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From a risk management point of view, insurance companies should evaluate whether web-based project management systems have the potential to reduce the frequency and severity of claims on construction projects.  If the use of these systems proves to be a good risk management tool, insurance companies may want to take this into consideration when underwriting coverage for construction projects.  Professional liability carriers, for example, currently adjust the premium if the insured participates in risk management training and practices.   Use of web-based project management systems may be worthy of similar consideration.

With the advent of web-based project management systems, project documentation is taking on a whole new dimension.  RFI’s, change order requests, various decision documents, drawings and other materials are being put on these systemes where all autorized project members can see them and respond to them.  This facilitates the quick and easy access of information to those who need it.  It also has the advantage of saving paper, postage, fax calls, express mail charges and other expenses.  The turn around time for response to RFI’s has improved dramatically as a result of these systems, according to some users.  This may be because of good organization of information making it easy to track, understand and respond to, or it make be because it keeps the spotlight on who is accountable for any particular response at any point in time.  In any event, it appears to be having a beneficial effect.

Some design professionals have expressed concern about the use of these sites, saying “Everybody will know what we are doing and whether we are responsible for delays.”  It certainly appears to be true that the information available on these sites will create a greater degree of accountability.  But does this necessarily equate to greater liability?  Perhaps not.  The web-based systems appear to facilitate improved communication and documentation that should reduce the likelihood of untimely resolution of issues causing delays and belated change orders.  As a result, it is possible that we will begin to see fewer claims.

Having said this, there are still several outstanding issues that need to be resolved before deciding to implement one of the web-based systems and before deciding which vendor’s system to use.  Issues that should be considered include the following legal and practical concerns:

* Electronic communication may create a contractual obligation (especially under the “E-Sign” law.

* If there is a dispute concerning the website content, what court has jurisdiction and venue?

* Will drawings get into the wrong hands and be misused?  How will they be protected from unauthorized revision and reuse?

* Who owns the data maintained on the site?  Who owns the website after job completion?

* If the web server goes down or goes out of business, and data is lost, who is responsible? What liability is there — by whom and to whom?

* Under one scenario it appears that project design is becoming a corroborative effort of multiple users right on the website. Who then is responsible for design errors?
And is there insurance coverage for this?

* How well protected is the data that goes onto the site?  Users apparently only get access to sections of the system for which they are specifically authorized.  Subcontractor’s for example, may be prevented from seeing the prime contractor’s financial data, if any. How reliable and safe is the firewall dividing access to the data is reliable and safe?

From speaking with vendors of web-based project management systems, it appears they are quite aware of the issues outlined above and are taking steps to address the issues. The importance of these issues gives emphasis to the importance of exercising due diligence in the selection process for a web-based project management system.

As this technology continues to change and improve, and as new vendors come into the market and others leave, it will important to proceed cautiously.  A project participant that does not own the rights to the web-based system, for example, may want to continue maintaining its own duplicate set of documentation as back-up for what goes onto the web-based system.  There is still much to be said for paper documentation.

A question that is frequently asked is: “How long should a design professional maintain copies of its documents, including drawings and specifications?”  Some A/E’s and contractors appear to maintain their records for an indefinite period of time if storage space permits, while others retain records only until the expiration of the individual state’s statute of repose.  This varies from state to state but is often between 6 to 10 years – sometimes more and sometimes less.  Of the records to be maintained, final plans, drawings and specifications are generally retained for the longest period (even beyond the statute of repose).  Correspondence, meeting minutes and other such records are sometimes discarded at the expiration of the statute.

Using electronic data and storage, it is possible to store all kinds of documents, including correspondence, Requests for Information (RFI’s), minutes, notes, and logs with relatively little effort for long periods of time.   Burning the data onto Compact Discs appears to better maintain the integrity of the data than does the use of floppy disks.  Because of the tendency for electronic data to lose integrity over time, however, it may be advisable to duplicate the disks periodically over the years of storage.  In addition, it is generally advisable to maintain hard copies of the final instruments of service in order to have a standard against which to benchmark any electronic files that may have been given to the A/E’s client or others.   In fact, retaining the hard copies may the best (or even only) way to protect against a client’s suit that alleges the electronic data is defective several years in the future.

An A/E firm recently suggested that instead of having to deal with hundreds of e-mail messages and questions, and instead of having to deal with electronic drawings and data, they wished they could just tell the owners and contractors to stick to the old way of doing business.  They feel more comfortable doing things the way they’ve always been done.  Stopping time, however, is not the answer.  And it’s not going to happen.  There’s no going back.  We are in the electronic age and should accept the benefits and promises it has to offer.  There will be problems and pitfalls along the way, but it should be worth the journey.

About the author: Article written by J. Kent Holland, Jr.,  a construction lawyer located in Tysons Corner, Virginia,  with a national practice (formerly with Wickwire Gavin, P.C. and now with Construction Risk Counsel, PLLC) representing design professionals, contractors and project owners.  He is founder and president of a consulting firm, ConstructionRisk, LLC, providing consulting services to owners, design professionals, contractors and attorneys on construction projects.  He is publisher of ConstructionRisk.com Report and may be reached at Kent@ConstructionRisk.com or by calling 703-623-1932.  This article is published in ConstructionRisk.com Report, Vol. 2, No. 11 (Nov 2000).

Copyright 2000, ConstructionRIsk.com, LLC