Kevin J. Cooley, P.E. and Hugh McAllister
Lee Iacocca (Chrysler Corp Chairman) said, "We are continually faced by great opportunities brilliantly disguised as [seemingly] unsolvable problems". The "unsolvable problems" that design consultants face today relating to their professional liability insurance may be, as Iacocca suggests, "disguised [business] opportunities. How can that possibly be so? The design-consulting industry is faced with escalating premiums that are driving overhead rates up and profits down. Firms fear being "dropped" by insurers and some have even been forced to close their doors because they can't get insurance
The goal...create advantage!
In a competitive business environment, opportunities lie in creating and exploiting "advantages". You want to un-level the "playing field" so it "tilts" in your direction. In today's professional liability insurance environment this means getting lower professional liability insurance premiums than your competitors and having coverage that is stable and secure while other "high risk" competitors get dropped. Here's how to do it:
There are many ways firms can become "lower risk" insureds. These range from having good clients with fair contracts to training their staff to engage in good business practices. However, this article focuses on one key area of practice that seems to fall victim to "lip service" in too many design-consulting firms and creates a serious liability risk exposure for them and their insurers... project quality control and quality assurance (QC/QA).
Start with a clear intent...
Few firms would say they do not agree with and follow an explicit or implicit QC/QA policy that says something like this...
"Every deliverable work product must receive an appropriate quality control review prior to submittal to our client and/or a regulatory agency".
The leaders, Chairs, CEO's... of these firms proclaim...
"If it comes to a decision between meeting schedule deadlines and/or budget limitations versus doing or not doing QC, then QC must come first!"
Who would tell a client, "We're giving you these construction plans today to meet our schedule commitment, but, unfortunately, we haven't had time to perform QC on them. But don't worry, we had a very competent team working on this project, so, they ought to be right"?
Maybe in a perfect world...
In a perfect world qualified and competent teams of skilled professionals perform all projects. They are given clear, detailed and complete scopes of work. They have sufficient time, budget and the tools they need for the project. They are well managed by a competent and experienced project manager. The project environment is exactly as planned with no unexpected conditions or changes. In this "fantasy" world there's a good possibility albeit not a certainty that projects will get done right without no major errors, or omissions. ...
Welcome to reality...
In the real world we face "best available" staffing, vague and/or changing scopes, insufficient time and budget, changing or unexpected conditions and inadequate project planning or coordination. The argument that we have teams that are so good that QC isn't needed is not supported. The real world shows us, time and again that the potential for major project errors or omissions where there is not appropriate QC review is significant and simply poses an unacceptable and avoidable business risk. Professional liability insurers recognize this "risk potential" and, more and more are taking a critical view of firms who pay only lip service to QC review, but have no tangible program for carrying out well intentioned management policies and proclamations about their "commitment" to doing quality work.
So what is or isn't appropriate QC?
Many firms have already addressed part 1 of the solution - creating policies. Some have procedures and processes for performing project QC reviews. However, their programs fall short in practice because of one or more of the following reasons:
Design consulting firms need not "re-invent the wheel" to adopt effective QC review policies and procedures. Many design-consulting firms already have a good "foundation" that simply needs to be "tweaked" to get meaningful results. Others lack a QA program and have no idea what's really happening on the front lines of their projects relative to QC review. Even those firms who admit to being at or near "ground zero' on QC/QA can quickly adopt and implement proven to be effective QC review and QA systems or processes to their organization.
The Devil's advocate...
If your firm consistently performs appropriate QC reviews on its projects before work products are released, are you and your professional liability insurer free from liability risk? The answer is "no". QC review can't eliminate 100% of all possible albeit insurable errors or omissions. Unfounded claims still arise for problems for which your firm has absolutely no responsibility. What an appropriate level of QC does, when it is part of a QC system of activity and documentation is minimize the firm's exposure. Consider these observations, also offered by industry legal counsel:
"Failure to perform (and/or document) appropriate QC review on a project goes beyond the insurable risk of simple errors/omissions ... it opens the door to uninsured claims for negligence and malpractice."
So, what can you do about it?
So then, the "weakness" for many design-consulting firms is not in the management's commitment to project QC or in its policymaking. The weakness is in not having effective programs that "assure" that appropriate QC review gets done consistently and is documented on every project before work products get released.
How, does a firm go from a "well-intentioned", "ad hoc" approach to QC review that is a "weakness" to one that creates strength, helps them deal with the business threat posed by the current professional liability insurance crisis and takes advantage of a competitive opportunity to secure stable professional liability insurance coverage at reduced premiums? Here are the steps:
While project QC/QA is always a critical component in the successful, long-term, operation of every design consulting firm and should be addressed, the unique "business playing field" for this industry today as it relates to professional liability insurance creates a window-of-opportunity and a serious need for firms to take aggressive action in this particular area of their practice. Take Lee Iacocca's advice and look at the liability insurance crisis as a great opportunity to build the strength of your firm. Let QA/QC be a foundation element in your efforts!
Kevin J. Cooley, P.E., is the President and founder of Organizational Solutions Consulting Group (OSCG), a management advisory and support consultant serving private and public "project-based" organizations. He spent 30 years working inside successful consulting engineering firms, including 27 years with PBS&J, a 3,000-employee, national, multi-disciplinary planning and design firm, where he was Sr. VP and Director of Technical Operations and Corporate QA Officer.
Hugh McAllister is President of Spirit Consulting, providing applied quality systems and training solutions to knowledge-based organizations. He has 20+ years of quality management experience, including 12 years in a global fortune 50 corporation (GE). Prior to forming Spirit Consulting, Hugh spent 10 years with engineering planning and design consulting firms, including 6 years as Manager of Quality Systems and Training for PBS&J, working with Mr. Cooley. Mssrs. Cooley and McAllister have collaborated to develop and offer a proprietary QC/QA system for project-based organizations called QPAC. They work together with design consulting firms of all sizes and disciplines to help them develop and implement effective project QC/QA programs.
For more information about project QC/QA programs and QPAC, contact Kevin Cooley at 407-788-6050 or and Hugh McAllister at (407) 786-0516.
NOTE: This article is intended for general discussion of the subject, and should not be mistaken for legal advice. Readers are cautioned to consult appropriate advisors for advice applicable to their individual circumstances.
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