front of you is correct, then you’re introducing risk.” Considering that the average document exists in 17 different versions, according to Gartner, it’s critical to ensure your team is working off of the correct document.

“Getting structure around this unstructured information is critical because information is not only becoming more widespread, but essentially, less accurate,” said Nick Nieder. “There are inconsistencies in how documents are created, how they’re named and stored, and how they’re transacted and sent around an organization. This is just increasing risk.”

AEC firms that have an electronic copy somewhere usually struggle to find proper documentation as litigation usually comes up years after the project is over and employees don’t have the time to go back to the project because they are on a new project. According to Mattes, “The projects that I deal with are usually multi-year, tens of millions of dollars projects… two years when the project is over is when the arbitration starts. Most of you are knee-deep in a new project.”

Mattes explains, “If I’m building a bridge, I know that those architects are mostly international and they’re traveling to a new place so I have to get on a plane and fly somewhere, bring them up to speed, and it’s hard if the documents aren’t in order, and it’s even harder if they aren’t electronically stored in manner that I can go through with them over dinner because they don’t have time to devote to a project they were on three to five years ago because they’re on a new project.”

When determining what to keep and how long to keep it Mattes suggests retaining documents as long as possible and involving the IT department. When employees leave the organization, you’ll want to make sure that emails are not deleted when employees turn in their computers and text messages are not deleted when phones are turned in.

Mattes emphasized, “The first and best way to stop any claims is to make sure your drawings are as close to 100% as possible… If you’re putting a stamp on it, you have to have sufficient oversight on those drawings... Before the stamp goes on there, you have to sure make that your drawings are as airtight as you can possibly get them in the time that you’ve been given and you have to think about stamping drawings. You have to think about the potential for loss of life and the potential for loss of money for claims that could arise from drawings that have issues... If you can stop pushing down to the lowest common denominator and try to push up the level of drawings that you send out you’ll find that the problems with projects are avoided.”

Mattes says that failure to document and to oversee the request for information (RFI), architect’s supplemental instruction (ASI), bulletin and change order process can result in litigation. “I’ll have a case come in where there’s 100 requests for information, 50 ASIs, numerous bulletins going out – all of those impacted by change orders – which is going to change the scope or sequencing of work and if you have a system that documents when this request came in, when it was reviewed, when it was acted upon, and when directions went out, you can build that into your as-built schedule and you can keep track of all of that information so that you know what the impact is.”

Discover more tips and tricks from Mattes for keeping your AEC firm safe in Risk Management: Protecting Your Firm Against Disputes and Litigation. Watch now.

Deltek Project Information Management (PIM) provides one lens into all project documentation. It provides an automatic audit trail of who read what and when through one searchable system for tracking all project information, including documents and emails. Specifically designed for the AEC industry, Deltek Project Information Management (PIM) is the one source of truth for corporate and project information.

About Bill Mattes, Partner, Dinsmore & Shohl, LLP

Bill Mattes is an experienced litigator who focuses his practice on complex commercial litigation, including high-stakes business disputes and bet-the-company matters. He has decades of experience with construction litigation, and has favorably settled several multi-million dollar construction-related disputes. He regularly draws upon his knowledge of construction law to counsel companies on their plans, and to assist in all phases of litigation, government investigations, and business counseling that can arise from OSHA investigations.