Faculty consulting

[MRM]

Hello Foundations by Terzaghi!!

What do I know? I’m about 4 or 5 years older. That’s good news for me because it means that I’m still alive! And life is fun; I want to be alive!

Without really noticing it at the time, I realized that I’ve taken a little break from Eng-tips there, I guess, because things got pretty busy. However, I’ve completed my Ph.D. though and now I’m a real person again in the eyes of society! By the way, I’ve missed our conversations and I hope you’re all doing great these days.

After thinking, at great length, about my goals, interests, etc., I chose to begin applying to primarily teaching-based universities. I've accepted a wonderful faculty position at Gonzaga University in Spokane, Washington. I’ve been here since August 2012 and it was an amazing and successful first year for me. I’ve made a good choice. I was extremely impressed by the students I've had, and it was such a pleasure working with them. I'm excited for the next 30 or 40 years! It was also exciting being here this last year during the basketball season. We had a great year, but we really should have had a really, really great year! Even still; a great time.

I have a question for you though, if you’re still willing to give advice to someone who went missing several years ago…
I’ve posed a similar question back in 2006, probably as a result of my trying to anticipate my future. Now this question has returned to haunt me some more. I've been weighing my options and I’d like to hear your thoughts.

Here’s the original thread:
thread765-146420

While it was a great discussion, I don’t think we really got to one of my main questions…

The question has to do with risk, liability, and insurance.

I’m interested in consulting. I'm interested in this for the following reasons: 1) stay sharp, 2) bring interesting and recent stories into the classroom, and 3) potentially have the ability to write items off associated with a small business, 4) officially looked upon favorably by my department for future promotions, etc.

Question: is it a good idea for me to do engineering consulting “going naked,” as many faculty everywhere do (I'm guessing...), or should I concentrate on getting back into playing guitar and bass somewhere on the weekends during the summers??

I've recently checked with PL insurance providers, and have been told that they won't even write a policy for "part-time" engineering.

It has been suggested by some of my excellent mentors that perhaps I should find my niche in forensic engineering, where I am relatively “safe,” legally speaking. Or perhaps work as a consultant to an engineering firm with an annual retainer, maybe under that firm’s insurance policy. I'm not quite sure I can deduct items for taxes purposes if I go that route though-stil

l need to determine that. Otherwise, these options sound very promising to me.

And while I was, by most any measure, successful in navigating the legal aspects related to working as a full-time consultant/project manager under an established consulting firm over the course of eight years, I'm obviously finding I still have questions concerning hanging out a shingle for myself. I appreciate any advice you have for me.

 

[SlideRuleEra]

MRM - Welcome back! I've been more or less gone for a couple of years myself. When I retired from "engineering for a corporation", in 2001, decided to go into part-time private practice myself. Formed a one-person LLC and investigated professional liability insurance. Like you found it difficult and expensive to obtain - especially for the income expected from limited part-time work.

Decided to "assume the risk" and go without insurance... but to compensate by drastically limiting the type projects to participate in. Here is a general outline of the results over the next nine years (I fully retired from engineering in 2010)

Accepted very few projects, but the projects that I accepted were interesting and challenging:

1. Never took a job that required preparations of plans / specs for a NEW project.

2. Worked with small owners or contractors, on specific projects that were underway, to get them out of trouble with building inspectors
.
3. Provide professional opinion on whether existing, often historic or "troubled" structures were worth, buying, repairing, investing in, etc.

4. A type of construction management, serving as an "Owner's (technical) Representative". This involved working with the Owner, Engineer of Record, and the Contractor to minimize change orders and propose / investigate value engineering type changes. I found this type work to the most profitable, while at the same time saving the Owner far more than my fee.

5. Teaching a continuing education PE Review Course at a local technical college. Since an LLC is the equivalent of a "person", with a tax ID number instead of a social security number, the LLC, not me as an individual, was "employed" and paid by
the technical college. (This is a way you could consider working with a larger firm, as you mentioned).

The LLC is a great way to handle US & State income taxes. Just a matter of filing a few additional forms (Schedule C, Schedule SE, etc.) with your personal return. No separate corporate return needed.

Take steps to separate yourself (as a person) from the LLC. For example, I opened the LLC's bank account at another bank - not the same one that I use.

Keep in mind that each state has both a Statute of Limitations and Statute of Repose that continue your liability on a project for a specific number of years. A general guide is attached. Gross negligence is another matter.

So far, things have gone as I expected 12 years ago.

Your idea to look into forensics is good. However the older and more total (years) experience you have the more likely you will be seen (by the public) as "credible". A similar avenue to consider would be as an arbitrator.

http://www.SlideRuleEra.net

http://www.VacuumTubeEra.net

 

[Mccoy]

Hi RMR and Sliderule, nice to hear from you again, I find RMR's a very good idea to keep 'sharp', students do appreciate an updated professor and sliderule's suggestions are also very sensible. Congratulatiosn to RMR for his new faculty position.
Forum has been very slow for a while, everyone was very busy and bigH almost decreed its demise, I hope he can change his mind now...

 

[dgillette]

Competition from LinkedIn perhaps? I started on that, and I need to either dump it or change my settings, because I get too many stinkin' emails popping up all day, and I'm easily distrac...Look! Something shiny.

 

[MRM]

Mccoy, dgillette, and SlideRuleEra:

So nice to hear from you! SlideRuleEra, congratulations on your retirement! However, for my sake, and for the sake of others, I hope you'll consider NOT retiring from giving great, and extremely helpful, advice on Eng-Tips like you just did! Thank you so much.

Would you mind telling me a little more about forming an LLC? I understand it doesn't necessarily offer much legal protection (as what we do is tied to us personally), but are the benefits primarily through being able to write items off, etc? Why is it beneficial to do business with another consulting firm through an LLC rather than myself?

Another thing I'm planning to do soon is to talk to 1) a lawyer, and 2) an accountant, as so many have suggested before. That's a pretty easy call and hopefully, that gets me on the right track.

 

[Mccoy]

LinkedIn can sure be irksome but facebook is atrocious, I had to close the account because it was a work by itself to keep updated on the messages coming in and answering, befriending and so on...

 

[MRM]

Well, Mccoy and dgillette, it must be nice having so many friends! No, I know what you mean...just like Betty White said, "you can really waste a lot of ----ing time on those things!"

I'm still trying to figure LinkedIn out. I'm on there, and it seems like a good networking tool in theory, but since the site avoids letting anyone pass out their real e-mails or contact info, it seems a little limited to me. I'm considering closing my Facebook account and just letting my wife keep me posted on what everyone's doing...sort of like a personal "social network liaison" (except I won't tell her that's what I'm doing)

 

[Mccoy]

Well, Mccoy and dgillette, it must be nice having so many friends...I'm considering closing my Facebook account and just letting my wife keep me posted on what everyone's doing

MRM, that's almost exactly what I did. I use my wife's FB account to log into jazz musicians facebook pages once in a while.

 

[Ron]

MRM...congrats.
Going bare is more risky than it used to be. When I started my first firm in 1983, I could not get professional liability insurance. They just weren't writing it. Practiced for 6 years "bare" then sold out to large international firm. Started my present firm in 2005 and have had professional liability insurance the whole time. When premiums went to $25k per year, I thought hard about dropping it. Fortunately found another carrier for 1/2 so still have it.

With or without insurance, the things described by SRE are good to follow. Be selective. Severely limit your liability by contract (as example I carry $1M in prof liab coverage, but by contract I limit my liability to my fee and I get the client to indemnify me for all claims. Doesn't always work, but good place to start).

Most of my practice is forensics. It doesn't make you immune to liability but because of the things you learn in the litigation process, you learn to reduce your exposure!

Good luck. Knock wood...in 37 years of practice never had a claim.

 

[SlideRuleEra]

Guys, thanks for the welcome back. I do plan to stay with ET, but on a more "relaxed" basis - fitting with retirement .

MRM - Forming an LLC appears to be quite easy these days, in 2001 they were fairly new (at least in South Carolina) so I had a lawyer do it. The LLC business structure is much simpler than a corporation yet has the same benefits. For a one-person LLC it is really very simple. IMHO, it sure beats a "sole-proprietor" structure. The LLC structure may not give you "perfect" legal protection, but it does establish a clear, distinct line between your business and your personal assets.

I "Googled" on "setting up an LLC in Washington state" and got what is practically a do-it-yourself manual from the Washington Secretary of State Office. Going to see a (business oriented) lawyer is a good idea, they should be able to give you accurate information on the risks. Suggest that you learn as much as possible about your Washington state procedures before seeing the lawyer. That way you can ask good questions.

The LLC structure will let you write-off your business expenses much more easily and completely than you can as an individual. For example, the LLC can reimburse you for "LLC BUSINESS" use of your car. This could include commuting to larger companies' place of business. Probably can't do that easily as an employee of the larger company, even though it is a second job. Of course, to write-off anything the LLC needs to be profitable. Don't be surprised if this does not happen quickly.

To begin with, you will have to fund the LLC and operate it totally using that money. The important thing is to keep your business finances and your personal finances at arms length. If money is flowing back and forth between the business and you there is no point in having an LLC. Of course you can, FORMALLY withdraw money from the business but you likely don't want to do this often - maybe once a year. The way I did this was to write (and sign) a check from the LLC's checking account to myself. Then deposit the LLC's check in my personal checking account. This may sound somewhat ridiculous, but it is a good way to keep the accounting simple and to help prove that your business and you are two separate entities.

There is a lot more to it, let me know if you want any more "advice", I'll be glad to offer it (but don't want to be too pushy).

http://www.SlideRuleEra.net

http://www.VacuumTubeEra.net

 

[Ron]

SRE....you can't leave us or even get out of dealing with us...so you're stuck...and we're glad!! Good to hear from you.

 

[BigH]

Good, too, to see you back MRM!! I'll keep this going . . . I am on LinkedIn but do not check very often. FB - but as I deal only with friends only, things don't get out of control. I am much more busily engaged on this dam job now . . . love the letters that the contractors "have" to write and letters I "have" to write . . . what happened to handshakes? I'm looking towards something similar in a few years time - but will be in SE Asia . . .

 

[MRM]

SlideRulaEra: again, thank you, and will do. I'll keep the group posted on what I discover as I go if you wish. It seems that I've heard of the idea of not "piercing the corporate veil" many years ago and it stuck in my head for some reason. It sounds like you're warning against that, at least in part.

Thanks, Ron. What you mentioned is consistent with what I was finding when I did some preliminary checking. My initial thought is to begin a pointless rant of "why won't the insurance companies cover the little guy?" However, I suppose if there's one thing an insurance company knows, it's statistics involving risk...we can probably safely infer that (based on insurance company reluctance to write policies for part-timers), they must statistically be a riskier group to insure... With that in mind, I can respect the insurance company's decision to insure or not insure a particular person or group.

As I continue to ponder whether I can begin consulting in a reasonably safe manner (or if I should make little handmade buttons, and sell them at the craft fairs over the summers...), I wonder if I should step back and put this risk I'm considering taking on, into perspective...

Let me know what you think:

For any person (even non-PE) who drives a vehicle on the streets, there is actually quite a bit of risk. For example, even with insurance, that person can readily, and relatively easily, be sued personally by just about anyone if they make a wrong move and hit and kill someone. [Note that it is my belief that auto, PL, Life, etc. insurance will look for any loop hole to not pay a claim-that is, any insurance company knows they don't make money by paying out claims...].

However, that driver can take reasonable steps to reduce his risk (e.g., make sure the car's brakes work, signals work, no items making blind spots, driver isn't overly tired, driver isn't drunk, etc.). For most people even though there is a risk of getting sued, with these precautions, most people decide to get in the car and go for a drive.

For another example, any property owner can very easily be sued by anyone else (tripping hazards on the sidewalk, stairs that are crooked causing a fall, etc.). Landlords probably have especially high liability potentially...

Can anyone think of other non-professional engineering activities that carry very high financial risk that many people do everyday? (probably many more)

So my question is actually more philosophical than I originally thought:

In the big picture, does performing engineering consulting (provided it's done in a well-reasoned and prudent manner, within someone's area of expertise), add risk to one's life in a way that is highly "out of whack" and not commensurate with the potential rewards (any more than any other profession)? I'm not sure yet... I can be convinced either way right now... any thoughts??

 

[MRM]

I didn't see you there, BigH. Great to hear from you again, my friend!

 

[Ron]

MRM...there are various professional and trade associations that have set up deals with insurors to provide professional liability insurance. One that comes to mind is a home inspector group, ASHI or something like that. There are others that I've heard of as well. Check around. Might be cheap to join one of them and tag on rather than trying to go alone.

 

[SlideRuleEra]

Thanks for the welcome, Ron & BigH.

MRM - Concerning your question about whether having a small business is worthwhile - take a look at that from another angle:

It's your business, you don't have to do anything... but if something that you really want to do comes along, you're in a position to immediately jump in. If you keep the business simple enough, there are almost no costs to let it just sit idle for long periods of time.

Also, even if you do very little, it is legitimate, legal business and you can add to your credentials (both short term and long term) experience in "private practice", or something like that.

For example, even though I am retired, the empty "shell" of my LLC still exists, I remain fully licensed as a PE (including keeping up with the annual PDH requirement), and if something I really wanted to do came up it won't be much trouble to make the business active again.

http://www.SlideRuleEra.net

http://www.VacuumTubeEra.net

 

[fattdad]

Poverty is a great line of defence. Set up your consulting business to separate your personal assets though!

Never publish any consulting advice/recommendations/opinions on your university stationary. Never use a signature line that relates your credentials to your university position.

Get a general liabilty/workman's comp/auto policy. Their cheap and provide some protection.

Pick your projects and clients carefully.

f-d

¡papá gordo ain’t no madre flaca!

 

[MRM]

Thanks, fattdad. I'll look into those items too. Actually, you've confirmed what I figured about the university letterhead, etc.-I figured things should be kept separate.

That brings up another minor question in the grand scheme of things: is it ethical to have separate business cards that make no mention of my Ph.D.? Essentially, they would state my name, P.E., without the Ph.D. .... The P.E. is really the relevant item when consulting. On the other hand a "Ph.D." may give a client the impression that I will always be surpassing my primary obligation of performing services in a manner consistent with what another competent engineer practicing in the same area would do. I will not-at least I will not make it known to anyone else that I'm doing anything in excess of that.

In fact, I've noticed that the other professors I know (especially at other universities that I've seen), do just that: P.E. only in signature lines. Perhaps for the reason I'm thinking? I'll have to ask some of them about that...

 

[SlideRuleEra]

MRM - This is the internet age, if you have a client who hires a lawyer to "pursue legal action", all the details about you will quickly come to light. Imagine a (simplified) courtroom scene that goes something like this:

"Mr. MRM, is it true that you have a PH.D., but you do not advertise that fact?"
"Yes"
"Since that is true, why didn't you apply all of your skills the solving my client's problem... instead of offering a "lower" standard of care to my client's problem?"

This is, of course, hypothetical but not too far fetched. In the late 1970's, I pursued a civil law suit about a construction claim against AT%T (when that company was the all powerful "Ma Belle"). I did this as vice-president of our family's small bridge construction company. A two day trial; I got to testify and be cross examined for over an hour. The key point of bringing this up - our lawyer made an absolute "fool" out of an AT&T technician who had presented himself to us as an "Engineer", and made promises to our company that he could not keep. End result, jury ruled in our favor, AT&T appealed, case went the South Carolina Supreme Court, Supreme Court ruled in our favor, we collected from AT&T.

There is an old saying in business that goes something like this: If a business deal will cause you to lose sleep, don't do it. Maybe you should consider not actively going into consulting, at this time. Or a better choice might be to set up a small business (say an LLC), but don't do anything. Again, this may sound ridiculous, but there is something about "doing" compared with "considering" that will help you make the proper decision, for you (at this time).

http://www.SlideRuleEra.net

http://www.VacuumTubeEra.net

 

[MRM]

I can't express how tremendously helpful everyone has been during this discussion. Thanks again.

I'm going to keep taking some time to become familiar with the geology of the area, the soil types and conditions, what constitutes "standard practice" for various projects, the expectations of the various clients my associates consult with, etc. So far, I have not observed anything substantially different in terms of what would have been done here compared to my old stomping grounds with which I had so much familiarity once upon a time...

Concurrently, this year, I'll be looking further into the business issues involved in starting things up (i.e., lawyer and accountant meetings). From there, I'll be pretty selective of the projects I'll eventually accept. I recently became licensed in Washington, so that's something checked off the list for now.

I'd really like to get my, formerly very promising, hand modeling career back on track too, but unfortunately, all those years of doing soil borings and digging in the dirt in the Midwest really did a number of them...I can't have it all, huh? (maybe Queen can though...!)