Preparing and Evaluating Building Damage Repair/Replacement Estimates
By: David M. Kenney, AIA, NCARB
Certain insurance and litigation claims involving damage to a building require a financial analysis of the costs to remedy the damage. In a plaintiff matter, a construction cost estimate for a damage repair or replacement project should be prepared in order to arrive at an appropriate demand for compensation. In a defense matter, when the claimed costs seem excessive, an estimate of the cost to perform appropriate repairs can be useful in evaluating and thereby resolving the claim.
In order to prepare an estimate of the cost of a construction project, the estimator requires specific project information – technical specifications, architectural and engineering drawings and details, project materials logistics and storage, and the project schedule. With this information, the estimator can calculate the two main categories of data that are required to produce a construction estimate – the quantities of required tasks, materials and manpower, and the costs associated with those quantities.
Repair/replacement estimates that are commonly prepared in a building damage cases should be evaluated for the accuracy of their work scope and costs. Damage estimates may include tasks that are outside the scope of required repairs and may be viewed as betterment. Damage estimates may include costs for excessive repair quantities or tasks such as more expensive union labor on a repair/replacement project that does not require union workers.
The financial analysis of a building damages repair/replacement project may involve the preparation of specific types of estimates to address a particular party’s involvement in the building’s original construction. If a party provided labor only to a specific task in the building’s construction, the repair estimate for that party would not include other aspects of the building’s construction costs. For example, if the building owner purchased the plumbing fixtures that were installed in a building, the plumber’s repair/replacement estimate would include labor only, rather than labor and materials. Such a “break-out” estimate would more accurately reflect the plumber’s limited cost participation in the building’s original construction.
Estimates should include more than the quantities and costs of the required tasks, materials and manpower, or the “hard costs” of a proposed building damage repair/replacement project. The estimate should also include the “soft costs” of the project, referred to as the project General Conditions. The project General Conditions scope and costs will vary depending on the repair/replacement project work scope. Examples of General Conditions costs include professional fees, permit fees, mobilization costs, temporary utility costs (water, electric, cold weather heating, etc.), temporary facility costs (scaffolding, equipment, fencing and barriers, chemical toilets, etc.), inspections, construction management and field supervision fees, dumpsters and disposal fees, and a contingency percentage for unanticipated conditions or events. If the repair/replacement project is extensive, other General Conditions may be required such as a temporary on-site construction office or trailer, secure materials and tools storage, special materials testing costs, special inspection costs, construction bond costs, and on-site security personnel costs. Also, if the building damage repair/replacement project is in a location where materials and labor costs are generally higher than at other locations, a location factor is required.
Building damage repair/replacement project estimates should be prepared and/or reviewed by a person with experience in preparing construction estimates to determine if the estimate includes the appropriate tasks and costs associated with the proposed damages mitigation project.
For matters that are in or have the potential for litigation, CESI is able to provide estimating services as a necessary part of a forensic investigation. Please contact us for additional information.