Potential Impacts of Hurricanes on Construction Projects – A Little Preparation Goes a Long Way
Published: 02-Sep- 2011 | Category: Resources
Over the past several years there has been an increase in construction projects along the Eastern seaboard of the United States – commercial, residential, and industrial. As many of these are still under way, hurricanes and tropical storms could lead to setbacks in project progress given expected high winds and torrential rain. However, with the right preparation, the impact of the storm can be mitigated.
Some key preparatory steps include:
Activation of a Project Impact and Loss Measurement Plan that includes coordination and collaboration between the project owner and contractor. This is in addition to a clearly defined emergency plan developed to ensure the safety of project personnel.
- Documentation of project completion progress through normal project controls processes, including cost reports, schedules, change order logs, site inspection reports and daily journals of project activities. Should a project be damaged or shut down for a period of time, the status of a project just prior to the event will become a focal point in loss measurement for many of insured and uninsured impact costs.
The following actions should be agreed upon for inclusion in a Project Impact and Loss Measurement Plan:
- Safeguard vital project records prior to and after a loss.
- Assign responsibility for gathering data – pre and post loss – to a Loss Measurement Team.
- Facilitate communications between project participants for effective decision making and execution.
- Understand insurance coverages for any losses as well as contractual provisions such as force majeure regarding impacts.
- Update and maintain a detailed asset, materials and equipment inventory, including clear support for materials stored on site.
- Consider the need for a property valuation.
- Consider who will quantify the damages, including how this will be done concurrently with recovery and restoration efforts following a loss.
The value of the Loss Measurement Team cannot be overstated. In the event of a catastrophe, internal and external resources can become overburdened or scarce so the team should be identified as soon as possible. Recommended team members to consider include:
- Project superintendent/executive (contractor);
- On-site construction manager;
- Owner’s representative;
- Risk manager(s);
- Internal accounting and project controls personnel;
- Insurance policy consultant, including expertise in clarifying coverage;
- External forensic accountant/construction claims consultant;
- Internal / external recovery scheduler;
- Forensic engineer; and/or
The Loss Measurement Team should be prepared to:
- Identify the full scope of physical damage.
- Measure financial impacts, including direct damages, indirect costs, and subsequent costs such as delays and lost income from the completed asset.
- Manage the recovery process, including replacement and repair of damage.
- Minimize delay and disruption to the project.
- Facilitate coordination among project, contractual and insurance experts.
- Prepare and present claims to maximize recovery.
- Pursue third-party recoveries.
Due consideration should be made when considering internal and external personnel to ensure that existing construction personnel have the ability to focus on the project while claim and financial recovery efforts initiate and progress swiftly.
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