Everyone agrees that the RRP rule will increase the cost of remodeling, but there is not much consensus on how big that increase will be. Certain costs are fixed, such as the fees for EPA company certification ($300) and individual training ($200 – $400 per person). But EPA estimates of other costs are unrealistically low.
In an interview with Remodeling (“An EPA Q and A on Lead Paint,” by Leah Thayer), the EPA estimated that the “costs of containment, cleaning, and cleaning verification will range from $8 to $167 per job, with the exception of exterior jobs where vertical containment would be required.” This is based on EPA research showing that “many contractors already follow some of the work practices required by the rule, such as using disposable plastic sheeting to cover floors and objects in the work area,” and that extra cost would only come from additional steps required by the rule. The EPA also made a deliberate effort to hold down the cost of paperwork, and states that “the record-keeping requirements specific to the RRP rule are designed to be completed by a typical renovator in 5 minutes or less.”
Based on conversations with working remodelers and our research into business benchmarks, REMODELING believes that project cost increases will be as much as 10 times higher than what the EPA estimates. Although actual costs to implement the RRP rule will vary depending on the type of job, the number of workers involved, and the number of projects where lead-safe practices must be employed, every company will pay more to implement the rule – more in overhead and more in direct job costs.
Training. While certification costs for individuals can be amortized over the 5 years before they need to be renewed, the $300 average per person cost for the 8-hour class isn’t the only employer expense. Many remodelers pay employees their daily wage while they undertake training; at a burdened cost of between $25 and $65 per hour, and adding 1 hour travel time and lunch, certification training works out to something closer to between $535 and $895 per person. Some employers’ burdened costs are higher, and some may incur overtime charges as well. These expenses would be prorated over a 5-year period, after which EPA requires recertification.
Legal and Professional. Virtually every remodeling company will need to consult with an attorney to modify or add language in contracts, change orders, and additional work orders, as well as to bring job descriptions and other elements of employee manuals up to date. Not including a company owner’s lost opportunity time participating in these meetings, and in similar meetings while shopping for pollution insurance, fees could range between $500 and $2,000. This could be an annual expense depending on whether states adopt administration of RRP and modify the requirements.
Insurance. Few, if any, general liability policies cover lead-related illness or injury, and those that do will probably be modified to exclude lead, much the way mold was excluded when liability increased. Estimates quoted by insurance agents in a Replacement Contractor article (“Are You Insured for Lead?” by Jim Cory) pegged the average cost of a lead-pollution policy at $2,500. The full range quoted was between $1,800 and $5,000, depending on the number of employees, the number of jobs where lead is present, and the policy coverage amount. This is an annual expense that will likely increase regularly.
Other Overhead. The cost of securing, copying, and storing documentation could be as much as $500 annually. Given that lead can remain in the human body for as long as 30 years, a contractor would be well-advised to store certification and testing documents for longer than the 3 year minimum required by the EPA. This may involve a lock box at the bank, a fire-proof safe in the office, or a digital imaging system. And while the EPA doesn’t require it, photographic documentation of on-site lead-safe practices would provide extra documentation should a liability lawsuit occur. These are annual expenses.
All together, overhead costs for an average company with three field employees paid an average burdened wage of $40 per hour could be about $3,000. At the high end, with costlier legal fees and insurance premiums and higher-paid employees, the overhead expense could reach $9,000 or more.
Because these overhead costs would typically be spread over all projects completed in a year, their affect on the cost of individual projects varies with company size. For a company with annual revenue of $500,000, the upper-end overhead expense estimate would add about 2% to overhead; on a $10,000 project, 2% additional overhead would be about $200. (Overhead expenses would be less than 1% for a $1 million company, less than 0.5% for a $2 million company, and so on, unless the assumptions change.)
But increased overhead is the least expensive part of implementing the RRP rule. Additional time and materials consumed at the job site add cost quickly, and some types of projects add more cost than others. (Replacing a window in two separate rooms, for example, will double costs because testing, room isolation and protection, lead-safe procedures, and cleaning are required twice. Working in three rooms would triple the cost, and so on.)
Just how much direct cost the RRP rules will add won’t be known until contractors begin to use the procedures and document costs. But REMODELING has consulted with several working remodelers in a systematic attempt to figure it out. What follows in the tables below is based on a gut remodel of a typical 6×8, circa 1920 lath, plaster, and tile bathroom.
We have listed a low and high estimate for only the additional labor and materials required to comply with the RRP rule. The variations depend on differing estimates of how many people are involved in the work, and how long the RRP portion of the work takes. The data below are good guesses, but more reliable data will be available as soon as companies begin to implement the lead-safe practices.
Adding it all up. Assuming that direct costs for a typical bathroom are about $10,000, the RRP adds between 5.3% and 11.2% to direct job costs, plus an additional percentage point or two for overhead. At the low end, the selling price (at 35% margin, 2% higher than standard to account for increased overhead) increases from $14,925 to $16,205, a bump of $1,280. At the high end, the selling price increases $2,180, to $17,105. (Where multiple rooms are involved, the cost will be higher.) To the homeowner, that represents a net increase of between 8.6% and 14.6% in the overall cost of the job.
It also represents the amount a remodeler not using lead-safe practices can undercut the price of a remodeler who is.