Relief for Farmers but Tough Times Ahead for Construction
The drought-breaking La Nina weather pattern has finally kicked in, bringing flooding rains along the
eastern coast and filling the rivers that feed into the Murray-Darling river system.
Forecasters are predicting an extended wet period but remain unwilling, at least officially, to call the
end of the worst drought in living memory. And they warn it would still take rains of ‘biblical
proportions’ to fill the dams of cities and towns.
One-in-20-year storms drenched parts of Sydney and
Wollongong through January and February, signalling
the beginning of what many analysts believe will be an
extended period of above average rain fall and
frequent storms.
The wettest conditions in a decade in Queensland have
brought relief to many locals but virtually brought the
construction industry to a standstill. In North Queensland, the Townsville Bulletin recently reported that
the wet weather has affected 25,000 tradespeople in Townsville alone, resulting in $8.5 million a day in
lost production.
While the recent rains have been welcomed by many and, in some parts, brought an end to the
drought, the cost to the construction industry could be significant with many projects already
experiencing increasing costs. These costs are associated with extensive rain delays, lost productivity,
extended equipment hire periods and increased personnel costs, not to mention the often expensive
task of cleaning up and pumping out water in the aftermath of heavy rains.
As with any delaying factor in construction, rain has the potential to add significant costs to the
construction of any building, often forcing sites closed for days after the rain has stopped.
Following a review of over 130 progress claims assessments completed by BMT & ASSOC in February
an average of 12 days delay was recorded due to inclement weather. Many projects in their earlier
stages with a higher sensitivity to the wet conditions experienced as many as 20 days of lost time.
As noted in previous bmt qs news issues, the vast majority of mainstream construction contracts place
the cost risks associated with rain delays squarely on the developer. Generally these contracts allow
for extensions of time for inclement weather, but can be structured to limit the actual amount of
money claimable by the contractor for these delays. The costs to the developer (such as holding and
interest costs) are unavoidable and should be prepared for through appropriate contingencies.
The Solution: Be Prepared!
While all construction is affected by rain to some extent, the severity of the delays is often dictated by
the type of project and the stage of construction. Largely prefabricated structures (such as
warehouses) minimise their exposure to inclement weather due to the construction method and materials used. However, those with extensive excavations and basements can often be held up for
weeks following heavy frequent rain, as water is pumped out and collapsed excavations are reexcavated,
adding significantly to the end cost of the project.
While there is no ultimate solution to inclement weather,
developers and financiers will be well served to take this
into account in the planning stages and when
considering finance to ensure that the potential
extended delays are not the factor that turns a
profitable project into an extended nightmare.
BMT & ASSOC provide cost planning services and
financial construction advice that extends to
recommended contingencies, time programs and advice, protecting the developer and financier to
some extent from such uncontrollable variables as the weather. Please feel free to contact Tom,
Brad, Brendan or Pedro at the office to discuss your development scenario.
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