The clouds have cleared, but the region’s record rainfalls have left a damper on the region’s construction activity.
Hardest hit have been public works projects that include road reconstructions and the Los Angeles Unified School District’s massive $3 billion building program. But private contractors and homebuilders have also felt the residual impact.
Most of the large construction projects in the county are facing weeks-long delays, and in many cases the added costs of overtime and replacing damaged facilities are being borne by contractors, although the full cost of the delays has yet to be calculated.
Jim Cowell, LAUSD’s director of construction, said that contractors would bear the costs of “rain days” that are not built into a contract.
“It’s the contractor’s responsibility to get the school built within a certain amount of time,” he said. “There are a certain number of rain days built into the contract. But each job is different. Just because it rains doesn’t mean you get a rain day. We’re evaluating those right now.”
The weather delays the region has seen 34.5 inches of rain this season, the third-highest level on record have dinged homebuilders as well.
Ryland Group Inc., a Calabasas-based homebuilder, cited the weather in Southern California when it lowered its first quarter earnings estimate by 10 percent earlier this month. In a March 7 release, Ryland said first-quarter earnings per share would be $1.18, rather than the $1.30 per share expected by analysts.
“Impacting the first quarter of 2005 are approximately 225 home closings originally scheduled for closing in the first quarter that will be delayed to later periods as a result of construction delays due to adverse weather conditions,” the release said.
Residual costs
In general, weather damage could also lead to litigation.
Chuck Patterson, a partner at Morrison & Foerster LLP, said it was likely that buyers whose homes were damaged might sue those who sold them the home, along with the geologists who signed off on the property and potentially the cities and counties that built the roads near their homes.
Patterson, who represented hundreds of homeowners who brought suit after the 1983 Big Rock Mesa landslide and the 1993 Anaheim Hills landslide, said the cost and success of each case depends on the extent of the damage and the value of the house.
There are other indirect costs. Bruce Toro, senior vice president of engineering and construction manager DMJM+Harris, which suffered delays on two road-building projects, said the trickle-down effect of the rain would be felt by commuters. “They get delayed in traffic and that costs them, or their company, extra money while spending time in their car or in a slow construction zone,” he said.
For commuters awaiting completion of the Metropolitan Transportation Authority’s Orange Line busway across the San Fernando Valley, the weather added yet another delay to what has been a prolonged construction schedule.
MTA spokesman Ed Scannell said the busway would miss its scheduled Labor Day completion date by three to four weeks. The delays come after the MTA had sped the pace of construction in the wake of a court order that halted the project for 23 days.
Crews were working 10-hour days, six days a week when the rains hit.
“We were starting to make headway and get time back that we’d lost,” Scannell said. “They had been making such good progress on catching up.”
The re-alignment of Santa Monica Boulevard in West L.A. lost a month’s worth of work due to the rain, and project managers are reviewing whether they expect to keep a March 2006 finish date, said Tonya Durrell, spokeswoman for the city’s Department of Public Works. The contractor is working on Saturdays and nights to “get the project completed as early as possible,” she said.
Overtime bills
Rather than miss projected delivery dates, which in many cases would carry penalties, contractors have opted to absorb near-term overtime costs.
“While you’re paying extra money, you’re saving money on the back end because you’re not keeping crews longer months from now,” Scannell said. “You can wrap up the project sooner.”
LAUSD contractors tend to incur the added costs necessary to open a project on time, said Steve Pellegren, vice president of Bernards Bros., the San Fernando contractor assigned to the East Valley Area New High School No. 3. There is a great deal of pressure, he said, to have schools open on time.
“Generally, if the project is on schedule, then the builder would take that responsibility,” he said.
If the project is not on schedule, the costs depend on the details of the contract. Many contracts have an assumed number of rain delays per month. If the project gets extended, or has too many rain days, sometimes the contractor pays for added costs. Other times, the school district has a contingency budget outlined in the contract.
If the costs go beyond the contingency plans outlined in the contract, “those are extreme situations that typically the owner and the architect try to work out,” he said.
James Atkins, project manager at Williams & Dame Development Inc., co-developer of the Elleven condominium project at 11th Street and Grand Avenue near Staples Center, said he expects overtime and efficient scheduling to make up for the 14 days he lost while building out the basement.
The bill for the delays, he said, could run to the hundreds of thousands of dollars.
Other individual cost estimates are beginning to trickle in.
The California Science Center received a preliminary estimate of $200,000 to replace the roof of its Air & Space Gallery, which closed for 15 days after a six-inch gap opened, resulting in half the building being waterlogged, according to Tony Budrovich, deputy director of operations at the Science Center.
