1. PRESENTATION TO WA SURVEY CONFERENCE 16 MAY 2013 TECHNOLOGY PARK BENTLEY IAN MARLER – CHAIRMAN & GENERAL MANAGER THE BASICS OF RISK MANAGEMENT PRESENTATION TO WA SURVEY CONFERENCE 16 MAY 2013 TECHNOLOGY PARK BENTLEY IAN MARLER – CHAIRMAN & GENERAL MANAGER THE BASICS OF RISK MANAGEMENT

2. PRESENTATION FORMAT A N EXPANSION OF ACSIS PROFILE T HE BASICS OF PRACTICAL RISK MANAGEMENT A RANDOM SELECTION OF CLAIMS AGAINST SURVEYORS A N EXAMPLE OF LOSSES THAT MAY BE INVOLVED IN A CLAIM D ISCUSSION OF D EEDS OF R ELEASE Q UESTIONS AND ANSWERS – GENERAL DISCUSSION

3. DISCLAIMER THE MATERIAL PRESENTED AT THIS SEMINAR IS OF A GENERAL NATURE TO PROMOTE DISCUSSION AMONGST ACSIS MEMBERS AND OTHER INTERESTED PARTIES. IT IS NOT INTENDED TO PROVIDE COMPLETE DISCUSSION OR SPECIFIC ADVICE ON ANY PARTICULAR TOPIC.

4. AN EXPANSION OF ACSISS PROFILE C URRENT PRACTICING MEMBER FIRMS R UN - OFF MEMBERS C LAIMS H ANDLING E NHANCED P OLICY WORDING S ELF C ONTAINED SCHEME 18 MONTH POLICIES P ROFITABLE A UDIT PROGRAM ACSIS PLUS S EMINAR ACTIVITIES R ISK M ANAGEMENT P UBLICATIONS

5. INTRODUCTION IF PI PREMIUMS ARE TO BE REDUCED OR EVEN STABILISED PAYMENTS AND COSTS MUST ALSO BE REDUCED ADHERENCE TO THE PRINCIPLES OF RISK MANAGEMENT PLUS A KNOWLEDGE OF THE TYPES OF PI CLAIMS WILL ASSIST ERRORS RELATING TO CONSTRUCTION SETOUT & INCLUDING LEVELS REMAIN THE SINGLE LARGEST SOURCE OF ERROR

6. THE BASICS OF RISK MANAGEMENT WE ALL MANAGE RISK – CONSCIOUSLY OR UNCONSCIOUSLY MANAGING RISK – AN INTEGRAL PART OF GOOD BUSINESS PRACTICE MANAGING RISK – AN INTEGRAL PART OF QUALITY MANAGEMENT RISK – AN OPPORTUNITY AND A CHALLENGE 6

7. Five methods to manage risk: 1. AVOIDANCE. THIS METHOD CAN RESULT IN OPPORTUNITY LOSS. 2. RETENTION. RISK RETENTION CAN BE BOTH ACTIVE AND PASSIVE. 3. NON-INSURANCE TRANSFERS. THIS TECHNIQUE RESULTS IN RISK BEING TRANSFERRED TO A PARTY OTHER THAN AN INSURANCE COMPANY. 4. LOSS CONTROL. ACTIVITIES UNDERTAKEN BY THE ORGANISATION TO CONTROL THE FREQUENCY AND SEVERITY OF LOSSES. 5. INSURANCE. IT INCLUDES RISK TRANSFERENCE, THE POOLING TECHNIQUE AND THE LAW OF LARGE NUMBERS IN ITS APPLICATION. 7

8. A table of risk might look like this Identify Risk Risk Category Potential Loss Management Strategy LowMediumHigh INSURANCE TRANSFERS RISK BUT DOES NOT MINIMISE IT RISK MANAGEMENT

9. DISCIPLINE THATS WHAT WE NEED. YOU MUST DISCIPLINE YOURSELF AND YOUR STAFF TO BE LESS ERROR PRONE. REMEMBER - THE COMMUNITY NOW EXPECTS YOU TO BE 100% CORRECT 100% OF THE TIME.

10. A LITTLE ABOUT PI INSURANCE

11. PI INSURANCE IS ONE FORM OF RISK MANAGEMENT IT TRANSFERS THE RISK TO AN INSURER IN RETURN FOR A PAYMENT (PREMIUM) PI INSURANCE DOES NOT MINIMISE THE RISK IT SIMPLY TRANSFER IT PI INSURANCE IS NOT A REPLACEMENT FOR GOOD SURVEY PRACTICE

12. REMEMBER PI INSURANCE IS A CONTRACT BETWEEN INDIVIDUAL FIRMS AND INSURERS NOT YOUR CLIENTS

13. SOME COLD FACTS IN THE EVENT OF A CLAIM IT IS YOU WHO IS BEING SUED NOT YOUR INSURER THE GOLDEN RULE OF INSURANCE IS THEY HAVE THE GOLD THEREFORE THEY MAKE THE RULES IF YOU WANT TO RELY ON THE INSURERS MONEY COMPLY WITH ALL THE TERMS OF YOUR POLICY CO-OPERATE DONT ADMIT LIABILITY DO EVERYTHING TO MINIMISE THE IMPACT OF A CLAIM LITIGATION IS NOW AN ART FORM

14. CAUTION INSURERS ARE BECOMING INCREASINGLY RELUCTANT TO COP IT ON THE CHIN WHEN PROFESSIONALS ARE NOT TAKING REASONABLE STEPS TO PROTECT THEMSELVES

15. POTENTIAL LITIGIATION MAY ARISE FROM ERRORS IN FIELD SURVEY ERRORS IN PLANS/REPORTS INFORMATION OMITTED TOO MUCH INFORMATION FAILURE TO MEET TIME CONSTRAINTS FALSE AND DECEPTIVE CONDUCT WRONGFUL USE OF DATA/PLANS SUPPLIED

16. MAJOR SOURCES OF ERROR SET OUT FOR CONSTRUCTION CADASTRAL SURVEYS DETAIL/ TOPOGRAPHICAL SURVEYS MISCELLANEOUS -DESIGN -FEASIBILITY STUDIES -PROJECT MANAGEMENT -STRUCTURAL OR CIVIL ENGINEERING (MULTI DISCIPLINARY FIRMS) -OTHERS

17. LETS LOOK AT WHO MIGHT SUE YOU CLIENT MORTGAGEE CURRENT LAND OWNER FUTURE LAND OWNER NEIGHBOUR OTHER CONSULTANTS BUILDER 3RD PARTIES OTHERS

18. CLAIMS MAY INCLUDE ALL OR ANY OF THE FOLLOWING ALLEGATIONS: NEGLIGENCE BREACH OF CONTRACT TRADE PRACTICES

19. WELL ALMOST ANYTHING NOT ALL CLAIM NOTIFICATIONS RESULT FROM ERRORS REMEMBER THERE IS NOTHING YOU CAN DO TO STOP SOMEONE SUING YOU FRIGHTENING! WHAT CAN GO WRONG AND LEAD TO A PI. CLAIM

20. SOME THOUGHTS TO MINIMISE YOUR RISK STAFF EMPLOYMENT HOW WE SAY AND WRITE THINGS RELEASE OF DOCUMENTS DEBTORS AND COUNTER CLAIMS QUOTING / ESTIMATING CONTRACTS & CLIENT RELATIONSHIPS PAPER TRAIL EXPLANITORY NOTES FILE RETENTION TECHNICAL MATTERS OTHER

21. A Selection of Surveyors PI Claims

22. AN ERROR IN SETTING OUT THE SURVEYOR WAS INSTRUCTED TO SETOUT A TOTAL OF 18 PILES RELATING TO A TRANSFER HOUSE AS PART OF A NEW CONVEYOR SYSTEM. THE CONSTRUCTION SITE COVERED A SUBSTANTIAL AREA AND THE TRANSFER HOUSE WAS 200M OR MORE AWAY FROM ANY EXISTING STRUCTURE. THE PILES IN QUESTION ARE BORED CONCRETE BETWEEN 900MM & 1200MM IN DIAMETER & BETWEEN 10M & 20M PLUS IN DEPTH. THE SURVEYOR CALCULATED THE PROPOSED PIER POSITIONS AND UPLOADED THIS DATA TO THE TOTAL STATION. UNFORTUNATELY THE CO-ORDINATES OF ONE OF THE CONTROL STATIONS WAS INCORRECTLY SET BY 5M IN ONE DIRECTION RESULTING IN ALL 18 PILES BEING OUT OF POSITION BY THIS AMOUNT. 1of2 slides

23. RECTIFICATION INVOLVED SOME RE-DESIGN SUCH THAT 4 OF THE 18 PILES COULD BE USED & A TOTAL OF 14 PILES HAD TO BE PARTLY REMOVED & NEW ONES CONSTRUCTED. COSTS TO THE INSURER WILL BE IN THE HUNDREDS OF THOUSANDS & COSTS TO THE SURVEYOR BEING HIS EXCESS, LOST TIME & EFFORT. CONCLUSION - SUFFICIENT CHECKS MUST BE PUT IN PLACE TO ENSURE WORK IS CORRECT. 2of2 slides

24. A DIFFERENCE OF OPINION OFTEN DIFFERENCES OF OPINION BY SURVEYORS RELATE TO CADASTRAL BOUNDARIES. NOT SO IN THIS CASE & THERE IS REALLY NO ERROR ON THE PART OF THE SURVEYOR. SO WHAT WENT ON. SURVEYOR IS ASKED TO DETERMINE THE DISTANCE BETWEEN AN EXISTING RETAIL ESTABLISHMENT & THE LOCATION A PROPOSED RETAIL ESTABLISHMENT OF THE SAME TYPE. DISTANCE IS TO BE MEASURED ALONG THE MOST DIRECT & LEGAL PEDESTRIAN ROUTE HAVING REGARD TO SAFETY. SURVEYOR A COMPLETES SURVEY & DETERMINES DISTANCE IS SLIGHTLY GREATER THAN REQUIRED MINIMUM. HENCE PROPOSED NEW ESTABLISHMENT CAN PROCEED. SOME FUNDS SPENT ON APPLICATIONS ETC. 1of2 slides

25. RETAIL JEALOUSY/COMPETITION & BUREAURACY KICK IN & SURVEY RESULTS CHALLENGED. EXISTING RETAIL ESTABLISHMENT INSTRUCTS SURVEYOR B TO PERFORM SAME SURVEY AS SURVEYOR A. SURVEYOR B s SURVEY SHOWS SLIGHTLY LESS THAN THE REQUIRED MINIMUM AS IT FOLLOWS A SLIGHTLY DIFFERENT ROUTE. BOTH SURVEYS ARE ACCURATE BUT DISPUTE CENTRES ON WHICH ROUTE WAS FOLLOWED HAVING REGARD TO SAFETY. CONCLUSION - KEEP A WELL DOCUMENTED PAPER TRAIL & ENSURE YOUR SURVEY IS ACCOMPANIED BY ADEQUATE EXPLANATION. 2of2 slides

26. DIGITAL INFORMATION ISSUES THE PROJECT WAS A LARGE AND COMPLEX ROAD CONSTRUCTION SITE. THE DESIGN WAS CARRIED OUT BY CIVIL ENGINEERS AND WAS PROVIDED ELECTRONICALLY TO ALL INVOLVED IN THE PROJECT. AT THE COMMENCEMENT OF CONSTRUCTION NOT ALL THE DESIGN PLANS WERE COMPLETED. ON THIS PROJECT, MACHINES (EXCAVATORS, DOZERS, GRADERS ETC) WERE GUIDED ELECTRONICALLY BY INFORMATION UPLOADED INTO THEIR MACHINE CONTROL COMPUTERS. IT WAS THE SURVEYORS ROLE TO PROVIDE SURVEY CONTROL, TO INTERROGATE THE DESIGN AND TO CONVERT THE DESIGN TO MACHINE CONTROL MODELS. THESE MODELS WERE UPLOADED INTO THE MACHINES SO THAT THE ROADS COULD BE BUILT. 1of2 slides

27. IT WAS DISCOVERED DURING THE WORK THAT PART OF THE SUBGRADE WAS CONSTRUCTED INCORRECTLY. IT WAS ALLEGED THAT THE SURVEYOR ERRED AND A CLAIM OF APPROXIMATELY $200,000.00 WAS LODGED AGAINST THE SURVEYOR. INVESTIGATIONS REVEALED THAT THE CAUSE OF THE PROBLEM WAS DUE TO AMBIGUOUS STRING DEFINITIONS ON THE ELECTRONIC DESIGN PLANS. AS WELL SHORTCOMINGS IN THE PROCESS WERE IDENTIFIED BEING THAT NOT ALL STRINGS COULD BE IDENTIFIED FROM THE METADATA AVAILABLE. THE DIGITAL DATA CONTAINED SUBGRADE, SUBBASE AND BASECOURSE DATA IN THE SAME FILE AND THEREFORE THE DATA HAD TO BE FILTERED IN ORDER TO CREATE A SUBGRADE MODEL. A LACK OF METADATA AND THE COLOCATION OF DATA LAYERS IN THE SAME FILE WERE AT THE HEART OF THE PROBLEM. THE RESULT WAS THAT THE PROCEEDINGS AGAINST THE SURVEYOR WERE DROPPED. 2of2 slides

28. SIMPLE TRANSPOSITION ERROR IN SETTING OUT A BENCHMARK FOR CONSTRUCTION THIS CONCERNS ABOUT 1400 METRES OF 1METRE DIAMETER SEWER TRUNK MAIN BEING LAID APPROXIMATELY 2 METRES DEEP AT A GRADE OF 1% IN WATER CHARGED GROUND. THE SURVEYOR WAS INSTRUCTED TO SETOUT CERTAIN CONTROL POINTS ALONG THE LINE. BECAUSE OF SITE CONSTRAINTS CONSTRUCTION OF THE PIPE WAS CARRIED OUT FROM BOTH ENDS TOWARDS THE MIDDLE AND FROM THE MIDDLE TOWARDS THE ENDS. THE CONSTRUCTION WAS INTERRUPTED FOR SOME TIME. PRIOR TO RESUMPTION OF WORK THE SURVEYOR WAS INSTRUCTED TO CHECK ALL THE CONTROL POINTS. 1of2 slides

29. THE SURVEYOR FOUND THAT ALL CONTROL POINTS EXCEPT ONE WERE RIGHT. ONE OF THE POINTS WAS DISTURBED. HE PLACED ANOTHER POINT APPROXIMATELY A METRE AWAY FROM THE DISTURBED ONE AND LEVELLED THE NEW POINT. HE THEN WROTE THE LEVEL OF THE POINT ON THE STAKE BESIDE THE POINT. UNFORTUNATELY HE WROTE THE LEVEL OF THE ORIGINAL POINT ON THE STAKE AND NOT THE LEVEL OF THE NEW STATION. THE DIFFERENCE WAS 70MM IN HEIGHT. THE ERROR WAS DISCOVERED WHEN THE INVERTS OF THE PIPES DID NOT MATCH AT ONE OF THE PITS. THE RESULT WAS THAT 900 METRES OF PIPE HAD TO BE REMOVED AND RE- LAID. THERE ARE SIMPLE CHECKS THAT MUST BE UNDERTAKEN TO MINIMISE RISK: O NCE YOU WRITE THE LEVEL ON THE MARK WALK AWAY FROM THE MARK FOR A FEW MINUTES AND THEN COME BACK TO IT AND CHECK THE WRITTEN LEVEL FROM YOUR FIELD NOTES 2of2 slides

30. DETAIL SURVEY LEADS TO A VERY LONG & COSTLY LEGAL ARGUMENT THIS PROJECT WAS THE CONSTRUCTION OF A MAJOR SEWERAGE INFRASTRUCTURE WITHIN A LARGE ESTABLISHED CITY. THE PROJECT WAS UNDERTAKEN BY THE CITY COUNCIL WHICH APPOINTED A HEAD CONTRACTOR TO CARRY OUT WORK WHO IN TURN APPOINTED VARIOUS CONSULTANTS & SUBCONTRACTORS TO DESIGN AND CONSTRUCT THE INFRASTRUCTURE. PRIOR TO DESIGN A SURVEYOR WAS APPOINTED TO CARRY OUT A DETAILED TOPOGRAPHICAL SURVEY AND TO PREPARE A PLAN SHOWING THE PROPOSED CONSTRUCTION ROUTE. PRIOR TO CARRYING OUT THE SURVEY, THE SURVEYOR RECEIVED SPECIFIC INSTRUCTIONS AS TO THE ROUTE LOCATION AND HOW FAR ON EITHER SIDE OF THE ROUTE THE SURVEY HAD TO EXTEND. AS WELL HE WAS SPECIFICALLY INSTRUCTED NOT TO EXTEND HIS SURVEY BEYOND THAT SPECIFIC AREA. 1of3 slides

31. DURING CONSTRUCTION AND IN ONE PARTICULAR SMALL SECTION OF THE ROUTE, THE SUBCONTRACTOR EXTENDED HIS EXCAVATIONS TO BEYOND THE SPECIFICALLY INSTRUCTED SURVEYED AREA. ONE OF THE CONSEQUENCES OF THE SUBCONTRACTORS ACTIONS WAS THAT HE CUT A SUBSTANTIAL TELECOMMUNICATIONS CABLE. THE RESULT OF THAT WAS THAT THE TELECOMMUNICATIONS PROVIDER HAD TO REPAIR THE CABLE (AT A COST OF APPROX $70,000) AND HAD CONSEQUENTIAL LOSSES DUE TO ITS INABILITY TO SERVICE ITS CUSTOMERS FOR A TIME INITIALLY ESTIMATED TO BE $6,000,000. DUE TO THE AMOUNT INVOLVED AND THE NATURE OF THE PARTICIPANTS THE MATTER ENDED UP IN COURT WITH A NUMBER OF PARTIES BEING SUED. EVEN THOUGH IT WAS CLEAR TO ALL THE PARTIES THAT THE SURVEYOR HAD DONE NO WRONG, HE WAS BROUGHT INTO THE ACTION. 2of3 slides

32. IT TOOK THE LAWYERS FOR THE SURVEYORS TWO YEARS TO UNTANGLE THE MESS AND GET ALL THE OTHER PARTIES TO AGREE TO RELEASE THE SURVEYOR FROM THE PROCEEDINGS. EVEN THOUGH THE SURVEYOR HAD CARRIED OUT HIS INSTRUCTIONS TO THE FULL, BECAUSE OF SOMEONE ELSES ACTIONS, THE SURVEYOR HAD TO SPEND A CONSIDERABLE AMOUNT OF TIME & EFFORT (NOT TO MENTION COST) TO ASSIST IN THE RESOLUTION OF HIS PART OF THE PROCEEDINGS. CONCLUSION - THE SURVEYOR HAD DONE NO WRONG BUT WAS SIMPLY IN THE WRONG PLACE AT THE WRONG TIME. GOOD RECORDS CERTAINLY HELPED 3of3 slides

33. CONVERSION ERROR Surveyor requested to determine the distance between two horizontal tanks – one vertically above the other and several metres above ground Conversion error results in significant claim Settlement exceeds $2mil

34. AN EXAMPLE OF LOSSES THAT MAY RESULT FROM A CLAIM ASSUMED SCENARIO SURVEYOR SETS OUT MARKS FOR CONSTRUCTION OF A PROPOSED RESIDENTIAL DWELLING. M ARKS PLACED ARE IN ERROR AND BUILDING IS 1 METRE OUT OF POSITION. E RROR NOT DISCOVERED UNTIL BRICKWORK AT AROUND 1.5 METRE HIGH

35. RECTIFICATION DWELLING NOT PERMITTED TO REMAIN IN INCORRECT POSITION PARTIAL DEMOLITION AND RECONSTRUCTION REQUIRED

36. POSSIBLE COSTS C OSTS FOR DELAY IN PROJECT D EMOLITION COSTS A RCHITECTS / STRUCTURAL ENGINEER COSTS FOR REDESIGN TO SALVAGE PART OF THE CONSTRUCTION R ENTAL COSTS FOR OWNER NOT BEING ABLE TO OCCUPY I NTEREST, MORTGAGE COSTS BY OWNER L EGAL FEES S URVEYORS EXCESS CONTRIBUTION TO SETTLEMENT F UTURE INCREASE IN PI PREMIUM OTHER

37. DISCUSSION RE DEEDS OF RELEASE

38. QUESTIONS AND ANSWERS GENERAL DISCUSSION