I get it… most restoration projects require multiple trades and skill sets. Jack-of-all tradesmen and cross-trained associates are highly sought after and retained in the restoration industry. I believe, however, that many restoration organizations have pushed the envelope beyond their ability to deliver quality – or even acceptable – services. Swapping-out a colored Safety Vest and proclaiming someone a Hi-Tech specialist does not an expert make. Increasing an hourly rate by 277% simply because of a change in clothes and title is unconscionable, but it seems to becoming the norm on large loss recovery projects.I recently audited a “full-service” fire restoration project that included a significant portion of recovery efforts of manufacturing equipment exposed to light soot. Analysis of the soot confirmed that the residues contained compounds that could potentially damage sensitive components (e.g., electronic controls, etc.) of the exposed machinery. Without question, the machinery needed to be serviced accordingly. My issue with the contractor concerned their execution… Specifically, the contractor automatically applied their highest billable rate (Electronics Restoration Technician) to EVERYONE that participated in the clean-up of the affected machinery.
While I was impressed with the restoration contractor’s supervisor assigned to the clean-up of the machinery, it was evident that the “Technicians” assigned to him didn’t have a clue about electronics or participated in any previous equipment restoration project. In fact, I noticed that the same crews were removing debris (wet ceiling tiles, etc.) and standing water from the office areas just a day prior to being assigned to the “Hi-Tech” crew. Their billable rates jumped from $45/hour to $125/hour overnight. From my perspective, the only skill set worthy of the “Electronics Restoration Technician” billing rate was delivered by the Supervisor… he was the only person that actually addressed the critical components that were at-risk. It was quite apparent that he knew what he was doing and expertly addressed the technical challenges of the project. His crews, however, simply assisted him on cleaning non-technical areas, and should have been billed-out at the general labor rate.
Niche contractors that specialize in Equipment Restoration realize that a significant portion of servicing machinery involves low-level skills and resource (and invoice) accordingly. Unfortunately, I’ve noticed over the past few years that many of the “Full Service” restoration contractors have been submitting invoices that are blatantly excessive. Although I initially questioned the motivation of an Adjuster that overlooked the inflated invoices, it became apparent that it is simply a matter of economic perspective. Most Adjuster’s operate at the Macroeconomic perspective and only drill-down to the Microeconomic level when confronted with lopsided “repair versus replace” conditions.
Consider my recent project audit… The contractor presented the Insured and Adjuster an initial estimate of $250K to service machinery that had a replacement value exceeding $1,000,000. From a Macroeconomic perspective, the proposal made sense and appeared reasonable. From a Microeconomic perspective, however, the actual service requirements by the loss conditions did not reasonably justify the proposed amount. Most of the recovery efforts required no more skills (or exposed more liability to the contractor) than routinely provided by general laborers employed to clean structure and contents. Based on my experiences, I believe that the project could have been completed for considerable less than $200K had the appropriate billing rates been applied. While it can be very easy for contractors to fly under the economic radar on large loss projects, it makes for interesting dialog among their Business Development associates when confronted by the Adjuster after they receive my audit reports.