Subcontractor Default — Hotel & Timeshare Development
Construction of a hotel and timeshare property in Hawaii came to a halt when the flooring subcontractor defaulted. Over several weeks it had become clear that the subcontractor was not bringing enough manpower to the site to stay on schedule, despite passing an extensive bid process that included a financial review.
The professionals of RT Forensic Accountants were engaged to quantify and support the general contractor’s subcontractor default insurance claim.
- Industry
- Hospitality construction
- Peril
- Default of the flooring subcontractor
- Coverage
- Subcontractor default insurance (SDI)
- Scale
- More than $10 million in accelerated labor and expedited material costs
The Loss
After the notice of default, it also emerged that the original subcontractor had not ordered enough tile to finish the job. Matching tile had to be air freighted from the same quarry in Italy at great expense, and labor was accelerated when it arrived to hold the project’s overall schedule.
The Process
We documented the additional costs that flowed from the default, separating the premium for expedited tile and accelerated labor from the cost the project would have carried under the original subcontract, and tied each cost to invoices, freight records and labor reports.
The Results
More than $10 million in costs to accelerate labor and air-freight matching tile from Italy were documented, tying each expense directly to the subcontractor’s default and the effort to keep the project on schedule.