Understanding the Process & Benefits of Deconstruction

The process of deconstruction involves structural and architectural components of a building being salvaged or removed before demolition. Remodeling and demolition projects produce more than 50 million tons of debris, which normally ends up in landfills. By hiring special contractors to assist in assessing what materials can be salvaged, the process is optimized. Plumbing, lumber, cabinets, some fixtures, concrete and a wide variety of other materials can be salvaged. After being saved, these materials can then be donated to charity or reused for future projects. In addition to this, it may be possible to gain LEED points or tax credits for some materials.

Basics Of Deconstruction
It is important to identify any permit issues and potential hazards. The main concept abbreviation to remember for the actual task of deconstruction is this: LOFO. It means last on is first off, which indicates the last piece of material placed during the construction process should be the first object to be taken out. When the deconstruction process is being carried out, the same tool that was used to install a specific object or material should also be used to remove it.

During the task of removing materials, it should not be necessary to use excessive force. When contractors find themselves reduced to this as the only option, something is preventing the object from being extracted. Evaluate the surrounding area to see if any alterations were made. If not, continue assessing the area until the source of the difficulty is found. For all projects, it is crucial to use proper safety tools. Employees should also be provided with the right safety gear and other materials. Workers should not be exposed to overhead activities, so work on only one floor at a time.

To keep safety a priority, plan an escape route ahead of time. All exits and hallways should be free of debris. Another important step to take prior to a project is to obtain an estimate, and one of the best sources for this may be the structure’s original blueprints. It is also helpful to know what to do with the material ahead of time. In addition to this, it is wise to have transportation for the materials scheduled beforehand. If the items will be donated, contact a charity such as Habitat for Humanity to arrange a time to receive them.

Costs Of Deconstruction
When planning a deconstruction project, this is the main area where people will notice an impact. Research shows that the highest value per labor unit varies for each residential construction component. The most valuable materials include following:

-Plumbing Fixtures
-Lighting & Electrical Features
-Massive Dimensional Lumber
-Wood Timbers
-Interior Wood
-Outer Sheathing
-Wood Flooring

Before starting a deconstruction project, people may consider various alternatives. These considerations are what lead people to choose the methods and tools used for the process. Although deconstruction is not a cheap solution, it does come with its own set of benefits. For example, it is better for the environment, reduces landfill waste, results in cleaner air and may be beneficial for charities if materials are donated. In the end, it is possible to create financial, environmental and social contributions.

Comparing Demolition & Deconstruction Costs
The United States Army uses the following formula to assess market price for materials: MP = MC + PC + TC + P. In this equation, P represents profit, TC represents transportation cost, PC represents processed cost and MC represents material cost. With demolition, there are rental costs involved when working with waste companies. There are also costs for relocating debris, maintaining equipment, paying workers and purchasing safety gear.

With deconstruction, there are costs for planning, management, hauling, labor, equipment maintenance and training. If salvaged materials are traded or sold, keep in mind they may be considered revenue. However, the benefits include LEED points, possible state funding and tax credits. In many cases, deconstruction provides a great overall solution for building owners. 

Why Insurance Premiums are Increasing

Insurance premiums are a function of these factors: The perception of future risks, recent catastrophic claims and the return available on investment. Huge fires and other disasters factor in, such as the Colorado Springs blazes earlier this year and other natural disasters have also forced large payouts. Even the devastating Japanese earthquake and tsunami from 2010 affects insurance premiums in the United States, since insurance companies routinely purchase re-insurance coverage from very large companies. And these reinsurance companies, such as General Re, have been increasing their rates. In addition, jury awards and settlement costs in a variety of commercial fields have put pressure on insurance company reserve funds.

Yes, insurance companies are just like you: They assess the risks they can cover, and then buy insurance themselves to protect themselves against very large but unlikely events that would overwhelm their reserves.

We saw a similar tightening of the property and casualty insurance world across the board, in 2001, following the 9/11 attacks on the World Trade Center. The direct costs themselves were significant, but reinsurance companies also increased their rates then, in order to cover their own risks and ensure clients were protected in case of acts of war, nuclear strikes, chemical strikes, etc.

Fortunately, their worst fears weren’t realized, but prudent insurers are in business to cover the worst case scenario, and so they had to plan and set premiums accordingly.

Fast forward to today, though, and we have a different phenomenon at work. Reinsurers had just started to climb out of the substantial capital shocks of 2008 and 2009 when they got hit with the Japan tsunami, which put pressure on capital pools. But as they work to replenish their reserves, all insurers, all over the world, have been forced to reckon with a new reality: Low interest rates.

Insurance companies make money in two ways: Bringing in premiums, and investing the “float.” Normally, insurers break even or even run a slight loss on premiums. This keeps premiums affordable, but is only possible because they can invest their accumulated reserves at a profit.

Ten years ago, an insurance company could get 5 or 6 percent on a portfolio of Treasuries. Now that same insurer struggles to get 2 or 3 percent on a AA-rated bond portfolio, and U.S. Treasuries – the traditional mainstay of conservatively-run insurance companies, may well be generating a negative real return after inflation.

Something has to give.

That’s what we’re seeing now: Actuaries have no choice but to increase premiums to cover anticipated payouts in light of the new lower interest rate environment. To do otherwise risks insolvency, which does no service to the insured at all, and even defeats the purpose of insurance.

The tightening of the reinsurance market, combined with adjustments to account for the lower returns on assets, is now making its presence felt on Main Street: Aggregate commercial insurance ratios increased for the fifth consecutive quarter, and by 5 percent in the first quarter of 2012 alone. That’s the biggest increase we’ve seen since 2004 (remember those summer hurricanes in Florida that year?)

The two lines responsible for the largest increases, according to a Towers Watson survey, were the two segments most vulnerable to jury award and medical cost increases (workers compensation), and increased reinsurance costs from megadisasters and lower interest rates (commercial property insurance), respectively.

Insurance markets tend to cycle along with other industries. As reinsurance pools of capital get replenished, or as interest rates rise, allowing carriers to generate more revenue from the “float” rather than rely so much on point-blank premium collection, rate increases tend to moderate, and new carriers spring up to compete for business.

So if you are seeing rates increase, it’s more a matter of prudence in the face of risk and low returns on capital, which affect all carriers everywhere. As a result rates increase to make sure there are enough in reserves to cover future claims . No one is exempt, and it’s a bigger issue than any single insurance agency, carrier, or insurance line.