The Cayman Contractors Association signed an agreement with government Monday to provide construction work at standardised rates for repairs to damage caused by the passing of Hurricane Paloma.
CCA President Steve Hawley said the rates were worked out by the CCA and the Public Work Department, with assistance by the quantity surveying company BCQS.
‘All CCA members have agreed to honour these rates when doing work in the Brac,’ Mr. Hawley said. ‘The reason for creating this agreement was to allow Government to dispense with individual negotiations with every contractor and simply get to work. The agreement means that PWD is now in the position to utilise the entire CCA as a resource to help the Brac recover as quickly as possible.’
The agreement does not mean, however, that only CCA members can do recovery work on Cayman Brac.
Mr. Hawley said it was essential that Brac contractors are fully used in the recovery efforts and that Grand Cayman contractors are used for the overflow work.
‘We would certainly welcome contractors from Grand Cayman who are not members of the CCA,’ he said. ‘The important stipulation would be that all those who are contracted by Government to perform recovery works would agree to the same rates and the same terms.’
The CCA also hopes to use people who lost their jobs on Cayman Brac as a result of Hurricane Paloma as possible construction labour.
Mr. Hawley said people displaced from the jobs working in the construction industry were very helpful on Grand Cayman after Hurricane Ivan.
‘…Many workers were needed for the initial cleanup, but we felt that the more important factor was that many of these folks needed to get a paycheque so that they could eat,’ he said. ‘We are hoping to set up an office in the Brac as a central job-placement agency, so that anyone, no matter what his normal occupation, can get some kind of work if he wants it.’
Having standardised construction rates will not only ensure Government receives value for money for the repairs of its properties, but that Cayman Brac residents will not pay inflated construction rates, Mr. Hawley said.
‘After Hurricane Ivan, we all saw what can happen when scalpers prey on people who are in a difficult situation,’ he said. ‘We are hoping that by creating standard rates that are realistic without being inflated, Brackers will be able to locate enough responsible contractors that they will not have to resort to scalpers.’
Effect on insurance claims
The standardisation of construction rates on the Brac could also play an important role in the loss adjusting process for insurance purposes.
Insurers are under no obligation to accept the standardised rates as accurate for rebuilding costs.
Gerard Mendez, claims and compliance manager with Island Heritage Insurance Company, said the rate standardisation was useful from a conceptual standpoint.
‘I see it as a good thing, once I’m assured that the rates of small contractors and big contractors were factored in when arriving at the [standardised] rates.’
Mr. Mendez said rates of larger contractors tend to be higher because of higher overhead costs, whereas small contractors – who could conceivably do much of the residential work on the Brac – tend to have lower rates.
Island Heritage, as well as all other property insurers in the Cayman Islands, received a list of the agreed upon standardised rates along with the terms of the CCA/Government agreement on Tuesday.
Mr. Mendez said he sent the rates to Island Heritage’s loss adjustors on Cayman Brac to examine and compare to what they were finding. What he would really like to know is exactly how the standardised rates were derived.
‘The appropriate transparency needs to exist,’ he said.
Accommodations
Mr. Hawley said it was important for insurers to consider all costs of construction.
‘Just after the storm, we learned that some insurers were not taking into account airfare to the Brac, food, accommodation and daily ground transport,’ he said. ‘The difference in rates between insurers can be dramatic if all costs are not considered.’
To help standardise the room and board aspect of construction work, Mr. Hawley said the Public Works Department has taken on the task of providing accommodation and food to construction workers.
Mr. Mendez said he was quite willing to take on board the costs of accommodation in construction costs as long as they were precisely quantified.
Underinsurance
Although insurers do not want to pay settlements for construction costs higher than they need to be, lower construction costs would actually also benefit those who find themselves underinsured on Cayman Brac.
Although Mr. Mendez wasn’t in a position to quantify cases of underinsurance, those on the ground in Cayman Brac and familiar with situation acknowledge underinsurance will be an issue there.
The lower the construction costs to rebuild or repair homes damaged by Hurricane Paloma, the less likely a property is underinsured. Generally, insurers follow an 85 per cent rule, which means that as long as a property was insured for at least 85 per cent of its replacement value, it will not be subject to underinsurance averaging.
Sagicor General Insurance Senior Vice President Michael Gayle said the standardisation of construction rates could help the underinsurance problem.
‘To the extent that these rates are less than those otherwise used, the rebuilding cost will be lower,’ he said. ‘This will potentially have an impact on the underinsurance.’
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