Labor vs. salvage: many factors play a role in the economic feasibility of deconstruction vs. demolition.

Deconstruction is the selective dismantling of buildings with the intent to recover reuseable building materials first and to recycle materials second. The economic case for &construction vs. demolition is made by the trade-offs between labor/equipment costs, materials values/revenues and the local cost of hauling/waste disposal for both the owner and the contractor.

Unfortunately, based upon studies by this author, &construction will require 10 to 20 times more labor hours than demolition for one- and two-story wood-framed buildings. The two considerations faced by &constructors discussed in this article are this intensity of labor effort and efforts to offset labor costs through salvage value or trade-offs through other benefits to the owner, such as personal or corporate tax-deduction credits for the donation of recovered materials to non-profits. Approximately 40 percent of deconstruction and reuse organizations are non-profits, according to a survey of participants at the Building Materials Reuse Association (BMRA) 2004 conference.

TAX RELIEF

The non-profit sector has become very involved in building &construction and the reuse of building materials. Non-profits are not exempt from paying prevailing wages to employees or from following OSHA regulations if they employ at least one person. These organizations' activities may range from active deconstruction to receivers of drop-off materials donations, for which both individuals and corporations can receive tax-deduction credits. In turn, the salvaged or donated materials are sold to support the organization and its mission.

The U.S. government has established the tax-exempt 501 c3 incorporation status for organizations to fulfill social and environmental benefits to society through service, charity, religious activities, education and research. This tax-exempt status provides a subsidy to these organizations via eliminating taxes on their purchases and their income. It provides an indirect assistance by providing a means for citizens and corporations to claim tax-deduction credits for cash or non-cash contributions.

In some cases, such as in the demolition industry, there is a perception that the involvement of non-profits in deconstruction poses an unfair advantage when non-profit deconstruction companies provide owners with tax-deduction credits for the donation of recovered materials and compete with for-profit companies for building removal contracts. In deconstruction, this incentive means more labor is able to be expended on recovery, reuse and recycling, which in turn means more materials diverted from landfill, more income taxes paid, more dollars spent in the local economy (from higher labor costs paid by the owner upfront) and further economic activity in the community through multiplier effects.

DECONSTRUCTION LABOR

In a study in 2001 by the Ministry of Environment, Land and Parks, British Columbia, Canada, the sensitivity of labor costs, salvage value, avoided disposal and time costs was examined on a representative project to determine which economic factors were most important in making &construction feasible. Labor costs were $20 per hour for this representative project. The total labor for the representative project was $6,400, the disposal costs were $475, and the time costs for an 11-day deconstruction vs. a 1.5-day demolition using 7 percent interest on a $t25,000 property was $300. The salvage value was $2,656, and the disposal savings were $1,425 compared to demolition, for a total savings of $4,081. A 10 percent reduction in labor costs equals $640, a I0 percent decrease in salvage equals $266, and a 10 percent increase in disposal equals $143. Clearly the labor costs dominate the equation, followed by salvage savings and then by avoided disposal.

Given the sensitivity of deconstruction to labor costs and the relatively lower value of salvage, many organizations are hard pressed to compensate for high labor rate requirements and for high insurance and workman's compensation costs. Deconstruction is very difficult in the context of Davis-Bacon Wage Act requirements that stipulate the use of "prevailing wages" on public work. Davis-Bacon wages are intended to represent the wage paid to at least 50 percent of the workers in the job classification in a given geographic location. Collective bargaining agreements and past wage agreements by local governments with labor organizations are typical means to determine the prevailing wage rates. Where unions have not provided this guidance, the prevailing wage can be quite different.

According to several prominent deconstruction organizations, insurance rates are very problematic for many deconstruction operators. Deconstruction on a residential scale involves almost exclusive use of hand labor over a longer time per building than mechanical demolition. Deconstruction of wood-framed buildings could be in the category of "carpentry." It is a dynamic and somewhat hazardous industry--but at the same time, deconstruction is clearly not as likely to cause catastrophic injuries, such as being crushed or trapped by machinery and trenching or falling from very high heights, although falls from low heights can be equally possible. It does, however, involve exposure to a myriad of minor hazards, such as impacts, cuts, foot injuries, etc.

For many non-profits the costs of insurance and workmen's compensation make it difficult for them to offer deconstruction jobs with a livable wage, much less a prevailing wage. The alternative has been to pay low wages, use temporary labor and, for many Habitat for Humanity ReStores, to also use volunteer labor. While volunteer labor does not exempt a non-profit from OSHA safety regulations and any other applicable environmental or construction related regulations, it does keep paid staff requirements and payroll low. Other alternatives include the use of prison labor, community service labor and federally funded job-training programs such as the U.S. HUD Youthbuild program.

DEVELOPING STANDARDS

The demolition industry, through the National Demolition Association, has developed safety training and guidelines for its members. It is also a well-established industry with many companies that have been in existence for several generations.

On the other hand, the deconstruction industry is relatively new, with many start-ups only in the past five or six years. With short experience records, likelihood of smaller-scale accidents and the unknown character of deconstruction for insurance companies, deconstruction companies can receive high premiums. Longer time on projects, using more labor hours means that insurance becomes an even greater burden to deconstruction activities.

Without clear definitions and standard safety guidelines from the industry, insurers will take the most risk-averse approach. The risk analysis and accident track record for deconstruction has yet to be determined to really determine appropriate classifications.

However, clear safety and training guidance in the form of standard wages that are commensurate with a skilled laborer and more use of mechanical assistance can be a key to avoiding injuries, determining the real risks of "proper" deconstruction and, therefore, allowing the deconstruction industry to develop a job classification that is "true" to the nature of the work, keeping insurance premiums reasonable while also making deconstruction more cost effective.

The author is the president of the Building Materials Reuse Association (BMRA). More information on the BMRA is available at www.ubmra.org.