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, high‐rise, 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
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