1. John Santos
Claims Coordinator
University of Texas
Timothy D. Christ, M.B.A.
Director
LWG Consulting, Inc.
Liquidated Damages: The Penalty for failing to
achieve the impossible. Construction Defect/Delay
Response Strategies for University Risk Professionals

2. University Risk Management and Insurance
Association
Learning Objectives
1. Develop familiarity with various types of
construction defect/delay issues and the risks
they pose for colleges/universities
2. Have a basic knowledge of the common
construction defect/delay causes and best
practices for mitigating against such incidents
3. Be introduced to up-to-date insurance coverage
considerations, recovery options, and
OCIP/CCIP, other insurance policy
developments.
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3. University Risk Management and Insurance
Association
Lowest Bidder Video
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4. University Risk Management and Insurance
Association
Audience Experience with Construction Projects
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How many have had a project go bad?
How many have gone to litigation on a project?
What are the common reasons for problems?
Are there any unique state-specific or system-
specific challenges for construction projects?
What creative methods have you used to ensure
successful delivery?

5. University Risk Management and Insurance
Association
Contractor Failure Rates
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6. University Risk Management and Insurance
Association
Construction Statistics
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7. University Risk Management and Insurance
Association
Claims by Project Type
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8. University Risk Management and Insurance
Association
Common Construction Defects
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Faulty materials
Faulty workmanship
Faulty design
In many cases, the construction defect is a combination of
these 3 causes/reasons
The GC and their subcontractors may control 2 of the 3
causes/reasons:
Faulty materials
Faulty workmanship

9. University Risk Management and Insurance
Association
Bids and Selection Methods
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Bids
Open bids
Closed bids
Selection Methods
Low bid selection
Best value selection
Qualifications-based selection
Insurance rating for contractors and subcontractors

10. University Risk Management and Insurance
Association
Typical Construction Contracts
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Lump sum
Cost plus fee
Guaranteed Maximum Price (CM at Risk)
Unit price

11. University Risk Management and Insurance
Association
Project Stages
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Design
Programming and feasibility
Schematic Design
Design Development
Contract Documents

12. University Risk Management and Insurance
Association
Project Stages
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Pre-Construction
Assign project team
Project Manager
Contract Administrator
Superintendent
Field Engineer
Site Investigation usually takes place during this step.

13. University Risk Management and Insurance
Association
Project Stages
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Procurement
Labor, materials, and equipment
Aka “mobilization”

14. University Risk Management and Insurance
Association
Project Stages
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Construction
Pre-construction
Permitting
Site grading & utilities
Foundation
Steel erection
Form & Pour concrete
Carpentry
Masonry
Roofing
Mechanical/Electrical
Drying In
Elevators
Plumbing
Electrical
HVAC
Interior finish out
Commissioning
Occupancy

15. University Risk Management and Insurance
Association
Critical Path Method
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16. University Risk Management and Insurance
Association
Project Management
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Project Management/Site supervision
Weekly project meetings
Trade coordination
Shop drawings & submittals
Reporting and cost control
Preparing and submitting applications for
payment
Final inspections & Occupancy
Commissioning and Project Closeout

17. University Risk Management and Insurance
Association
Common Construction Defects
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 Building envelope and structure
 Door & window
 Exterior wall
 Roof
 Damp proofing and waterproofing
 Deck and balcony
 Infrastructure
 Drainage
 Compaction and structural
 Foundation Electrical and HVAC - condensation
 Plumbing and other leaks to internal systems – “wet walls”
 Sound, vibration, odor, vapor transmission and code compliance deficiencies

18. University Risk Management and Insurance
Association
Case Study
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19. University Risk Management and Insurance
Association
Case Study
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20. University Risk Management and Insurance
Association
Common Construction Defects
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Construction defects cause problems and result in
million dollar+ issues, but construction accidents
or deaths make the news.

21. University Risk Management and Insurance
Association
Construction Accidents
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22. University Risk Management and Insurance
Association
Construction Accidents
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23. University Risk Management and Insurance
Association
Construction Accidents
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24. University Risk Management and Insurance
Association
Construction Accidents
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25. University Risk Management and Insurance
Association
Construction Accidents
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26. University Risk Management and Insurance
Association
Case Study
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27. University Risk Management and Insurance
Association
Case Study
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28. University Risk Management and Insurance
Association
Case Study
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29. University Risk Management and Insurance
Association
Case Study
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30. University Risk Management and Insurance
Association
Case Study
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31. University Risk Management and Insurance
Association
Case Study
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32. University Risk Management and Insurance
Association
Case Study
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33. University Risk Management and Insurance
Association
Case Study
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34. University Risk Management and Insurance
Association
Case Study
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Conclusions
Lateral bracing was not correctly installed
Pier depths were not correctly installed
Space between shoring tower #5 and #6 was 45 feet,
which exceeded design specification of a maximum of
30 feet
Shoring towers #5 through #11 have heights exceeding
four times the minimum base width and were not guyed
or braced (Height to width ratio maximum was 1 to 4)
Toggle pins were main cause of failure

35. University Risk Management and Insurance
Association
Construction Defects
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36. University Risk Management and Insurance
Association
Case Study
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37. University Risk Management and Insurance
Association
Case Study
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38. University Risk Management and Insurance
Association
Case Study
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39. University Risk Management and Insurance
Association
Case Study
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40. University Risk Management and Insurance
Association
Quality
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Quality is an attitude
Quality is a journey, not a destination
Quality is everyone’s job
Quality is a habit, not an act
There are no half measures in the pursuit of quality
excellence --- you have to do it all
Quality is a new way of thinking, being and doing
Quality is so important it pays for itself

41. University Risk Management and Insurance
Association
Safety
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Safety is an attitude
Safety is a journey, not a destination
Safety is everyone’s job
Safety is a habit, not an act
There are no half measures in the pursuit of safety
excellence --- you have to do it all
Safety is a new way of thinking, being and doing
Safety is so important it pays for itself

42. University Risk Management and Insurance
Association
Quality & Safety
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Quality and safety go together
The best contractors with respect to safety
performance and risk transfer also had the
fewest claims

43. University Risk Management and Insurance
Association
5 leading indicators in quality management
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1. 100% material verification
2. Pre-install and first-work-in-place meetings
3. Zero defect program
4. Digital photography procedure
5. Pre-closure inspection sign-off procedure
including digital photographs

44. University Risk Management and Insurance
Association
100% Material Verification
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 For any material delivered to the jobsite, one of the contractor’s field
staff should physically compare the material to the approved material
submittal
 This ensures that unapproved materials are not used on their jobs
 This person can be an engineer or superintendent
 The GC should pass down this requirement to trade subcontractors,
by insisting that they give the GC on a daily basis, a listing of all
materials delivered to the jobsite with a certification that they meet
submittal requirements
 Spot check with the GC’s QC personnel that indeed the sub’s
materials comply with submittal requirements

45. University Risk Management and Insurance
Association
Pre-install Meetings & 1st
WIP Inspections
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 A proven technique originated by the US Army Corps of Engineers
http://rms.usace.army.mil/datafiles/rms_qcs_manuals/qcs_manual_2_38.pdf
 These are part of the Corps “3 Phases of Quality Control”.
 These meetings are held for each CSI division and subdivision
 It is basically “Plan the work and then work the plan”.
 The Pre-install Meeting reviews the specs, drawings, submittals and
manufacturer’s installation instructions and resolves conflicts and errors –
participants include the owner, designers, the GC and trade subcontractors
for that particular work or assembly. Minutes can be published.
 First Work-in-Place Inspections are held in the field to “fly spec” the first work
that takes place. Participants are same as above but includes the
manufacturer’s rep. Minutes can be published.
 Follow-on inspections are conducted by the sub and/or the GC’s personnel
or third party independent inspectors on a daily basis to ensure that work
conforms to the requirements.

46. University Risk Management and Insurance
Association
Zero Defects Program
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To complete the GC’s scope of work with a zero
punchlist at the time of substantial completion
To complete outstanding non-conforming items
during the course of the project within 7 calendar
days of notification of the existence of the non-
conforming work item
To receive the owner's recognition of the GC’s
zero punchlist accomplishments

47. University Risk Management and Insurance
Association
Achieving Zero Defects
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 Start the program at the beginning of the project
 Select a zero punchlist jobsite champion prior to mobilization to the
jobsite
 Insert zero defect language in all subcontracts
 Conduct a zero punchlist kick-off meeting with owner,
Architect/Engineers, the GC (OAC) and subcontractors
 Schedule weekly walk-throughs with the OAC project team and
update each team member on the results of the walk-throughs
 Publish punchlists weekly
 Hold punchlists to a handful of items and promptly correct them
within 1 week

48. University Risk Management and Insurance
Association
Digital Photography
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 Appoint a quality representative to train and implement this
procedure
 Label photographs within 24 hours
 Purchase a camera that allows audio files of what the photo is
 Jpeg images and audio file (wave file) are indexed together – no
need to transcribe voice files
 File photo’s in weekly albums plus a copy in a topical album, such
as, RFI’s, NCR’s and pre-closure
 If a photo of a NCR or punchlist item is taken, one must “clear” that
deficiency with a photo of the corrected condition
 Acquire photo management software to make retrieval easy is best
practice

49. University Risk Management and Insurance
Association
Pre-closure Sign-off Procedure
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 Appoint a pre-closure supervisor (engineer or supt.) to inspect and
enforce correction of deficiencies
 Build a 3-day “hold point” into the construction schedule for these
inspections
 Walk the area with the applicable trade subcontractors, electrical,
mechanical, etc.
 Trade subcontractors have 1 day to make necessary corrections
 Pre-closure supervisor inspects corrected work
 Pre-closure supervisor makes final walk-through with Owner and
Design Professional representatives
 Pre-closure supervisor takes digital photographs of every square foot
of wall/ceilings to be covered up

50. University Risk Management and Insurance
Association
Lessons Learned
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 Using an effective photo documentation process before areas are closed-in
or covered-up will assist in litigation
 “Prove your innocence, not defend your guilt”
 Take pictures of neighboring structures beforehand to assist in future
liability defense
 University of Texas’ “live 24 hour feed” for Southwest Medical
 Third-party inspection firms can/should be used to identify deficient areas of
construction
 Hire the best inspector, not just the lowest price inspector
 Flood test a representative sample of windows/door assemblies to determine
the quality of installations – 2.5% to 10%
 An effective warranty call-back process in place that quickly addresses post-
completion customer service issues will reduce litigation

51. University Risk Management and Insurance
Association
Lessons Learned
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 Have an effective document retrieval system for the time period of the statute
of repose where the work was completed
 If litigation, or threat litigation, it made - keep the records
 Document corrective actions made either prior to or after construction
completion
 Document “as-built” construction conditions – record drawings
 Select subcontractors based on past quality performance, not just price
 Provide adequate supervision of subcontractor’s installed work
 Hire the following consultants if the Owner does not:
 Waterproofing/roofing consultant
 Sound and vibration consultant
 Code compliance consultant

52. University Risk Management and Insurance
Association
Lessons Learned
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 CD claims happen to large and small contractors alike
 There is no project type that is immune from CD claims
 The majority of CD claims involve water in some way
 Contractors who only perform inspections required by the Owner or what the
building code requires will likely build projects with CD’s
 Insured’s that have a QA/QC program should reduce their CD claims
 Insured’s that have a QA/QC program should minimize rework
 Failure to construct mock-ups or 100% inspection of critical assemblies may
result in CD’s
 Implementation of a water intrusion prevention plan can reduce your
exposure to CD claims

53. University Risk Management and Insurance
Association
Quality Management Manuals
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 Ins.Co. Risk Engineering has published sample quality management
manuals (QMM’s):
 QMM – Comprehensive for General Contractors (GC’s)
 QMM – Basic for GC’s
 QMM – Basic and Comprehensive for non-building Contractors
 QMM – Basic and Comprehensive for Contractors - Private sector
 Each QMM uses proven procedures, consistent processes, terminology,
forms and meeting minute templates
 Best practice is to have all subcontractors submit a Site-Specific Quality
Control Plan for review and approval by the GC
 QMM’s provide a sample 2-page Site-Specific Quality Control Plan for
subcontractors to complete and submit to the GC
 Companies should have a “corporate” QMM and require each project to
prepare a Project Specific QMM

54. University Risk Management and Insurance
Association
Additional Resources
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Ins.Co. Risk Engineering has developed other quality-related
documents:
Ins.Co. quality management program
QA/QC self-evaluation survey
Trade specific QMM’s including checklists
Quality management implementation plan
Resources on the topic of quality
Water intrusion prevention procedure
Quality control graphic
Water infiltration and mold prevention strategies for
contractors

55. University Risk Management and Insurance
Association 55
Water Intrusion Prevention Plan

56. University Risk Management and Insurance
Association
Investigating Potential Problems
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Inform contractor of desire to have independent review of
concern
Hire a well respected forensic engineering firm that is on your
Insurance Policy’s approved vendor list, with the consultant
being specific to that particular issue
Have them do a conflict check
Develop a scope of work and a budget up front
Proceed with investigation
This is a ROOT CAUSE ANALYSIS investigation, not a “How
do we work around it?”
No WRITTEN REPORTS at this stage, only verbal opinions

57. University Risk Management and Insurance
Association
Investigating Potential Problems
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Maintain an evidence chain
 Damaged debris/material kept in a secure location
 No adhoc destructive testing
Anticipate what the insurers will need to expedite their
investigation
Send invitation to all potential parties with Proof of Notice and
a RSVP requested
Provide opportunity for all to inspect in situ, if some decline,
make specific note about it, and then send follow-up letter
Do not speculate on cause of loss

58. University Risk Management and Insurance
Association
Certificates of Merit
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59. University Risk Management and Insurance
Association
Certificate of Merit
59

60. University Risk Management and Insurance
Association
Certificate of Merit
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 I have prepared this Certificate of Merit in accordance with the following provisions of the Texas Civil Practices and
Remedies Code, Title 6, Chapter 150. I hereby assert:
 I am competent to testify. I am over 18 years old, of sound mind, and my opinions herein are completely
truthful, based upon the information that has been provided to me.
 I am a Professional Engineer, licensed to practice Civil Engineering in the State of Texas, which is the same
license held by the Defendant, Texas Engineer.
 I am knowledgeable in the same practice area as the Defendant, and offer testimony based upon my:
 Knowledge
 As a licensed Civil Engineer, I have direct knowledge of many types of civil engineering and other construction
projects. I have over 30 years’ experience related to Civil Engineering and various Construction projects.
 Skill
 As a licensed Civil Engineer, I have direct skill in Civil Engineering and Construction through my education,
training, and actively practicing Civil Engineering and Construction in the State of Texas and other states.
 Experience
 I have direct experience in design, construction, and maintenance of many types of Civil Engineering projects,
including retaining walls, sub-surface investigations, structural foundations, buildings, and more.
 Education
 I hold both Bachelor of Science and a Master of Science degree in Civil Engineering. I have taken many
courses and continuing education on many aspects of Civil Engineering, including design, construction, and
maintenance of the physical and naturally built environment, including works such as bridges, roads, canals,
dams, and buildings.

61. University Risk Management and Insurance
Association
Certificates of Merit
61
 Training
 I have direct training in the design, construction, and maintenance of many types of Civil Engineering projects,
including retaining walls, sub-surface investigations, structural foundations, buildings, and more.
 Practice
 As a licensed Professional Engineer in the State of Texas and 10 other states, I actively practice Civil
Engineering for many clients.
 The documents that I reviewed to prepare this affidavit includes the following:
 “Project construction drawings prepared by Texas Engineering Company (DEC) with various revision dates.
 “Project Manual for Levee Improvements Project Which Coincides With DHS Segment O-4C (0.44 miles)”,
dated September 2008, prepared by TexasEngineering Company.
 Construction Contract 08-024-09-30, the “Contract”, between Hidalgo County Drainage District No. 1 the
“Owner” and Ballenger Construction Company, the “Contractor.”
 Change Orders #1, #3, #5, #7, #8, #9, #10, #11, #12, #13 and #14 to the “Contract.”
 Letter from Richard Reed of Coats/Rose to Stephen Crain of Atlas & Hall, dated July 27, 2010.
 Letter from Stephen Crain to Richard Reed, dated August 30, 2010, covering the “Written Opinion on Matters
Contained in Coats/Rose Letter to Hidalgo County Drainage District No. 1's Attorney dated July 27, 2010
Concerning the Above Referenced Project”, by Richard Seitz, P. E.
 Letter from Richard Reed to Robert Guerra and Stephen Crain, dated September 22, 2010.
 This affidavit is also based on interviews with Rudy Alvarado and Robert Acuna, who were the Ballenger
representatives responsible for managing this project.

62. University Risk Management and Insurance
Association
Best Practices
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Quality
Control
Progra
m
Documentation:
• Meeting Minutes
• Warranties
• Record Drawings
• O&M Manuals
• Subcontractor QC Plans
• Non-conformance Log
• Inspection & Test Log
• Inspection Checklists
• Photos/Videos
Material Verification:
• Field verify Deliveries
Conform to Submittals
• Manufacturer Visits
• Proper Storage
Meetings:
• Pre-Install
• First-work-in-place
• Follow-up
• Close-out
Inspections:
• Quality Tours - ZDP
• By GC
• By Subcontractors
• By Third Parties
• Daily Observations
• Mock-ups
• Pre-Cover-Up
• Performance Tests

63. University Risk Management and Insurance
Association
Insurance Programs
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Rolling Owner Controlled Insurance Programs
OCIP/CCIP’s for specific projects
Traditional programs as specified in the contract
documents
Texas courts view wrap-up policies as the “sole
remedy”

64. University Risk Management and Insurance
Association
Recommendations for Risk Management
64
Allocate risk to the party best suited to control
the risk
Design errors?
Lack of sufficient design detail?
Unidentified existing conditions in land?
Bodily injury and/or property damage during construction
Delay in schedule due to delays in RFI/change order
approval?
Delay in schedule due to logistics at site or other activities
on campus?

65. University Risk Management and Insurance
Association
Recommendations for Risk Management
65
Allocate risk through indemnity provisions
Contractor indemnifies owner for BI or PD arising from
negligent performance by contractor or subcontractors
Use insurance to support indemnity provisions
CGL, auto liability, workcomp
Builders risk policies
Professional liability policies for design team
Require project specific coverage or excess limits
applicable to PL or consider owner’s policy?

66. University Risk Management and Insurance
Association
Recommendations for Risk Management
66
Require additional insured status and evidence
of insurance
Not a certificate of insurance
Get copy of policy declarations and all applicable
endorsements
Include waivers of subrogation
Review documents with appropriate consultants
For example, project lender and owner requirements for
payment timing and conditions should flow down through all
project contracts
Dispute resolution provisions should be consistent

67. University Risk Management and Insurance
Association
Creating Leverage BEFORE the claim
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Performance bonds
Enforceable Indemnity Provisions which comply with
local law
Additional Insured endorsements collected before
anyone steps on the job
Training and empowering contractor personnel to enforce
insurance requirements
Early tender to carriers
Subcontract provisions requiring mandatory joinder of
subcontractors in presuit ADR and arbitration

68. University Risk Management and Insurance
Association
Any Questions?
68
John Santos
512.579.5029
jsantos@utsystem.edu
Tim Christ
210.557.0968
tchrist@lwgconsulting.com