MEC&F Expert Engineers : 09/17/14

Wednesday, September 17, 2014

DISTRESSED PROJECTS AND CONSTRUCTION SURETY CLAIMS




DISTRESSED PROJECTS AND CONSTRUCTION SURETY CLAIMS
In June, overall U.S. construction spending grew at a seasonally adjusted annual rate of $950.15 billion in June, according to the U.S. Census Bureau.  As a result, the surety bond sector looks to register its second consecutive year of growth, led by the private construction sector as the economy slowly improves.
Construction owners and contractors know all too well the risks involved in completing projects.  Often, conflicts are inevitable – and when they occur, they are always expensive.  Vague contracts, insufficient communication, and lack of transparency combined with project changes, complex construction, and time constraints increase the exposure of all parties to disputes and claims.  



Surety is a credit instrument known as a bond guarantee.  It is not insurance.  Corporate sureties issue bonds (the surety bonds) to a party (Obligee or beneficiary) to guarantee performance or payment of an obligation by a third party (Principal).  The Surety, under an indemnity agreement with the Principal, assumes liability for non performance or nonpayment or other promise in case the terms of the obligation or contract are not performed and there is no defense to the claim.  Often a surety will dispute liability because its Principal is not liable or because the surety itself has a defense to the claim of the obligee
When a contractor defaults and is unable to complete a construction project (i.e., does does not fulfill its bonded obligation), the Obligee can make a claim demanding that the surety company satisfy the obligation or pay the bond penalty.  The surety company has the right to reimbursement from the principal in the case of a paid loss or claim.  In these situations, Metropolitan can help.




Metropolitan offers Surety Construction Claims analysis and Distressed Project Completion services.  We clearly understand the urgency of performing risk evaluations during construction default situations for sureties to add value and to mitigate surety loss.  Our team assists Prime Contractors, Subcontractors, Owners, Attorneys, Sureties and Insurance companies in construction disputes and surety bond claims involving contract performance issues on building, industrial and civil projects.  Our breadth of experience in the construction industry provides us with the well-rounded skill set to offer the array of services necessary to efficiently and effectively resolve surety claims and assist the owner to complete construction on distressed projects.
To that end, we specialize in the investigation, independent evaluation and resolution of all types of surety claims regardless of the stage of the claim.  We have been assisting and/or managing technical and construction issues related to performance, payment, supply, maintenance, warranty and other non-contract surety bond disputes and claims.  This includes analysis and oversight of the completion of medium to large construction projects with the goal of resolving claims and disputes.  Our involvement can begin anytime from the initial filing of a claim to the oversight of the completion of defaulted work.  Regardless of the stage of the claim, our basic approach remains the same:
·         we start with in-depth research of project documentation and data collection;
·         sort out information relevant to the dispute issues;
·         interview project team members;
·         analyze evidence gathered; and
·         generate an objective evaluation of the claim issue based upon the contract terms, including:
·         Delay
·         Disruption
·         Acceleration
·         Design defects
·         Termination
·         Differing site conditions
·         Change order impacts
·         Suspension
·         Consequential damages
·         Analysis of filed liens



As part of our investigations and analysis, we provide many, if not all of the following services:
·         Bid review and analysis
·         Bonding score
·         Assess the work completed to date and inventory the project site
·         Perform investigative cost audits and forensic review
·         WIP report review
·         Generate benchmark and “cost to complete” construction estimates
·         Prepare default reports
·         Analysis of filed liens
·         Provide on-site project management from our staff of professionals
·         Analyze project schedules and generate alternative recovery schedules (delay analysis)
·         Generate a financial impact analysis and recovery plan
·         Perform performance bond, and payment bond claim review and analysis
·         Perform Fidelity Bond claim analysis and evaluate claims presented
·         Make recommendations to Surety Counsel as to choice of remedies (default, cure, takeover or relet) and participate in establishing loss and expenses reserves
·         Perform project re-lets/Ratification of subcontractors and vendors
·         Completion strategy and protocol analysis
·         Project Completion Management
·         Perform change order review/claim preparation and negotiation
·         Discovery assistance and deposition package preparation
·         Forensic investigation of architectural and engineering issues
·         Project Monitoring
·         Assist in negotiating and settling, tender, takeover, completion, joint escrow, sub-contract and other contractual agreements necessary to discharge surety's obligations, working with Surety Counsel.
Our experience in both the technical application and practical aspects of surety claim investigations results in thorough, prompt, and cost-effective analysis and resolution of each unique case that comes our way.  Our experience includes claims analysis, delay analysis, surety completion services, construction management and administration, preparation and review of contract documents, partnering facilitation for major construction projects, and litigation support.  Our investigations are impartial and responsible in order to meet state standards as well as the surety’s own service requirements.
Metropolitan has directed and performed virtually all types of claim analyses including delay and inefficiency (typically using measured mile for inefficiency); assessed responsibility for contract changes, and calculated various types of delay damages. Metropolitan has analyzed claims on commercial, healthcare, educational, highrise, highway, government, residential, prison, environmental remediation, and transit projects.  Metropolitan has provided these analyses during the project to help the project team resolve disagreements and avoid disputes; and after the project has completed to help the parties resolve their differences without resorting to costly litigation.



Extensive Experience helping Sureties
Metropolitan also has extensive experience helping sureties fulfill their bond obligations resolve disputes after a contractor has defaulted.  This work includes the evaluation of contractor bid pricing, evaluation of the contractor’s ability to perform work, risk assessment, evaluation of termination, construction completion services, claim and litigation support services, loss recovery services, evaluation of payment bond claims, negotiation and settlement of payment bond claims, and construction defects investigation services.  Metropolitan has provided these services for commercial, development, educational, and assisted living projects.



Where after contractor default and demand upon the surety is made, and the remaining balance of contract funds are insufficient to cover the costs needed to complete the contractor’s scope of work, the surety may look to third parties to recover some or all of the losses it is about to incur.  This section of the materials will discuss the viability of such claims, and some of the defenses that may be asserted against them. 
Underlying the surety’s claim against third parties is that their errors or omissions impaired the surety’s rights, diminished the contract balance, or increased the surety’s risk of loss.  Most often the acts of the architect will come under scrutiny.  Other potential targets include accountants, lenders, construction managers, inspectors, engineers and other design professionals.  The most common assertions by the surety against the design professional are: (1)  failure to properly inspect work in place, (2) failure to properly supervise the contractor, (3) failure to timely respond to RFIs or submittals, (4) premature release of retainage, and (5) failure to properly certify contractor pay applications resulting in over payment of the contractor. 

Property Condition Assessments

METROPOLITAN’s PCA experts assess building system’s physical condition, general code compliance, capacities/adequacies, repair and maintenance issues, and identification of potential environmental contaminants. METROPOLITAN follows the ASTM PCA assessment guidelines. METROPOLITAN provides consistent, quality reporting to our clients.

Loss Control

METROPOLITAN can assist insurers in managing risk and reducing exposure to construction defect losses on all types of projects.  Our loss control services center on the insured’s management culture and risk reduction strategies.  These services generally include site inspections and evaluations of project controls, project management, quality control/quality assurance programs and safety programs. Additional services as noted below can also be provided as needed. Through these services, it is METROPOLITAN’s goal to build an understanding of potential construction defect issues with the insured and to provide value to both the insurer and insured by recommending areas of improvement to reduce loss exposure.

Loan Monitoring

From pre-construction to job completion, METROPOLITAN offers fact-based information for lending professionals and investors. In support of our clients, METROPOLITAN reviews budgets, work schedules, compliance requirements and provides progress reports, observation and assessments of disbursement invoices and payments.

Contract Claims

Because METROPOLITAN is so versed in the preparation of construction claims, we offer an invaluable service in reviewing the merits of claim submissions and often are able to settle dispute matters before they proceed to arbitration or litigation.

CONSTRUCTION DEFECTS SERVICES


Metropolitan specializes in addressing and resolving disputes involving public work projects, business/commercial disputes, complex construction defect, environmental health and safety issues, construction delay and contractual matters, partnerships, homeowners association, retail centers, and real estate issues.  Our three decades of forensic experience includes advanced research and analysis of code, materials and building practices, as well as the development of comprehensive repair methodologies for maximization of repair and restoration efficiency.  We have financial and legal education, expertise and experience that we used to better focus our engineering arguments and presentations to the various parties.  We have successfully participated in dispute resolution mediation, arbitration, and settlement procedures on numerous occasions.



Metropolitan’s design experience includes civil site improvements for single family housing, multi-family housing, commercial and industrial land development, roadways, public works construction, pipelines, reservoirs, pump stations, hydraulics and hydrology, and environmental impacts of construction defects.  We are also proficient in all aspects of claims handling and management, including damage, liability and coverage issues, reserving, risk transfer, auditing, litigation management and expense control measures.



Metropolitan has extensive experience in the fields of moisture/water infiltration/intrusion, roof system failures, lath, plaster, mortar, stucco, drywall, dimensional stone, handset applications, prefab installations, light-gauge metal stud, fireproofing, architectural pre-cast concrete, and EIFS for all types of facilities.  Our skills and experience include design, construction estimating, material take-offs, site inspection, corrective construction detail, scheduling, subcontractor and field crew coordination, contract drafting and execution, worker and environmental health and safety.



We have handled thousands of factual issues dealing with:
·         Delay, disruption, extra work and impact claims;
·         contractual change orders;
·         standard of care;
·         cost of repair;
·         scope of work disputes;
·         mechanic’s liens;
·         stop notices;
·         bid protests;
·         errors and omissions;
·         environmental matters, including mold;
·         construction defects, as well as contract drafting and review;
·         green technology defects, including vegetative roof systems and wind turbines;

We are including our web address below, should you wish to find out more about us and our services.  We are very competitive.  We will beat every competitor’s prices and quality of work.  We provide discounts for multiple assignments.



Risk Management Services at Metropolitan
·         Serve as an integral part of the business management team as an outsourced risk manager
·         Overview current loss prevention and loss mitigation processes
·         Provide project management services to ensure critical processes are completed in a timely manner and consistent with overall needs
·         Provide an objective and independent expert evaluation of the current risk program, including a written report containing specific findings and recommendations
·         Identify and assess your current and potential risk of loss
·         Develop alternate (non-insurance) methods of risk financing
·         Assist in strategic planning to achieve long range risk management objectives
·         Develop risk management education coursework for specific needs
·         Provide guidance during merger, acquisition and divestiture activities
·         Provide expert witness and litigation support
Metropolitan Engineering, Consulting & Forensics (MECF)
Providing Competent, Expert and Objective Investigative Engineering and Consulting Services
P.O. Box 520
Tenafly, NJ 07670-0520
Tel.: (973) 897-8162
Fax: (973) 810-0440
We are happy to announce the launch of our twitter account.  Please make sure to follow us at @MetropForensics
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