CHECKLIST FOR ENGINEERING FIRM ADDING ARCHITECTURAL SERVICES
Engineering Firms practicing in the AEC industry often consider adding Architectural design services to their offerings. This is often an exciting addition because it adds a stream of income to the firm and adds opportunities for cross-selling inside one organization. Adding architectural design services also adds, if implemented correctly, opportunities for enhanced design efficiency, making the engineering team’s work better suited to be integrated into architectural designs, since they can learn from the architects on staff.
However, adding architectural services to an engineering firm also comes with multiple regularity challenges that could lead to fines and license suspensions. The following is a checklist for PE firms that are looking to add architecture to their service offerings.
ENSURE YOU HAVE A REGISTERED ARCHITECT (RA) ON STAFF OVERSEEING THE ARCHITECTURE DESIGN PROCESS. Many States do not allow unlicensed teams to perform the main scoping, concept, and design drawings unless overseen by an RA. Some firms try to get around this legal requirement by having their internal staff perform the conceptual and design drawings and then send the drawings to a friendly RA to be stamped. These practices are often expressly forbidden by law, and if an AHJ discovers that a PE firm is operating in such a manner, that PE firm will be fined, and potentially lose its license.
ENSURE YOUR ENTITY MEETS THE OWNERSHIP REQUIREMENTS IN EACH STATE IT INTENDS TO OFFER ARCHITECTURE SERVICES. A state-by-state analysis is needed to see if the practicing entity needs to be co-owned by an RA, and the ownership percentage required. At times, to be compliant in one State requires the same firm to be out of compliance in another state. Such dilemmas require an expert AEC licensing lawyer to create a corporate entity structure that keeps the firm in compliance with each State it intends to offer all of its services. The attorney may create a related entity with a teaming agreement that allows the Firm to operate like one entity day to day but legally perform services as different legal entities that are structured to meet each State’s requirements. If you are unsure if you need such a strategy, schedule a consultation with an attorney at DRAI Services to help.
ENSURE YOUR ENTITY MEETS THE LEADERSHIP REQUIREMENTS IN EACH STATE IT INTENDS TO OFFER ARCHITECTURE SERVICES. Like the Ownership requirements, some States require that the RA assume a formal leadership position, such as being a corporate Director or Officer. This cannot be in title only; it must be backed up by the shareholder meeting minutes or amendments to the Operating Agreement depending on the type of entity. AEC licensing legal expertise is needed here to ensure your leadership structure is formalized and documented just in case your entity is audited.
FINALLY, ENSURE YOUR ENTITY UPDATES ITS PROFESSIONAL LIABILITY INSURANCE TO INCLUDE THE ADDED COVERAGE FOR ARCHITECTURE SERVICES. Insurance policies can be extremely specific. If you have not let your insurer know that you have added a new professional service, you could run into a coverage issue. You do not want to realize you are not covered for architectural services after claim is made. Further, if you have added related entities to your portfolio to meet the ownership and leadership requirements, ensure those entities are covered by your insurance as well.
Growing your firm to add more services is an exciting venture. You will be able to serve your clients better and bring more revenue in-house. However, adding a highly State-regulated professional service, such as architecture, comes with multiple compliance requirements. Using this checklist, along with an AEC licensing attorney, you can make sure you are covered. If you have any questions about whether any of the State and local rules apply to you or what, if any, changes you need to make to your organizational structure to comply with such rules, reach out to an AEC licensing attorney at DRAI Services here.