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Claims happen.

Wednesday February 8, 2017      |      By: Ashley Garcia

Construction defects, contract termination, warranty issues … regardless if you’re an owner or a general contractor, claims are never fun.

As noted in our previous blog, according to Dodge Data & Analytics SmartMarket Report, “Managing Risk in the Construction Industry,” 77% of owners and 83% of GC’s have experienced a claim or dispute in the last 5 years. Claims happen and they happen to just about everybody.

But as an owner, what types of construction claims arise more frequently? According to the report, over half of respondents said that the most common types of claims arise from construction defects followed by warranty issues. And of the varying types of claims, 36% of respondents said that claims arising from construction defects are the most costly! So the most common type is also the most expensive type.

Construction defects affect all projects whether it’s public, private or public-private partnership according to Dodge’s research. But, what is interesting is that commercial properties and educational facilities are the most prone to construction defects.

Construction Defect:
A deficiency in the design or construction of a building or structure resulting from a failure to design or construct in a reasonably workmanlike manner, and/or in accordance with a buyer’s reasonable expectation.
1

Construction defects arise from deficiencies in how something is designed, built, operated or maintained. Essentially, these types of claims can happen at any point throughout a projects lifecycle, even after occupancy. Think about the Leaning Tower of Pisa. This is design failure at its core. Clearly, the architects and designers behind the Tower did not take into account the soil conditions.  This is why those initial brainstorming meetings, like we discussed in last week’s blog, at the onset of a project is so crucial. Claims can be avoided from the very beginning. In fact, 57% of owners said that formal brainstorming not only increased reliability in overall project performance but it also reduced the cost of construction and improved project schedule.

Here's another way to help identify and prevent claims. What if you could centralize all documentation such as field inspections, commissioning reports for equipment, etc. Storing all of this in one location makes finding the information easier and creates the documentation trail to measure progress during construction, prevent errors, or find them earlier. Progressive centralized inspection reports and having a historical record from older projects can help put processes in place to prevent future claims. The City of Norfolk, VA. was able to achieve this with the use of mobile devices. Hear how field inspectors are able to leverage the cloud to improve field processes in this on demand webinar.

1The international Risk Management Institute (IRMI)

 

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