A Start-To-Finish Overview of Risks in Building Master Planned Communities
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A Start-To-Finish Overview of Risks in Building Master Planned Communities By Deborah Grooms and Ray Szczucki Business Descriptor These exposures run a wide spectrum, First Things First Building a including property damage and destruction, construction material loss, The initial phase of a planned master planned equipment and vehicle damage and community generally begins with destruction, and various other perils, infrastructure development, including community including weather-related incidents, fre, sitework, grading and drainage, and the vandalism and theft. installation of underground utilities. Once the initial sitework is completed, of new homes Managing the development of raw land further development includes: into an expansive community of homes is a massive is an intensive process. A variety of • Building streets, sidewalks, curbs and diferent subcontractors are usually gutters undertaking called upon to perform an array of • Building entry gates and other paved, diferent tasks, and project developers landscaped surfaces and includes many and homebuilders must monitor and • Installing utility poles and street lights manage the infow and outfow of • Constructing storage areas for risks that can result construction trades to ensure proper equipment, supplies and fll/backfll sequencing of the construction activity. materials in the project Materials and equipment need to be properly secured, while debris and trash A crucial consideration in the project costing more than require regularly scheduled disposal development phase is the need to in designated locations. Construction- anticipate and mitigate the impact of budgeted related risk exposures must be severe weather in certain regions of continually assessed and communicated the country. It is not uncommon for an and taking longer to workers, inspectors, homeowners, extreme weather event to cause damage prospective homeowners and real estate during the land improvement phase. time to complete agents. For example, if an unexpected and prolonged rainstorm occurs while the than planned. Lack of attention to these exposures infrastructure is partially completed and can be costly to developers and in a vulnerable state, resulting rainwater homebuilders, impacting anticipated and runof may produce substantial proft margins. But there are steps that physical damage losses and delays in the can be taken to mitigate the breadth of project’s completion. risks inherent in developing a master planned community, from initial The larger the planned community, the construction through fnal completion. greater the risks, given the greater land area that may be susceptible to the impact of an adverse weather event. This highly exposed aspect of the early development process focusing on initial sitework often does not receive the same level of loss prevention attention as later phases. Once the infrastructure development has been completed, model homes and sales centers are typically built for marketing purposes. These structures generally feature high-quality fnishes, furnishings and landscaping. Once these structures are in place, the building of homes commences. 2 Fires, Theft and Vandalism Although weather risks remain a prime consideration, other loss exposures include fre, vandalism and theft. With regard to theft, a wide range of high value items are on premises at the construction site throughout the community development. The theft of equipment and materials from construction sites in 2016 accounts for between $300 million and $1 billion in annual losses and other costs for homebuilders.1 It is not uncommon for thieves to drive a large truck onto the worksite during non-working hours to dollar losses. Some materials used in Every homebuilding project produces steal high value appliances, lumber, construction such as paints, varnishes a wide range of debris and other refuse tools and other expensive equipment and composite panels are highly requiring expedited removal; otherwise and materials. fammable, potentially increasing the there is a heightened risk of fre and Vandalism, such as tagging newly built intensity and duration of a fre. worker injury. Trash containers should be homes with grafti and setting fres situated throughout the construction area. Fires can ignite from diferent causes. A for amusement, is another risk that These locations should be far enough contractor doing so-called hot work like increases after substantial construction away from structures under construction welding, for instance, can inadvertently has been completed, exacerbating the to provide ample ingress and egress for create a source of ignition. The use of potential for property damage. Even construction workers and equipment. temporary heating devices situated during work hours, home development close to fammable materials can set Certain types of materials should be sites are at risk of vandalism, theft and these items on fre. Careless smoking by disposed in designated containers for fre, as these are typically open access construction personnel and visitors to recycling and inspection purposes. environments often in close proximity to the site is an additional risk. Some debris may be highly fammable, surrounding neighborhoods. requiring storage in freproof containers The biggest risk confronting at a farther distance from completed Storage and Debris Removal homebuilders is fre. According to the homes and those under construction. At April 2017 report from the National the end of each workday, all containers Other homebuilder considerations Fire Protection Association (NFPA), fre should be emptied into dumpsters along include the need to identify a safe and departments respond to an estimated the perimeter of the construction site for secure location for subcontractors to average 3,750 fres in structures under easy pickup and removal. store equipment and materials. A large construction in the United States each planned community of homes generally Lastly, it is incumbent upon contractors to year. Such fres resulted in $172 million provides ample space to accommodate ensure that all debris, scrap materials and in direct property damage per year from the storage needs of all contractors. trash are consistently and safely removed 2010-2014, NFPA estimated.2 With smaller developments, on a coordinated and scheduled basis. Model homes, clubhouses and homes homebuilders may need to designate Homebuilders should train contractors under construction can be partially specifc areas where each contractor is with regard to their expectations on debris damaged or destroyed entirely by provided an allotment of space. In all removal and hold them accountable for a fre. Contractors’ equipment and cases, storage sites should be situated in noncompliance. In cases of consistent construction materials face similar low-hazard areas with adequate security infractions, assessments for clean-up costs risks, resulting in potentially high and weather protection. should be considered. 3 To limit the risks heightened by use of inexperienced tradespeople, major developers and homebuilders should cultivate longstanding close relationships with a wide range of subcontractors. Quality Control To limit the risks heightened by use of inexperienced tradespeople, High quality construction depends major developers and homebuilders on high quality contractors and should cultivate longstanding close tradespeople. One of the more pressing relationships with a wide range of challenges in the homebuilding industry subcontractors. In cases where a is the shortage of experienced and relied-upon subcontractor is unavailable professional subcontractors. According for an upcoming project, project to the Bureau of Labor Statistics, superintendents should reach out to employers through the frst quarter of their peers for references. In such cases, 2018 were looking to fll an average of the superintendent should request nearly 225,000 construction jobs per documentation on the background and month.3 training levels of new subcontractors. It is highly advisable to observe these This labor shortage is so acute that 91 personnel at work on a current project percent of more than 2,700 contractors, before hiring. construction managers, builders and trade contractors report having a Once retained, new subcontractors difcult or moderately difcult time should be required to sign of on the fnding skilled workers. A major reason homebuilder’s site-specifc safety for such difculties is the impact of requirements. The objective is for the 2007-08 housing collapse on the the subcontractors to either meet or homebuilding industry. Out of work, exceed specifcations of the developer’s many skilled tradespeople found safety program. In some situations, employment elsewhere and continue training may be needed. Homebuilders to be employed in these jobs.4 The should provide this training prior to the good news is that employment levels commencement of work. are gradually returning to pre-fnancial crisis levels. 4 Close supervision of contractors is often adversely afecting the work of another These orderly approaches are crucial required to ensure they are not cutting contractor is minimized, decreasing to managing project housekeeping corners to conclude their tasks on time. the potential for damage to previously and construction waste. Prospective Inferior workmanship is a key risk that installed work. homebuyers and current homeowners often does not present itself until after will likely be visiting or occupying the the homeowner takes occupancy