Brokering Engineering Services

[msdengineer]

Scenario 1:
Can Company A (licensed engineering firm) provide engineering services for Company B (not engineering or architectural firm) who combines engineering services and building materials into package to resell to a customer? Basically can Company B broker engineering services?

Scenario 2:
If Company B in the above scenario is a licensed engineering firm, but does not provide a specific service and does not want to assume liability for that service, can that service be subcontracted to Company A without Company B assuming liability? Is it permissible for Company B to still offer/advertise the service, even if they do not actually provide it or assume liability for it? (they just want to sell it)

 

[civilperson]

No. Only licensed professional engineers can offer engineering services.

 

[SomptingGuy]

Impossible to answer without knowing the location and the prevailing local laws.

- Steve

 

[MiketheEngineer]

Why not put Company A in touch with the client and make everything legal??

Or sub-contract the work to Company A - but make it clear to all that "B" is not an engineering company. Done all the time.

 

[hokie66]

It is called design-build. The designers work for the builder, not the owner. Like it or not as a method of delivery, it is common.

 

[TDAA]

hokie66 hit it right on. The builder is the client.

I provide geotechnical services to a builder who combines that with bnuilding materials to make a house / building, and sells it to an end user.

A truss manufacturer has no in-house eng serveces, so they purchase the design from a PE to cary x load over y dist., combine that with the wood / metal and sell a truss to a builder.

For Scenario 2: The liability can be contracturally shifted (check local laws), but regardless, Company B will still likely have to defend the suit. These costs can also be shifted contractually. Laws may limit the transfer of liability to costs incurred because of Company A only.

 

[dig1]

SomptingGuy is right in that it depends on the state. Some states do not allow design-build and require that the owner have the contract with the design professional.

 

[hokie66]

That is very interesting, dig1. Do you or anyone else who is reading this know which states (or countries)?

 

[cedarbluffranch]

It's funny how some people automatically say "no". It happens almost every thread.

Anyways, I purchased a set of home plans from Architects Northwest here in Washington State. They had contracted with a professional engineer to do the structural engineering on the home.

So I guess you could say that company B brokered engineering services from company A, where company A sold me engineering services and architectual plans in a combined package. So I would say this is fine in Washington.

 

[SomptingGuy]

Depends on the country too.

- Steve

 

[dig1]

hokie66,

This comes the NYS Office of the Professions FAQs:

"12. Can an entity not authorized to provide professional engineering or land surveying services in New York, such as a general contractor, subcontract with a licensed professional engineer or land surveyor in order to provide such services?
No. An entity not authorized to provide professional engineering and/or land surveying services, such as a general contractor, can not subcontract with a licensed professional engineer or land surveyor in order to provide professional services to a third party client. The basis for professional regulation is that the service of the professional must be provided directly from the professional to the client without any unlicensed third party between the client and the professional. This unlicensed third party may have other interests (such as financial) that could jeopardize the level and/or quality of the professional service received by the client."

To do so is a felony in NY. I do not know if there are other states which have similar requirements. I have worked on design-build outside of NY where it is legal.

NY has specific requirements on entities who can practice engineering. In general, an "Inc." cannot practice engineering (even if the entity can practice in another state)and all owners of the firm must be licensed professionals.

If anyone else knows of another state I would be interested.

 

[JLSeagull]

Let's say that our company B sells widgets. Surely we can pay company A to design the widgets. Instead of widgets, lets sell two-story houses. Someone else prepares a standard set of plans that we build in a repetitive manner. This week our client wants our standard plan, except they want to add a cantelevered porch. Why can't we estimate the additional cost and sell that porch for what we think that we can add, then pay the design firm for new plans that include the porch? Scale the scenario up to the point that it exceeds the PE sealing requirements for your state to avoid that objection. My house building firm is not an engineering firm but we buy engineering services and pass the end product along to our client.

 

[stevenal]

Selling an engineered product is not the same as reselling engineering services (the OP's scenario). Might be important how the contracts are written.

 

[MechEng2005]

For "Scenerio B", the company I work (in machine design) does sometimes sub-contract "specialty" work. For example, we might design a machine and work with a material handling company to integrate and install a converyor to get material from some other location to the machine and automatically load it into the machine.

I am located in Wisconsin (USA) and we have done this type of project in Wisconsin, Alabama, California, and Ohio.

In the case that there is an issue, the customer holds my company liable for the entire project, including sub-contracted portions, and my company can then hold the sub-contractor liable if appropriate.

I know in Wisconsin (in residential/commerical architecture), design/build firms exist, so it is legal here.

-- MechEng2005

 

[BigInch]

Company A can provide engineering services to company B. What company B can do afterwards is sell their legally engineered product on to anyone that wants to buy it. I don't know of anywhere that such a thing is not common practice.

I've never bought an engineered product personally where I contracted with a design engineer or architect separately, although on many pipeline jobs the company I worked for has 1.) Contracted for one or several design engineering companies separately,
2.) Combined contracts to include engineering design and construct projects under one constructor's umbrella,
3.) Combined separate engineering design and construction services under a still yet a 3rd party as a project management and finance consortium.

**********************
"Pumping systems account for nearly 20% of the world’s energy used by electric motors and 25% to 50% of the total electrical energy usage in certain industrial facilities." - DOE statistic (Note: Make that 99.99% for pipeline companies)

http://virtualpipeline.spaces.live.com/

 

[IRstuff]

"Company A can provide engineering services to company B. What company B can do afterwards is sell their legally engineered product on to anyone that wants to buy it. "

That's different than company B offering company A's services to the public or a third party.

In the first case, company B is selling a tangible product, while in the latter, company B is offering engineering services of another party.

TTFN

FAQ731-376

 

[msdengineer]

Thank you for all of your posts, this has definitely been helpful as I attempt to think thru this issue.

Quick summary of the last few posts: It is permissible to resell an engineered product, but not an engineering service.

Followup Question: What constitutes an engineered product vs. an engineered service? It is pretty clear if we are discussing a machine or a wood truss to resell to a customer, but consider the following:

Engineering Firm A provides Company B with structural design construction documents (foundation plan, framing plans, wall sections, details...) and supporting calculations for a given building design and location (not generic to be used multiple times). Is it permissible for Company B to resell this "product" to a customer? Or is this considered a "service"? Would it make a difference if Company B were an Engineering Firm?

 

[IRstuff]

If you recall someone else's previous posting above, the rationale was the potential conflict of interest of an intermediary. In your latest example, the new client has no say in the work previously performed for company B.

And, company B is usually even allowed to modify such plans for cosmetic changes that do not affect structural integrity.

TTFN

FAQ731-376

 

[hokie66]

msdesigner,

As discussed above, it would vary with the laws of the state/country. Dig1 has identified New York State as one jurisdiction which prohibits design-build contracts, and he says it is a felony there. I think NY is in the definite minority, but there may be others.

 

[stevenal]

The latest scenario described by msdengineer does not appear to be either a product or a design build, so would be forbidden if B is not be an engineering firm. If B was, many more questions arise? Who is the responsible charge? Who seals? What is B doing to add value? Who is liable?