ICS Magazine

Large or Catastrophic Restoration Projects

September 18, 2007

Q: I have a small restoration company in Louisiana. After Katrina, we started receiving phone calls for drying and remediation services from homeowners. I didn’t get the opportunity to work on any commercial projects. What do you think we need to do in order to be better prepared for another storm?

A: I can comment on some of the procedural and administrative issues regarding catastrophic restoration projects. However, if your question has to do with marketing, I would recommend that you contact a marketing consultant.

Working on large or catastrophic restoration/remediation projects can be very different from working on a residential water-damage restoration job. They tend to be more complex with respect to the materials that are being restored and the management requirements. The Institute of Inspection, Cleaning and Restoration Certification S500 Standard and Reference Guide for Professional Water Damage Restoration (3rd Edition) has added a standard section and chapter on “Large or Catastrophic Restoration Projects.” I would encourage you to get a copy of the S500 3rd edition if you have not already done so.

As a clarification, a large restoration/remediation project can include large or complex residential properties as well as commercial, industrial or institutional structures. The S500 Standard states that:

1.1 Introduction
“Large projects generally involve four basic types of structures: commercial, industrial, institutional, and complex residential. Large projects involve many building materials, components, systems and methods of construction different from those found in typical residential structures. Differences in large projects are especially apparent in the size and intricacy of mechanical and HVAC systems and electrical systems, the presence of low voltage and special wiring systems (e.g., fire suppression, security systems) and in more complex building materials and construction methods. Large projects also involve challenges related to public access, security, and authority or organizational hierarchy.

Determining whether a water damage restoration project is large (i.e., “large loss,” and hereinafter referred to as a “large project”) requires a process of evaluation. Size is not the only factor to consider. Large projects are handled differently from other water damage restoration projects and usually require a higher level of project management or administration. The management and administration might be accomplished in-house or outsourced to a specialized expert.”

(Author’s Note: The following is an overview of what is covered in more detail in the S500.)

The building systems found in large projects are generally more complex (e.g., mechanical, HVAC systems, plumbing, electrical, and gas). In addition, there can be other systems that are not normally encountered in residential projects, such as fire suppression and dampers, climate sensors, alarms, low-voltage cabling and high-voltage electrical. The more high-tech the building use is, the more likely there will be other systems encountered.

Management of large projects is more complicated. You might be used to unit-cost pricing and computerized estimating systems. In these projects, there are a variety of pricing methods that can be used. Each method presents its own challenges.

You might be requested to provide an estimate or bid. In a bid process, a scope is developed and a price established. Changes in scope result in change orders to adjust the price. The advantage is there is a lower administrative cost. However, the disadvantage of a bid is it takes longer on the front end of the project to determine the scope and agree on pricing. It results in delaying the start of restoration or mitigation work.

Using a time-and-materials pricing method allows for a more expeditious start. The scope of work does not need to be as detailed, but the cost for labor, materials and equipment are predetermined. This system requires detailed tracking of these items so a price can be determined. A streamlined data collection system can facilitate project invoicing. The disadvantages can include the need to negotiate the terms of payment, predetermine a pricing structure and ongoing changes in the scope of work. A published price list for labor and material items can be a very useful tool when negotiating.

Another pricing system that you might not be familiar with is the cost plus method. Like the time and materials method, the scope of work does not need to be as detailed. The advantage is a fast start to the project. The disadvantage is the need for very detailed tracking of costs. Typically, all of the company’s direct costs, without any mark up, are tracked. A predetermined markup is agreed to by the parties. For example, you may use temporary labor from a labor pool. Your cost for that labor could be $25 per hour. You might have previously charged $50 per hour when using the time-and-materials method. However, with this method, you can only markup the actual cost by the predetermined markup. Let’s say that the agreed upon markup is 40 percent. That means that you can only bill $25 plus 40 percent markup, or $35 per hour. It is also possible there might be a third party (clerk-of-the-works) that is on-site to monitor the labor and materials use.

There is added complexity in other administrative tasks, regardless of which pricing method is used. The mobilization of people and equipment can be expensive. You might have ongoing daily reporting requirements. You will need to negotiate progress payments in order to avoid cash-flow problems. Where there are numerous materially interested parties, regular meetings to update everyone will be necessary. Site security is another consideration.

The S500 Reference Guide makes the following comment about project documentation:

“Consistent documentation at regular intervals during a large project is essential. Many of the daily logs, notes and reports are similar to those outlined in Chapter 10, “Administrative Procedures, Project Documentation and Risk Management.” Documenting large projects provides more than limiting liability exposure for restorers; in most cases, documentation is necessary for communicating, billing and reporting to the customer. The amount of documentation necessary to expedite a large project is often the primary justification for an on-site, full-time or third-party administrator. The expense associated with documentation should be considered in estimating the cost or billing for a large project. “When you are working out of state, you will need to meet the federal, state, provincial, and local laws and regulations applicable to your activities in those areas. “Licensing and permits, as well as laws regulating the conduct of a restoration business, can also be different between jurisdictions.”

As a final and personal comment on restoring or remediating buildings where there has been catastrophic flooding, keep in mind that there are probably contaminants present. When there is a delayed response, the likelihood of developing additional contamination is even greater.

If you are performing these services fairly soon after the flooding, the surrounding environment will continue to remain wet for sometime. Buildings that have been remediated and restored in such an environment may become subsequently damaged from secondary moisture problems if the indoor environment is not properly maintained.