Case 99-3: Engineering Review for Prospective Buyer

The following is a summary of visitor responses and comments on the case study presented on the Web site between July and September, 1999. It is intended to be a factual portrayal of trends and individual comments without editorial input from EERI staff.

Review The Situation:

New Properties, Inc. is considering purchasing an apartment building located in a region of high seismicity. They are informed that the building had recently undergone a seismic rehabilitation, and they contract with ABC Engineers to review the work done for this upgrade and to assess the building in general. A senior structural engineer reviews the drawings and conducts a field inspection. He notes that the rehabilitation work was performed by Reasonable Engineering, a structural engineering firm known for its "competitive" fees and "liberal" designs. This competitor has recently been selected for several major projects that ABC Engineers had been pursuing.

The engineer finds that the other firm has selected a system that he believes is entirely inappropriate considering the characteristics of the building. The details of construction were clearly developed to minimize both the impact on the existing building and the construction costs. He believes that the rehabilitation not only fails to improve the seismic safety but may, in fact, have made it worse. In the event of moderate to severe ground shaking, the building continues to pose a significant threat to life. The engineer presents the situation to several principals in his firm, and they all concur with his assessment. The engineer summarizes this situation for his client in a letter report. Based on this information, New Properties decides not to purchase the building. They tell the engineer that they have no objection to his disclosing the results of the investigation to any other interested party.

How should ABC Engineers proceed?

Response Summary:

If the responses had a common theme, it would be this: It is important for ABC Engineers to keep the situation discrete and not jump to quick conclusions that could be damaging to the other engineering firm. Many readers stated or implied that public disclosure should only be used as a last resort.

The readers tended to describe two primary courses of action. First, both the building owner (different from ABC’s client) and Reasonable Engineering should have an opportunity to review the findings and discuss the situation with ABC Engineers. If an adequate conclusion can not be reached, a neutral third party should be engaged to provide an unbiased review of both the report and the retrofit design.

A small percentage of readers felt that ABC does not need to take any further action as they had fulfilled their obligations to their client. These readers raised concerns about initiating premature and potentially damaging claims regarding the prior upgrade work.

Possible Actions:

The following is list of possible actions that ABC Engineers could take. Rate these choices on the following scale based on what you think would be the best action considering the interests of all stakeholders. There is space for reader-suggested actions at the end.

5 — Strongly Agree 4 — Agree 3 — Neutral 2 — Disagree 1 — Strongly Disagree

  1. The firm could do nothing. They have completed the work as requested by their client and have no further obligations. Average Rating: 2.4
  2. The engineer could discuss the matter with a trusted associate or colleague in a different firm who may have a different perspective or opinion on the rehabilitation strategy. Average Rating: 3.7
  3. The engineer could discuss the matter with Reasonable Engineering or send them a copy of the report. Average Rating: 3.3
  4. The engineer could send the report to the apartment building owner and their real estate broker. Average Rating: 3.0
  5. The engineer could send the report to the local building official. Average Rating: 3.4
  6. The engineer could send the report to a local professional society for review by their members. Average Rating: 2.7
  7. The engineer could send the report to the Board of Registration for Professional Engineers for their review. Average Rating: 2.5
  8. The engineer could make their findings public through some form of the media. Average Rating: 1.6

Readers were asked what additional information would have put them in a better position to pick an alternative.

Based on the readers’ comments, the following is a listing (in no particular order) of relevant information that would have helped ABC Engineers make a better decision:

  1. Are there any relationships between the ABC and Reasonable Engineers that could have been utilized to facilitate a discrete discussion of the situation?
  2. More detailed information on the risk level associated with the building. E.G. is there imminent danger?
  3. What were the objectives and/or criteria for the prior upgrade? What were the owner’s expectations?

Readers were then asked to offer a suggested course of action for the engineer. The following is a brief summary of the suggestions. As is the nature of ethical dilemmas, there is no right or wrong answer, and many courses of action could be considered equally valid depending on individual values and/or interpretation of events

Most respondents suggested that ABC Engineers should follow up on the situation. A small number noted that no further action is required, but many suggested actions that imply that ABC does, in fact, have an ethical responsibility to at least inform the building owner of the situation.

Respondents suggested a large range of actions, most of which fit into four broad categories.

  1. From the beginning, it is important for ABC Engineers to be discrete and not jump to conclusions. Discussions with colleagues, the building owner, or other parties should be kept private and non-alarmist so that premature and potentially damaging claims are not made public before all the facts are in.
  2. The building owner should be informed of the situation and Reasonable Engineering should have an opportunity to review ABC’s findings and offer explanations and justifications for the design.
  3. A neutral third party engineer should be engaged to review the upgrade design and ABC’s findings. Several respondents noted that this was important to "ensure neutrality and demonstrate prudence." This third party could be the local regulatory agency.
  4. Only a small percentage of readers stated that ABC should take no further action. ABC had sufficiently served their client, and the readers indicated concern over raising potentially damaging allegations against the other engineer.

Comments on Questions for Further Thought:

Finally, readers were asked to respond to the following two questions:

Does a structural engineer have a professional obligation to disclose potential seismic risk? What steps should be taken to ensure that the engineer is not making a premature judgement? How far should an engineer go in attempting to disclose risk?

All readers who responded to this question indicated that the engineer does have a responsibility to disclose risk. About half of these narrowed their response to include that the primary obligation is to the engineers’ clients. A few stated that the obligation is only to raise concern over a potential problem and direct the building owner to pursue the nature of the risk. The standards for public disclosure are much tighter. Many respondents stated that public disclosure should only be used for situations involving imminent risk and where the engineers are completely confident in their understanding of the problem.Nearly all responses for the second part of this question indicate that some sort of review – from an internal review to discussions with colleagues at outside firms to an official peer review – should be made prior to disclosure.

Almost all responses for the third part contained the word "reasonable" or "judgment," and many readers indicated that the extent of disclosure depends largely on the level of risk.

Do building owners and/or tenants have a right to know about the potential risks associated with their building.

All readers who responded to this question indicated that owners and tenants do have such a right. A few responses added that the owners also have an obligation to inform their tenants of potential risks.