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02.14.2020

Design Firm Strategies to Help Ensure Payment for Professional Services

Mark Blankenship - Assistant Vice President - Architects & Engineers Professional Liability Lines

Professional architecture and design firms depend on sound financial billing and contractual practices to achieve financial success. Revenue is the driver of long term firm stability. Appropriate client and project selection are crucial for helping to ensure payment for services throughout the life of a project. Architects and engineers can benefit by following a course of strategies for timely payment of services and mutually-productive client relationships. 

A priority when taking on a new project is to align firm capabilities with client expectations. A realistic way to establish common ground is to spend significant time discussing the scope of the project with the prospective client. The candid conversation should be motivated by the need to reach mutual agreement on client goals and intended outcomes for the project. Differing views and impractical expectations are some of the most frequent issues leading to client non-payment of professional services.

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When entering into a project with a new client, design firms should investigate the client’s track record of payment patterns and any history of litigation. For the sub-consultant, the analysis also should include both the primary consultant and project owner. Reference checks of prior firm relationships can be invaluable in understanding the client’s responsiveness and payment commitment on other design projects. An electronic search of court and county records in jurisdictions of the client’s past projects can reveal potential exposure to the risk of litigation. Further, the design firm should research and/or confirm the actual ownership of the property. Failure to do so may hamper lien rights, making collection of payment more difficult. When multiple entities are involved, the firm may want to consider having other parties added to the contractual agreement or seek written guarantees from such parties.

Different projects present different challenges. A well-defined and realistic scope of work set forth at the outset with the client can avoid the potential of financially damaging outcomes. Of primary concern is if the project is terminated early, for whatever reason, and the scope of work is generic or unclear. In such circumstances, the firm may not have compelling means to establish an argument for entitlement to fees. A vague scope of work often leads to both lack of payment and claims for breach of contract and negligence.

Two keys to a realistic scope of work for successful payment of firm fees and expenses are:

1. A detailed description of the total project and services sufficient to enforce payment at timely intervals and at project completion.

2. Identification of project milestones that define the project process and a scheduled timeline to enforce incremental payment of fees.

Post-project evaluation can provide a roadmap for client selection best practices and project scope of work guidelines. The end of one project should be viewed as a critical opportunity to assess selection processes for structuring future projects. A professional review of all aspects of the project can offer fresh insight into project success in meeting client expectations and the financial performance of the design work plan.

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