The tunnel-boring machine Bertha has been halted underneath Seattle for more than two months. The most recent news is that seals protecting the TBM’s bearings may need to be repaired or replaced. Another tidbit of news is that Bertha is still under warranty. Do you think Bertha will be extracted from the partially-completed tunnel, packed up and shipped back to the manufacturer for repair or replacement? You laugh, but the scope of a construction-related warranty is the stuff of major battles.
The manufacturer touts the TBM on its website. Tim Newcomb from ENR reports that Bertha is still under warranty from the manufacturer, as the warranty reportedly extends for the first 1,300 feet of tunneling, and Bertha has moved just past the 1,000 foot mark. The scope of the warranty is not known to this writer, but the potential arguments are a well-trod path. Manufacturer and contractor both have much at stake.
Unlike a smartphone or a coffee-maker, one cannot easily ship a boiler or a TBM, for instance, back to the manufacturer for repair or replacement. Has the manufacturer agreed to replace worn-out or defective parts? If so, where and under what conditions? And what about all the other costs associated with repair/replacement – are those costs covered under the warranty or not? It takes little imagination to envision a situation where the cost of getting access to a piece of equipment dwarfs the cost of the repair that may be required. Or where the cost of removing and replacing defective material outstrips the replacement value of the material. There are, as well, arguments over whether the warranty is the exclusive remedy of the purchaser, or if some other cause of action – typically, breach of contract – may also apply. And the manufacturer of a high-profile piece of equipment (Exhibit 1: Bertha) may decide to go beyond the written terms of a warranty for its own PR purposes.
Whatever the outcome with Bertha, one hopes that the manufacturer and contractor made deliberate decisions about the scope of any warranty, evaluated the potential risks and priced them accordingly. Or even sought specialized insurance products to cover some of the risks. And this is a reminder, writ large, of the need to evaluate warranty promises and obligations, particularly if the cost of midstream action may outweigh the value or cost of the item warranted.