Construction Litigation Industry in California - Thesis Example

Construction Litigation Industry in California Construction Industry The Construction Industry has been evolving constantly. With the rapidly changing business environment, we see a change in the marketing tactics and strategies of these companies. Today, the marketing campaigns of renowned contractors focus on product quality, value offerings, repeat purchases, and try to communicate the value and the solution offered. The image of the construction industry has been modified from consumer goods market to service market. The shift of the emphasis would provide numerous opportunities for Architectural and engineering firms and allow them to offer new services. In the light of improved opportunities, we find that the general contractors now offer a number of services such as: financial assistance, management of the total program, operations and maintenance, and renovation besides the core service of designing, building, and construction management1. Hence, we see that the construction industry has taken over a number of services that were offered by A/E consultants. The contractors have taken over a large share of the service market of A/E consultants and thus, A/E firms need to expand the services offered to retain their market shares. They need to venture into service segments such as providing financial assistance to the clients, assistance with regulations, cost analysis of project life cycle, O&M functions, and renovation services. The situation has changed dramatically for marketing professionals and construction services providers and it is not as simple as it used to be. The shift in the project delivery system and the advances in communication technology requires the architects and the engineers to change themselves from their usual procedures of working. For example, in the past architects relied on their name and recognition whereas consulting engineers relied on 80/20 rule2 , and general contractors used to bid low in competitive bidding situations3. The A/E consultants can retain their market shares by strengthening their market niche, marketing plans that increase customer retention, and restructuring of the organization to increase flexibility in the human resource and the services offered. If we take a look at the US construction industry, it is a pretty large profitable market and the barriers to entry in the market for foreign firms are low as there have been indications that a number of foreign firms have entered the heavily civil and public works markets in California, Massachusetts, and Florida. Statistically, Construction industry is a huge one. According to the US Census Bureau, the total value of business done in 2007 was $748,4994 (in millions of dollars). Similarly, in the state of Washington, there were a total of 21,701 establishments in 2007 and the dollar value of business done was $27, 916, 1235. Construction Litigation Industry The function that Construction Litigation serves is dealing with legal disputes that result from construction projects. The disputes could result from disagreements in construction contracts and from injury claims or accidental deaths caused by ignorant behavior. In any case, construction litigation consultants are responsible for dealing with civil lawsuits involving private parties that are governed under separate rule and regulations from those of criminal prosecution6. Several new methods have evolved in the construction industry such as design/build, at-risk construction management, built-operate-transfer methods7. Difference of opinion exists on the claims and litigations under these methods. Proponents of these methods are of the view that these methods tend to bring down the hostility of the relationship between the concerned parties, hence resulting in an overall reduction in claims and litigations whereas advocates of litigation believe that despite the use of alternate methods; these methods just place the associated risks within the construction process. Consequently, there is no significant impact on the claims or litigation. On the contrary, they believe that litigations or claims would increase because of the complexity of the projects and the competitive nature of the market and resulting decreased profit margins. In the recent years, due to increasing competition and lower profit margins, there has been a rise in construction litigation8. Another reason behind this fact would be the competitive bidding system used in private and public sectors. Saturation of the construction market caused competitors to reduce margins, hence, they ended up with lesser money and tight cash flows asking them to make claims for profits. Thus, the involvement of the construction litigation industry is now needed more actively in the construction industry. Statistically, the industry holds 5% share in the overall litigation industry. Moreover, respondents of the 6th annual litigation trends survey report felt that the number of disputes would increase in any industry and even more so in the construction industry as the cause of litigations most highly rated pending litigations in 2009 were: contracts, 45% in US and 31% in UK; labor and employment, 45% in US and 18% in UK; and personal injury, 27% in US and 13% in UK.9 Following diagrams show how the claims in construction have been rising with time: Figure showing the rise in claims in the construction industry10 Forensic Construction Forensic Construction analysis deals with the building science focusing on the physical aspects of the building envelope including the kind and quality of material used, style, labor, design11, and the legal disputes that surround it12. The design/build method, at-risk construction management, and build-operate-transfer (BOT) help in the timely and on budget completion of projects as opposed to the competitive bidding method. However, the change in project delivery has changed the situation and has redefined the construction process. Several industry trends that have emerged as a result of change in project delivery methods are: Changing system of project delivery Focus on the front and back ends of project lifecycle Shifting of the construction industry from a product manufacturing industry to service industry Focus on the cost of life cycle along with the total project costs Focus on value driven from construction project Segmentation of markets into niches Globalization of economy and global competitors Disputes in construction projects are a very common phenomenon. It has been reported that in 1998, 285 heavy highway construction projects had 325 disputes13. The national and local statistics suggest the scope of the industry and the market. The market is offering numerous opportunities with the rising number of construction litigations. Engineering Industry Technological advancements have resulted in the integration of construction and engineering as one concern14. Construction is becoming more like manufacturing and hence, we can employ the managerial techniques used within. We encounter various aspect of manufacturing in construction such as single family housing construction (reproduction), high-rise construction (repetitive vertical), and highway construction (repetitive linear). This would have an impact on cost engineering and cost engineers. Before, we go forward, we need to define the cost engineering that has resulted with the evolution of AACE International. Cost engineering is a significant part of the development, planning, execution, and closeout of every project. It is core to any project and responsible from brining all the elements of a project together15. As we have mentioned earlier, statistically, construction/engineering takes over 5% of the overall litigation in US and UK. Moreover, if we take a close look at the survey, we see that the sectors that had a plus-20 range increase were engineering/construction besides energy and real estate, showing that the market is constantly expanding. Cost Engineering deals with each and every aspect of the project. Integration is necessary for the successful completion of projects and firms need certified cost engineers to be involved in all of the phases of a project cycle. Competitors Profile CSI Seattle Case Forensic Corp. Stewart Consulting Claim Dispute Resolution Service Offered CSI Seattle offer services mostly to attorneys who require her to provide forensic engineering investigations, support evidences and at times, testimony. Provides forensic and consulting engineering services to insurance companies, law firms, manufacturers and construction industry16 Provides advice and assistance to the clients on construction matters17 It provides alternative dispute resolution and insurance claims service18 Customers Attorneys, private homeowners Insurance companies Construction industry but not specifically defined Homeowners, policy holders, attorneys, adjusters Niche Single and muti-family dwellings, Attorneys, insurance companies Insurance companies, specialization in maritime survey Construction contractors Dealing in all sorts of insurance claims Competitive Factors Personal relations with clients, knowledge, expansion possibility in newer avenues Expertise in multiple fields, competent workforce, in-house lab, sizable workforce with multi-facet engineers Focused on dealing with construction contractors and provide honest advisory and assistance services Focused towards dealing with insurance claims, experience as in business since 1965, cost-effecitve Price Versus Value offered Target Market Attributes Target Market Age 35-55 Geographical Area Washington State Income Varied Type of Customers Attorneys, Homeowners, Insurance companies Education Law degree, varied Service Provided Roofing issues, Drainage problems, Concrete problems, Foundation problems. Accident investigations, Accident recreation, Storm damage investigations, Structural damage/faults investigations, Research and analysis of evidence. Rationale for the selected market The main target market of CSI Seattle is construction litigation attorneys and private homeowners, besides insurance companies, however, we would discuss that later. Currently, both the areas of the target market, i.e. the construction litigation attorneys and private homeowners, they work on approximately 20 case per month all coming from their previous client base asking for forensic engineering investigations, supporting evidence, and at time, testimony. The target market of Attorneys could be an easy one as the company has already penetrated the market to some extent and could its contacts to get more forensic engineering work from its existing client base. The market of homeowners could be targeted and expanded as it is a lucrative segment by helping homeowners in issues or answering the questions that they might have. Homeowners are the most naïve customer base, as they have no idea of the concerns or their rights. Moreover, the company could easily segment the market and position itself in the homeowners segment and look for people who have recently purchased custom built homes or who have purchased homes from developers. If we try to look for the rationale of the market, we can refer to the statistics provided by US Census Bureau providing data for the people who have recently purchased homes in Washington alone and the dollar value of business done in construction/engineering alone. The total number of establishments in Washington was 21,701 in 2007 and the figures show a rising trend from the past several years suggesting that they will increase even more. This proposes a remarkable opportunity of CSI Seattle. Similarly, the dollar value of business done in Construction/Engineering area alone was $27, 916, 12319, which again shows an opportunity of a firm like CSI Seattle to further penetrate the market. Another market segment could be that of insurance companies. One negative aspect of the segment is that it has already been penetrated by other competitors such as Case Forensics, and several others. However, it still provides sizable opportunity as insurance companies always want to reduce the claims made against them. This market segment poses some challenges for CSI Seattle, such as insurance companies require faster service delivery and turn-around times as compared to the previous client base of the company. This means that Mrs. Iftner need to make herself available all day long and respond quickly. She would need to work for long hours an This potential customer base has some particular challenges to address before Mrs. Iftner can enter the market with CSI Seattle. Insurance companies generally demand faster service and quick turn-around times compared to attorneys. She would need to be in the office all day long and provide quick responses to the client. She would also need an additional employee to help her. Hiring an employee could save the trouble of doing the field work while she can do the research and formulate the report without having to give immediate response to the insurance companies. Hence, in the short run, the target market for CSI Seattle would be that of homeowners and attorneys, whereas she can focus on the insurance companies in the future when she has hired at least one competent employee. Marketing Strategy We can define the marketing strategy into two phases: long term and short term. Problems with Marketing Before we can make any recommendations for the marketing strategy, we also need to focus on the company and its owner. Mrs. Iftner owns CSI Seattle and currently, she works alone. She is an engineer and had worked at DBM at first but she quit later to open her own business of Construction/Forensic Litigation. Being an engineer with a construction background helps her a lot, however, she sometimes have a conflict of interest with the attorneys. She also has conflicts with architects at times because of the change in mentality, as architects are more concerned with designs, color, shape, whereas engineers consider the interior structures and foundations more important. Another problem is that mostly engineers do not have good personal relations skills and are not very sociable. Their speaking and writing skills are average and they encounter difficulty in simplifying the technical jargons to the attorneys so that they can understand the issue with the construction. Besides, her image that comes across being a young women is that of an inexperience person, that makes it difficult for her to sell herself. Short-Term Marketing Strategy Her short term marketing strategy would try and penetrate the homeowners and attorneys market. A word-of-mouth strategy where she gives her visiting cards to her clients Personal Selling – She could visit her clients and extend her services showing confidence that she would be able to serve them Making the clients aware of her various capabilities so that her clients can take her services for a number of problems and not just associate her with one. CSI Seattle need to develop different marketing plan for both the markets as they consist of different people. Attorneys She could use her existing links with the clients and ask for more work She could use her clients as referrals to expand her customer base and opt for more diversified cases Homeowners She could visit a homeowner association in Seattle or Puget Sound and introduce herself, the services being offered, as well as ask them if they have any problems. Distribute brochures and visiting cards to particular people like homeowner association, new homeowners, explaining her services, charges, benefits, etc. Conduct workshops inviting homeowners so that they become aware of the service and might avail it when needed. Attend social events in the Puget Sound Area and in Seattle and grab any opportunity of networking with people She could also write, teach, and provide consulting services to contractors regarding the engineering concerns and issues Long Term Goals The main aim of long term marketing goals are to create newer market segments so as to get a newer client base as well as customer retention. Create a brand name for oneself Penetrate the homeowners and attorneys markets with the help of word-of-mouth marketing, client referrals, diversified client base Use social networking, media marketing, pamphlets, brochures, billboards, to enter the insurance companies market Personal Contacts and experience bringing her a positive reputation that can help her in customer retention as well as in getting new customers Implementation The 4Ps of marketing with respect to CSI Seattle would be: Product – Mrs. Iftner’s CSI Seattle is a more service based business that provides technical expertise, scientific and engineering analysis, report formulation, and expert witness services to the construction litigation industry. Her main customers are single and multi-family residential units suffering from design or construction problems. Price – Mrs. Iftner offers her services at a comparatively average price at $156 per hour of consultation, which is quite average as compared to the highest priced competitors taking $170 for similar services. Place – The place of operation for Mrs. Iftner would be Washington and in particular Seattle and Puget Sound. Promotion – The promotional scheme would involve several different things, such as: word-of-mouth with the help of client referrals and visiting cards, meetings with existing client for discussing possibilities, meeting homeowners associations and other similar offices, personal selling, brochures explaining the kind of service offered. We could divide the implementation into three phases: Phases I, II, & III. Phase I would be effective immediately, whereas Phase II would begin next year and Phase III would follow in a couple of years. Phase I – The initial phase would involve visits to existing clients and distribution of visiting clients and making them aware of the diversified nature of services being offered. She could also start visiting the association of homeowners and other similar societies and make her face known. She can distribute brochures, visiting cards, and conduct a workshop to explain her business and the services it offers. She can also start social networking right away and email the news through her updated mailing list to her existing clients a full detail of her service offering. Phase II – The second phase would focus more on building brand image and customer retention through sensing the needs of the customers and proposing solutions accordingly. Referrals from the client would happen in this phase, as by one year, Mrs. Iftner would have created a certain image in the minds of the consumers and consumers would judge the services provided by CSI Seattle based on that perception. She could also use her established reputation and personal contacts to attract more customers while retaining existing ones. Phase III – By the time the third phase is underway, CSI Seattle would have penetrated the Attorneys and homeowners market and it would be looking for newer target markets, like the insurance company. In order to market itself for insurance companies, it would need to do personal selling, besides having an employee or two for fieldwork, etc. It would also need a brochure highlighting what the company has done and can do in the future for the insurance company. It would also need to work on its communication mix and refine the website to be more professional and appealing. Market Research For the research on Mrs. Iftner’s past customers and target market, we conducted two different surveys: one analyzed the customer satisfaction whereas the second focused on the homeowners target market. A survey form was sent to 20 past customers for whom Mrs. Iftner had performed investigative services. Similarly, around 300 survey forms were sent at the mailing lists of homeowners in Washington area who have recently purchased homes. Some of the questions that we were trying to answer are: Attorneys Survey Some of the questions sent out in the survey were: Are you involved in any litigation right now? How did you come to know of CSI Seattle? Were the services of CSI Seattle helpful for you? Why? How can CSI Seattle improve its services? Would you recommend CSI Seattle to other attorneys for similar or different litigations? Homeowners Survey Have you recently purchased a house in Seattle or Puget Sound area? Do you know about the services CSI Seattle offer? If yes, How? Have you ever taken similar services from some other company? Would you consider litigation if the house has design or structural issues? How much are you willing to pay for such services? References Charles, M (2006). Congress Approves New Design/Build Law. Civil Engineering; pg 100. Friednian, W. (2004). Construction Marketing and Strategic Planning. McGraw-Hill, Inc., NY; pg 172-173. Sweet, Jonathan J. (2005). Avoiding or Minimizing Construction Litigation. Wiley Law; pg 50-56. http://www.nyconstructionlaw.com/construction-litigation Humphreys, K. (2008). Jelen’s Cost and Optimization Engineering. McGraw Hill, Inc. NY. Pg 1-2. Abi-Karam, T. (2004). Engineering in the New Millennium- Trends and Outlooks. Consulting Specifying Engineer. Vol. 24, No. 4, pp 19-22. Justin, S (2008), Legal Aspects of Architecture, Engineering and the Construction Process. CL-Engineering; Pg 400- 450. Read More