Lawyers and in-house counsel can be strategic partners for AEC firms when consulted at the right junctures.
Lawyers aren’t always leveraged correctly in the AEC industry. According to Amber Hardwick, in-house general counsel and corporate secretary for OAC Services, Inc., “Lawyers and in-house counsel can be strategic partners when consulted at the right junctures.” Hardwick is one of Washington State’s notable construction attorneys, having chaired Washington Bar’s Construction Law Section in 2019-2020. She has remained active in the construction law community and spent 10 years as a litigation and transactional attorney, representing architects, engineers, and construction professionals.
There is a misconception that lawyers should only be involved in “legal” matters. What constitutes “legal” matters is subject to interpretation and, unfortunately, sometimes legal consultation is initiated too late to avoid conflict.
AEC professionals often approach challenges without consulting their trusted legal advisors on the misguided basis that an issue “hasn’t reached the level” requiring legal input or in the interest of saving on costs. This approach risks losing focus on the big picture. Hardwick says, “Lawyers are trained in critical thinking. Critical thinking is driven by questions, not by answers. This means that lawyers, if leveraged at the right time, can prompt project teams to ask the right questions to entirely avoid or mitigate claims and disputes.”
Here are the top advantages to clients and firms utilizing in-house counsel:
Providing clients with a competitive edge. Firms with in-house legal departments have an edge. “The main difference between in-house and outside counsel is that outside counsel looks at specific questions or items, providing targeted responses, without necessarily ever seeing the big picture,” Hardwick says. “When you have in-house counsel, that legal expertise is more holistically leveraged by someone with insight into many parts of the company.” By bringing a top-notch construction lawyer like Hardwick in-house, OAC gave its project teams the edge of having that critical thinking at their fingertips. In fact, once monthly, Hardwick leads OAC project managers in a meeting dedicated to risk management best practices, analyzing hypothetical challenges and issues that commonly occur in the construction setting – a net benefit for their clients who are looking to OAC to provide detailed risk assessment at key parts of a contract and project, thus minimizing the number of claims and conflicts experienced later.
Indeed, the crucial role of in-house legal counsel becomes more evident when examining organizational structures of leading AEC companies. More and more AEC leadership teams feature general counsel as key members of the team. The industry has begun recognizing that integration and collaboration of the legal team is essential for better company performance and better client results.
Conflict avoidance. The reasoned and considered guidance of experienced legal counsel is a differentiator when it comes to providing strategies to avoid conflict and to bolster relationships through clear and defined communication.
The difference between project litigation and delay, or conflict resolution and avoidance often depend on when the parties consult their lawyers.
Normalizing hard conversations is a net positive for maintaining healthy client relationships. For example, Hardwick described how, in the early part of the COVID-19 outbreak, many owners wanted construction to continue for their project sites without adjusting the schedule or the project cost. “We found that taking a proactive approach and engaging clients in online seminars about issues like force majeure clauses, [a term of art, commonly used to reference ‘an act of God’ or something beyond either party’s control] and compensable delays.” OAC project teams, Hardwick contends, ultimately came better prepared to advise owners about means for minimizing remobilization costs, managing schedule challenges, and forestalling large impact claims. In short, OAC was a case study for how an AEC company can leverage its in-house counsel to mitigate risk and possible conflicts for the benefit of all parties to the project.
Supporting contracts and negotiation. Construction contracting carries unique risks which in-house legal counsel play a pivotal role in navigating. The unique role contracts play in managing the risks of the AEC industry was recognized by Washington’s Supreme Court case of Berschauer/Phillips Constr. Co. v. Seattle School District. No. 1, 124 Wn.2d 816, 826-827 (1994): “The fees charged by architects, engineers, contractors, developers, vendors, and so on are founded on their expected liability exposure as bargained and provided for in the contract.”
The AEC industry is necessarily high risk. On every construction project a group of loosely associated AEC companies work collaboratively without direct contract relationships. Whether maximizing for insurance coverage, limiting liabilities, or anticipating changed conditions, construction contracts are ubiquitous in the AEC industry. In-house counsel is critical to ensuring the company goes in with “eyes wide open.” Hardwick regularly engages with company leadership about the feasibility, challenges, and negotiation possibilities of clauses, stating: “As general counsel, my role is to ensure the company takes on only that amount of risk it absolutely must in order to secure the contract.”
Whether in-house counsel directly negotiates contract changes or supports the project team, the goal is to get to “yes.” This highlights another difference between in-house and outside counsel: In-house counsel is closer to the teams performing the contracts and better able to make recommendations which outside counsel might find too risky.
Saving time and money. In-house counsel can also save companies and clients time and money. There is a time commitment associated with getting outside legal counsel up to speed – time that costs money. While in-house counsel might have expertise in some areas, Hardwick opines that “knowing when to bring in outside counsel, triaging issues before we meet with them, and speaking the same language all help toward minimizing fees spent on outside legal consulting.” In fact, bringing in outside legal counsel only when necessary is an important business strategy, given the rising cost of legal services.
As AEC companies continue to bring legal counsel in-house, involving them in board and shareholder meetings, leadership decisions, and contract negotiations, is key to minimizing costs.
Having legal perspectives that are integrated into the business decisions of a company, means that better decisions are made, and risk and prevention are taken into consideration along with overall legal issues for the benefit of the client and the firm. “Large project management firms, as they scale-up, will need to have a legal department integrated into the company,” Hardwick says. “My primary function at OAC is to set the company up for successful growth. I want to ensure that the scaling-up of their business, project ventures, and client support is done in a risk-controlled manner and helps to identify any roadblocks that need to be avoided. Letting AEC experts be experts in their field, while I focus on risk assessment and expertise in my area, means that they have their minds focused on the needs of the client.”
Callum Roxborough is a marketing specialist with OAC Services Inc. Connect with him on LinkedIn.