Use of a Warranty Tracking Program to Identify and Resolve Performance Risks

Warranties in the construction industry have become more prevalent as buyers often rely upon the length of the warranties in evaluating products and services. Research has shown that the length of the warranty has no correlation to the actual performance of the product or service being purchased. The purpose of this paper is to present the findings of a study, seeking to optimize the value of a warranty as a risk minimization tool. In the research, a warranty program was developed and tested with a medium-sized construction coating manufacturer. The program tracks all the installed projects and provides an overall snapshot of the performance of all the installed projects and identifies "risky projects" (leaks, blisters, end-user dissatisfied) via annual collection of post-construction performance data. Five years of data are presented with 68 risky projects being identified with an average risk resolution of less than 30 days. The paper presents the development of the warranty risk minimization program, the risk identification and resolution methodology, a new model for measuring performance in the construction industry and the optimal use of warranties.