Risk management strategies before, during and after construction

By Don Neff | January 2, 2006

The construction-defect wave of the past decade has demonstrated that a comprehensive litigation risk management program must address a project’s needs at pre-construction, during construction and at post-construction and involve multiple facets of the developer’s organization. This article will address the residential sector, though many of these concepts are equally applicable to commercial properties. The difference is that litigation tends to arise more often from residential than from commercial owners.

Pre-construction procedures
The first component of pre-construction is defined by the design and purchasing processes. Clearly, this encompasses a thorough peer review of architectural and engineering plans, specifications and trade contractor scopes of work. Through these critical front-end documents builders can assure that the proper industry standards of care are integrated into their processes and contracted for prior to actual construction.

A diligent peer-review effort must focus on the major risks of litigation, which vary with the product type, from wood-framed, one- and two-story, single-family homes to wood-framed, four-story podium condominium projects to concrete and steel high-rise condominium towers. Each has a slightly different risk profile. Single-family homes, for example, require attention to concrete foundations, structural framing and water intrusion risks. Higher density podium and high-rise projects carry these same exposures, plus acoustical assemblies and common-area improvements as litigation risk elements. Acoustical assemblies include floor-ceilings, common or party walls, plumbing and mechanical elements. Potential water intrusion issues surround all windows, walls and roofs (above grade) and foundations (below grade).

The architectural plans and related construction documents must review all of these components to assure that details are properly designed. Once designed and specified, they need to be properly purchased in the buy-out process through trade contractor scopes of work.

During construction: field operations
The second aspect includes peer review of field construction practices, including inspections, mock-up testing and documentation of actual conditions and component performance. Defining the selection of a representative or statistical sampling of the homes and assemblies within those homes is critical to assuring that actual construction is consistent with the plans, specs and trade scopes reviewed previously.

Extraneous, unwanted sounds or noise pollution can be accentuated in higher-density, attached residential projects. Much of the problem noise can be traced to three sources: outside vehicular traffic; internal water movement (supply and waste); and voice or footfall sounds through the floor-ceiling and common wall assemblies. Specific to real-time testing on acoustical matters, for example, one needs to observe and document representative wall and flooring assemblies to establish the actual performance and consistency with the Sound Transmission Class and Impact Insulation Class measurement requirements and industry standards of care. Such a report in a builder’s files will help defend the performance of the installed design solution against a legal challenge.

Relative to water intrusion issues, the common practice of using commercial storefront windows in mid- or high-rise residential condo towers can be a recipe for failure, depending upon the design and assembly details of window frames and joint work. Adjacent yet discontinuous (non-interlocking) frames in a butt-joint configuration tend not to seal well. If light shows through these joints common with store-front assemblies then water and moisture will travel through also. This clearly supports the need to conduct mock-up testing of the window-wall designs and their installation. High-rise towers are subject to greater environmental stress due to wind pressure, suction and deflection. As such, windows in these buildings must achieve higher performance standards than those with smaller podium buildings.

Post-construction maintenance
The third aspect, post construction, clearly focuses on maintenance obligations associated within the individual unit (private, exclusive-use areas) and homeowner association (HOA) common areas within the completed project improvements, be they buildings and hardscape or irrigation and landscape. These maintenance obligations are played out over either a short-term horizon of less than one year, or a longer-term horizon over many years.

A comprehensive maintenance program is not created and implemented in a vacuum, but must embody a conceptual partnership across several industry specializations: development, construction and property management. In addition, legal aspects, cost accounting and warranty-service components are integral to achieve success.

What is critical is not simply providing a set of HOA maintenance manuals as a reference tool for the property management company and board of directors. Diligent implementation will require properly drafted language in the Conditions, Covenants & Restrictions to integrate procedures for maintenance inspections with completed checklists that are returned to the builder. This will assure maintenance activities have been implemented and that deferred maintenance is not a risk.

Training considerations
The final consideration in packaging a construction litigation risk management strategy is comprehensive training for field and office personnel on technical construction assemblies. Such training touches upon several critical components of the development and construction process, beginning with an overview of the relationship between quality control and litigation prevention.

A logical extension to this is an industry response that organizes an effective field personnel educational/training effort for those high-risk components such as foundations, structural framing, weatherproofing, mechanical systems and interior finishes. In this regard, while it is important that the trades and field superintendents know how to install assemblies correctly, it is just as critical to address why they install the assemblies the way they do. Theory and practice are symbiotic partners in this process.

Builders throughout the U.S. have begun implementing programs such as those outlined here. The “proof is in the pudding” these progressive companies are achieving substantial success in reducing or eliminating construction-defect litigation and dramatically raising the quality of their end-product.

Don Neff is president of La Jolla Pacific Ltd., of Irvine, Calif., a provider of third-party peer-review and quality assurance services. He may be reached at drneff@lajollapacificltd.com.

Topics Lawsuits Training Development Construction Risk Management

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