Home Owners Warranty – Scope of Work

The claimant was an Owners Corporation representing the interests of all owners of a Strata Titled complex.
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The Sydney suburb development, comprised of three separate multi-story residential apartment buildings. During the course of the matter, Sergon Building Consultants:

  • Confirmed Insurers acceptance of claimed defects
  • Prepared detailed, accurately measured scopes of works for rectification of accepted defects
  • Agreed the scopes of works with the claimant
  • Sought tenders for reinstatement based on the agreed scope
  • Reviewed tender submissions, and
  • With agreement of the Insurer and claimants, saw a builder engaged for rectification works.

Reinstatement works were progressing smoothly when Claimants lodged a further claim for additional defects at the situation. Sergon Building Consultants re-attended and conducted a review of the additional claimed items, culminating in preparation of and agreement with a detailed measured scope of works for those items. As the reinstatement of the originally agreed defects was well underway a challenge now arose.

  • The Challenge

    • A tender process would now cause delays both to additional works and those already authorised
    • The tender process would introduce others who would never be selected to complete repairs
    • Costs were likely to increase as the rectifying builder became aware he was to be selected as the sole provider of rectification prior to submitting reinstatement cost estimates on additional works

  • The Solution

    In an effort to ensure the reinstatement continued to run smoothly while controlling claims costs on additional items, Sergon Quantity Surveyors completed a site inspection with the rectifying builder, prior to his submission of a quotation for additional works. Utilising the scope of works for additional defects prepared by Sergon Building Consultants, Quantity Surveyors discussed all aspects of the additional works directly with the rectifying builder.

    The builder was acutely aware that an independent observer was now involved in the process. The builder submitted a quotation for additional works at $208,340.00 (Incl. GST). Utilising first principle estimating techniques, Sergon Quantity Surveyors prepared an independent cost estimate which was used to complete an analysis of the builders quote. Quantities Surveyors discussed inaccuracies, high percentages and the occasional double up on quoted items directly with the builder. The rectifying builder agreed with Sergon Quantity Surveyors analysis and agreed to complete reinstatement at their estimated value calculated at $188,919.50 (Incl. GST).

    The outcome was a satisfied claimant who noted scopes were readily agreed, delays did not eventuate as a result of additional items being claimed, and was pleased they could deal with a single rectifying builder whom they trusted. A satisfied builder who increased the value of work he completed at the site at reasonable pre-agreed rates.

    A satisfied Insurer who had a difficult claim resolved without customer complaints, was satisfied that works were scoped accurately and quoted appropriately, recognised that while some additional costs were incurred by engaging other specialists this resulted in claim cost management producing a saving that readily exceeded professional fees.

Project Management and Quantity Surveying

Overview
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Sergon was engaged by the Loss Adjusters to Project Manage all aspects of the reinstatement.

Due to a rapidly increasing Business Interruption loss following the incident, the claimant immediately engaged their preferred builder who provided reinstatement design documentation, arranged Council approvals and submitted their own Scope of Works for reinstatement.

The Builder also submitted a detailed Reinstatement Tender for consideration by the Insurers.

  • The Challenge

    While a quick reinstatement was a priority to mitigate consequential losses, Insurers and Loss Adjusters required control over the reinstatement process to ensure the scope was limited only to the insurable damages and to manage the costs. Also required was a separation of costs, i.e. two Insurers (for the Landlord and Tenant), and the issue of upgrades and requests for changes in design.

  • The Solution

    Sergon engaged a team of experts consisting of a Project Manager, an Engineer and Quantity Surveyors. From the outset, the team regularly met on site with the Insured representatives, engineers and builders, allowing all stakeholders to work collaboratively on a thorough review of damage, which ensured a scope of required reinstatement works was readily agreed. This was an important step to avoid confusion or disagreement.

    Regular onsite meetings also allowed the scope to be monitored and refined to the agreement of all stakeholders. This not only avoided delays but also ensured that the scope related to reinstatement of the fire damage only eliminating scope creep and unrelated building works.

    As part of the project management process a rigorous review of the Builders tender submission was carried out by Sergon Quantity Surveyors who completed a Tender Appraisal Report. It became evident that the Builders tender submission included numerous high value provisional sum allowances and contingency sums. Inconsistencies were rectified and a revised budget estimate was successfully negotiated with a demonstrated saving of approximately $164,000. As a result of agreeing for Sergon Quantity Surveyors to monitor all reinstatement costs, Insurers gained sufficient comfort to allow reinstatement to proceed. Builders monthly progress claims were reviewed in detail by Quantity Surveyors and corrected as required prior to recommendations for payment being released to Loss Adjusters.

    All costed variations were submitted in writing to Quantity Surveyors who approved reasonable costs only within the agreed Scope of Works. At the conclusion of reinstatement, Sergon Quantity Surveyors completed a detailed reconciliation of all Provisional Sum Allowances.

    Outcomes
    The involvement of Sergon Project Managers and Quantity Surveyors produced the following results:

    • Building reinstatement was completed in a compressed time frame.
    • Consequential losses for the Landlord and Tenant were significantly minimised.
    • Cost control by Quantity Surveyors resulted in direct savings of approximately $269,000.
    • Scope creep and unrelated building matters were eliminated and variations were tightly managed, producing unquantifiable additional savings.
    • Reinstatement went smoothly and the Tenant was able to return to normal operations in a shorter than expected time frame.
    • The matter has now progressed to the Supreme Court as the Insurer is pursuing recovery of their outlay. The Insurers are confident that the costs were tightly controlled and anticipate no disputes on quantum.
    • The Builder was required to submit all invoices to demonstrate costs and substantiate their spend resulting in a further saving of approximately $105,000.

Scope of Work

Overview
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Sergon Quantity Surveyors were also engaged by the Insurers, requesting they provide a detailed reinstatement Cost Estimate based on the Scope of Work, allowing Insurers to consider their claim management options.

Using First Principal Estimating techniques, Sergon Quantity Surveyors reviewed the Scope of Works, inspection report and plans for the home, which was described as an average quality, single storey residential dwelling of 356m² gross floor area.

The Detailed Cost Estimate (DCE), which included all fire damaged external infrastructure and necessary Bushfire Attack Level upgrades, was calculated at $808,876 (inc. GST), with an additional allowance of $7,500 for professional fees.

  • The Challenge

    Insurers passed the Sergon Building Consultants Detailed Scope of Works to their trusted panel builder requesting a reinstatement quotation. A challenge arose when the Insurers trusted panel builder provided them with a reinstatement quotation in the amount of $1,110,725, a difference in excess of $300,000 when compared to the Quantity Surveyors cost estimate. Insurers asked the Builder to review their quotation. However, the Builder returned to Insurers confirming that the quoted price was both accurate and represented value for money. Insurers contacted Sergon Quantity Surveyors questioning why the DCE was so low compared to the panel builder’s quotation.

  • The Solution

    Sergon Quantity Surveyors agreed to complete an additional service for Insurers known as a ‘Verify Quote Cost’ (VQC). Quantity Surveyors contacted the Builder and obtained the quotation in a detailed trade format and then analysed the Builder’s resubmitted quotation to compare quoted costs against known industry standards and Sergon’s DCE.

    This helped Quantity Surveyors to identify any price discrepancies and check calculations. Our Quantity Surveyors soon discovered that in their opinion the Builder’s quotation included multiple calculation errors. Additionally they demonstrated that the Builder had doubled up on the costs of some items, quoted different values on Prime Cost items and had on occasion, inflated some rates in excess of Industry Standard Pricing.

    Sergon Quantity Surveyors submitted an easy to read report of their findings to Insurers. The report demonstrated that the Builder’s initial quotation was neither accurate nor did it represent value for money. More importantly, the report demonstrated that reinstatement was able to be completed by the panel Builder at a much lower price than quoted, while still allowing the builder to make a reasonable profit from the construction job.

    Armed with the Sergon Quantity Surveyors VQC report, Insurers challenged the builder on the price. The builder readily agreed to a significant reduction of their quoted costs and submitted a revised quotation. On this occasion, the Insured ultimately requested a cash settlement so Insurers proposed using the revised builder’s quotation as the basis for a cash settlement calculation. The Insured agreed that the quotation was reasonable for the Scope, and agreed to settlement as proposed.

    The final claim settlement value represented a saving to Insurers at in excess of $100,000.