When you are the developer of a commercial property, a lot is riding on your general contractor, and never more so than when you must submit a construction delay in completion insurance claim. The general contractor is the person in charge of building the project, making sure all of the subcontractors get paid, and keeping records related to the job.
One of the most important documents maintained by the general contractor are the CPM (Critical Path Management) schedules. CPM schedules are a detailed estimate of the time remaining to complete the project. Because CPM schedules are usually updated regularly, and if they are kept with integrity, they can be an excellent tool to estimate the impact on a delay in completion or soft cost claim.
Theoretically, one can see the estimated completion immediately before the incident and then see the impact on the completion date after the schedule is updated following the incident. Here’s the fly in the ointment: If the general contractor could have potential liability, because his actions (or inaction) caused the loss event, he may not want to show the delay in the schedules.
I have seen situations where the contractor showed absolutely no effect to the CPM schedules until six months after the incident because the developer had threatened to sue the contractor for the damages. Alternatively, I’ve seen situations where the contractor fabricates and exaggerates reasons to change the schedule so that, ultimately, no delays are related to the incident caused by the contractor. Either way, the flawed records will cause significant challenges in quantifying the delay in completion or soft cost claim, and defending the valuation during the insurance company review.
To avoid this potential pitfall, I suggest that the developer retain two experts immediately following the incident that triggered the delay. First, retain a forensic engineer/planner. This expert will document the damage, create a scope of repairs, create an estimated timeline for repairs, ensure that CPM schedules are updated correctly and account for the incident, and be available to report on the final delay in time due to the incident.
Second, retain your forensic accountant. The accountant will set up a specific record keeping system to ensure that all material, labor, and resources are accounted for in a manner that will withstand the audit of the insurance company’s accounting expert. If these steps are not taken, the developers financial future may be left in the hands of the general contractor.
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