REPORT

Risk Performance Strategies
November 2019

www.smartrisk.biz

 Mailing List Link:

 

Join Our Newsletter Link


View Past Newsletters:


Archive Newsletters
Link

 
What is Your Firms Risk Profile?

Free Risk Assessment

Risk Indication Link

Quick Links Section

Insurance, Risk or Professional Liability (PL) Question?   

Ask SmartRisk

 


Subcontractor $22 Million Dollar Claim Caused by Design Errors




Introduction


New Jersey subcontractor Trematore Plumbing & Heating Inc. sued the Walsh Group and Consigli general contractors on Oct. 23 in White Plains federal court stating its work on the $545 million Vassar Brothers Medical Center was delayed due to the defective design on the project.

The Project

The project is an expansion of the Vassar Brothers Medical Center in Poughkeepsie, New York. Trematore Plumbing was awarded the $17.9 million plumbing contract in September 2016. The plan was for a seven-story, 696,000-square-foot project that included hundreds of patient rooms, critical care rooms, an emergency department and surgical suites.

The Claim

Trematore is suing general contractors Walsh Group and Consigli for $5.5 million in past due payments and $16.4 million in punitive damages driven by changes and cost overruns allegedly caused by the design of the medical facility. The lawsuit claims the subcontractor submitted 390 requests for information (RFIs) and 109 change orders that were caused by the incorrect and incomplete design provided by the owners and developed by architecture firm CallisonRTKL. Trematore stated in the lawsuit that many RFI’s went unanswered and unresolved that caused problems with sequencing, scheduling and coordination of work.

The Expert

Trematore hired an independent expert who reviewed the design witch stated it omitted important elements of the project that hampered Trematore's progress. The lawsuit also indicates that Trematore asked repeatedly for information on the design, however had no communication with CallisonRTKL. The expert determined that the project design was not at a sufficient level to construct the systems as shown in the BIM provided.

The Problems

Problems mentioned in the lawsuit included water pipes, medical gas piping did not fit in the allotted space, location of toilets was not properly coordinated with the design of steel framing, an ionization system to prevent biological hazards was left off of the original design, a lack of water on site required Trematore to perform smoke testing instead of water testing on the plumbing system, pipe hangers were installed, relocated and reinstalled three times on several floors, resulting in $133,000 worth of extra work, various HVAC systems and electrical components in the ceilings had to be reinstalled, and the work of other subcontractors conflicted with the installation of piping.

The project's original completion date was August 2019 however has been pushed back to February 2020. Trematore states in the lawsuit it has not received an updated schedule related to the extended timeline.

Working Out Differences Outside the Courtroom

No project is ever perfect and general contractors and subcontractors routinely try to work out differences outside of the courtroom. Lawsuits are costly, time consuming and can cause damage to business relationships. Neither party normally sees a lawsuit as the best path to resolving a dispute. However, there are factors causing a change in that trend and recent claims. Subcontractors conducting work on the $1 billion Oceanwide Plaza project in downtown Los Angeles filed $98.6 million worth of mechanic's liens against developer Oceanwide Holdings.

Problems routinely are caused by late payments for services. A recent industry study conducted by Rabbet a construction finance platform has shown slow payments are costing general contractors and subcontractors $64 billion a year, a $24 billion increase from the 2018. The study found that the 51-day average payment turnaround is particularly hard on labor and material-intensive subcontractors.

More than 60% of subcontractors stated they have elected not to bid on certain projects if the owner or general contractor has a reputation for slow and late payments, 72% indicated they would offer a 1% to 5% discount for quicker payments. Thirty nine percent (39%) of subcontractors reported that they are able to cover late payments with cash on hand, forcing them to incur the costs associated with using lines of credit, credit cards, and personal savings.


You are welcome to forward this newsletter to others who may be interested.

 
If you are interested in obtaining more information about SmartRisk, and services offered, please contact us.  http://smartrisk.biz
 
Thank you. 

Feedback or Comment?  Comment Link


SmartRisk
Risk Performance Strategies



SmartRisk is a leading risk and performance management consultancy for design and construction professionals. Through firm specific risk assessments, training and consulting, services focus on improving overall performance, profitability and reducing insurance costs through tailored risk management solutions.

If you have any questions about our services, or would like dicusss how we could assist your efforts, please contact us.

Thank you,

Timothy J. Corbett, BSRM, MSM, CERG, LEED GA
Founder & President
626-665-8150
tcorbett@smartrisk.biz
www.smartrisk.biz.

Copyright and Information Only. This newsletter is for information purposes only and should not be construed nor relied upon as guidance, regulatory or legal advice. Readers should consult with appropriate counsel regarding their specific situations and circumstances. SmartRisk shall not be liable for any errors in content, or for any actions taken in reliance thereon.

If you would like to be removed from the SmartRisk Report mailing list, please use the link below.   

T: 626-665-8150
Email:
info@smartrisk.biz
www.smartrisk.biz