AmericanJan Posted February 15, 2012 Report Share Posted February 15, 2012 A/E firm has a service contract with GSA in which GSA has strongly encouraged use of a particular subconsultant. Subconsultant is a WOSDB/sole proprietor and maintains no professional liability insurance, which is a problem since our agreement with GSA requires insurance requirements to flow down. The scope of services for the contract is to prepare drawings. The subconsultant's specific scope would be as a planning consultant. Do I have any options? Link to comment Share on other sites More sharing options...
Guest Vern Edwards Posted February 15, 2012 Report Share Posted February 15, 2012 Yeah. The option to do what's best for your business. Send a letter to the person at GSA who "strongly encouraged" the use of an uninsured consultant explaining that you won't breach your contract with GSA. Link to comment Share on other sites More sharing options...
AmericanJan Posted February 15, 2012 Author Report Share Posted February 15, 2012 I agree. I am having a hard time convincing folks that there is really no other option. Link to comment Share on other sites More sharing options...
joel hoffman Posted February 16, 2012 Report Share Posted February 16, 2012 I agree that this is a topic to dicuss with the Government if they want this firm as a subcontractor. However, could you clarify a couple of points? I am assuming that your agreement with GSA that requires insurance requirements to flow down refers to government required liability insurance. Is this a service contract or an A-E contract? Where you referring to a clause that requires you to have liability insurance? ...professional liability insurance? What is the clause? Just curious, thanks. Link to comment Share on other sites More sharing options...
AmericanJan Posted February 17, 2012 Author Report Share Posted February 17, 2012 Yes, this is an A-E contract. and yes, we are required to flow them down. No associated clause, this is a requirement set forth in the SOW. Link to comment Share on other sites More sharing options...
joel hoffman Posted February 17, 2012 Report Share Posted February 17, 2012 Thanks, Jan. I couldnt find such a requirement in the FAR or GSAM. This is really more of a requirement to protect the interest of the contractor and its sub than that of the government. But definitely bring it to the attention of the government, which might be able to modify its requirement - or might not. Of course, not having such insurance might increase your firm's exposure to professional liability due to a sub's actions. Your firm might not be willing to assume this risk. Link to comment Share on other sites More sharing options...
Guest Vern Edwards Posted February 18, 2012 Report Share Posted February 18, 2012 The government has not stipulated a "requirement" to "modify." It didn't specify or direct use of the firm, it " strongly encouraged." For all we know the prospective subcontractor is someone's aunt. This is a matter of the contractor either having the guts to say no or doing what it was "encouraged" to do. There is nothing more to it. If I were the contractor I would tell GSA to put its "encouragement" in writing, just to see what happens and whether this is official or personal. I don't know why the question was posted here. Link to comment Share on other sites More sharing options...
joel hoffman Posted February 18, 2012 Report Share Posted February 18, 2012 Vern, I don't disagree with you. I was wondering how the requirement for professional liability insurance ended up in the A-E contract. As to whether or not the government should or could "encourage" or even require such an "encouraged" arrangement to hire a subcontractior that doesn't currently possess the required professional liability insurance, that is beyond the scope of this discussion. Link to comment Share on other sites More sharing options...
Guest Vern Edwards Posted February 18, 2012 Report Share Posted February 18, 2012 Your agreement or disagreement is of no concern to me. The propriety of the government's encouragement most certainly is within the scope of the discussion. It is at the very heart of AmericanJan's inquiry. AmericanJan said he was strongly encouraged to do something that he considered to be improper because it is inconsistent with the terms of the contract. He asked what his options were. One of the them is to question or even challenge the propriety of such encouragement and to decline to comply until the government has fully explained and justified itself. Link to comment Share on other sites More sharing options...
joel hoffman Posted February 18, 2012 Report Share Posted February 18, 2012 The contractor should tell the government that the subconsultant doesnt currently possess professional liability insurance, which is a contract requirement. Plus, it should discuss any other concerns that it has concerning the issue. If the contractor is concerned about cronyism, unacceptable risks, the additional cost to hire this particular person versus self-performance or another qualified, insured person, or its original planned approach was different, or whatever other concerns it has. Let me rephrase why I said that whether or not the government should or could "encourage" or even require such an "encouraged" arrangement to hire a subcontractior that doesn't currently possess the required professional liability insurance is beyond the scope of this discussion. We don't have enough information to determine that. We don't know for certain whether or not the government's preference for the subconsultant is improper. The subconsultant might - or might not - be highly technically qualified to perform the service. We know that this person/firm - like many small firms performing architectural and engineering services - doesnt currently have professional liability insurance. This type of insurance is extremely expensive for any firm, let alone a small firm. It might - or might not - be possible for the "subconsultant" to obtain coverage to perform the services required by the contract. We know that whoever performs the service must have coverage per the terms of the contract. This will probably be within the cost of the subcontract, if subcontracted - or not. We don't know whether or not the contractor otherwise cares who performs the service or if the identified person is highly qualified - or not. She might be the best technical choice for the job - or not. She might have extensive knowledge and experience concerning the instant services - not. "For all we know", which is nothing, she might be somebody's aunt - or not. She might be more expensive than another choice to perform the services - or not. Using this person to perform the services without obtaining the professional liability insurance does potentially increase the prime contractor's liability exposure, which could be a problem - or not. The cost to obtain insurance, if available, might be cost prohibitive - or not. At first glance, it looks like the government doesnt have the right at this point to require the prime to hire somebody that doesnt have the insurance - as a change to the requirement, if it would increase the prime's liability exposure. There isn't enough information to tell other than that the current agreement requires such coverage. Link to comment Share on other sites More sharing options...
Guest Vern Edwards Posted February 19, 2012 Report Share Posted February 19, 2012 Joel: I'm not interested in your views about this. As is so often the case, you are beating on a horse that died several posts ago. Perhaps AmericanJan is still interested. Talk to him/her and enjoy the rest of your weekend. Vern Link to comment Share on other sites More sharing options...
joel hoffman Posted February 20, 2012 Report Share Posted February 20, 2012 Vern, I wasn't speaking to you. I don't really care what you said 3 times either. I was trying to explain to Jan what I meant, after you kept repeating that it isn't relevant. Jan, this topic picqued my interest because of the requirement in the contract for all work to be covered by professional liability insurance. I don't know what GSA's policy is as an organization on requiring that type of coverage. It is protection for the design firm more than for the client. From my experience long ago in a consulting firm, we found that is extremely expensive and difficult for a small firm to obtain and maintain this type of insurance. It adds a significant share of design costs for a small firm, which must spread those costs over a smaller workload than that of a large firm. I don't think that it is a Federal requirement. It is possible that requiring such insurance might put small consulting firms at a disadvantage. I don't know what business the recommended subconsultant normally performs. You mentioned that the work involved "planning services" . That doesn't look so risky that it would normally merit the requirement for such insurance to protect the owner's interest. The contract already contains the contract clause "Responsibility of the Architect-Engineer Contractor". However, this contract requires such coverage of whomever that performs it. I don't think that the government could simply waive or change requirement.at this point without the consent of your firm. You can argue that to do so would alter the risk arrangement that was established in the contract by requiring it in the first place. The risk for errors by the subconsultant are the contractor's. Edited 2/23: So, you asked for options in your original post. In your second post, you said there aren't any other options than to say you can't breach the contract requirements. To summarize, I think that there is more than one option: 1. Your original option was to say no, because the contract requires the insurance and the subconsultant doesn't possess it. 2. Agree to hire the sub w/o insurance and accept any impacts, such as additional costs or liability over the original plan. Not advisable. 3. Agree to accept a change to the requirements waiving the required insurance, which might or might not effectively increase your firm's exposure for the risk of liability due to errors and omissions by the sub. 4. Take the position that the original requirement effectively provided some liability protection for the contractor and its subs. Such a change would increase your firm's risk exposure and the subconsultant's risk for cost or other liability due to errors and omissions by the sub. Therefore to accept such a change to the requirements is effectively out of scope. To do so. would first require mutual agreement as to any price or the terms and associated impacts , including but not limited to pricing the change for any direct cost impacts versus your otherwise planned performance method. 5. Find out if the subconsultant can obtain the insurance. I doubt it can do so for only one assignment but it might be able to. If it can, you can explain to the government what, if any, costs would be above and beyond your originally planned method of performance that would comply with the contract's requirements, if it still wants the specific person to do the job. 6. Possible other options(?) Link to comment Share on other sites More sharing options...
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