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.

 

[oldestguy]

MRM Howdy:

I have been here for a few years now and try to inject things that may be of help. The handle really fits, since I turned 85 last month.

One item that may be important. A professor has his first duty to the job he was hired for. Once you get going with an occasional outside job, make darn sure that it is OK with the administration. Repeating that assurance every year might be required. I won't get into the names involved, but one of my early jobs was in the consulting business of a professor. It took a lot of his time, but I didn't see that it affected his teaching. He wrote a book that still is used and that helped his reputation. However, the administration was somehow in love with another branch of civil engineering and directed much help and funds in that direction. Getting funds for this professor's sub-department became quite difficult and there developed some rather nasty situations. It further irritated the administration when the consulting business became very much in demand by clients. It all ended with a break-up under very unfriendly circumstances.

Another professor in a different sub-department really stuck gold with a great outside consulting program and it brought great recognition to the CE department.

What the moral here might be is predicting how things will go in the future can very difficult. Just doing "grunt" consulting probably will not do much toward enhancing your reputation. I'd go very slow with any outside activities.

As for me, an engineer with PhD has never impressed me out on the job when it came to solving problems there. Many times they could not add to the discussion in solving practical problems.

 

[MRM]

Hi there, oldestguy-

I hope you had a nice birthday. They say 80 is the new 40 right?? At any rate, I hope I find myself in your shoes one day!

Thank you for your thoughts and observations. I’ll certainly be disclosing my plans to the department (according to the handbooks, etc.). There’s no reason I would ever want to (or need to) sneak around with this. I agree that moving slowly is the best too.

I think I know what you mean about the PhDs who don’t seem to contribute much in practice... now, the question is: have I lost every ounce of “geotechnical pragmatism” I may have once had?...well...maybe!...

I’ll keep an eye out for this though... If I find that I’m insisting on having my clients allow me to do a bunch of SEM with x-ray diffraction analyses to obtain what I should be able to obtain with a good combination of PL, LL, and hydrometer testing, I’ll know I should hang up the consulting idea for good!

 

[BigH]

MRM - one other thing you can think about - and I believe that a number of retired "experts" use this is to get the client you have to indemnify you - to cover you for the work that you do for them. Mining companies come to mind.

And Happy Birthday OldestGuy!! May you see many more; we need your insights!

 

[fattdad]

You obtained your Ph.D. independent of any university position that is now available. I see no reason not to show your complete credentials on your private business business card. It's a reflection of your dedication to the profession, as is your PE. A university professor is assumed to have such an advanced degree, so I'm not sure a university professor's business card is the best gauge of how they present their credentials as a consultant.

In the grand scheme of things it doesn't matter. I'd bet anybody that hires you for private consultating already knows your credentials and your position in the university.

f-d

¡papá gordo ain’t no madre flaca!

 

[MRM]

Thanks, fattdad...probably true that it doesn't matter too much...I agree.

BigH-interesting idea about the indemnity. While I like the idea, particularly for certain very high risk projects where I might be offering a simple opinion about a direction the client might take (or something along those lines), I wonder how an indemnity clause would actually hold up either by a client who feels they've been wronged, or by a jury in a courtroom. Not to mention the fact that the indemnity would likely not apply to any third party looking to collect either...

It seems to me that if the engineer insists on taking on zero risk for his actions, a jury might not think such a clause is really enforceable. At least in reading many of the ASFE articles, if any of those summaries are accurate, it appears that clauses that are fair to both parties are the ones that are enforceable. Any thoughts from experience, observation, etc.?

However, all of that aside, I noticed that no one bit on my philosophical question I posed earlier! And I wouldn't normally bring these things up multiple times, but the fact is I enjoy hearing your thoughts (So sue me for enjoying our discussions.. But not really!) In going through various "thought experiments" I would like to challenge the notion that engineering is, in and of itself, really any riskier than any other activity done by millions of non-engineers everyday. I gave the example of a driver getting sued for doing something horrible above and beyond, for example, what their insurance would ever cover or beyond their policy limits. Now with engineering, it seems to me that, at least anecdotally, the vast majority of the claims and disputes directed at an engineer or (relatively small) firm are resolved without going through any insurance (hence the willingness of an engineering firm to offer, say, limitations of liability of $25,000, $50,000 or greater (for, say, a $3000 job), and also being prepared to eat another $50,000 or more in losses to resolve the matter beyond the limitation of liability; all with never considering getting insurance involved. That's, of course, a lot of money particularly to a relatively small firm, all for the chance to make a profit of, say, $500 on that $3000 job.

I know that losing everything is a possibility, but I'm still struggling with how "likely" that is, and whether we should all be questioning our decision to make a living in this manner. What say you?

 

[oldestguy]

I'll take a shot at it. A firm I was with had a few legal cases to deal with. The cases were the fault of: Underlings not recognizing the behavior of expansive clays; a contractor didn't believe his "test pile installation" would apply to his job?; internal communication within the firm missed an important fact (known in the lab, but not at the top); building actually built in a place different from the test borings; a competing engineer claimed our job recommendation was a Cadillac job; among others. So you see, even if you do your job correctly, others can bring you into the case where deep pockets rule. On my own, a multi-million $ case came about due to contractor not fully following the report recommendations. Deep pockets paid the bill. One thing that saved me was my terms and conditions printed on the back of the invoices. Transfer all your assets to the spouse even if insured. This was stated in the Terms and Conditions and known before any claim is made. I still own only a computer and a truck that might be attached. So far the wife hasn't run off!!! Of course there are other legal matters to deal with.

 

[BigH]

oldestguy hit a good point - the terms and conditions part . . . You should read the Book Engineering and Tales of Being Sued by Meehan.

http://books.google.com.my/books?id...q=Engineering and Tales of Being Sued&f=false

 

[MRM]

BigH, that book looks excellent. I'll be looking into that.

oldestguy, I can see those are certainly good examples of the starts of some serious losses (probably both monetary and time, etc.). Did any, none, or all of those go to trial and/or did insurance come into play?

I still remember a time that some of our surveyors place a new monument in a wrong spot. Essentially, that mistake cost us about $20,000 (which we paid ourselves before the situation went to the heavy duty legal routes). And of course, that's always the worst way to spend your retained earnings, but there's not much of an alternative sometimes when a mistake like that is made. The president of our firm insisted that a "chunk" of that monument concrete be placed on the surveyors desk as a reminder (about a 10 or 15 pound chunk-it took up a little space).

Please remind me: even though I've prepared hundreds of invoices (prior to my decision to take my 5-year vow of poverty and obedience during grad school!), I can't recall any applicable legal terms and conditions on the invoice... all I recall on the invoice in terms of "terms and conditions" are payment-related (e.g., pay by xxx or incur xx% in late fees, etc.). I only recall contract terms being in the contract, not invoice. I'm interested to know which terms and conditions on the invoice you had in mind...if you don't mind.

 

[SlideRuleEra]

MRM - Your firm was lucky to be able to solve the survey error in an affordable, but painful manner. If the error had not been caught in time, there may have been substantial Consequential Damages. Say... a building constructed on the wrong piece of property.

There are ways to "go after" a engineer that does not have "deep pocket". I was involved in the technical solution to such a problem from 1989 to 1991. My employer, an electric utility, constructed a new multi-million dollar office building. It was a witch's brew of errors by the Architect, errors by the Structural Engineer, gross negligence by the Contractor, and corruption by one of the electric utility's executives. Our office, normally involved with design, engineering and construction management of electric generating stations, was assigned the project of getting the technical aspects of the office building resolved.

Our attorneys negotiated an out of court settlement with the deep pockets Architect.

The Contractor declared bankruptcy.

The utility's executive committed suicide the day before his criminal court proceedings were scheduled to begin.

This left the Structural Engineer, a small firm whose design errors resulted in the massive, monolithic cast-in-place concrete column / beams being under reinforced in shear. Repairs cost about $1,000,000.

Our attorneys negotiated an out-of-court settlement:
1. The utility was paid the maximum amount of the Engineers E&O insurance, about $100,000 as I recall.

2. The Engineer, at his expense, personally served as the full time, on-site construction manager for structural repairs designed by others. This design was performed by an independent Engineering firm that the utility hired. This phase of the repair work took about six months. To his credit, the Engineer performed these humiliating duties to the best of his ability (which was considerable) with dignity and grace.

So, the Engineer winds up like this:

1. His firm likely cannot purchase liability insurance for future work.
2. Both his and the firm's previously spotless reputation is damaged (to put it mildly).
3. He did not have to pay either "loss of use" or "consequential damages" that were both real and documented.
4. At least his personal assets are intact.
5. He was in his 60's and had the option to retire, which I believe he did.
6. He has an "experience to remember", just like the surveyor in your office who was "allowed" to keep the chunk of the survey marker.

Don't want to scare you out of considering a small business, but sometimes it can really get nasty.

http://www.SlideRuleEra.net

http://www.VacuumTubeEra.net

 

[MRM]

Wow, I wonder if anything else could have gone wrong on that one...that was very unfortunate, indeed. Thanks for sharing those observations about that project.

I agree with you that they found a creative solution for the engineer as you described. It sounds to me like they sentenced him to six months of being a grad student again...

You'd better believe our project managers/owners knew it could have been a whole lot worse too than $20,000... beyond the "parking ticket," they were relieved it was resolved when it was.

 

[oldestguy]

Hello MRM

As to any of the former firm's claims going to court, all except one were settled. The case of the pile contractor, went to arbitration. The three arbitrators ruled in our favor. However, it cost us the time of three engineers out of town for a week, plus an outside expert who mainly was there for guidance. I could give his name, but he is (was) well known, so his rate was steep.

On the Terms and Condition's, it described the legal ownership of mine and wife's assets and notified the client of that, with the stipulation that no claim would extend to the wife. All prepared in the hope that no claims would come my way. However, the multi-million claim was from the Owner, not my client, the design-build contractor. I slept nights because there was ample evidence of the wrong doing. Maybe I was nuts, but I was looking forward to going to court. The main argument was who's insurance would pay the bill, with a court battle that did not specifically involve the reason for the problem. Final settlement abided by the Terms and Conditions. In regard to these, you have to have it part of the contract before any idea of a claim comes forth. They were prepared before I was able to get insurance, but thereafter kept them on.

 

[MRM]

oldestguy: that's interesting-I have never seen that type of condition in an invoice. It DID hold up in court, which appears to make it enforceable (at least under those conditions). Certainly something to think about.

I like to try to be innovative as well, and I've been thinking about another type of clause too for consideration... Premise: What is the harm in disclosing one's personal financial situation right from the beginning to the client (provided it is 100% true).

This is hypothetical...

CONSULTANT discloses, and makes it known, to CLIENT that CONSULTANT has a personal NEGATIVE net worth, and CONSULTANT's business has approximately ZERO net worth. CLIENT acknowledges CONSULTANT's financial status and, further, understands that CLIENT has the choice as to which engineer CLIENT does business. If CLIENT determines that CLIENT requires CLIENT's engineer to have positive assets in the event of a claim, CONSULTANT recommends that CLIENT select a more appropriate engineering firm to meet those needs."

If something like this is effective, perhaps it would do its real job and clearly tell me if the client wants to retain me as there own insurance policy, or if they are genuinely interested in what I can offer in terms of cost to benefit for their project.

Thank you for your comments!

 

[SlideRuleEra]

MRM - Don't think I would say that. As we all know, economics is a large part of any engineering project, especially from a client's viewpoint. Stating that the Engineer, personally, is not financially stable likely will not give a potential client a "warm and fuzzy feeling".

http://www.SlideRuleEra.net

http://www.VacuumTubeEra.net

 

[MRM]

Thinking of ways to weed out those clients who scare easily!

 

[SlideRuleEra]

Don't rely on potential clients not to do business with you. If you are working as a one-person business, you can (and, IMHO, should) interview potential client. If you don't get a good impression... tell them that you won't take the job. I did this routinely and rejected more potential clients than I accepted. Selected only one "bad" client. He did not pay for work on a two-day project. Didn't like it when I would not agree to "ok" what he wanted to do. Just dropped the issue and moved on (remember, its your business and you are not accountable to anyone for this type "mistake").

http://www.SlideRuleEra.net

http://www.VacuumTubeEra.net

 

[oldestguy]

In my experience, for sure two types of clients should not be considered. One: an attorney on his own project. Two: Developer that has had trouble financing his jobs. Another that may be the same as developer; that is a contractor that says, "I will pay for that job after you complete this second job". It goes on and on.....

The terms and conditions has not caused me any problems getting work, since it is easily overlooked, as an attachment to a proposal or on back of the invoice.

Another stickler is getting a purchase order that wants you to hold the Owner harmless. In that case, the copy returned, signed, has an added statement modifying that to "only if I am negligent".

Many a job has been done with no contract with contractors that are personal friends, sometimes engineers themselves. The invoice still has the statement on the back. Probably not a good idea, but it is common.

Be careful about cashing a check for part payment, if it has "Final payment" written on it. You will lose in court.

 

[BigH]

I wonder what Charles Ladd and Karl Terzaghi had as far as insurance went . . . and Ralph Peck . . .

 

[Mccoy]

Folks, I'm almost signing a part-time contract with the government agency where I'm working, which will allow me to keep the job at half salary and at the same time open up a small consultancy business, but you guys are scaring me, lol. I agree that total safety in this job is achieved by owning absolutely nothing, like oldestguy's situation. This is not always possible of course. Oldest, I really find funny that in the invoice backside you advertised your lack of possessions and funniest yet that it worked! MRM,

 

[GeoPaveTraffic]

Sorry I'm late to the discussion; I have been reading along, just couldn't quite get my thoughts together to post.

First, congradulations MRM! I hope you enjoyee teaching.

As for consulting on the side; I would not do any design work without insurance, period. Just too much risk and too much to loose. Clever lawyers and judges can come up with all kinds of reasons that whatever protection your lawyer thought was perfect, isn't.

Here are some ways that I would consider conculting in your situation, more or less listed in my pereference order. Most have advantages and disadvantages, funny how that always seems to be the case...

1) Work as a part time consultant for an established firm. As I'm sure you know there are several good ones in the northwest, including the one I happen to work for. This offers you the best proection, but a lot less control over the projects you will be offered and depending on how busy the firm is, maybe less work than you would like.

2) I don't expect that this option is possible, but it might be worth checking out. The University where you are/will be working might have insurance that would cover you.

3) Join / form a LLC with other professors. I know there is a group at the University of Missouri in Rolla (MS&T) that have either a LLC or a company set up. Don't know what they do for insurance, but even without insurance looks like it would be a lot easier to show separation between personal assests and the LLC if there were other members.

4) As others have discussed create an LLC and go bare. If I went this route, I would not do any design work but would focus on review, IEPR, etc. May go this route myself in a few years...

Again, best of luck.

Mike

Mike Lambert

 

[oldestguy]

McCloy:

No it didn't say I owned nothing. It mentioned that there is a marital agreement separating our assets and that any claim to me would not apply to her. No mention of funds, since the State statutes (not mentioned in there) exempt any specific retirement funds and the homestead.


Here is only part of the overall Terms and Conditions. Also there are statements about Hold harmless (I hold no one harmless) , Payment, Limit of Liability, Applicability of the Terms and Conditions, Warrants, Scope of Services, etc.

"Marital Property:

The Client is notified herewith that XXXXXXXXXXX and XXXXXXXn, husband and wife, have executed an agreement in 19XX whereby the assets of each are separate and immune from any Wisconsin Marital Property Law provisions that may indicate the assets of one are also in some way part of the assets of the other. Any claim against XXXXXXXX, will not also include a claim against XXXXXXXXXX or her assets, as individual property."

Wife had to re-name all her assets "XXXXXXXXX As Individual Property."

Later they were put into a trust because of taxes on estates taking too much.