A lot of BAS companies lose money during the warranty phase.
But it doesn't have to be that way.
In this episode we discuss how you can protect yourself and establish a warranty process that avoids project slippage.
Click here to download or listen to this episode now.
Resources mentioned in this episode
Transcript
Phil Zito 0:00
This is the smart buildings Academy podcast with Phil Zito episode 297. Hey folks, Phil Zito here and welcome to episode 297 of the smart buildings Academy podcast. In this episode we will be discussing how to manage the warranty phase of a construction project. So up to this point we have went through the entire construction project process. We've covered everything from sales to operations, handoffs, takeoffs, submittal creations, subcontractor line outs, working with your different trades on the project, all the way now to performing a proper management of the warranty process. Now, I'll be honest with you, I have seen a lot of folks lose their shirt during warranty phase because they do not understand how to properly manage the warranty process, what typically happens is you will have a tech or maybe a senior tech who don't really have a lot of project training. And they will be responsible initially for managing the warranty process. It won't be until you start to get a lot of calls, and rack up a lot of dollars that it will flag the eyes of the operations manager who will then be like what the heck, why are we billing so much time to this project, this project should be closed out, only then to realize you've established a basis now for the customer to be coming back to you and requesting quote unquote warranty service, when in actuality or they're requesting stuff that isn't remotely within the scope of the warranty. So in this episode, we're going to address how to put some controls in place to make sure that we go and basically avoid these warranty calls in the first place if possible, how to ensure that we really understand what's considered warranty and what's not. And how can we actually take this warranty phase which so many people lose money on and actually turn it into a money making and service generating opportunity. Alright, everything we discuss can be found at podcasts at smart buildings academy.com forward slash 297 Once again, that is podcast smart buildings Academy comm forward slash 297, I encourage you to check out our project management boot camp if you have found this series from episodes 283 to 297. Valuable, I encourage you to check out our bas project management bootcamp, well, you will learn about each of these topics in much greater detail. Alright, so warranty warranty is this phase after certificate of occupancy where you basically in most cases support the project for a period of a year. And what should happen is that there should be a defined warranty process what is considered an in warranty claim and an out of warranty claim. And then you should go and address those claims on a case by case basis within the standards of the specification. And then, once you have addressed that as either a valid valid warranty claim or a non valid warranty claim, you should actually be able to even pivot further to sell a plant service agreement or to sell some form of ongoing service support maybe in the form of labor and materials at a you know, whatever price, you know, maybe you set up a price per quarter or price per year, and you sell time and materials to support that customer. However, let's contrast this to what often happens, what often happens is the customer calls in to complain, they normally will have the text number from training because the tech gives them their number and says hey, if you got any issues call me. And they'll call they'll complain, they'll be like, ah you know, such and such isn't controlling right or this is happening or that is happening and the technician, rather than triaging the issue. Rather than running it through our warranty process, which we'll talk about in just a second. We'll go in immediately respond and we'll build time to the project. And this will fly below the radar Not intentionally, but will fly below the radar of the operations or project manager. And it won't be until you start to have significant labor hours hitting this project in a post warranty. And this usually takes a month or two to show up. That people are going to be like What the heck's happening here.
Phil Zito 4:45
We need to stop this. Because what will typically happen is it'll be you know, a couple hours here a couple hours there. And about a month in or two months in you'll notice like we're still getting charges on this project and We've already, although you shouldn't do this, we've already re estimated the project. You know, I don't believe you should ever re estimate a project until it's closed out. As a matter of fact, legally, there are some ramifications of re estimating a project before it's closed out. But just saying, you know, I've seen people do that. And then they're like, Oh, crap, we already sucked all the profit out of the project and applied it back to the business. Now we are in trouble. So what should happen, in my opinion, and based on my experience, having run ops teams, having run a lot of projects, is you should have a flowchart you should have basically a decision chart on warranty. So first, everyone on the team should be educated on the warranty policy. So the warranty policy. So a policy dictates kind of what you are expected. So this is our policy on warranty, we're going to go and check the specification, we are going to execute our warranty process. And then the process is the actual steps. So the policy is going to dictate out what folks need to do in regards to warranty, and then the process is going to dictate out how to do it. So how the process will happen is the call should not be routed to the tech, it should be routed to an agent, either a service agent, or a construction agent or the project manager, someone who has the ability to look at this and say, Okay, I am going to make a decision. If this is within the standard of warranty work. Now, this call right the call is going to come in. And that needs to go into the specifications, or we need to look at the specifications and say, okay, specification dictates, this is how we're supposed to respond the warranty. So one of three things may happen. One, the specification may say you need to immediately respond and then submit your bills. I hate those kind of spec languages because those bills rarely get paid. It just is something that I would oppose personally unless I'm really hungry for work. The second thing, and in today's climate, honestly, there's less workers than there are opportunities to work. So you're in a powerful position. The second opportunity, or the second option, typically is that there is an escalation, the customer will submit a warranty claim to the contractors, and then the contractor like they'll submit it to the owners rep or to the general contractor and then that person will go and submit it down the chain to the subcontractors. And they'll get handled accordingly that way. The third option is the customer will make a request of warranty. And then it'll be up to you to go and determine whether you want to respond to that this is the least common I would say the the most common, unfortunately, is you're supposed to respond and then sorted out from a bill perspective. But I see increasingly where it goes to the GC or to the owners rep and then gets pushed down to the contractors and you handle it accordingly. And you have what is called a warranty log. Now there will be a warranty log typically on all projects. And this is similar to a change order log, similar to a issue log etc. Now, in a warranty situation, it is critical that one you have a warranty log so if the site or project does not have a warranty, look, you need to create one, too. You need to document what is the issue? How was the issue noticed?
Phil Zito 8:53
What caused the issue? And how was the issue resolved. So what is the issue? Right? How was the issue noticed? What caused the issue? And how was the issue resolved. And this is going to be important and you need to take screenshots if this is on the computer you need to take pictures with your phone and document because for example, customer complaints central utility plant it's not providing enough chilled water to and this is real world example central utility plant across the church parking lot is not providing enough chilled water to the air handlers. There's a design issue. Okay. Let's go check it out according to the warranty process, go to the site walk into the central utility plant here a deadheading pump. It's an obvious noise if you've ever been out in the field. You know what a deadheading pump sounds like? Go and sure enough the multipurpose balancing strainer check valve thingy, right? It is bumped someone bumped into it during a maintenance or I have no You know how it happened, but they bumped into it and was slightly closed? Right? Took a picture of it said, Okay, slightly closed, went and sent that picture to the test mound said test mounts, you need to go and reset this to whatever position it is to be, and then build the customer for the issue, because that was not a control issue. Right? It was not a control issue. It was not within the warranty. So I figured out what was the issue issue was the deadheading of flow, I figured out what caused it someone bumped into it or adjusted it during maintenance. The matter wasn't my folks who did it because we didn't even install that valve. Then I took pictures of it, how was it resolved? Okay. So went through and took care of all of that. And this is how you have to manage and approach warranty, you have to have a definitive process of documentation. I know, it seems like a pain in the butt documentation is a pain in the butt. You know, I don't personally like to document things, I have a very rebellious streak. I mean, that's after all, why I created our business is because I didn't like being told what to do. I was like, I don't need to wait to get promoted, I'll just create my own business be in charge of it. So a lot of us don't want to have to sit there and document it's not fun. But it is important, because at the end of the day, a lot of you your jobs, maybe not right now, because our economy has way more work than we have people. But I've been alive long enough to know that that will eventually reverse and there will be more people than there are jobs. And the people who get to stay on the bus are going to be the people who can go and make profit for the business and justify their existence in the business. So my friends, that is how you approach managing warranty. Pretty short, but very important episode. That brings us to the end of our series on construction. I hope you really enjoyed this series. I look forward to hearing from you on what future series we can do just send us an email, leave a comment. However you prefer to reach out to us let us know what future series we can do. I know that starting Friday, we have a series on bas careers, we're going to talk through how to establish a BAS career, talk about why you'd want to do that. And then we're going to go through each of the different roles and talk through what they are the skills they need, how to develop them, etc. Then after that we are going to move into sales. And we're going to talk all about sales for several episodes. And then finally, we're going to move into workforce development. And we're going to talk about how to manage your team how to grow your team how to find talent, a whole slew of things related to workforce development. Thanks so much for being here. I hope you're enjoying these new kind of themed series of episodes. Let us know I look forward to talking to you on Friday where we start to dive into bas careers. Thanks a ton. Have a great day. Take
Unknown Speaker 13:11
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