DESIGN MANAGEMENT
Design management is concerned with an engineers sphere of activity. It is therefore important to consider the variety and types of design activities to which professionals devote their efforts. The engineers basic role is to harness scienti?c principles and other knowledge to practical applications that bene?t humanity. In ful?llment of this role, design management is concerned with proper utilization of human labor, energy, and
technical skills to serve present and future needs of the economy.
The design managers goal is to complete a project on schedule and within budget while meeting standards of quality in order to meet the clients needs.
2.1 Where Engineers Are
Employed
Principal ?elds of employment for engineers include:
Academic For many engineers, the teaching profession is both the ?rst and ?nal career. Many others, however, devote to teaching a few years of their careers or sometimes part of their time, for example, teaching evening courses.
Many educators also serve as advisers to industry and consulting ?rms. Thus, they move into the designers sphere of activity. Furthermore, many university departments are retained by government and industry for research projects. As a consequence, the departments, in essence, act as private ?rms performing professional services. The university administrators have to work withinbudgets and have contracts to negotiate, reimbursable expenses to determine, and schedules to meet. They also have to contend with other administrative matters that are part of design management.
Industry Industrial ?rms that handle any substantial volume of business have engineers on their staff. The role of such engineers, however, varies. A ?rm with productive capacity and thus plant facilities must have a plant engineer and staff to ensure proper maintenance and operation of the plant. In many industries, the plant engineers also serve their employers in the design ?eld. For instance, if new equipment is to be installed in an existing plant, not only must space be provided but engineering questions must be addressed. Typical questions include: Are the foundations adequate to carry the added loads? Are new utility services required? Is the present power supply adequate? Furthermore, building may have to be constructed to house the new equipment. Thus, a plant engineers normal activities and responsibilities often lead to the design ?eld.
Because of their size, growth, and specialized needs,many industries have their own engineering and design departments. Such a department ful?lls the same professional function as a private engineering ?rm, with one basic difference: The industry engineer serves one client, whereas the design ?rm serves many. Concerned with many of the same administrative matters as a design ?rm, an engineering department can be organized like a design ?rm. The engineering department will be organized to operate ef?ciently in meeting thespecialized needs of only its industrial employer.
Government Like engineers in industry, government engineers serve only one client, their employer. The federal government is the largest single employer of architects and engineers. In addition, most states, counties, cities, towns, and public bodies have engineers and architects on their staffs or in their employ. These professionals perform a variety of functions encompassing both design and administrative activity.
The agencies or authorities maintain engineering and architectural departments that perform basic design work and thus act as in-house professional service ?rms. Such organizations do not need to retain outside private consultants, except for specialized tasks or when the volume of design work to be performed exceeds their in-house capabilities. In addition, these agencies, whether or not they have in-house design capability, employ professionals who work on a variety of different administrative levels, including
administration and supervision of projects as well as review of basic design and construction activities. Administration of the engineering projects requires the services of professionals on all levels, starting with junior staff members and extending up to top-level administrators and of?cials charged with responsibility for implementation of the public projects.
In public service, the engineer may be either the designer or the client.
Engineer-Contractor The term as used here refers to the construction ?rm that identi?es itself as both an engineer designer and contractor. Although many use the title engineer-contractor and perform only the actual construction, we are concerned here with the ?rm that truly undertakes either design-build or most frequently turnkey projects both design and construction under a single contract.
Process and utility industries generally use the turnkey contract. These industries are primarily interested in the ?nal product, such as number of barrels of oil re?ned or number of kilowatthours produced. The engineering staff of the company building a plant establishes design criteria that the engineer-contractor has to meet. Because of the specialized nature of these industries, the engineer contractor employs designers with knowledge of particular processes to develop the most economical and ef?cient design. Engineer-contractorsnormally bid on performance speci?cations and prepare the detail designs necessary for construction. Other turnkey operations include those that combine land acquisition, design, and construction for commercial and industrial buildings and can even include ?nancing.
The design is accomplished by the same organization, or division within the organization, that constructs the building or facility. Depending on a variety of factors, there are advantages and disadvantages of this combined service as compared with the division of responsibility between a design ?rm and a construction company.
Contractor A traditional construction project team consists of three parties: owner, or client; designer; and general contractor (GC). After being awarded a general construction contract by the client, the GC hires the subcontractors and the trades. Some forms of contracting, however, require several prime contractors instead of one GC. In such instances, the owner usually contracts directly with the major trades, such as heating, ventilating, and air conditioning (HVAC); electrical; plumbing; and vertical transportation
installations. Also, in some situations, such as for a project administered by a construction manager (CM), the owner may engage several prime contractors, whose separate contracts will be coordinated and managed by the CM. Most contractors operate in a regional or limited geographic area.
Whether performing construction as a GC, prime contractor, or subcontractor, these companies employ engineers from a wide variety of disciplines. Engineers may serve as project managers who have responsibility for bringing the project to a successful completion while meeting the time, cost and quality goals; Project Engineers who schedule and coordinate construction; and Superintendents who plan and supervise the work in the ?eld. Hence, there are many employment opportunities for engineers with contractors. Furthermore, the nature of construction contracting is such that it provides many opportunities for engineers to assume proprietorship roles.
Consulting Engineer A consulting engineer has been de?ned as a professional experienced in the application of scienti?c principles to engineering problems. As professionals, consulting engineers owe a duty to the public as well as totheir clients. In addition to rendering a professional service, the consulting engineer also operates a business. Consulting engineering is practiced by sole practitioners, partnerships, and corporations, many with large staffs of professionals, CAD operators, and other supporting personnel. Regardless of the form of the engineers organization, the ?nal product a client receives retains the same professional characteristics and meets the same professional standards. Consulting engineers usually have several clients, and they must select methods of operation to suit their own and their clients needs best.
Consulting engineers are paid a fee by clients to provide professional design services on diverse projects, types including but not limited to transportation, industrial, education, institution and environmental facilities.
Construction Manager (CM) Managing and coordinating construction projects as an agent of owners, i.e., acting as the CM, is the prime specialty or discipline of many ?rms. Although engineers and architects are the traditional professionals operating or employed by such ?rms, construction management is a separately de?ned technical ?eld. The tasks and functions of construction managers, whether part of a professional service agreement or a guaranteedmaximum-price (GMP) contract, are well established areas of practice.
While the primary goal of construction managers is to construct a project with the time, cost and quality goals established, they are increasingly being hired during the design phase to ensure that the design is constructible and cost effective. Others n There are numerous specialty ?rms that practice in private industry but limit their activity to speci?c or specialized ?elds. These ?rms or individual practitioners may be appropriately
classi?ed under any of the broad de?nitions above but, as engineers, limit their professional activities. For instance, some specialty ?rms perform only cost-estimating services (consulting engineers or construction managers); act as construction consultants, serving as troubleshooters; or specialize in one technical area for the sole purpose of serving as expert witnesses in construction litigation.
2.2 Forms of Consulting
Engineering Organizations
Consulting engineers may practice as individuals, partnerships, or corporations.
Individual Proprietorship This form of organization is the simplest, has the fewest legal
complications, and enables the proprietor to exercise direct control over the operation.
As a one-person operation, however, this type of practice has distinct limitations because
its activity essentially can be restricted to the efforts of the individual.
Although conducting a business as a sole pro- prietor, a consulting engineer may have several employees. Thus, as an employer, the consulting engineer is operating a business and has to handle the problems associated with a business enterprise. Also, because consulting engineers represent the legal entities conducting their businesses, they are
responsible for all obligations of a business and all contracts are entered into in their names. Consulting engineers are personally responsible for all debts and can be liable for these to the extent of all their assets, business or personal. All pro?ts, however, are earned by the consulting engineers, and they are not required to distribute earnings, as
in a partnership, or be concerned with the declaration of dividends, as with a corporation.
Partnership n Another form for a consulting engineering organization is a , that is, an
association of two or more professionals who combine forces and talents to serve their
clients on a more comprehensive scale and, by offering more services, to serve a wider clientele. Typically, each partner is responsible for a speci?c area. The management of the business, depending on its complexity, is assigned to one partner, the.
A partnership retains the identity of the individual professional, and basically its legal
structure is similar to that of the individual proprietorship. Instead of one individual assuming all contractual obligations, liabilities, and earnings, all pro?ts are shared by the partners. The partners, however, may not necessarily share equally in the business. Interest can be worked out among the partners as desired. For instance, one partner may
own more than 50% and thus have a positioncomparable to that of the majority stockholder of a corporation.
Partnerships, although once predominant in the engineering profession as in other ?elds, such as architecture, accounting, and law, are rarely used. Most large engineering organizations that operated as partnerships have reorganized into corporations. From the business point of view, partnerships have several disadvantages that cause many
?rms to incorporate in states where such corporate practice is not restricted.
One disadvantage of partnerships is that each partner is legally liable to the extent of total personal assets for the wrongful act of any partner in the ordinary course of business. Another disadvantage is that a partnership terminates on death or retirement of one partner unless other provisions are made in the partnership agreement. Furthermore, a partnership does not have the ?exibility of a corporation for comprehensive employee-bene?t programs and provision for key employee participation.
Although a partnership as an entity does not pay taxes, the partners as individuals pay taxes on the pro?ts. This is not necessarily a disadvantage, but it can be a prime consideration in the choice of an operating organization.
Also, although a professional cannot limit per- sonal liability for professional errors or omissions in a corporate structure, the proliferation of litigation in the industry hasmade itmore advantageous for engineers to operate as corporations or as Limited Liability Partnerships (LLPs) or Limited Liability Corporations (LLCs) rather than individual proprietorships or partnerships.
Corporations Most ?rms with several employees practice either as general or professional corporations (PC), depending on the laws of the state in which they practice. Practitioners who perform engineering in more than one state must take into account the variation in states requirements, to ensure compliance not only with professional requirements (licensing) but with business practices (registering to do business, certi?cation, and tax ?lings). Most states permit the formation of professional
engineering corporations. But usually a corporation can be formed for the purpose of practicing engineering only under certain conditions: ownership and management of the company must betotally vested in professionals or, at least, majority interests be held by professionals.Many states have passed legislation permitting the formation of such
corporations to give professionals, not only in engineering but in other professions, the bene?ts and protection of conducting business as a corporation. Although permitting such corporate practice, the legislation includes requirements so structured that the public is protected fromunquali?ed persons conducting a professional practice under a corporate guise.
With such protective requirements, professional identity can be maintained in corporate practice. Therefore, if conditions warrant and state law permits, engineering organizations should consider the corporate form of practice. The advantages that are attained, however, are mainly business ones. The management structure of the organization is clari?ed. Responsibility is de?ned. The area of employee fringe bene?ts becomes more diversi?ed. Opportunities exist for pro?t sharing, for realistic retirement plans, and for employees to
buy into the ?rm. Also, the principals personal liability is limited to the assets of the corporations although the principals continue to be responsible for their own professional acts and cannot use the corporate structure as a shield from liability for professional errors and omissions.
Each form of practice has to be evaluated on its ownmerits. A corporate structure for an individual practitioner with a small practice may not be warranted, but one with a large volume of business that can be assigned to subordinates may ?nd a corporation advantageous. For some ?rms, the tax advantages of a corporation may be more bene?-
cial than operating as a partnership. (For federal income tax purposes, a small business corporation, meeting certain requirements, can elect to be taxed as a partnership, a practice advantageous for a small corporation.)
Limited Liability Companies and Partnerships The majority of states provide for the formation of limited liability companies (LLCs) and partnerships (LLPs). Statutes provide
for the formation of LLCs for most business purpose except special areas, such as banking and insurance for which there are other controlling statutes. Professional limited liability companies (PLLCs) can also be formed. Members of a PLLC,however, must be registered professional engineers.
As the name implies the objective of doing business as an LLC and LLP is to limit liability.
Members, managers and agents of such entities are not personally liable for debts, obligations, and liabilities of the LLC or of each other. However, members, managers and employees of an LLP are personally liable for negligent acts (professional errors and omissions), as in any professional business entity. There is no business shield for
any professional for professional misconduct or negligence.
The advantages of limited liability entities as compared with other business forms of organizations are the unique combination of limited liability and pass through taxation. Namely, taxes are only incurred at the ownership level not both for the business entity and for the distribution of pro?ts (dividends).
Organizations conducting business as general or professional partnerships, or S corporations may ?nd LLCs, PLLCs and LLPs to be advantageous business structures. Consideration, however, must be given not only to the laws of the State where the business entity is organized but also to other states where the business is to be conducted.
By : E-book Standard Handbook for Civil Engineers
