Keeping A Lid On Costly HVAC Claims

By Tom Bongi, Director of Industrial Relations for Design Professionals, XL Insurance May 18, 2006

Hot enough? Too cold perhaps? If an office’s temperature seems too hot, too cold or too unpredictable, maybe the building’s HVAC isn’t working properly. Often situations like this lead to claims that the system was improperly designed. That is not good news for the individual or firm responsible for designing or installing the HVAC system.

For mechanical engineers, architects and others in the design industry, HVAC claims are a big concern. We have found that HVAC-related claims account for a whopping 45% of claims brought against mechanical engineers. Furthermore, HVAC claims accounted for 55% of all the claims dollars paid out on behalf of mechanical engineers. For all design professional disciplines combined, HVAC problems still account for a significant 7% of the claims count and 7% of the claims dollars.

But the vast majority of HVAC claims are avoidable. Consider the case of a mechanical engineering firm that was enlisted for a school remodeling project. During the project, the owner asked the engineer to specify a replacement HVAC system for an additional existing classroom that was not part of the engineer’s original scope. Since the additional classroom was identical to the size and shape of another classroom, the engineer specified the same AC unit. Once the school was up and running, there was an immediate problem. The additional classroom was a computer lab that generated a lot more heat than the other classroom. Had the engineer simply looked inside the additional classroom, it would have been immediately evident that it was a computer lab and he could have specified a higher capacity air conditioning unit—and avoided a settlement of more than $10,000.

In another dispute, a mechanical engineer specified an HVAC system based on plans the architect had presented. The project involved an office building located in a very hot area. Later in the project, when the windows were changed to a less heat-resistant design, the architect assumed the change wouldn’t affect the HVAC requirements. The problem was twofold: first, the architect relied on the window manufacturer’s product literature; and second, the architect never informed the mechanical engineer of the change. Once the building was occupied, it was so hot that it was clear the AC was substantially undersized. But the same wasn’t true of the settlement of the claim against the architect, which was in the range of $200,000.

If engineering firms are serious about reducing HVAC claims, they need to consider implementing specific management practices that focus more on producing a good HVAC design and carefully managing the process than trying to deal with problems after they occur.

Let’s communicate

It should come as no surprise that communication can play a big part in preventing HVAC claims. Better communication between architect and HVAC engineers in the previously mentioned case would have prevented the problem that resulted when the windows were changed. After all, even minor changes in construction can have a very large impact on HVAC requirements.

To keep the lines of communication open and to enhance feedback, regular meetings with other parties involved in a project can help. On all projects, schedule regular project review meetings among representatives of the contractor, the client and the consultants involved. For large projects, these meetings may need to be held weekly. These sessions can often pinpoint problems before they occur or become serious, and facilitate the development of satisfactory solutions in a non-crisis atmosphere.

Other strategies that may help enhance communication are weekly internal conferences on a formal or informal basis for each project. It also makes sense to have project professionals recount their progress over the past week, list problems that still need solutions and make requests for whatever information is necessary but has not been received.

Additionally, many HVAC claims can be traced to a failure to determine exact project requirements. The communication and exchange of information when developing the program with a client can return huge benefits. It is important to question the client about what will go on after the project is up and running. What a client may think is unimportant could have a significant impact on the sizing of HVAC equipment and systems. An important consideration is a written program document be developed and approved by the client before starting the design process.

Knowledge and how-to

HVAC systems are very sophisticated and require more technical expertise than the typical maintenance crew usually has. And putting a high-tech system in the hands of people who lack the appropriate qualifications and training is an open invitation for problems. Therefore, another important strategy for preventing HVAC-related claims is commissioning.

Commissioning is something very few mechanical engineers insist on, but it gives design professional an opportunity to discover problems and fix them before they cause problems for the owner because, of course, an owner’s problems can quickly turn into a design professional’s problem.

Recently, the General Services Administration awarded its first contracts that incorporate the building commissioning process. Once associated with the start-up activities, today’s commissioning begins even before the first bucket of dirt is moved or concrete is poured.

The process starts with developing a detailed, comprehensive program that is refined, updated and managed throughout the design, construction, start-up and facility operation. Commissioning provides a viable solution to reducing HVAC claims by taking a proactive role in understanding and managing the client’s building goals from cradle to grave.

When cutting costs turns costly

Ironically, many HVAC claims are the result of trying to cut costs when designing the system. Attempts to save money can be disastrous, as it was for the HVAC consultant and his museum client when the consultant chose a system that would fit the budget but not necessarily the requirements. The client’s museum was full of old paintings and fragile artifacts. Any fluctuation in temperature or humidity would cause significant damage. As soon as the system was turned on, the museum’s holdings began to deteriorate. It was determined that more aging took place in the time the particular HVAC system was running than in the previous hundreds of years of the works existence.

In another example of cost-cutting measures backfiring, there was a situation with a university classroom building in which the maintenance crew shut down the AC every night. They couldn’t figure out why the humidity—and their costs—remained high. What they didn’t realize was that once they turned the AC on each morning, the system had to work harder to remove the humidity that had accumulated overnight. It would have been more cost-effective to keep the AC at a steady temperature around the clock.

Construction administration

Another consideration in preventing potential HVAC claims is project vs. consultant location. If an HVAC system is being designed by a firm located in a different state from the project location, an engineer in the project state should be enlisted to do a thorough peer review of the design.

Other administration tips to consider:

  • Don’t fall prey to a contractor who overwhelms you with a barrage of uncoordinated submittals.

  • Require that the contractor provide a detailed submittal schedule before processing the first construction progress payment.

  • Evaluate the demands that the schedule will place on you and your consultants and discuss any resource concerns that you may have with the client and the contractor.

  • Negotiate a realistic flow of submittals and manage the process vigorously.

  • Require, too, that the contractor provide objective evidence that all submittals have been coordinated before presenting them to the design team for review.

  • Consider the use of a submittal approval stamp with a statement confirming coordination.

  • Work closely with the contractor and his or her subcontractors in overlaying mechanical system shop drawings and in laying out major mechanical equipment.

  • Resolving design conflicts before the shop drawings are formally submitted helps expedite submittal turn around times while avoiding project delays.

Preventing costly HVAC claims does not necessarily involve complicated risk management strategies. Instead, prevention begins with listening to clients, communicating with employees and entire design team, and managing clients’ overall needs. As a result, there is a greater likelihood that claims will go down, client satisfaction will go up, and more of the client’s budget will go to your bottom line.

XL Insurance