The design / build model is gaining momentum. Instead of managing a separate contractor and designer, owners can manage a single supplier. This can result in a faster, streamlined project. At the same time, it can lead to new and increased liability exposures for the design / construction supplier.
Construction industry changes
According to The Next Normal in Construction, a report by McKinsey, the COVID-19 pandemic accelerates disruption in the construction industry. Construction companies are currently handling many changes, including digitization, new materials, sustainability requirements and a shortage of skilled workers.
Change is not always bad, but even when it is positive it can make some big adjustments. Transition periods can be particularly filled with risk exposures. As a result, responsibilities and claims may increase.
Property Casualty 360 says that construction projects have become larger, more complex and more expensive. The efforts – and the potential losses – are also greater. Allegations of certain types, including defective products and the supply chain, have increased.
Now the design-build model adds project complexity and risk risks.
The Design-Build model grows
19659003] DBIA market study projects constructing construction costs will increase by 18% between 2018 and 2021. In 2018, these projects are expected to be $ 320 billion, corresponding to 44% of construction costs .
According to Property Casualty 360, this represents an important development in the construction market. As more and more contractors adopt internal design services, their exposure to responsibilities changes. Insurance coverage and risk management strategies must keep pace.
Contracts should be iron clad
In the design-build model, areas of responsibility that are usually very distinct and definable can become a bit obscure. If something goes wrong, this can be a problem.
The construction company's owner says that is why fair and balanced contractual agreements are necessary. Standard forms from the American Institute of Architects, Engineers Joint Contract Documents Committee and DBIA can provide a good starting point but should be revised as needed to comply with other existing agreements.
Takeaways for Design-Build Contractors
- Check your insurance. It is important to check your insurance policies to ensure that all your activities are covered. This is not something you want to discover after a claim has been made.
- Work with an insurance company that understands your industry and its unique risks. Ask about experience in managing claims in your industry, as well as risk management tools that can help you avoid these claims in the first place.
- Check your contracts. Solid contracts are always necessary, but this is especially true in design construction projects. Work with your BNC agent to ensure that contract and insurance issues are handled adequately and consistently.
Contact us to learn more