Is your firm prepared for the next big wildfire, tornado, or hurricane?
On Aug. 30, 2005, Jimmy Haynes, owner of JH Haynes Electric, Gulfport, Miss., returned to his shop after weathering Hurricane Katrina from the second floor of his house only to discover that the office had been flooded. More than 5 feet of water had ruined or washed away all of the company's tools and equipment, 13 trucks from the backyard, the computer system and its software (plus all backup data), and most of the materials from an onsite warehouse. “We lost everything that was 4 feet and down,” Haynes says. “We were absolutely devastated.”
Working in the large commercial and industrial electrical contracting business in Gulfport for the past 41 years, Haynes has outlasted storms before, including Camille in 1969, Ivan in 2004, and several in between. To prepare for Hurricane Katrina, he and his staff took the usual precautions, covering most of the office equipment in plastic and putting system backups in a fireproof safe. “We were concerned about part of the roof blowing off, and the rains getting the computers,” Haynes says. “We never dreamed that the water would come from the ground up.”
Not located on a floodplain — his company is seven miles from the coastline — Haynes had not invested in flood insurance. In addition, the fireproof safe proved not to be waterproof. Despite these obstacles, Haynes never considered closing up shop. “I jumped back in,” says Haynes, explaining that it's always been his philosophy that he and his employees (numbering 200 at the time) take care of their personal needs first, and then come back to work as soon as they can to get people back in service.
By the following Monday, Haynes had about 80 employees back working in the field. “Everybody stayed,” he says.
Within 11 days of the storm, the utility companies were able to re-energize facilities and homes that could take service, so it was Haynes' goal to make sure everybody that had a feasible building was able to be re-energized. “Being a service company, we were trying to get as many customers as we possibly could back online,” Haynes says. “We did our part to where the utility company could re-energize them and turn their lights on.”
During the first few days of recovery, the National Guard provided generators for the city — which Haynes Electric's employees installed — and meals ready to eat (MREs). A distributor on good terms with Haynes had filled its fuel tanks before the storm and offered fuel as well as bottled water. “We had vendors from Mobile and Pensacola and places like that bringing us cans of gasoline, ice, and food, like bologna and cheese,” Haynes says. “No stores were open. You couldn't go buy a loaf of bread. So we had those suppliers bring those kinds of goods in, and we ate peanut butter and jelly sandwiches at the office for about three weeks.”
However, the biggest boon to Haynes Electric's recovery was a $30,000 donation from the National Electrical Contractors Association (NECA) Cares Relief Fund, chaired by District 3 Vice President Frank Russell. NECA members from around the country contributed to the fund. “We couldn't even get into our bank accounts,” Haynes says. “It didn't matter that it was a small amount compared to what I lost. It was enough to get going again.”
Since that time, Haynes has rebuilt his company and gotten all of its work back. His company's projects have moved from the first line of recovery — installing generators and getting city services back online — to reconstruction work for local municipalities, banks, businesses, and casinos. “[Gulfport] is still three years into another five-year recovery,” Haynes says. “There's still a long way to go.”
In 2007, Haynes was able to repay NECA Cares the $30,000 sum, plus an extra $10,000 donation. “It was money greatly appreciated, and it came at a time when it was needed,” Haynes says.
Although the floodwaters created by Katrina were an unusual occurrence for a storm in Haynes' area, he has adopted a different approach to disaster preparedness from here on out, including moving the telephone system and server from the first floor to the attic. “We feel like Katrina was a once-in-a-lifetime event,” Haynes says. “I don't anticipate us ever having that kind of water backup again, but you never know. If it does happen again, every computer in this office building will go home with someone.”
The devastating effects a storm the magnitude of Hurricane Katrina creates are always unpredictable, as can be damage from any other disaster caused by natural hazards. However, there are certain precautions electrical firms can take to protect their business, employees, and customers, as well as to ensure they're able to aid in the quick recovery and rebuilding phases of their communities (see FEMA's Quick Tips for Disaster Planning on page 45).
According to Washington, D.C.-based Federal Emergency Management Agency (FEMA), the first step is to identify whether your property or business is at risk from disasters caused by natural hazards. Local building officials, city engineers, and planning and zoning administrators will be able to provide this information, especially for the most common natural hazards such as hurricanes, floods, earthquakes, wildfires, or tornadoes. In addition, FEMA hosts several disaster and flood maps, which can be found online at www.fema.gov/hazard/map/index.shtm#flood. These resources can help you tailor a disaster plan to your particular risk, as well as aid in any insurance decisions or requirements. “Wind and flood are two different damages,” says Matt Stevens, president of Stevens Construction Institute, a Winter Park, Fla.-based construction contractor management consultant and training firm. “Know the difference in your insurance policy and adjust accordingly.”
Stevens offers several tips for disaster planning in “The Contractor's Business Digest,” which can be found online at http://www.allbusiness.com/construction/9492949-1.html. In this article, he advises that a higher deductible/higher maximum coverage are more desirable than a lower deductible/lower maximum coverage.
To help with insurance claims, he recommends you take pictures of all work completed before the storm or event. After the storm, send out a letter to the clients and partners on your projects that contains an estimated recovery time. “Don't have people assume what is obvious to you,” Stevens says. “Some will be upset and demanding at first. However, taking a proactive approach gives you a good basis for discussion later when there may be some outstanding issues to resolve.”
The loss of essential records, files, and other materials during a disaster is commonplace. According to FEMA, this not only adds to your damage costs, but also delays your return to normal operations. The longer a business is not operating, the more likely it is to lose customers permanently. To reduce vulnerability, owners and managers should determine which records, files, and materials are most important and take steps to protect them,
As Haynes Electric learned the hard way, backing up your computer systems and storing them in a safe place is a crucial element to keeping your business safe from damage caused by natural disasters. Currently, there are many services that allow companies to work with offsite storage and servers. Some even recommend out-of-state storage. “We always had backups to our computer, but we've taken it to offsite backup through a national vendor that has a server out of state,” says Jude G. Raspino Jr., president of Stuart Services, a Metairie, La.-based electrical contractor that also endured the wrath of Katrina. “We've also moved our Web site hosting. Now it's hosted on an external server that has a backup server in New York.”
Stuart Services also has a stand-by generator. “The old joke is that you can always tell the contractors in your neighborhood by the power generators in front of their houses,” Stevens says.
Generators are vital to getting your business back up and running, particularly for your information technology (IT) operations. In addition to a generator, Stevens recommends syncing software to keep laptops current with desktops. The laptops should also have broadband capability and adapters for charging in a car or truck.
Because a firm is only as good as its employees, the safety and care of your employees during and after a disaster should be at the top of the disaster plan. “There's a covenant between contractors and their employees,” Stevens says. “There's a special responsibility.”
There's also a real incentive in keeping all your employees in the area. “You've got to pass the week or two weeks — whatever it takes — which is not a long time in the scheme of things when you're talking about the 30- to 50-year life of a construction firm,” Stevens says. “Keep them close and working, because if you put them on furlough or lay them off, you're going to lose them.”
Stevens recommends contractors keep at least three contact methods on record — home phone number, cell phone number, and physical address — for all employees. The latter method may be the most crucial for certain disasters. “If the phone lines are down, the employer can go by their houses to check on them,” Stevens says.
However, there are many disasters that destroy physical buildings. Therefore, in addition to contact methods, designate a meeting place or rally point — one that isn't dependent on a physical structure — to be used immediately after it's okay to return to your area. This will help keep track of everyone and pinpoint any missing persons. Major throughways will be the first for electrical power to be re-energized, so locate this first meeting option or makeshift office near a major boulevard.
Employers should have cash on hand for the aftermath of a disaster. This will be used to not only restock any supplies or tools that are lost in the disaster, but also to lend each employee a set amount of cash for personal essentials with the understanding that the money will be paid back later once regular payroll has resumed. Employees may also need other items, such as food and/or clothes to work in. “I had two men that came in here on the fourth day after the storm,” Haynes says. “They were ready to go back to work, but all they had were the clothes on their backs. They were two good employees, so I was ready to put them to work — but first I had to give them something to eat. They hadn't had anything in two days. So they sat down and ate a meal before they went to work.”
In certain situations, your employees may need a place to live. In the aftermath of Hurricane Katrina, Stuart Services housed some of its staff members in townhomes leased by the company. In addition, check on emergency rates in area hotels, says Stevens. Some may offer reduced rental rates during and after a storm. “During 2004's Hurricane Charley, my daughter and I stayed at the Rosen Hotel in Orlando for $42 a night for eight days,” he says. “In hindsight, it was fortunate we did some planning.”
Often, many evacuees will not return to their rental apartments, so keep a list of these, as they may be available for lease on short notice. After living for two weeks in a tent in his front yard, Haynes and some of his employees were able to move into apartment complexes abandoned by casino workers. “They realized immediately after the storm that they were going to be out of work for a year or so, so they packed up and went to places like Atlantic City and Las Vegas,” he says. “We were fortunate enough to get our name on a waiting list at two or three apartment complexes and then get an actual apartment.”
That self-interested generosity should also apply to employee's pets. Many evacuation services do not allow animals to accompany their families. According to Stevens, this may lead to your employees taking unnecessary risks for their four-legged friends. “Consider sheltering the animals in your building,” he advises.
Although most people hate to admit it, there are many opportunities for electrical contracting firms that have weathered a storm or fire to expand their business. Most insurance claims need a contractor quote, so don't be hesitant to charge for these as long as you're up-front and honest about your pricing. “There are some opportunities here in disaster,” Stevens says. “You can make a lot of friends, and you can make some money. That's not a bad thing, as long as you don't overcharge people.”
At least 13 states, including Florida, Louisiana, and Mississippi, have limitations or prohibitions against increasing the price of goods or services immediately before, during, or after a state of emergency. Most statutes accommodate price increases due to additional costs or expenses incurred as a result of the emergency. “You do not hurt yourself by doing the right thing, which is rebuilding your community,” Stevens says.
However, electrical firms should still take some precautions against price-gouging accusations, such as setting prices on true cost, publishing your prices, and having customers sign off on invoices.
Once Haynes gained access to a copy machine, he created a form letter stating what his company's billing rates were prior to the storm and how much markup on materials there would be. He also kept daily time and material tickets. “We provided that to our customers so they knew that they were going to be billed the exact same thing that they would've been if they'd called us in to do work prior to the storm,” Haynes says. “I don't believe in kicking anybody when they're down, and we were all down.”
At Stuart Services, Raspino held meetings with his employees in which he recorded the minutes and filed them for safekeeping. “We did this every week as more people came back,” he says.
The company also stayed within its existing price book. In addition, Raspino turned one of his key employees into a quality control officer. “That's all he did full-time was visit jobs and check the invoicing,” Raspino says. “He made sure we were pricing out to book to match the job and the work that was done.”
Despite these precautions, Attorney General Charles Foti brought Stuart Services up on price-gouging allegations. Fortunately, the charges were dismissed later that year (see Contractor Cleared of Price-Gouging Allegations).
A swinging of the pendulum is how Raspino describes the aftermath of Hurricane Katrina. In the first year or so, demand for all trades — electricians, plumbers, air-conditioning installers — rose dramatically. “Everybody wanted to rebuild at the same time,” he says. “But once you get most of the homes rewired, what happens next? We predicted that service would decline, and it did.”
The company tracked calls related to Hurricane Katrina. Immediately after the storm, 100% of the calls were storm-related. At the end of last year, only about 7% of the calls were storm-related. “We've seen instances where some companies folded when service calls started to diminish, in rewire calls especially,” Raspino says. “We used to get plenty of those calls, several a day in fact, and now we might get one a week.”
To mitigate the decline in calls, Stuart Services embarked on a trade expansion. Through an acquisition, it started a plumbing division, which it launched in May. The company now offers electrical, air-conditioning, and plumbing services. “To survive, you have to look for a bigger piece of a smaller pie,” Raspino says. “Some smaller firms just didn't want to fight it anymore. There's a shift in the marketplace after such an event, as you can imagine.”
There also comes a time when insurance claims are denied or the cost of insuring a new building becomes prohibitive, so projects become scarce. “There's still a lot of vacant buildings where nothing but slabs exist,” Haynes says. “The whole Mississippi Gulf Coast — and the Alabama and Florida Gulf Coast — we're all suffering from the results of the insurance crunch. Until that is alleviated, we're handicapped as to what we can do.”
For more details about each of these items, visit FEMA's Web site at http://www.fema.gov/plan/prevent/howto/index.shtm.
On September 14, 2006, Judge Robert Klees signed a joint motion and order to dismiss without prejudice charges of price-gouging brought against Metairie, La.-based Stuart Services by State Attorney General Charles Foti Jr. Despite careful and transparent policies and procedures, Stuart Services had been accused of increasing prices for their services in the aftermath of Hurricane Katrina (see “Price-Gouging Accusations Create a Storm After the Storm,” from the January 2006 issue of EC&M, available from the online article archive at www.ecmweb.com.) “If they'd checked our invoices, they would have seen the same pricing before and after Katrina hit,” says Jude G. Raspino Jr., president of Stuart Services.
At the time the accusation was running its course, Raspino contacted the state legislature for help in changing the wording of the provision that covers price-gouging during emergencies or hurricanes. Sponsored by State Representative Joseph P. Lopinto, House Bill 1354 was passed unanimously in Louisiana House of Representatives on May 6, and is now assigned to the State Senate Judiciary Committee for review. “We expect it to be passed into law this session,” Raspino says.
The bill adds an exemption for price increases due to fluctuations in commodity markets, market trends, or to “reasonable expenses and charges for attendant business risk.” It also changed wording regarding prices that were “readily obtainable,” the condition under which Foti had originally brought Stuart Services up on charges. “Our argument with that was, if everybody had the same price, then you could file charges for violation of the Sherman Act [the federal antitrust law],” Raspino says. “You can't collude to set a price, and if you offer different levels of service, you can't have the same price.”
The impetus behind changing the statute was not to take price-gouging off the books but to accommodate different types of service. An example Raspino uses is Starbucks coffee versus a cup you buy at the gas station. “Different products and services have different levels of quality and different levels of service,” he says. “These are all offered by different types of companies, some of which are specialized, such as new construction, which may be focused only on price of a commodity and competitive bidding.”
The new law would compare a company's pricing immediately before and after an event and also allow for the increased cost of doing business during an emergency. “It's harder to get materials and employees, and you may have to buy generators,” Raspino says. “The law will now look at each individual company and the cost of doing business.”
While disturbing and surprising, the false allegations did not prevent Stuart Services from helping in the recovery and rebuilding of its community. “It's what we do,” Raspino says. “We wouldn't stop serving the public.”