Scoping the Loss – Two Perspectives

The first thing a property loss analyst must understand is that scoping a loss is distinctly different from estimating a loss. Scoping is the process of developing and constructing the framework from which an estimate can be prepared. Without the scope of loss, there can be no estimate. The development of the framework begins at the scene of the loss. After the scene is released, and necessary approval and authorization are given to the contractor to physically access the site, preparation work is determined which will ultimately lead to scoping the loss.

Unobstructed path and eliminating open items

When a property suffers extensive damage, there are two obstacles to viewing the structure clearly: Unstable or collapsed structural and finishing components, and contents. If we assume the cause of loss has been determined, the contractor must act to realize a safe, clear and accessible open space or spaces. First, they must make the worker environment safe by removing and/or stabilizing vulnerable and compromised materials. Second, or blending with the first, pack-out and move-out all contents that have been damaged or will ultimately impede opened structure examination and repairs. The reference to “opened” speaks to test cuts that are designed to follow the otherwise hidden travel path of water, fire and smoke. Third, catalogue and save materials where identification of like, kind, and quality will become necessary when the point of estimating the loss is reached. With the efficiencies of expert project management from the technician to the carpentry/ labourer end of the business, the unobstructed path can be realized in as little as 24 hours.

Creating a plan

We are now left with a clean slate on which to build a scope. It is not the repair, but the framework for the repair. At this point we create a plan to plot the scope of the repair. What comes first, second, third? What is directly and indirectly related to the loss? Are these relationships interdependent when it comes to repair? Are permits required? Building code considerations? Upgrades? Who pays for what? Notes are both critical and helpful. How do I adjust my scope to provide current market materials (of same performance, longevity, and properties) to what is no longer made? Understand what has been affected by the loss — follow the travel path of damage.

Planning the scope

If we know what the direct and secondary effects of damages are, we can begin to format and build the framework. The framework is simply a way of organizing headings and subheads in a clear, readable and understandable order. As an example, it can move from an overall heading of “Two Storey Residential” to subhead one, interior, subhead two, second floor, subhead three, rooms: master bedroom, Cathy’s bedroom, John’s bedroom, guest bedroom, bathroom. Assuming a sketch or floor plan has been done, we can then record dimensions by each room showing width, length, ceiling height and dimensioned objects such as doors and windows.

Scoping the loss

Scoping the loss is simply identifying the repairs required and setting them out in a chronological order. This is a stage where logic can be applied. Think sequence: What is the first item in the repair process? Let’s use the example of a fire and assume we have the condition of an unobstructed path and have eliminated open items. Here is a typical order: Clean, seal, insulate, vapor barrier, drywall, trim, paint, pad, carpet. There is a start to finish sequence in what is done first and what is done last. Depending on the degree of damage, other items requiring repair may be inserted into a sequence. Notes can be extremely helpful to the analyst who reviews the scope, as they support the scope, and expand, clarify, rationalize and satisfy ambiguity.

In preparing the scope, we must be cognizant of our purpose. We are restoration professionals. Our role is returning damaged property without compromise to pre-loss condition.

This speaks to the thinking process in preparing our scope of repair. When do we repair (including detach and reset) versus replace and vice versa? If the answer is that the recommended action does not compromise like, kind, and quality, then the action is correct.

The final subhead in the framework of the scope should be General Information. This area can include scope items of post construction cleaning, services, permits, fees, disposal bin/ waste tonnage any other general entry which is non-specific (or for a bulk sub-source or sub-trade entry) to individual subheads.

Now that the scope has been created, the estimate can move forward as the final component to completing the report.

Greg Miller is vice president of business development and a partner with IntegResource Canada. He has 18 years service in the service provider and was an Insurance Institute Chapter recipient of the McLaughlin Award for community service in 2005.

By Graham Dick

Property damage restoration has been a rapidly evolving industry. Increased government regulations and laws regarding safety, hazardous materials, labour code, building codes, material choices and ANSI standards for water and mould have created a much more challenging technical environment. Educating and training staff is a constant challenge and is increasing cost. Helping our clients (the adjusters, examiners, and brokers) understand how these effect change on claim processing is also a big challenge as many changes have caused costs to outpace inflation.

Scoping vs. estimating

Is there a difference between scoping and estimating? Many use these words interchangeably. It is also critical that material specifications are defined as large price variation can occur here. A scope is the technical steps or procedures that return the subject property to pre-loss condition. Estimating is the pricing and customized formatting with appropriate breakdown/documentation to satisfy client requirements. One cannot write an estimate until the scope and specifications are clearly defined.

Timing

The timing of this process is important. Reserves must be set quickly after the emergency has begun. Communication and collaboration between the insured, the adjuster and the contractor must be regular enough that no one is making assumptions. It’s interesting that no matter how well you know someone, when you make an assumption it is rarely positive. This makes getting accurate information into every-one’s hands in a timely matter the key to managing the crisis event successfully. First the damaged materials must be identified and valuated to create the specification list. The scope of repair for emergency, contents and final repairs are developed and refined during the emergency phase of the job. The emergency is typically defined as that point at which contamination is removed, activity can stop without continuing damage and there are no further surprises that would prevent an accurate repair scope. This isn’t a business that allows low-balling the price because of a poorly written scope and making all your profit on the supplemental.

Parts of a scope

When preparing a scope there are questions that need to be answered. Consider that you’re painting a picture for an examiner that may never physically see the site. Noting the cause, describe how the resultant damage occurred and trace the complete extent of the damage. Bring attention to any issues that create an unusual cost burden to the loss. Good damage assessment requires a clear understanding of construction methods, materials, chemical and biological contamination issues, hazardous material identification and proper remediation/abatement techniques and content restoration technologies. The value judgments in scoping the loss come in deciding whether it makes sense to restore, repair, refinish, renovate or replace. In most cases it’s crazy to spend any more than about 60 to 70 per cen
t of replacement cost on restore and repair options. Just because something can be done technically doesn’t make it a good decision to do so. Another point in the scope is to identify health and safety risks on the loss and what must be done to minimize these risks. The finished result looks like this:

• Cause and damage report with pictures

• Safety assessment with recommendations

• Hazardous material identification and contamination issues report

• Area specific breakdown of activities required to return to pre-loss condition

• Notes of unusual issues and recommended solutions

• Material specifications of all replacement parts

Estimating

Estimating is not going to your industry software program, clicking on a bunch of line items with ‘average’ unit prices and seeing what the number is at the end. This is like shooting at a wall and then taping the target over the hole. Unfortunately, this is common practice. Some go so far as to rely on subtrades to price the parts and simply add their overhead and profit.

Proper estimating starts with understanding your direct costs, indirect costs, overhead and enough profit to have sustainable business model. For example, industry studies show that true overhead runs between 23 to 35 per cent depending on the size of the contractor. Once you have figured out what the final price needs to be, you are ready for the next step.

Formatting

This is customer service: To format the invoice to fit the particular needs and requirements of each customer. Various software programs are requested. Breakdown and documentation requirements vary somewhat between insurance companies. Overhead and profit rules vary. What is important to understand is that the formatting doesn’t create the final price, it explains it. Creating value and showing how the decisions made reduced the cost/size of the loss will result in repeat customers. In the end, it’s about closing files as efficiently as possible.

Graham Dick is president and owner of Genesis Restorations Ltd. in B. C. Committed to education, Graham has achieved almost every available industry certification and designation.