Coming clean in a dirty industry – Part 1

Consider this scenario…

A full-service precision machine and fabrication shop experiences a small fire in one of its CNC Machining Centers. The fire was quickly extinguished, but produced a light smoke residue dispersed throughout the facility. The Insurance Company dispatched an Adjuster to the site, who arrived with one of their approved restoration contractors within hours of notification. The contractor was immediately retained by the Insured to start cleaning smoke residues from the facility and contents. Within a few hours the contractor mobilized resources and initiated the cleaning process. A short time later, the contractor requested a meeting with the Insurance Adjuster and Machining Company Management team to discuss the results of some tests they conducted on the smoke residues.

The restoration contractor introduces an Equipment Restoration Specialist, who explains to everyone present that the smoke residues are highly corrosive and that the only chance to save the electronic components within the machinery and equipment is to professionally decontaminate it immediately. Without rebuttal, the contractor is given authorization to proceed accordingly and mobilize the additional resources. Five (5) weeks later and an additional $370,000 in restoration costs, the facility’s CNC machining operations were fully resumed. Everyone involved with the project considered the recovery efforts a huge success.

Coming clean – a critical review…

• The sky was not falling — A more comprehensive analysis of the smoke residues, as well as pre-existing conditions, revealed that the smoke residues introduced by the fire incident posed a nominal threat (at best) to the equipment assets. The contractor clearly exaggerated the urgency and difficulty of the recovery operations.
• The plant did not need to be shut down for 36 days. Aside from the fact that the contractor could have used a much simpler cleaning process, they also could have installed active corrosion control and environmental containment systems to enable delayed recovery scheduling to accommodate critical production runs. The contractor not only maximized their overtime billing but unnecessarily extended the plant shut down time by at least 20 days.
• The plant’s employees could have participated in the recovery process – Granted, isolated areas of the machinery and equipment did, in fact, require specialized decontamination processing. Most of the work performed by the contractor’s Equipment Restoration Technicians, however, required no special skill sets. Cleaning non-technical surfaces (e.g., covers, external surfaces, cabinet enclosures, etc.) could have been completed by the machine operators and maintenance crews (who were more familiar with the machines than the restoration crews). Aside from cutting-in on the contractor’s profit, there are few downsides to engaging employees that would otherwise be sitting at home waiting for the plant to reopen.
• It was not economical (or sensible) to service some of the equipment – Spending $175 to clean a $150 printer was obviously a bad decision, and would have easily been avoided had the contractor provided line-item estimates. Fortunately, there weren’t ample circumstances of such situations to cause significant concern. Had the Insured known upfront how much it actually cost to clean some of their equipment, however, they would have elected to taken a different path (such as settling with the Insurance Company on the estimated cost and applying the money to upgraded replacements).

What many restoration contractors don’t want you to know…

Many Contractors doesn’t want the Insured (or Adjuster) to evaluate alternative recovery options such as:

1. Engaging Insured’s personnel to assist with cleaning efforts.
2. Insured settling claim on estimated cleaning/restoration costs (“Take the money and run”).
3. OEM retrofits and/or upgraded controls.
4. Preserve equipment in-place to buy time so that production could be resumed temporarily and/or provide time to make the appropriate business decisions.

If it’s not an emergency, act with priority instead of urgency…

The sense of urgency is one of the most powerful aspects of human psychology. Urgency causes people to act quickly, often bypassing deliberate thought process. Scarcity is one on the most powerful sources of urgent behavior. Add difficulty and loss aversion/catastrophe to the mix and you’ve now described the perfect psychological setup for conversion… a salesperson’s dream. Sales people working for fire/water/mold restoration contractors have perfected their pitches to compel action right away – with little regard to actual conditions or stakeholder objectives. Make it a priority to align yourself with an expert that doesn’t turn every small incident into a major disaster.