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12 August 2010
This Guideline has been prepared by the Ontario Association of Architects (OAA), to assist members and practices in understanding the issue of conflict of interest as it relates to the provision of architectural services and construction services.
It is the position of the OAA that construction services should not be provided through a Certificate of Practice in Ontario. While the OAA does not discourage members from pursuing other avenues of business such as the provision of construction services under a separate entity, it is also the OAA’s position that in the traditional Design-Bid-Build situation there is an inherent conflict of interest in a situation where construction services are provided by an entity in which a member is involved where that same member is also providing architectural services in respect of the same project. This conflict is described below.
Sub-section 42(16) of Regulation 27 under the Architects Act states that it is “professional misconduct” to have a conflict of interest. Sub-sections 43(1)(c), (d) and (e) all provide specific and particularized examples of conflicts of interest regarding construction services.
“43. (1) A member or holder has a conflict of interest where the member or holder or an officer, director, partner or employee of the member or holder,
(c) has a direct or indirect financial or other interest, whether personal or otherwise, in or with a person, firm, partnership or corporation that is the owner, contractor, subcontractor, construction manager, design-builder or project manager of a building project with respect to which the member or holder provides architectural services;
(d) has a direct or indirect financial or other interest in a contract or transaction, other than the agreement between the architect and the client, to which the owner, contractor, subcontractor, construction manager, design-builder or project manager is a party on a building project with respect to which the member or holder provides architectural services;
(e) has a direct or indirect financial or other interest, whether personal or otherwise, that may adversely affect the judgement of the member or holder as to any question that may arise on a building project with respect to which the member or holder provides architectural services; or…”
Conflict of Interest
It is the position of the OAA that a conflict of interest exists where the architect is engaged to provide both architectural and construction services on a project. It is extremely difficult to be impartial in such circumstances. As the architect’s duties often include responsibility for certifying the value of work and advising the owner on the quality of work of a constructor, it creates a “conflict of interest” to act in both capacities. The specific conflict of interest is addressed in sub-section 43(1)(c) of the Regulation, as noted above. While the conflict appears to be currently manageable pursuant to sub-section 43(3) of the Regulation, architects, through experience, have found that conflicts of interest can arise through an architect having any contractual relationships or financial interest outside the client/architect contract which might affect their ability to exercise impartial professional judgment with respect to their duties under the contract.
If an architect finds himself/herself inadvertently in a position of conflict, he/she shall promptly notify the parties and be prepared to withdraw from the relationship with one or both parties unless he/she receives the written consent of both to a continuance.
If an architect proposes to engage in a relationship which may possibly give rise to a position of conflict, it is advisable to discuss the proposed arrangement in confidence with an OAA Practice Advisor or the Office of the Registrar.
Professional Liability Insurance
With respect to professional liability insurance, architects are advised to review their coverage carefully with Pro-Demnity Insurance Company and any other insurer prior to entering any unusual or special contractual obligations to ensure that their protection is not inadvertently voided.
Professional liability insurance covers “errors, omissions or negligent acts in the provision of professional services to others”. Coverage applies to the services that would be considered “usual and customary” for architects operating within their recognized professional sphere of expertise.
A professional liability insurance policy will NOT extend coverage beyond professional services / advice provided by the insured. That means it will NOT cover the actual performance of the construction work by the constructor, including any defective, inadequate or incomplete construction or construction not conforming to the contract documents.
There is a wide range of services and activities that may be characterized by one entity or another as “construction services” ranging from an entity with construction expertise acting as an additional consultant retained by the owner providing only professional advice related to the construction (CCDC 5A - 2010 Construction Management Contract – for Services) through to activities that are akin to those of a general contractor delivering the actual construction of the project (CCDC 5B - 2010Construction Management Contract – for Services and Work.)
The risk to architects providing construction services in conjunction with their professional architectural services is illustrated where the architect, often without realizing it, fails to maintain an arms-length relationship with the construction process, thereby compromising their professional liability insurance. For example, no coverage will apply for the review or approval as an architect of your own work as a contractor.
Regardless of the scope, most available descriptions of construction services anticipate that the “consultant” (architect) is a different entity from the constructor, construction manager, or design-builder on any particular project. Maintaining that “arms-length” distance will help architects avoid any risk of loss of coverage.
Do not hesitate to contact your professional liability insurer(s) should you have any concern regarding your insurance coverage.
If you are concerned about any of the information provided in terms of the provision of services under your Certificate of Practice or under existing business relationships, it is recommended that you take time to review these guidelines.
In the industry the term “Construction Management” is used and is an alternative contracting method used in the construction industry whereby the construction manager acts as advisor / agent for the owner. This entity provides construction site management, administrative and technical services as it pertains to construction issues only. Construction services can be provided in both the design and construction phases of a project or provided during construction only.