It’s no longer ‘Business as Usual’.
The days of ‘business as usual’ are over. Today we demand cars with greater gas mileage, absolute warranties the product outlives and buildings that use less energy than ever before.
Let’s look at construction. How comfortable are you with building a petrochemical cracking plant awarded to lowest bidders that have limited experience and use the same safety manuals and quality manuals for the last 20 years? This could give new meaning to construction defect for the surrounding community. That is business as usual.
The challenge is in five areas: claims/losses, safety, quality, contracts, and trade (sub) contractor defaults.
The frequency and severity of claims in the US is more significant than in most other countries. What does this mean to you?
In the US, higher liability insurance limits are required, typically 300 – 400% higher than in most parts of the world. This would be in the range of $200 – $300 million during the construction phase and up to $600-$700 million during the operational phase depending on the project.
Has safety changed? Absolutely! The moral obligation is the same: however, the financial impacts have multiplied. The direct and indirect costs to the construction industry are in the billions of dollars now.
Quality has changed. The conflicts of performance contracts, value engineering, product substitution, early procurement and delivery, and inadequate auditing have raised the bar to new heights.
Contracts have changed dramatically. Instead of constructing with planned efficiency; just pass the problems, costs, rework, non-conformity, non-payment, whose insurance will pay first until exhausted, bond recalls, and bankruptcies downstream through risk transfer.
The average value of subcontractor defaults, covered by insurance and subject to retained deductible and co-payment conditions, is approximately $2 million and constitutes 80% of the original subcontract value of the work. In extreme cases, subcontractor defaults run a multiple of two times the original subcontracted value.
Green building, (a $60 billion market estimated for 2010), and Building information Modeling (BIM), sets new, untested standards for the construction industry. Litigation is expected. Are we ready?
The solution is a detailed, adaptable, ongoing system. CSQS’s SafQual Methodology is the solution all of our clients need to succeed for the future. It is the systematic process approach that changes from guessing that it is right to a holistic approach to knowing that it conforms to the regulations, plan and specifications.
Ask us to help your clients succeed. All of our livelihoods will depend on it.
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