5 Lessons Learned from Katrina: Understand and Manage Hurricane-Related Risk

As the two-year anniversary of Hurricane Katrina approaches, the Gulf Coast remains engaged in the most ambitious rebuilding effort in U.S. history.

The first year after the storm, most of the effort went into immediate relief and recovery activities, such as repairing levees, removing debris, mud and sludge and dismantling unstable structures. Most of these tasks are complete, and a rapidly increasing army of architects, engineers, urban planners and construction professionals now are focused on getting the region back up and running.

With their help, the local infrastructure is once again taking shape. Roadways, power lines and cell towers washed away by the storm are re-appearing on the landscape. The next stage is to rebuild the homes and businesses needed to support the slowly returning population. This period of renewal presents an opportunity to reduce the human and financial toll from future hurricanes by employing the most current thinking in construction risk management.

Lesson 1: Understand and Update Your Risk Factors

During the 2005 hurricane season, many business owners learned they were underinsured. Let’s look at a small machine shop owner’s experience. He purchased more than $200,000 of tools over a twenty-five year period. To restart his business after a hurricane, he must find a new location and purchase all new equipment. Advances in technology make it impossible for him to replicate everything he had, and the tools he can replace will cost more than what he originally paid.

To help ensure your policy provides adequate protection, you should reevaluate the cost of replacing your building and equipment every three to five years. Ask your insurer whether you are fully covered.

Lesson 2: Remember that Buildings under Construction Are Highly Vulnerable

Buildings under construction are more vulnerable to both wind and water damage than existing properties. Construction materials, equipment and debris can become dangerous projectiles during a storm. Temporary structures such as formwork and trailers are not hurricane-resistant and usually suffer severe damage. In addition to jobsite hazards, it is important to scan adjacent properties for possible spillover exposures. For example, suppose your construction site is adjacent to a large commercial nursery specializing in container-grown plants. You can anticipate that during a hurricane, hundreds of airborne trees and shrubs will hit your project- damaging exterior finishes and envelopes and adding cost and time for debris removal.

Statistically, construction projects at both ends of the spectrum-the smallest and the largest-sustain the greatest relative hurricane damage. Smaller projects, such as homes, apartments, motels and light commercial, are of the lightest construction types (wood frame, concrete masonry and light steel frame), and all structural elements must be in place to achieve wind/water resistance. Small projects often are designed to meet only the minimum requirements of the coastal construction codes and, therefore, do not follow the best engineering practices possible for the structure.

Larger projects, such as high-rise residential and commercial developments, take longer to build and can be exposed to more than one storm season. The scale of these projects means even minimal damage can produce large dollar losses and long delays. The typical large-project schedule is sensitive to material and equipment shortages, as well as labor disruptions. However, when a storm is approaching, having the know-how to make critical decisions regarding the safety of your personnel, material storage and equipment protection can mean the difference between completing the project on time and on budget or falling into the red. Making the right decisions before a storm will also enhance your ability to recover quickly.

Lesson 3: Don’t Let Complacency Undermine Your Emergency Preparedness

“You need a plan and must be able to manage whatever is thrown your way,” said Brian Cooney, vice president and CFO of Barriere Construction, a New Orleans, LA-based firm. “Seventy-five percent of the time, hurricanes never arrive or the forecast changes. However, it’s important not to get complacent, because the one time you fail to prepare is when you’ll get hit hard.” 

Forecasters initially thought Katrina would make landfall west of New Orleans. Because of this, many business owners were slow to react to the threat. If you are within 200 miles of an approaching hurricane, you must make preparations. 

Emergency action plans should be coordinated with local authorities and include storm tracking procedures. If you decide worsening weather conditions require a facility shutdown, the following points can help minimize your losses:

• Create a backup of computer system data. Many businesses learned this lesson from unfortunate and avoidable experience and now retain mirrored servers at remote locations to guarantee accessibility.
• Remove any loose yard and roof debris.
• Have materials such as tarps, cables, straps, lumber and steel on hand to anchor and/or brace yard storage, cranes and roof-mounted equipment.
• Verify supplies for emergency team members (nonperishable food, flashlights and communications devices).
• Obtain an emergency generator capable of providing power for life safety systems and critical equipment such as coolers, freezers and communication devices.
• Establish methods for safely shutting down operations and protecting key equipment and materials. Identify all hazardous and/or reactive materials, and make provisions to safely store, neutralize or relocate the materials.
• Protect building openings with shutters, pre-fitted plywood or other coverings to minimize damage from flying or floating debris.
• Cover key stock and equipment with waterproof sheets. Also, consider raising or relocating extremely sensitive items.

To Minimize Loss Due to Bad Weather:

• Create a backup of computer system data.
• Remove any loose yard and roof debris.
• Have materials and supplies on hand to anchor and/or brace yard storage, cranes and roof-mounted equipment.
• Verify supplies for emergency team members.
• Obtain an emergency generator of sufficient power.
• Establish methods for safely shutting down operations and protecting key equipment and materials.

While there is no hard and fast rule for deciding when it is necessary to shut down a project, it is always better to take a conservative approach. Obviously, protecting people should be your first concern. However, you should also plan ahead by asking yourself: What will it take to return to the project when it is safe to do so?

When it comes to safeguarding cranes and other large equipment, use the manufacturer’s guidelines. If you must choose between saving your equipment or shoring up the project, do what makes the most sense financially, contractually and operationally. Replacing a small amount of construction work already in place may be necessary to protect a crane and other equipment you may need to recover once the storm passes. Of course, the amount of time you have before a storm’s arrival affects what you can do.

Lesson 4:  A Solid Recovery Process Saves Time and Money

After a widespread catastrophe, things we take for granted-gas, electricity, water, phones, drinking water-often aren’t available. If the worst-case scenario becomes a reality, how will you recover? How are you going to help your employees and your clients? How can you provide good customer service when the environment for recovery is in survival mode?

To help get your business up and running as quickly as possible, your recovery team should include your insurance broker, your banker and your attorney.

When allowed by local authorities, secure the jobsite and begin to assess damage to buildings and equipment. Be sure to document damaged items and prioritize repairs.

• Make sure all electrical systems, natural gas lines, fluid transfer operations, production and maintenance equipment and building structures are examined by qualified individuals before returning to service.
• Repair and reactivate damaged fire protection systems as soon as possible.
• Before conducting any repairs to the facility, make sure safety programs are fully implemented. Contractors, like employees, should follow proper safety procedures at all times. Control all potential ignition sources, such as smoking and hot work.

Lesson 5: Get Ready to Pursue New Business Opportunities

Contractors interested in rebuilding the Gulf Coast are finding it easy to get work but hard to get workers. The lesson here is to plan by securing the phone numbers of your workers’ friends and relatives, anywhere they may be staying after an evacuation.

Many business owners make the mistake of underestimating the availability of craftsmen and materials, as well as the financial impact of working in a post-disaster zone. You can count on paying your workers a higher hourly rate and providing additional money for housing and meals. During the early stages of recovery, logistics will be a constant problem. Communication and transportation will revert to an earlier time.

Following these lessons and putting a solid preparedness plan in place can offer significant benefit when a storm strikes. The more protection you can provide before a storm arrives may place you in the best position to move forward-and ensure you are up and running as quickly as possible after a catastrophe.

Construction Business Owner, August 2007