President’s Message – Warranties

Posted 10/08/2014

PeteGrass_PM_webBy Pete Grass, P.E., C.A.E.

This summer I was lucky enough to get out to a couple paving sites with a few Asphalt Institute members and see their work from design, through material selection and construction. The quality being built into the process from start to finish was noteworthy.

These projects started with a conversation with the customer around what they were trying to achieve. It included a careful review of the segment of highway, looking at areas that would create problems later if not corrected up front as part of the work. 

We took a look at the lab where the mix designs were optimized and tested to ensure they would meet specifications. We also looked at the plants and practices there. Everywhere, everyone was working toward a high quality product.

The construction sites were equally well controlled with construction quality in mind. In short, I was both impressed and pleased. We hear a lot about shoddy workmanship these days and it is professionally rewarding to see this level of attention to detail.

We talked about warranties and I learned both of these projects had seven year warranties on them. Perhaps a bit higher than normal in your area? I asked about this and our members were nonplussed by it. “It’s the right thing to do.” “We want to build a quality product or we don’t want the work.” “We’re going to fix any problems we see and not wait to be asked to do so.” These are companies working very hard to please their customer and to exceed their expectations. It is excellence!

Longer term warranties are not usual in our paving businesses. The system we operate between the owner, the contractor and the bonding company is just not very conducive to making this a routine practice. These performance bonds (creating the warranty) are required by law on public projects, and typically regulated by state insurance departments. The bonding company has to weigh the qualifications of the contractor with the risks of the project. The financial strength of the company and their performance weigh heavily in the evaluation process.

So here’s the problem. Long-term warranties put the burden on the bonding company. They must make judgment on the financial viability of the contractor over a longer time horizon and the longer that horizon is, the greater the risk. This tightens the underwriting parameters and thus reduces the availability to underwrite companies, especially the smaller ones.

There are many alternatives, either not bothering with warranties at all (and thinking good specifications will get the quality built in – it won’t) or settling for very short warranty periods. What is needed is conversation with all three parties to find an agreeable way to manage the construction risk and liability sharing. Warranties help build in quality because a well-designed one will properly place the construction quality where it belongs – with the builder and material supplier, while protecting them from existing condition defects that should be corrected up front.