GET FEEDBACKTaking stock of your performance entails a lot more than an exit or ultimate satisfaction survey. Atlantic Builders of Fredericksburg, Md., collects quarterly feedback from buyers, employees, and trade partners, crunches the numbers, and attacks the lowest-scoring areas. The builder also requires its project and sales managers to make weekly phone calls to buyers, and has trained its sales staff to ask prospects about their previous home buying and owning experiences to ferret out flash-point issues to address with that buyer and perhaps incorporate into its overall QM program.
GET INNOVATIVEThink outside the norm to help everyone on the team, and the home buyer, get on the same page regarding your expectations for quality and risk management. Atlantic Builders, for instance, generates “hot spots” packages of photos, inspection results, and solutions to help its subs train their crews on proper techniques against the builder's standards for the next job. Moser Builders' “daily walk” of each job captures omissions and defects from a construction manager's point of view and a customer's perspective. Also, be willing to look deeper into your operation to find “defects” that undermine quality and safety.
KNOW YOUR TROUBLE SPOTSAccording to Criterium Engineers, a Maine-based consultancy, 17 percent of the new homes it inspected last year had at least two significant problems, primarily substandard window and door installations, roofing jobs, and framing issues that resulted in water damage about 80 percent of the time. In the realm of risk management, meanwhile, construction defect attorneys list the top five reasons builders are exposed to litigation as poor customer service, inadequate plans and specifications, lack of production supervision, lowest-bid awards, and shifting the responsibility of a defect to others.
REDUCING RISKThe landscape of a builder's liability has changed significantly in the last decade.
Once shielded by short-term warranties and code compliance, builders are now targets for construction defect claims and litigation, with ramifications for their reputations, insurance premiums, sales, and profitability. “There's now a cottage industry of construction defect attorneys,” says the NAHB's David Jaffe, “And there's no going back.” Jaffe and others offer a four-point plan for risk management that takes builders out of the false god of warranties and into a realm of self-protection, as follows:
Avoid. Simply, just stay away from hazards, such as attached housing, high seismic zones or other suspect sites, EIFS, fire-retardant plywood, and other past and present lightning rods for lawsuits.Control. Prevent or minimize risk by improving quality, jobsite safety, and customer service and satisfaction tools, such as homeowner manuals. Also, build in mediation and/or arbitration clauses into the contract to stem lawsuits, and disclaim implied warranties with express warranties that define and address potential issues and how they'll be managed.Transfer. In this age of the subcontractor and supplier-installed sales, it makes sense for builders to consider shifting or sharing the risk of potential production defects with their trade partners. “The one who did the work is the one who should bear the risk,” says Jaffe. Some builders are asking their subs to name them as an “additional insured” on their policies, triggering that coverage to kick in first and thus protecting the builder's loss record.Insure. Once the sole component of a builders risk management protocol, liability insurance is hard to get, afford, and effect ... even if you've lined up all your ducks (ideally in hardhats behind a guardrail) and you boast a stellar claims history. Still, if you can get it, it offers an additional layer of protection.