How To Manage Liability in Construction
Mar 20, 2021 11:59 AM EDT
Construction is one of the industries that face constant risk. This is largely because most construction projects are run by multiple stakeholders that include the owners of the project, managers, general contractors, and designers. Each of these stakeholders invests money and time in the construction project in advance. As suppliers and sub-contractors get into the scene, the risk multiplies as human error and unpredictability set in.
All these risks pose a threat to the project and the anticipated profit margins. The main risks that the construction industry faces include safety accidents and delays in completing projects. This results in additional costs, reduced profits, and payment issues. Other risks that affect the industry include sub-contractor liability and weather or environmental risks. While some risks may be unforeseeable, construction companies can anticipate and develop strategies for reducing risks before they hit the ground running.
If not managed well, risks can easily become liabilities for construction companies. A common liability in the construction industry is subcontractor liability. If you're in the construction business, here are several steps that you could take to manage liabilities in the industry:
1. Get Insurance And Comply With Its Requirements
Another way to manage liabilities, particularly those associated with employee injury is getting insurance. Depending on where your construction firm is located and the project that you're undertaking, the responsibility of taking up insurance may fall on your construction firm or the subcontractor.
Whatever the case, it's critical that you ensure that all minimum requirements have been met before the subcontractor reports for work on day one of the assignment. Having insurance enables you to transfer any liabilities arising from occurrence of risk, particularly when your subcontractor bears the responsibility of insurance. This means that any insurance claims or liabilities would be the responsibility of the subcontractor.
If transportation is huge part of your construction process, especially when moving materials, equipment, and construction waste, consider getting no-fault insurance. You can read this article to learn more.
2. Ensure Prequalification Of Subcontractors
One of the most effective ways to keep liability issues in construction at bay is to ensure that the subcontractors that you engage in your project are duly vetted and prequalified prior to being hired. The vetting process is critical because it enables you conduct background checks to ensure that subcontractors are clean and have no issues that might come back to haunt you.
You can easily conduct the vetting and prequalification process by asking potential subcontractors to complete a pre-qualification tool. With this information, you'll be able to identify a subcontractor that shares your values to help you deliver on the project in a timely manner and without causing problems.
3. Emphasize On Safety Practices
Safety at the construction site is critical, especially when people are working with bulky materials and heavy equipment. If workers sustain injuries while working on these sites, your company can easily be forced to bear the cost of treatment and other related costs. If you own a construction company, you can make sure that your team to comply with safety regulations.
However, there's no guarantee that the subcontractors you hire to help you implement your construction project will do the same unless you find a way to enforce those safety regulations. To ensure this happens, construction companies should insist on strict adherence to safety practices and ensure that the necessary safety protocols are adhered to.
This will help in preventing liabilities that arise from work-related injuries. In addition, construction firms should emphasize the importance of maintenance at jobs sites to keep workers safe.
4. Have A Plan For Quality Control
Though it may not be necessary to monitor everything that your subcontractors do, it's always safe to develop a quality control plan for the project and discuss it with them before you hire them. Having a plan for quality control enables you to oversee the work that your subcontractors do during the project.
A comprehensive quality control strategy can also go a long way in ensuring that the work is completed in line with your specifications and in compliance with the local or state construction codes. This means that you won't have to hover over the shoulders of your subcontractors as they work since you'll already have a way of ensuring that they provide safe, quality work.
The risks associated with construction work can expose construction firms to liabilities that run into millions of dollars. The most common risks that companies in the construction industry face include subcontractor liability, safety accidents, and delayed completion of projects. When they occur, these risks lead to extra project costs, payment problems, and reduced profits.
There are several things that construction companies can do to manage liabilities effectively and avoid suffering losses. These include enforcing safety guidelines in construction sites, getting insurance, and preparing a quality control plan.