We have gathered together five former presidents of the chapter who are experts in their field to help you with your Construction Management dilemma. Email your Construction Management related questions to coordinator Christine Oates.

Christine will obtain responses from the experts which will be posted on this site.

Question:

“As a sole proprietor of a small company providing CM services on Energy Management projects and upgrades, I need Liability Insurance for certain projects/clients. Can you direct me to any policies or insurance designed for a small CM firm such as mine?”

Response from our Experts:

One should understand exactly what type of liability insurance coverage they are looking for. Today's construction market place has a host of 'problems/ risks' and obviously, there are as many products to offset the potential liability from embracing those risks.
General liability [GL] coverage is available from just about any commercial insurance agent. the biggest problem in securing insurance is having a track record. If you are a new/ small firm, with a limited portfolio of completed work, the insurance companies if they accept you will charge a premium for extending coverage.
In addition to GL, there is umbrella coverage which in today's market, a contractor must carry, this is a term type policy which piggy backs with the GL and increases the coverage limits.
There is also environmental liability coverage, which obviously provides limited coverage for various risks, again this is a specialized field with a limited number of insurers providing limited and specific coverages for specific hazards.
There is professional liability insurance, again this is coverages that you would provide for his clients that would protect them from errors & omissions that you may cause in the execution of his practice.
A word of caution, you should be very careful in procuring the coverages, there are differences between an occurrence and an event, limiting the insurance companies response to a potential claim. Some coverages, are limited only to the term of the policy, another words if and when the coverage expires, the insurance companies responsibility for the risk also expires. However, you should take careful note that depending on the event/ claim, you may still have a down stream fiduciary responsibility for the event; two incidents where this could happen would be with discovery of latent defects in professional services provided by you, or with discovery of latent environmental contamination to a site that is attributable to the your operations.

You should seek advice from an insurance consultant and or attorney who can counsel you on the specific needs of the firm, its operation and better counsel him on the products available to address the risks that you are seeking to mitigate.
You may want to contact Lexington Insurance Company (617-330-1100) for guidance.

Question:

Is Home Office Overhead an allowable addition to the cost of any change order?

Response from our Experts:

Normally how this expense is to be treated is defined in the contract documents as to how the expense would be calculated. If allowable in the contract, the expense would show up as an identified line item expense with the methodology for calculating this expense outlined in the contract documents.

Most construction companies have the home office overhead (HOO) expense built into their established/ published hourly rates, once the rates are established and accepted, the cost becomes transparent since it is covered proportionally in the hourly fees charged off to the scope change. Obviously if your firm is being reimbursed for HOO as directed in the contract documents, the hourly rates need to be adjusted to back out those HOO costs that are added to the hourly fee, so the client is not billed twice for the same expense.