Liability of a PE owning a small construction business 1

[Orion44]

I am a licensed professional civil engineer and have worked as a consultant for 10 years. Before I received my degree I worked in construction for many years. I've always wanted to get back on the construction side of the business and i am considering starting my own small construction business. I believe I can get the appropriate licenses but my biggest concern is whether I would have added liability by being a licensed professional as a contractor. Anyone out there have any experience with this?

 

[SlideRuleEra]

Anyone out there have any experience with this?

Yes.

(Any) added liability by being a licensed professional as a contractor?

No. Don't advertise yourself or your business as performing "engineering", and don't stamp anything... even if it is totally unrelated to your construction business.

http://www.SlideRuleEra.net

http://www.VacuumTubeEra.net

 

[RocketRed]

Yes, almost exactly.

It wasn't me but my partner was a PE for a while and then got into big civil construction for about 10 years, and then did engineering for 15 years, and then opened a civil construction company about 7 years ago.

I know they spent a lot of time with the different insurance companies to make sure everything was straight, but never really had any issues at all. Where the engineer issue hurt the company was that he was so meticulous about submittals, bidder design work and other paperwork that he continually ran his overhead costs too high. They did really nice work and the submittals they put together often exceeded the design plans for accuracy and skill. When they found a niche job where the engineering expertise was important they made obscene profits, when they bid standard work they never did worth a darn. The economy floored and the niche work was so rare he went back to just engineering with debt on the construction company. However, the big engineers and contractors remembered the great submittals and he brought back lots of temporary work design, shoring design, and claim work. Which has really rounded out our portfolio so win/loss/win.

I don't see what the liability difference would be. Either you are engineering, or building something. I think you can take advantage of the fact you are an engineer, but don't be like my partner and let the engineer in you steal the profit from the contractor in you.

 

[TehMightyEngineer]

Love the story Red, great details.

Professional and Structural Engineer (ME, NH)
American Concrete Industries

http://www.americanconcrete.com

 

[Ron]

RocketRed....as SRE noted, your liability will increase if you practice engineering along with your construction....In fact, your liability will increase even if you don't do engineering in conjunction with or related to your construction. Here's why.....

Engineers have expanded technical knowledge over contractors. For this reason, you will always be held to a higher standard. An example:

Contractor A (a non-engineer) makes a mistake in the the construction of a stormwater management system. Honest mistake because he didn't understand the impact of his actions and proceeded with construction in a manner similar to what other contractors would do, but not in compliance with the plans.

Contractor B (an engineer with civil design experience) makes same mistake on another project. Because he has design experience, he should know the impact of his actions and should have prevented the issue from developing, even though he had no design involvement on the project.

Contractor B would get shredded in litigation because of his "superior knowledge". Contractor A can plead ignorance and get away with at least part of it!

 

[RocketRed]

That is a great point Ron. It is kind of a better way of saying what I said above: A contractor can play dumb a lot easier than an engineer can. It really comes down to the type of work you are doing and how you bid it.

In my case, my partner was mostly bidding public work as a contractor. He never ever advertised himself as anything but a run of the mill contractor. As I said above it both helped and hurt him, but mostly in his case it hurt him, because he could not play dumb that well. He just did too much thinking on the clock when the competition would play dumb and write change orders. Liability wise I don't think the public works stuff had any problems, there are plenty of PE's working for contractors, and PEs owning construction companies. Get the insurance, get the bond, bid the work, do the work, pass your inspections, and make sure the paperwork meets the contract requirements.

I spoke with him regarding liability during design/build work. In the cases where they did a design/build thing for a private owner, they typically would add liability insurance riders of some persuasion to cover the engineering. In some cases the liability rider required us to hire outside engineering review of the plans as well. In one particular case we could not have the owner of the construction company be the EOR, so we had to hire another consultant to be the EOR.

To the OP it comes down to what you plan on doing and how you are going to represent yourself. I am sure there is an insurance package out there that will cover you. If you are going to be an EOR and do the construction, you should check with the owner to see if they have specific insurance requirements for design/build projects.

 

[Orion44]

Thank you all for your insight on my question!