Cold, Ice, Heat, Mud and Deadlines: Will Weather Disruptions Cool Your Margins?
Ottawa is a tough place to build anything. Ottawa last winter was snow on ice on freezing rain on snow. Builders and trades came back from Christmas and shoveled snow off their jobs for hours before they could actually start working again. The rest of the winter saw materials frozen into the snow, trashed tools and crumpled ladders. It was no fun working outside. Then last summer was the wettest on record — workers and machines sank in the mud, foundations flooded, building materials got soaked, leading to grumpy framers and site supers and home buyers. That was last year. This year, despite people (including a U.S. president) still misusing the term “global warming,” the thermometer plummeted just before Christmas and stayed pinned there for weeks. Exposed skin froze in 10 minutes. Machines broke. Deliveries took forever. Everything slowed down. After three weeks the temperature shot up and it started raining. Then after a good downpour the temperature sank again. You get the picture. This ain’t global warming. This is climate disruption, and it’s no fun to work in.
We don’t see a lot of coverage on climate disruption related to residential building. Maybe people don’t have time or don’t want to connect the dots. The exception is the Feds who are tinkering with building codes in light of changing weather. It’s just weather, right? We’re Canadians, we’re tough, and we build houses outside. But this is fairly new and there’s a weather record broken every month now, and even the Feds aren’t sure what to do because, although it’s obvious weather is changing, it’s complicated to apply climate change modeling to regional weather projections, so they’re working on those projections. Have you noticed how often the weather folks are getting the forecast wrong? How can we plan our work when nobody is sure what’s going to happen to the weather?
Let’s clarify. We do have past trends and aggregated climate models to make some assumptions. In our region (east-central Canada) we have been getting more rain storms especially in spring and autumn, more freeze-thaw cycles in the winter, more rain on snow and paradoxically more hot, dry spells. Flooding is apparently our main concern, and now there’s increased risk of more severe cold snaps too. Our best info indicates that, just like the rest of Canada, weather here will get more intense, and that’s on top of the fact that this is already a tough place to build. So what does that mean for your job sites and production schedules? The following focuses on east-central Canada from various on-line resources, weather records and personal observations, but there are global implications:
- More rain and flooding means more days of low worker productivity and production delays;
- Expect shipping delays from weather events locally and around the world. Do you source any tools or materials from China?
- Extreme temperatures at both ends of the thermometer create challenges with curing concrete and sealants;
- Extremes are also hard on workers and machines;
- In-ground water saturation during severe wet spells creates new challenges for structural and civil engineers. Ditto for extremely dry spells;
- More intense wind adds to the mix by testing structural limits especially during construction.
We have noticed that conscientious engineers and planners no longer talk about the “100-year event” for rainstorms because it’s an obsolete term. We had two “100-year events” in our region last year. There is some speculation that climate change might extend the construction season with earlier starts and later freeze-up in some parts of North America. Can we count on a longer building season over the next years? We don’t think so. Storms and extreme heat will likely cancel gains. We will add to this list the growing risks to workers from ice, heat stroke, frostbite, falls, drought and dust (which are bad for machines too) and especially all of the above for an aging workforce. We suspect the hazards from climate change will multiply as will attendant legal liabilities and drains on productivity and profit.
Construction contracts and climate disruptions are a directly related topic. Insurance companies increasingly reference damage and delays from climate disruptions. Insurance and legal professionals as well are recommending provisions in construction contracts for weather delays. These changes fall in three general categories. The first is risk management plans along with builders’ risk insurance (also known as course of construction) to cover delays due to unpredictable weather events and lost income from same on building sites. A second emerging area of interest is interrupted material deliveries and production schedules due to problems suppliers might encounter off-site for which builders might consider contingent business interruption coverage.
A third area of interest is unforeseen changes to standards, codes and regulations as a result of climate change that could not have been reasonably anticipated (see this link). In addition, risks from weather events are spurring the uptake of alternative risk management tools like weather derivatives, also called weather futures as a hedge against weather events. Futures bridge the gap between a weather event and an insurance payout. Other topics to watch are workers’ insurance and compensation for injured workers, as well as for building design professionals who do not adequately factor weather extremes into their designs. Our point is to inform building professionals that change is in the air for risk management strategies on your jobsites.
So what can city builders do to factor in the changing nature of weather impacts on your business? It’s already tough to build in much of Canada and we think it’s going to get tougher. Cut your risks. Understand how changing weather patterns may impact your production, your contracts and your products in the future. Talk to your legal folks and clients about weather disruptions and force majeure clauses in your contracts, and in the contracts of suppliers and subcontractors. Check in with your subs and ensure you and they are both actively managing weather-specific risks on jobsites. Please consider that the more you use pre-fab components, the less you depend on the weather. The more you prefab your components in a controlled space the more control you have over production, your contract deadlines and your margins. As Kent Larson, Director of the City Science research group at the MIT Media Lab famously quipped, building a house on site is a silly as building a car in your driveway.
Please believe us — we want to be wrong about this. But there is no question we have been getting more intense storms, and the projections for Canada are for increasingly severe weather disruptions that will interfere with construction projects more as time goes on. We recommend preparation and adaptation, not hankering for the good old days.
Gary Martin holds a doctorate in sustainable urbanism from Carleton University. He splits his time between building stuff, sustainability advocacy and teaching, and trying to connect the three. [email protected]
Ruth McKay PhD is a tenured prof Carleton University’s Sprott School of Business. One of her areas of interest is business risks from climate change. [email protected]
Thanks to Glenn McGillivray, Managing Director of the Institute for Catastrophic Loss Reduction, for clarifications about insurance products.