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    Contractingbusiness 1712 70476wiegmann0200000046072

    When Rising Costs are GOOD for Business

    Aug. 27, 2007
    By GERRY WIEGMANN For many, rising energy costs are a cause for concern. For Design/Build contractors, however, they may be a cause for celebration. As


    For many, rising energy costs are a cause for concern. For Design/Build contractors, however, they may be a cause for celebration.

    As building owners and managers become more aware of the importance of managing their buildings' energy consumption, they will look beyond the first costs of an HVAC system and pay closer attention to the long-term operating costs. This opens the door for Design/Build professionals to step in and offer their expertise.

    As time goes on, with the emphasis growing on sustainable buildings, green buildings, Leadership in Energy and Environmental Design (LEED), and total operating costs, an increasing number of building owners and managers are going to be looking for Design/Build professionals who can help them control their operating costs.

    At Wiegmann Associates, we've had many developers tell us that if we can save them $1 in operating costs per sq.ft., it's worth $8 to $10 per sq.ft. in HVAC system investment to them. The system investment pays for itself over time, and they're saving that $1 per sq.ft. forever. This is a powerful selling tool for Design/Build contractors. Building developers are well aware that if they can reduce their operating costs, they can offer a lower lease rate, thus making their building more attractive to potential tenants. A potential building owner knows that if he occupies the building, energy savings go right into his pocket.

    A trend we're seeing is developers who are also long-term building owners. In the past, many developers, as short-term owners, simply passed all the operating costs on to the tenants until it was time to turn the building over to an owner or management company. However, we're seeing an increasing number of proactive developers who have a long-term ownership approach. They have a strong interest in energy costs. They realize the total operating benefit of buying a high quality HVAC system, and they're the ones you want to work with.

    Don't overlook retrofits. We have found excellent opportunities for energy savings in the built market for many clients. Any building using steam for heating is a prime candidate; a simple heat recovery system on the exhaust stream can often yield large savings. Industrial customers in particular often reap a huge reward for investing in an energy retrofit. Just be aware that the energy business has an extremely long sales cycle. It's a time-consuming sales process, and there's a significant front-end cost for sales and engineering, so you have to decide how to spend your time and choose your targets wisely. For these projects we generally seek out current clients, or clients that we can foresee doing repeat work with.

    Keep in mind that buildings with excellent energy performance histories are an easy sell for the developer to an owner. Talk to owners and developers and ask them how much their buildings are operating for now, and show them how you can reduce those costs. Show the owner/developer buildings that you've retrofitted, with the "before" and "after" energy costs, and show how much you've saved those owners. Make them ask, "Wow, how did you get to those numbers?" Now you're talking the universal language of greenbacks, and you've got their attention.

    The Tricky Part
    Even though the future of Design/Build is bright, there's still a tricky part: making the crossover from being perceived as a subcontractor into being a Design/Build contractor. You want to be someone the owner engages when he engages the architect. How do you position your firm to be selected early in the process?

    The answer is to call on multiple-building developers and Design/Build general contractors. It's a tough sell with architects, who generally like to have the consulting engineer or Design/Build contractor as a sub to them. We've had much better success going to developers, because if you deliver a successful concept and method that works for them, they're continually going to have new projects to put in front of you.

    Design/Build general contractors are another good market. We refer to them as "selling" GCs, because they sell themselves to the building owners, and you can team up with them. However, be aware that the great majority of GCs are not selling GCs, they're bidding GCs. We've had very little success with that group, as they don't understand the benefits of true Design/Build.

    What the Future Holds
    As energy costs become more of a building owner focus, owners will need to look at who they're bringing on board that can guide a project to the right first costs combined with the right total operating costs. The systems we install have the biggest impact on total operating costs, and mechanical equipment and ductwork take up more space than other equipment, such as electrical, plumbing, sprinklers, etc.

    Therefore, I think the real future for the Design/Build mechanical contractor is to be engaged with the architect when the building is still in the conceptual phase. In many cases, the mechanical contractor should be brought on board before the general contractor. There's only so much real estate and a finite amount of energy, and, going forward, those two facts will be increasingly dominant factors in the importance and selection of a qualified Design/Build contractor.

    The future for Design/Build contractors is to be a total solutions provider to the owner, not just an entity that's narrowly focused on HVAC. The role of mechanical contractors promises to expand significantly, because there's no one else who's better positioned to be accountable for energy and its control.

    Ultimately, rising energy costs are likely to fuel a boom for Design/Build, thanks to building owners' increasing awareness of the importance of energy efficiency.

    Be Cautious With Performance Guarantees
    When retrofitting a building for energy savings, many owners may request an energy cost or performance guarantee. However, we approach guarantees with caution. It can often be difficult if not impossible for a contractor to predict a building owner's total usage — HVAC system costs are dependent on the building and how it's used, and are typically only 50% of the utility costs. The rest comes mainly from lighting. The typical commercial office building will have several sources of lighting expense: interior lights, exterior building lights, task lights, parking lot lighting, etc.

    For a Design/Build contractor to make a true and accurate performance guarantee, he or she must be engaged in the intelligent building business. This means not only doing the energy management, but also controlling and monitoring lighting and receptacle power.

    We've found that only when we take control of everything in the building that consumes power — including monitoring and controlling lighting and receptacle power — are we in a position to project what it's going to cost to operate the building. Allowing us to take this control can involve a degree of trust on the part of the building's developer, owner, or manager, so we must make them view us as the experts in the intelligent building business, and trust us in that capacity.

    Of course, that leads to us shouldering the "burden of proof" and paying back their trust with a worthwhile performance guarantee that we meet without fail. But isn't that what Design/Build is all about?

    What About Design-Assist and Design-Bid?
    For all the reasons discussed in this article, I believe the future of Design/ Build is bright. What about the future of its two offspring, Design-Bid and Design-Assist? As a true believer in Design/Build, my feeling is this: the real opportunity those two delivery methods present is for the mechanical contractor to develop relationships with architects, owners, and engineers, so that you can be involved with them on future Design/Build projects.

    As a Design/Build mechanical contractor, you bring an important core competency to the table, and deserve to be involved in a project from the planning stages. I don't feel it's a worthwhile effort for you to simply be paid a fee in the design process and then step aside. It's not a simple world, so many Design/Build companies (including us) will continue doing some Design-Bid and Design-Assist work. That's fine, as long as it's always done with an eye toward relationship-building.

    Gerry Wiegmannis president of Wiegmann Associates, a $35 million Design/Build mechanical contracting company in St. Charles, MO. He can be reached at 636/757-2008 or [email protected]