See discussions, stats, and author profiles for this publication at: https://www.researchgate.

net/publication/303515491

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

Conference Paper · May 2016

DOI: 10.1061/9780784479827.216

CITATIONS READS

0 33

4 authors, including:

Dean Kashiwagi Kenneth Sullivan

Arizona State University Arizona State University
127 PUBLICATIONS   319 CITATIONS    101 PUBLICATIONS   653 CITATIONS   

SEE PROFILE SEE PROFILE

Brian C. Lines
University of Kansas
21 PUBLICATIONS   57 CITATIONS   

SEE PROFILE

Some of the authors of this publication are also working on these related projects:

Pavement Performance Modelling for Botswana Low Volume Road Networks View project

best value View project

All content following this page was uploaded by Brian C. Lines on 06 June 2018.

The user has requested enhancement of the downloaded file.

 Construction Research Congress 2016 2171

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

1 2
Dhaval Gajjar ; Dean Kashiwagi ; Kenneth Sullivan3; and Brian Lines4
1
Del E. Webb School of Construction, Arizona State Univ., P.O. Box 873005,
Tempe, AZ 85287-3005. E-mail: dgajjar@asu.edu
Downloaded from ascelibrary.org by University of North Carolina At Charlotte on 11/28/16. Copyright ASCE. For personal use only; all rights reserved.

2
Del E. Webb School of Construction, Arizona State Univ., P.O. Box 873005,
Tempe, AZ 85287-3005. E-mail: Dean.Kashiwagi@asu.edu
3
Del E. Webb School of Construction, Arizona State Univ., P.O. Box 873005,
Tempe, AZ 85287-3005. E-mail: Kenneth.Sullivan@asu.edu
4
Civil, Environmental, and Architectural Engineering, Univ. of Kansas, 1530 W. 15th
St., Lawrence, KS 66045. E-mail: brianlines@ku.edu

Abstract
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.
INTRODUCTION
The construction industry has revealed poor performance documentation in
the last couple of decades (CFMA 2006, Flores and Chase 2005, Egan 1998, Davis et.
al. 2009). Since there is no documented performance, the various entities in the
construction industry rely on long-term warranties and unrealistic expectations to
market their product / service. This has created a misconception among the buyers in
the industry that the length of the warranty is directly correlated to the performance.
The buyers also believe that in case a product / service fails to perform as expected,
the warranty will offer the level of protection they expected.

© ASCE

Construction Research Congress 2016

 Construction Research Congress 2016 2172

The manufacturer’s warranty that is offered in the construction industry is

provided by the manufacturer to the buyer (Agarwal et. al. 1996). The warranty is
generated and written by the legal representatives of the manufacturer and contain
certain exclusions that has the possibility to void the warranty (Murthy & Djamaludin
2002, Christozov et al. 2009). Therefore if a product / service fails to perform as
expected the buyers have to prove that they did not violate the exclusions of the
Downloaded from ascelibrary.org by University of North Carolina At Charlotte on 11/28/16. Copyright ASCE. For personal use only; all rights reserved.

warranty and the manufacturer needs to also agree with the buyer (Kashiwagi, 2012).
Hence it can be concluded that the length of the warranty has no correlation to the
actual performance of the product / service (Kashiwagi 2011).
One of the medium-sized US based construction coating manufacturers in the
construction industry realized the problem and wanted to use the performance
measurement as a differentiating tool from other competitors rather than just the
length of the warranty. Moreover, the manufacturer also wanted to ensure that the
buyers are satisfied with the product / service and mitigate the problems proactively,
if any, after the installation of the product. Keeping this objective in mind, the
manufacturer approached the research group to implement a warranty tracking
program as a risk minimization tool that tracks the performance information of all the
installed products, measures the customer satisfaction of the buyers and identifies the
“risky projects” proactively. A project is classified as a “risky project” if the end user
is dissatisfied with the final product, has existing leaks or any other defects.
METHODOLOGY
The post-occupancy evaluation (POE) method in the form of owner
satisfaction questionnaire’s has previously been implemented in the construction
industry and was an integral part for the warranty program (Wicks and Roethlein
2009, Forbes 2002, Gajjar et. al. 2012). The manufacturer provides coatings for five
different systems – Wall Coating, Flooring, Waterproofing, Direct Bond Roofing, and
Sprayed Polyurethane Foam (SPF) Roofing and the performance information in the
form of owner questionnaires for each coating system was measured for five years.
The warranty program minimizes the risk for the manufacturer by providing
the information on:
1. Performance information on all the warranted projects
2. Dissatisfied end users
3. Identification and proactive resolution of the “risky projects”
The steps in the warranty process are outlined in Figure 1.

© ASCE

Construction Research Congress 2016

 Construction Research Congress 2016 2173

Performance Information
END USER
Downloaded from ascelibrary.org by University of North Carolina At Charlotte on 11/28/16. Copyright ASCE. For personal use only; all rights reserved.

Risky
Project Warranty
Resolution
Warranty
Info. RESEARCH
MANUFACTURER
GROUP

Performance Ratings
Risky Projects
Etc.

DATABASE

Figure 1. Warranty Tracking Process

The warranty process is initiated when the manufacturer and the end user
enter into the agreement after the completion of the project in the form of a warranty.
Once the warranty has been issued for a project, the project information is transferred
to a research group. The research group contacts the end user for the customer
satisfaction ratings on the coating system, the manufacturer and the applicator as
follows:
1. Customer Satisfaction Rating with the Coating System (1 lowest, 10 highest)
2. Would you use the manufacturer’s product again? (Yes or No)
3. Customer Satisfaction of the Applicator (1– 10)
4. Would you hire the applicator again? (Yes or No)
5. Overall Customer Satisfaction (1 – 10)
The end user is contacted every year until the end of the warranty for the
satisfaction ratings. Based on the satisfaction ratings of the end user, the projects are
classified as “risky” or “non-risky”. The project is classified as risky if the end user is
dissatisfied with the final product, has existing leaks or any other defects. All of the
performance ratings for each project and the list of risky projects are updated in the

© ASCE

Construction Research Congress 2016

 Construction Research Congress 2016 2174

real-time database. Using the real-time database, the manufacturer can resolve the
risky project and performance issues by contacting the end user directly.
RESULTS
The performance information for the past five years has been tracked using
the warranty program for coatings of waterproofing, wall coatings, direct bond
Downloaded from ascelibrary.org by University of North Carolina At Charlotte on 11/28/16. Copyright ASCE. For personal use only; all rights reserved.

roofing, sprayed polyurethane roofing and flooring. Table 1 shows the performance
information of all the manufacturers system’s for the last five years. The number of
projects surveyed decrease from Year 1 to Year 5 because 79% of the projects are
less than 2 years old. Only 21% of the projects that have been installed are more than
3 years old.
Table 1. Manufacturer’s Performance Information

# Criteria Yr. 1 Yr. 2 Yr. 3 Yr. 4 Yr. 5

Overall customer 9.0 8.8 8.7 9.1 8.8
1
satisfaction (1 – 10)
2 Oldest job surveyed (Yr.) 9 7 7 6 6
Average age of jobs 4 4 4 5 5
3
surveyed (Yr.)
Customer Satisfaction - 9.1 8.8 8.7 9.1 8.7
4
Coating System (1 -10)
Percent of customers that
5 would purchase the product 98% 95% 90% 97% 88%
again (%)
Customer Satisfaction – 9.0 8.8 8.9 9.1 8.8
6
Applicators (1-10)
Percent of customers that
7 would hire same Applicator 96% 95% 92% 95% 89%
again (%)
Total job area surveyed (SF 35.9 22.5 13.2 5.4 2.4
8
in Millions)
9 Total # of jobs surveyed 1,412 585 334 154 56

Along with performance information, the warranty program was successfully

able to identify 68 risky projects (2.7% of all projects) for the last five years. The
real-time database assisted the manufacturers to contact the end user within 2 days of
“risky project” notification by the end user. The average resolution days, i.e. the time
between the notification of the risky project and the final resolution of the project,
was 27 days. Table 2 shows the breakdown of risky projects.

© ASCE

Construction Research Congress 2016

 Construction Research Congress 2016 2175

Table 2. Risky Project Analysis

Criteria Data
Total # of Risky Projects 68
Total # of Risky Projects Currently Pending 0
Average days for resolution 27 days
Downloaded from ascelibrary.org by University of North Carolina At Charlotte on 11/28/16. Copyright ASCE. For personal use only; all rights reserved.

The manufacturer was also successfully able to track the performance of the
applicators that installed their products on the project site. Based on the performance
rating of the applicator three categories were created as follows:
1. Green: Applicator performance rating between 8.0 and 10.0 (1 to 10)
2. Yellow: Applicator performance rating between 5.0 and 7.0 (1 to 10)
3. Red: Applicator performance rating between 1.0 and 4.0 (1 to 10)
Table 3 shows the performance information of the applicators in the red
category. The manufacturer realized that the applicators who are not an expert in
installing their products are a high risk to the manufacturer.
Table 3. Risky applicator analysis

Criteria Data
Total # of Applicators 660
Total # of Risky Applicators (Red) 22 (3.3%)
Total # of Jobs for Risky Applicators 36
Average Customer Satisfaction Rating for Risky Applicator 2.3 / 10
Total SF installed by risky applicator 0.07 M

CONCLUSION
The manufacturer was successfully able to not only implement the warranty
risk minimization program but also utilize the program to minimize risk through
identification of performance information, risky projects and risky applicators. The
overall performance of 8.9 out of 10 shows the manufacturer is high performing.
Moreover, by implementing documented and verifiable performance information on
their product and its application, the manufacturer was able to differentiate
themselves from other manufacturers in the industry (who primarily market their
products based on the length of the warranty).
The identification and resolution of the risky projects provided the end user
with a quality final product. Even if any problems did arise with the installed product,
the end user was assured that the manufacturer would proactively respond and
mitigate the problem. This minimized adversarial disputes since the manufacturer was
measurably accountable for any product problems that arose during the length of the
warranty. The risky applicator provided the manufacturer the clear identification of
which applicators were under-performing. The manufacturer realized that in order to

© ASCE

Construction Research Congress 2016

 Construction Research Congress 2016 2176

minimize risk, the low-performing applicators have to be eliminated from installing

their products.
The warranty program provided the optimal use of warranties i.e. to assist end
users and minimize risks. Similar model for measuring performance in the
construction industry can be implemented in any aspect of the construction industry.
Downloaded from ascelibrary.org by University of North Carolina At Charlotte on 11/28/16. Copyright ASCE. For personal use only; all rights reserved.

REFERENCES
CFMA’s. (2006). Construction Industry Annual Financial Survey, Moss-Adams,
LLP, 18th edition
Davis, B., and Sebastian, R. (2009a). “The relationship between contract
administration problems and contract type”, Journal of Public Procurement,
9(2), 262-282
Egan, S.J. (1998). “Rethinking construction: The report of the construction task force
to the deputy prime minister, John Prescott, on the scope for improving the
quality and efficiency of UK construction”, The Department of Trade and
Industry,1 Victoria Street, London, SW1H 0ET
Flores, V. and Chase, G. (2005). “Project controls from the front end”, Cost
Engineering, April 2005, 47(4), 22-24
Agrawal, J., Richardson, P. S., & Grimm, P. E. (1996). The relationship between
warranty and product reliability. Journal of Consumer Affairs, 30(2), 421-443.
Christozov, D., Chukova, S., & Mateev, P. (2009). “On Two Types of Warranties:
Warranty of Malfunctioning and Warranty of Misinforming”. Asia-Pacific
Journal of Operational Research, 26(3), 399-420.
Murthy, D. N. P., & Djamaludin, I. (2002). “New product warranty: A literature
review”. International Journal of Production Economics, 79(3), 231-260.
Kashiwagi, D. (2011). PIPS / PIRMS: The Best Value Standard. 11th ed. Tempe:
KSM.
Kashiwagi, D. (2012). “The Best Value Standard”. Performance Based Studies
Research Group, Tempe, AZ, Publisher KSM Inc.
Wicks, A. M., & Roethlein, C. J. (2009). “A Satisfaction-Based Definition of
Quality”. The Journal of Business and Economic Studies, 15(1), 82-97.
Forbes, L. H. (2002). “Continuous Learning in Construction through Quality-Based
Post Occupancy Evaluation”. IIE Annual Conference. Proceedings, 1-7.
Gajjar, D. R., Kashiwagi, D. T., & Kashiwagi, J. (2012). “Manufacturer's New
Approach To Risk”. RICS COBRA 2012, 1859-1868.

© ASCE

View publication stats Construction Research Congress 2016