By: Ronald W. Brenke, PE
A recent story by Eric Lawrence, Detroit Free Press, relied heavily on a study by Dr. Rolland Zullo of the University of Michigan Dearborn to conclude that it is more cost effective to complete engineering services by government workers versus the private sector. Unfortunately, Zullo’s study is severely flawed in its methodology. For example, Zullo concluded that Michigan’s use of private sector firms cost the state $90 million more than if the work was done solely by MDOT employees. However, the study fails to include a multitude of government costs in its comparison, including facility costs, executive, supervision and administrative costs, paid time off and non-project related time spent by project staff. A similar study completed by the NYU Tandon School of Engineering in 2016 used a comparable model to Zullo but considered these variables across 28 states. It found that overhead costs averaged 40% of direct wages, not 10% as “assumed” in the Zullo study. Factoring in these and other costs, NYU reached the opposite conclusion and estimated the total annual average cost for a DOT engineer was $272,684 versus $217,020 for private sector firms.
That being said, simple cost comparisons cannot accurately measure actual value in delivering design services to the public. As stated in the NYU study, the real value in using the private sector in partnership with public agencies is in what the numbers cannot tell you. It’s in innovation, efficiency, timely project delivery, sustainability, and project success (including costs). As transportation funding fluctuates over time, the private sector helps to supplement DOT staff to get projects off the planning desk and into the real world. The key word here is supplement, not replace. Private sector firms seek to provide their expertise in coordination with talented state DOT employees, while under the watchful eye of government oversight. Competition in Michigan between engineering firms is fierce and the DOT and taxpayers are the beneficiary of this competition.
Private sector engineering firms have brought many innovations to Michigan and are often used to design complex projects, accepting the risk for any design errors or omissions. It is also important that we do not lose sight of the fact that these firms employ people who live in the communities they work to improve. Those salaries are reinvested into the community and support the local tax base.
In the end, leveraging the knowledge and expertise of the state’s engineering industry to deliver MDOT’s transportation program is a benefit to all Michiganders. The engineering consultant community brings lessons learned from projects around the globe, to improve technology, delivery methods and efficiencies. Having a healthy, highly-sophisticated private industry to supplement MDOT’s workforce has and will continue to be the best recipe for success as we work to fix the roads.
Published by Detroit Free Press 2/22/2019
By: Frederick F. Butters, FAIA, Esq.
You may have heard of a lien being referred to as a “mechanics’ lien”. That term owes to the fact that the legal underpinning behind a lien claim derives from origins of the law. As automobiles became more prevalent so did the need to repair them. The auto mechanic faced a difficult question when faced with a customer who refused to pay for repairs. If the mechanic allowed the owner to take the vehicle the odds of payment dropped to zero. However, if the mechanic retained the vehicle a claim for conversion (the civil version of theft) likely followed
The legal answer was to afford the mechanic lien rights. The mechanic could retain the vehicle by asserting a right to the value the repairs added, in effect claiming part ownership in the vehicle as necessary to secure payment. That same thinking was adopted in the context of construction liens; hence the reason the term “mechanic’s lien” is sometimes used to describe the process.
Inherent in the lien concept is the notion that the work has actually added value to the property. Obviously a vehicle repaired so that it is in running condition has value a vehicle that won’t run doesn’t. In the case of design services the added value isn’t quite so apparent. As such, the traditional lien laws have required actual physical improvement to the realty in order for a lien to attach. Therefore, where a design professional claims a lien but no actual work ever occurs, the lien would never attach and the lien would be unenforceable. That was particularly problematic since the design professional is the first to be engaged as without a design there can be no construction. In instances where the project didn’t proceed to construction, the design professional had no effective lien.
Senate Bill 465 (“SB 465”) addresses that failing. Once it became law, a design professional lien may attach to the realty even if no actual construction ever occurs. In specific, there could be two scenarios under which a lien could attach. Each is addressed as follows;
Actual Physical Construction / Improvement Occurs; In the event actual physical construction or improvement occurs, nothing changes. In order to keep all liens arising out of the design and construction process equal, all liens attach on the date actual physical construction commences. This is the current law, and that does not change presuming actual physical improvement occurs.
Actual Physical Construction / Improvement Never Occurs; In the event actual physical construction or improvement never occurs the design professional’s lien would still attach provided the design professional has complied with the requirements set out in SB 465.
With SB 465 effective, the design professional must now record a “Notice of Professional Services Contract” in the chain of title (actually that is now a precursor to any claim of lien by a design professional in every instance). If the design professional has taken that step and no construction / improvement ever occurs, any the lien will still attach effective on the date on which the notice was recorded. Although recording is a necessary step, it isn’t difficult or costly, and the required form (as is generally the case with all lien forms) is itself set out in the statute
In addition, to address some of the opposition from lenders and land title insurance interests SB 465 adds a requirement that a design professional have a written contract in order to make a lien claim. While perhaps not universally practiced, securing a written contract for any design services is certainly always a wise practice. While a breach of contract claim in the event of non-payment is still possible without a written contract, lien claims by design professionals no longer are. Similar requirements apply to sub-consultants, with the exception being their engagement and contract must be approved by the Owner in order for the lien to attach. In addition, a Notice of Design Professional Contract must be recorded by the prime design professional before a sub-consultant may record its notice.
The question then becomes whether a lien will attach to the interests of the Owner or whether its effect is limited to the interests of the person or entity contracting for the design services. Under the prior law, where a design professional has a contract with a tenant or a developer who only held an option on the realty, the lien would only attach to the tenant’s lease or the option unless the tenant or developer was acting as an agent of the Owner.
The new law clarifies the process for design professional liens and plugs a hole in the lien law but it also adds a number of other logistic changes the design professional who seeks to claim a lien must be aware of and must comply with. By reducing the process to statute, a significant portion of the litigation surrounding lien claims will hopefully be eliminated.
SB 465 passed 38-0 in the Senate and 105-4 in the House, by all accounts a massive majority. Although legislation typically takes effect 90 days after the end of the legislative session in which it passes, it may also be given immediate effect if it receives a 2/3 majority on an immediate effect vote in both chambers. The bill passed an immediate effect vote and became effective when it was signed by the Governor and filed with the Secretary of State on December 12, 2018.
This article is offered for general education and information only. Always consult with an attorney knowledgeable in the specific area of law applicable to your specific issue before making business decisions as how you should proceed.
 In a perfect world design services would simply be defined as an improvement. That approach would have dramatically clarified the law and while it would fall in line with the traditional design professional thinking, a change that drastic would not have been politically palatable. Legislation unfortunately often disregards the ideal and becomes an exercise in the “art of the possible”
 That requirement was a long standing feature of Michigan lien law, first established in Norcross Co. v. Turner-Fisher Associates, 165 Mich. App. 170 (1988). While an agency can be established by the express terms of a contract, it generally depends on the facts of a particular case – specifically the extent to which the Owner controls or dictates the specific activities of the person or entity contracting with the design professional. That will not change.
 An immediate effect votes is provided for in the Michigan Constitution at Article IV, Section 27
© Copyright Frederick F. Butters, 2018
all rights reserved
Frederick F. Butters, FAIA, Esq.
Frederick F. Butters, PLLC
Attorney at Law
Comprehensive Legal Services for the Design and Construction Professional
26677 West Twelve Mile Road
Southfield, Michigan 48034
(248) 357-0832 (fax)
(248) 514-4694 (cell)
By Ronald W. Brenke, P.E., Executive Director
I have to admit it was discouraging to see Proposal 1 fail after a lot of hard work by many members of the Safe Roads YES coalition. But the vast majority of Michiganders did not like what was offered – period. Now it is time for the legislators to show leadership and find a long-term funding solution that will fix Michigan roads. No gimmicks and no complicated proposals that need approval by the voters. Many of voters already felt resentment this issue was punted to voters in the first place, let’s not try that again.
Another common theme heard from taxpayers is a general lack of trust with state government. Again, it is time for the legislature to provide a solution that will help regain the trust of the public. No more hand-picked projects by legislators who want to get re-elected. MDOT and local governments have done a great job implementing an asset management system that they know precisely which roads and bridges need to be fixed first and the type of fix that is needed. Provide the funding and let the professionals use the tools they have to improve the quality of our transportation system based on science, not on politics.
We must act now. Every day we delay sufficient funding, it will cost taxpayers more to fix our roads. Some 23 other states have taken the step in the past few years to increase the investment in their transportation system. Many solutions have been simple gas tax or registration fee increases, but they all have found a way regardless of the makeup of their legislative bodies. Michigan needs an infusion of funding now – so let’s keep it simple and get it done. We can discuss other alternative solutions while we begin to repair our roads and bridges – but waiting is not an option.
Safety is a concern and should not be taken lightly. Poor roads affect so many people in so many ways. Whether it is a first responder, a farmer trying to get his/her grain to market, a school bus full of children, or just a motorist trying to get to work, many of the roads are in poor condition and people are becoming more at risk of getting injured on Michigan roads.
So let’s get this done while the state budget is being developed. No summer break until a solution is found. Legislators have a golden opportunity to get the job done and win back public support. They must show leadership and do what is right for Michigan.
By: Ronald W. Brenke, P.E.
The temptation for municipalities to select design professionals based on the lowest bid for their infrastructure improvement projects has grown as public agencies struggle to absorb budget shortfalls. Unfortunately, many officials soon discover that trying to cut corners on engineering and design is not in the long-term best interest of the project or the community.
Design professionals (engineers, architects, etc.) have the greatest potential to influence the short and long term success of a construction project. Although engineering fees typically account for less than 5% of a projects lifecycle costs, the final design can have a significant effect on the remaining 95% of a project’s costs for construction, operation and maintenance.
Furthermore, the time to implement the best solutions is during design, not during construction or later. The costs to implement changes are the lowest during design.
Because a quality design has such a major effect on a project, selecting a design professional should not be taken lightly. All architectural & engineering firms are not the same and owners should review qualifications, experience, and past performance to ensure they are hiring the right firm for a given project. A decision based on price alone excludes many other important factors that bring quality and long term viability to a project. For instance, innovation and the use of new technology can result in major cost savings for a community. A design professional that delivers concise project drawings and specifications can reduce change orders and costly litigation.
Procuring design professionals using a qualifications-based approach also gives owners an opportunity to interview the firms before selection. Owners can experience first-hand how the firm communicates and can ask questions that would not be afforded under a low bid process. After you make your selection, you have the benefit of developing a detailed scope of services with the professional so that each party is clear on what is expected. This will improve trust, reduce misunderstandings, and will ultimately get the best price because costs are not added for unknowns and uncertainties.
Municipalities should review their procurement policies to ensure they are not treating professional services like a commodity. Buying office supplies is not the same as hiring an engineer, and the procedures should reflect the difference. When you hire a design professional, you are buying their knowledge, expertise and experience. Caution: if you select your professional based solely on the lowest price, you may get what you paid for.
“It is unwise to pay too much, but it’s worse to pay too little. When you pay too little, you sometimes lose everything because the thing you bought was incapable of doing the thing you bought it to do.”
-John Ruskin (1819-1900)