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Economics Impacting A/E's
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Detailed survey of 20 A/E Law Firms across the United States providing regional and national perspectives on legal developments, claims and root causes driven by economic conditions with loss prevention recommendations and other insights from these legal experts.
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Survey of 17 insurance carriers specializing in A/E Professional Liability (PL) insurance identifies current economic risk factors, services offerings, claim trends and recommendations for reducing liability exposures.
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Conditions Improving For Some A/E's
There are some positive signs in the design and construction sectors. Surprising many in the industry, construction spending reached its highest level since December 2009. The Department of Commerce announced construction spending for May 2012 was at 0.9 percent above the April estimate of $822.5 billion. However, private construction spending increased while public spending decreased. Private construction was up 1.6 percent above the April estimate of $551.8 billion. Public construction spending was 0.4 percent below the April estimate of $270.7 billion.
SmartRisk Survey Results
Based on a SmartRisk Survey of architect and engineering (A/E) firms, conditions have stabilized or improved for certain firms. Eight percent (8%) indicated conditions have leveled off with 6% seeing significant improvement. Four percent (4%) stated revenue were up 10% and two percent (2%) identified an increase of greater than 25% in annual revenue.
Consistent with the Department of Commerce report on public project growth, firms in the SmartRisk Survey with increased revenues of 10% or more were predominately working in the private sector. Private commercial office building projects were 17% of project types, retail and shopping centers 12%, apartments 12%, single family 12%, and mixed-use, multifamily condominiums 11%. The public sector projects such as water/wastewater were only 4%, and roads, highways and bridges were also 4%. Airports were only 3% of the project types identified. However, several firms with increased revenue of 10% and more were working on airport projects. Industry officials have said the enactment of a federal highway and transportation bill that slightly increases spending over the next 27 months will help keep public construction from falling further.
The A/E firms with increase revenues hired staff to support project efforts. Thirty three percent (33%) hired at the technical level, 15% technical management (minimum eight years experience), and 12% at the administration level. In an effort to obtain additional work, 13% indicated they have entered new markets, 11% are offering broader services and 9% have entered new regions.
Risk & Challenges
However there are words of caution. Driven by the tough economic climate, firms in the SmartRisk Survey identified the following as challenges and risks. Twenty five percent (25%) are not obtaining proper fees for services, 17% are having difficulty getting paid for services, 12% stated staff reductions may be negatively impacting performance, and 10 % indicated that not enough due diligence is being conducted of project and clients. Nine percent (9%) acknowledged that low profit margins are driving the use of less experienced staff and 9% identified they are not pushing back on unfavorable contract provisions.
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Sm artRisk
SmartRisk is a leading risk and performance management consultancy for design and building professionals. Through firm specific risk assessments, training and consulting, services focus on improving overall performance, profitability and reducing insurance costs through tailored risk management solutions.
SmartRisk has extensive experience analyzing risk and implementing organizational and process improvement strategies for the design, environmental and construction sectors.
SmartRisk unique background of insurance underwriting, claims analysis, and risk management provides the ideal platform for understanding the challenges today, and having the ability for identifying effective risk and performance management solutions.
If you have any questions about our services, or would like dicusss how we could assist your efforts, please contact us.
Thank you,
Timothy J. Corbett, BSRM, MSM, LEED GA
Founder & President
626-665-8150
tcorbett@smartrisk.biz
www.smartrisk.biz.
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Copyright and Information Only. This newsletter is for information purposes only and should not be construed nor relied upon as guidance, regulatory or legal advice. Readers should consult with appropriate counsel regarding their specific situations and circumstances.
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