Case History 91
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[00:00:00] Liz: Welcome to the GBA case history series, brought to you by the GBA podcast. My name is Elizabeth Brown and I am the principal geotechnical engineer at JLT Consultants.

[00:00:10] Abi: I'm Abi Corbett, a project consultant at SME.

[00:00:13] Liz: So today we're diving deep into a particularly costly case history number 91, involving 180 unit assisted living facility. This case history is a classic example of how poor budget management and a serious lack of communication can turn a minor construction problem into a multimillion dollar disaster.

[00:00:37] Abi: That's right, Liz. This case is truly remarkable because it highlights almost every critical warning sign that design professionals, especially those following GBA guidance, are taught to look out for. It's really a textbook lesson in risk management and liability.

[00:00:54] Liz: So let's start with the crisis itself. GBA member firm [00:01:00] was retained by the facilities administrator to evaluate what they suspected was mold in a crawl space beneath the ground floor.

[00:01:08] Abi: Ooh, and their initial forensic evaluation confirmed the administrator's worst fears. Of course, mold was present. The project manager accompanied by a field representative, checked the crawlspaces, living areas, and even evaluated the HVAC system.

[00:01:26] Liz: So the finding was clear. But what happened next is where the financial shockwave hit. The project manager recommended a comprehensive remediation effort, so this included installing perimeter drains outside the foundations, sump pumps, and repairing the HVAC system.

[00:01:49] Abi: And the price tag for that comprehensive of a fix, a staggering $1.2 million.

[00:01:57] Liz: Oh, ouch. [00:02:00] So that figure, that $1.2 million completely stunned the facility administrator. So it's important to note though, that following guidance in GBA's contract reference guide, the project manager referred to that figure specifically as a quote, engineer's opinion of probable cost. It was not a cost estimate.

[00:02:27] Abi: That distinction is absolutely vital. The sources emphasize that design professionals who aren't certified cost estimators should not offer cost estimates or even use that label. The why? If an estimate is argued to be too low, it can be claimed that it encouraged a client to move forward inappropriately.

[00:02:50] Therefore, making the design professional responsible for damages the opinion of probable cost simply represents the [00:03:00] project manager's best judgment for the client's guidance, acknowledging that they really had no control over labor costs. Competitive bidding or construction means methods.

[00:03:10] Liz: Oh. Once the administrator recovered from the price shock, she immediately pivoted and directed the project manager to conduct an additional study to form an opinion about the liability of the original design team. So the architect, the site slash civil engineer, the geotech engineer, and the contractor in charge.

[00:03:34] Abi: This forensic investigation uncovered the true cause of the mold and the moisture problems, which largely revolved around an original budget that was far too low. When the project originally was bid, the low bid came in well above the architect's estimate.

[00:03:52] Liz: Ooh. Another estimating problem. So the owner's representative at the time [00:04:00] described as a quote "relative, novice," went into panic mode because the construction budget was, it was just inadequate for what needed to happen. This panic made the representative particularly susceptible to an offer from the low bid contractor in charge to cut some costs, which we all know, as you know, value engineering.

[00:04:25] Abi: Always so interesting how the relative novice. Lines up with cutting some costs.

[00:04:31] Liz: right? I agree.

[00:04:34] Abi: And as we see so often, this is where the cheap engineering becomes incredibly expensive. The owner's representative said, do it, and three weeks later, the constructor's project manager handed over a report promising to quote, "save you a small fortune."

[00:04:51] Liz: Ooh, that's like a red flag right there.

[00:04:54] Abi: Yeah, talk about a red flag

[00:04:56] Liz: But those cost cuts were [00:05:00] devastating. Crucially, the value engineering effort resulted in the deletion of permanent sumps, pumps, and associated plumbing.

[00:05:10] Abi: and the most alarming part, the architect of record strongly objected to almost all the proposed value engineering changes and even ended her firm's affiliation with the project via letter. She seemed to be trying to insulate her firm from negligence liability, which based on the final forensic findings, she really succeeded in doing.

[00:05:35] Liz: And again, red flag, right? Like if one of the design team members is walking away because they don't agree, like red flag should be, you should be seen what's going on there.

[00:05:44] Abi: Yeah, the, the team should not fall apart mid project.

[00:05:47] Liz: Agreed. Yet another failure of communication, the architect failed to advise the site civil and geotechnical firms about the proposed changes. [00:06:00] The novice owners representative feeling he had no other way forward, went ahead and directed the constructor in charge to proceed anyway.

[00:06:11] Abi: This is where the original geotechnical engineer record is gonna come into play. The geotechnical engineer of record had performed their initial study and found that neither the architects nor the site civil engineers project manager had asked the geotechnical engineer of record to review their plans and specifications that would've ensured they properly applied those geotechnical findings.

[00:06:35] Liz: Which is such an important step, which often doesn't happen in our industry, is getting that geotech engineer involved to make sure that their report is, you know, it's properly implemented into the plans.

[00:06:50] Abi: Early and often.

[00:06:51] Liz: Early and often. Yes. So the sources stress that the project parameters upon which the geotechnial engineer of [00:07:00] record based, their original study were changed during the architectural design and then changed again by the value engineering. Yet the architect and the constructor in charge and the owner, they all failed to discuss these changes with the geotechnical engineer of record.

[00:07:21] Abi: About the opposite of early and often.

[00:07:24] Liz: Right.

[00:07:26] Abi: because the permanent pumps were deleted, when the constructor encountered groundwater during excavation, they had to use temporary sumps to continuously pump the crawl spaces during construction. Naturally, once construction was complete, those temporary pumps were removed.

[00:07:43] Liz: Well, and once those pumps are removed, that groundwater's just gonna come right back in.

[00:07:48] Abi: That's the truth.

[00:07:49] Liz: Four months after initial occupancy, faculty members noticed moisture in the crawlspace. Imagine that. And after a few failed [00:08:00] attempts by the constructor to fix the issue, including installing ten one foot square vents, three months later, there is up to two inches of standing water and mold on the insulation and joists.

[00:08:15] Abi: Oh no.

[00:08:16] Liz: So now this leads us to the liability question, right? Who is responsible for this $1.2 million remediation cost? Somebody's gotta hold it, right? So the administrator tried to call on the constructor in charge, but found the phone was disconnected. Well, the constructor in charge had gone outta business.

[00:08:41] Abi: Talk about worst case scenario.

[00:08:43] Liz: Agreed.

[00:08:45] Abi: The insolvency left the client holding the bag. The forensic study concluded that the original geotechnical engineer of record was not liable at all. Their report accurately represented groundwater occurrences and elevations, [00:09:00] and specifically warned about the perils of installing basements without quote waterproofing designs.

[00:09:08] Liz: Crucially, the geotechnical engineer record had included a copy of the GBA published document titled Important Information about this Geotechnical Engineering report. So this document provides important warnings, including one that instructs the client to inform the geotechnical engineer of record about any changes to the project.

[00:09:30] Abi: So the liability ultimately belonged to the constructor in charge for performing the flawed value engineering, and then dissolving. The client sadly had to bear the cost of the repair and remediation, perhaps with some insurance assistance.

[00:09:46] Liz: The lessons learned from this case history are invaluable for anyone in design or construction.

[00:09:53] Abi: No doubt. Effective communication is essential. All parties must be apprised of changes in [00:10:00] activities. The best time to emphasize this, ironically, is during a project kickoff meeting where project leaders can emphasize key issues like communication.

[00:10:09] Liz: Right. I mean, how many case histories have we been through? Right? Where a lot of 'em come down to communication.

[00:10:16] Abi: Can fix a lot of things.

[00:10:19] Liz: Agreed. Lesson two would be follow up is a professional essential. The geotechnical engineer of record was considered lucky in this case. If that constructor in charge hadn't went outta business, this could be a total different outcome here. So they were definitely lucky, but firms really have a vested interest in preventing problems and documenting their activities because claims can quickly balloon and go outta control.

[00:10:51] Abi: And it seems they like to do that pretty often.

[00:10:54] Liz: Agreed.

[00:10:56] Abi: In lesson three, which we've really been hammering is cheap [00:11:00] engineering can be expensive. When the budget is inflexible or really just inadequate, the client is forced to cut some corners and basically pursue a course destined to fail. Design professionals must ask questions about a prospective client's budgetary situation, and then be wary of getting involved with projects where the fee just doesn't justify fundamental risk management.

[00:11:25] Liz: I think one of the things as an industry we, or especially like on the geotechnical engineering side, is we don't like to ask for more money for some reason. Where if we would, you know, take that initiative and, you know, explain the value added to spend the additional money could definitely help a lot of projects along,

[00:11:47] Abi: No doubt. I think sometimes we get stuck in the helper mentality too. Like, oh, they only have this much, so I'll just make it work.

[00:11:55] Liz: Right, right. Which isn't always a good thing.

[00:11:58] Abi: No.[00:12:00] 

[00:12:00] Liz: So lesson four would be consider the risk credit in your go no go analysis. Most practitioners consider financial credit, you know, getting paid for your fee. But you also need to consider the risk credit you extend by accepting the project's associated risks. In this case, considering the health impact on 200 plus elderly residents, plus business interruption loss, profits, and defense costs, the risk credit really could be worth million.

[00:12:33] Abi: Yeah, that's the truth. And finally, we can't forget the importance of construction, management, engineering, and testing services. The sources call CoMET the last line of defense against construction errors that become particularly prevalent when cost cutting is the order of the day.

[00:12:53] Liz: It's also crucial to remember the elevated risks of residential projects, especially those housing [00:13:00] susceptible individuals like the elderly. Mold can cause serious respiratory illness in some people. So geotechnical engineers must make sure that their mold warnings are conspicuous when dealing with housing for the most at risk.

[00:13:16] Abi: Yes, yes, and yes. Mold can affect people who are , truly healthy. So , those really susceptive. Individuals need to be treated with more care. In essence, this case history serves as a grim warning when an inexperienced owner representative accepts a too good to be true value engineering offer because of their inadequate budget, and then everyone fails to communicate those changes to the original design experts.

[00:13:44] The outcome is predictable and painful. It's a costly demonstration that those who want something in the worst way often get it just that way.

[00:13:56] Liz: A perfect, albeit expensive analogy for [00:14:00] poor project management is trying to build a complex sandcastle of the tide line when you cut costs by skipping, you know, that essential sea wall, or in this case the sump pumps and waterproofing. Because the budget feels too tight, the inevitable forces of nature, you know, groundwater and moisture. Will eventually wash away your structure and then, you're left footing the bill alone.

[00:14:25] Abi: Complex sandcastles definitely hurt when they go down, but , these case histories definitely are a big hurt. That's a really good analogy.

[00:14:34] Liz: That concludes this episode of the Case History Series, brought to you by the GBA podcast. I hope you're able to take away some useful information that will help you and others at your firm make good risk-based decisions in the future.