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www.NAEPnet.org. CONSTRUCTION AND RENOVATION. WARRANTY/GUARANTEE What Do You Get And When Does It Start? C. G. “Sonny” Jester Robert Ferguson and FTI Consulting Stan Scott Construction Solutions Hill International, Inc. Warranties and Guarantees.
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CONSTRUCTION AND RENOVATION WARRANTY/GUARANTEE What Do You Get And When Does It Start? C. G. “Sonny” Jester Robert Ferguson and FTI Consulting Stan Scott Construction Solutions Hill International, Inc
Warranties and Guarantees Type of Project Makes a Difference May seem like a “no brainer” But the differences are significant Critical Considerations • Type of delivery methodology • What drives your project? • Who provides the warranty? • And is it backed by anyone?
Where Does the Warranty Originate? • Cannot discuss Warranties without addressing several basic issues: • Contractual context • Start up and Commissioning
Begin at the Beginning • Must plan for the “end” before you kickoff the project
Actually, Not the End… Close out, Commissioning and the activation of warranties should be viewed as the beginning of the life of the project/systems… Not the END of the construction project It is a transition, and a very real risk shifting time in the life of the project
A Question of Degrees… Life Safety and HVAC on a dormitory Or Process/performance Guarantee on a bio-containment facility
3 Step Process • Quality Planning…do it right the first time • Quality Assurance…implementing what has been planned • Quality Control…monitoring specific objectives to ensure compliance with standards
Step 1 - Planning • “Look where you are going”
Commissioning of Systems • Not an “end of the job” consideration • But intimately connected to the warranty period • To be most effective, should begin at the Pre-Design stage • Don’t just focus on mechanical systems • What about your building envelope? • Roof systems and Curtain walls
Procurement of Equipment • This includes drafting the contracts • UCC considerations (not international) • If contract for the procurement of equipment does not address warranties and remedies, among other things, UCC provisions may be read into the contract • But note…Article 2 governs contracts for goods, not services • Design, installation, maintenance not covered?
Factors to consider in equipment procurement contracts • What happens to facility if equipment doesn’t work? • Underperformance? • How does equipment fit into construction of facility? • Time issues, interfaces • How is risk of loss (to or from equipment) allocted? • Who owns IP for equipment?
Equipment procurement factors continued • Who monitors performance specs? • Design Build? • Who tests for compliance? • What happens on failure? • Who provides the warranty?
Step 2 - QA “You wanted what?…”
QA Processes • Peer Review at Schematic Design phase • At 100% Design Development phase, conduct a System Coordination Review • Validate vs. spatial requirements, etc • Constructability Review at 70-100% Construction Documents • Before released for construction
Step 3 - QC “Nobody will notice…”
QC Processes • Identify and empower commissioning agent • Coordinate activities in a logical, sequential order • Gather operations/maintenance manuals • Gather and review control sequences and interfaces • Prepare pre-functional tests • On site observations
Start up and Warranties • As part of QC process • Plan for seasonal or deferred testing and correction • Review operation and related issues before end of the warranty period • 10 months? • More often or earlier?
Warranty Discussion Consideration of specific issues… When does the warranty start? What does it cover? Who provides the warranty? Criticality of the warranty? Damages recoverable?
It is important to note at the outset… That these considerations overlap in many respects.
Example of an early warranty… The Code of Hammurabi (1800 B.C.) 229 If a builder build a house for some one, and does not construct it properly, and the house which he built fall in and kill its owner, then that builder shall be put to death. 230 If it kill the son of the owner the son of that builder shall be put to death. 231 If it kill a slave of the owner, then he shall pay slave for slave to the owner of the house. 232 If it ruin goods, he shall make compensation for all that has been ruined, and inasmuch as he did not construct properly this house which he built and it fell, he shall re-erect the house from his own means. 233 If a builder builds a house for someone, even though he has not yet completed it; if then the walls seem toppling, the builder must make the walls solid from his own means
When does it start? Upon design? Fitness for a particular purpose? Upon purchase? Upon installations? Upon start up? Commissioning?
When does it start? What about the impact of: • Suspension • Delay • Force majeure • Occupancy and/or completion issues
What does it cover? Limitations and disclaimers Who is the “buyer” for notice purposes? Privity of contract Goods vs. services? Installation, maintenance
Who provides? Manufacturer? Distributor? Contractor? 2007 AIA A201 §3.5 Contractor’s work = free from defects Except: • Inherent in quality of work required • Defects due to abuse, alterations to work, bad maintenance, improper operation, normal wear and tear
Who provides? Contractor Manufacturer/supplier Subcontractor Insurance for same Impact of insolvency by any? Who should receive notice? Can you compel notice?
Who provides? Type of contract or delivery methodology make a difference? Design build Design assist EPC vs EPCM
Criticality of Warranty Is it a component system? Necessary for use and/or occupancy? Is it the reason for the project? Without the warranty/performance, what is the value of the project?
Limitations on what is recoverable? Economic Loss Rule -Repair or replacement costs of defective system, and lost usage, income, etc from delayed completion barred without privity? -Damage to other property or personal injury damages recoverable?
THANK YOU! QUESTIONS?
