What are the ramifications of “competitive pricing”

I don’t normally report press releases from architects or contractors who are starting new projects. It seems counterproductive to rub it in the face of the firm’s competitors and of no interest to those at the other end of the country. But an exception with this one as it raises an interesting question.
   The announcement is that R.D. Olson Construction, Irvine, CA, has started building the 129-suite Homewood Suites in Oxnard, CA. Olson is on the fast-track to complete the project by early 2010 after offering its client, T.M. Mian & Associates, Dallas, exceptionally competitive pricing. “Customers are expecting competitive pricing in order to justify building in today’s tough market,” said Joseph Cervantes, Olson’s senior executive vice president operations. “We provide that without compromising quality and schedule.”
   The all-suite extended stay hotel, part of the Hilton brand, features a number of in-room amenities geared for vacationers and businesspeople. Those include kitchens, refrigerators, cook-tops, and microwaves. The approximately $10.5 million project was designed by RYS Architects of San Francisco.
   The question this announcement raises is in the two statements from Cervantes. Just how much are architects and contractors having to discount their work to get jobs and what is the breaking point? Cervantes claims that they are cutting pricing “without compromising quality and schedule.” Assuming that their work was competitively priced to begin with, and I’m confident it was, something has to give if the project cost is reduced and quality and scheduling maintained. Are the suppliers taking the hit? Are architects and contractors simply working on smaller margins? What is this recession doing to the overall cost structure of commercial construction and will those changes remain in play as the economy recovers? It’s an interesting dynamic and it will be more interesting to see what ramifications result.—Gary L. Parr

H.R. 2187 a drop in the bucket?

In a May 14 blog item, I discussed legislation H.R. 2187, the 21st Century Green High-Performing Public School Facilities Act, which, that day, was passed by the House of Representatives. The bill, should it be enacted, would authorize $6.4 billion for school districts to do green-oriented renovation work in 2010. To me, $6.4 billion seemed like a ton of money that would make a significant difference.
   It became obvious to me that I have absolutely no concept of how far a billion dollars will go when I received a press release a few days ago for the Green California Schools Summit (Dec. 9 to 11, Pasadena). That release refers to H.R. 2187 and then states, “There’s lots of work to be done. The American Federation of Teachers estimates it would cost just short of $225 billion to fully renovate and repair schools across the country.”
   If my calculator is accurate, that puts us $218.6 billion short of the needed funds! H.R. 2187 doesn’t even get us in the parking lot with the heavy equipment.
   Who is going to provide the rest of the funding? I’ve not recently heard of any states being flush with cash, particularly California, so that’s not a source. I don’t know of one U.S. citizen who will vote for anything that resembles a tax increase and any legislator who supports a tax increase is likely signing his/her own political death warrant.
   I still hope that H.R. 2187 gets enacted, but it’s going to take a few more of those $6.4-million payouts to truly make a difference.—Gary L. Parr

A rare, and enlightening, trip to Walmart

 

Walmart's new logo to go with it's new, fresh look.

Walmart's new logo to go with its new, fresh store look.

It’s a rare day that I set foot in a Walmart store. Truth be known, when it comes to shopping, I have a disappearing act that makes David Copperfield look clueless, so it’s really not a Walmart thing. Nonetheless, I was in a Walmart the other day that was in the process of a complete overhaul to incorporate their new fresh look—colors, logo, no hyphen in the name.
   It works.
   My wife was with me and we were in the store to get one thing, which was at the back of the facility. While there, we decided to pick up some paper goods, cleaning supplies, etc., which necessitated my walking all of the way to the front to get a cart, and say hi to the greeter person for the second time (If you’re a Jeff Dunham fan, a joke comes to mind at this point). While strolling through the store, I started to realize that the lighting was very pleasing, more so than any store I’d been in recently. It created a crisp, clean look and felt good, i.e., I didn’t mind being in the store.
   I looked up. Much to my surprise, I saw rows and rows of skylights. Yes, other than around the edges and a few places where artificial lighting made sense, the entire store was lit by daylight. Fluorescent lights were up there, too, but those irritating tubes were turned off, for the most part. I stopped and just took in the lighting and the very pleasing effect it was having on the store environment. I saw first hand why studies keep telling us that daylighting in retail, healthcare, and education facilities has a positive overall effect. It really does work. A tip of the cap to Walmart’s store designers.
   However, as nice as the experience was, I’ll still avoid shopping like the plague.—Gary L. Parr

MLB offers more green than the grass

Editor Melissa Larson and I were talking earlier today about green editorial and, since we’re both baseball fans (She worships the Cubs, I root for the Sox. It’s a Chicago problem.), we wondered what types of “green” things were in place at the Major League Baseball stadiums. We were confident that “green” had a different meaning in Chavez Ravine, where the Los Angeles Dodgers play. No doubt, green for the Left Coasters means waterless urinals, plenty of veggie dishes, and no smoking within a 50-mile radius of the parking lots that surround the stadium. In Boston, Pittsburgh, and Chicago, green means my hot dog wrapper didn’t blow onto the field during the game. In Yankee Stadium, green is built into their newly discovered wind-tunnel feature, which will suck all trash out of the stadium so the city’s Dept. of Public Works can clean it up when it lands in Queens.
   Sarcasm aside, Melissa did a little research and found the article linked below from Scientific American, which describes many examples of how Major League teams are doing their part to reduce any negative effects the game might have on the environment. It’s most interesting reading. When you get to page two, you’ll run into the word zeitgeist. I’ll save you the dictionary time: Zeitgeist: (noun-German) the spirit of the time; general trend of thought or feeling characteristic of a particular period of time. Enjoy!—Gary L. Parr

Green Diamonds: Baseball Stadiums Take a Swing at Energy Efficiency, by Adam Hadhazy

Marketing tips for slow times

When business slows, the typical accountant reaction is to reel things in and shut things down to ride out the storm. Smart business people, who are generally the successful business people, tell you otherwise. In an article that came to me the other day, Steve Collins of Desana Partners offers his take on what to do when business gets a little snug.—Gary L. Parr

When Business Slows, Do These Eight Things

Steve Collins, president, Desana Partners Inc., Cranston, RI

An old contractor friend of mine, when asked how he maintains his business through the inevitable cycles of the economy, replied, “When business is good, we plan for it to go bad. When it is slow, we plan for when it will pick up.” By virtually all measures, the construction economy is in the midst of a down economy. Everywhere we turn, contractors and suppliers are seeing a tightening of project flow as the system continues to constrict. To add to the angst, those projects that seem to be secure will likely be re-bid. In down cycles such as this, the typical company reaction is to cut marketing and communications budgets in the mistaken belief that these are discretionary cost centers that do not generate profit.
   The irony is that communications and earned media are perhaps most important during slow economic times. Maintaining a strong image during these times can differentiate your company from your competitors and reinforce the message that you are the company with which to do business. Here are eight action steps that you can do right now to help your company stand out:

  • Get closer to your customers. It is likely that your customers have more time than ever to spend with you. Get out of the office. Nothing beats a face-to-face meeting. Work together to identify their problems and develop joint solutions.
  • Provide training. When times are good, all you hear is, “We don’t have time for the training sessions.”  They have the time now. Take advantage of the slow times and bring your customers together for basic or advanced training programs. These are winning situations for both parties.
  • Develop project profiles. With a couple of photos and a few phone calls to assemble some facts, you can develop project profiles that will make your customer look good and deliver positive exposure for your company. Develop a template for these profiles to make it easy to assemble and organize the needed information. Offer the profiles to trade publications and  distribute them to your customer base in direct and electronic mail. Encourage your customers to nominate their projects as potential candidates.
  • Advertise in trade magazines. Be visible with your customer base. Trade magazines, both print and electronic, are typically the most efficient and inexpensive advertising and communications vehicles available. Take advantage of this. While your ad budgets may be cut, particularly with architectural journals, increase your visibility with trade venues as they do the best job of reaching your customers and getting your message across. Your strong and consistent presence here will be seen by your customers and your competitors.
  • Develop media coverage. Set up interview sessions with the editorial staff of the prime publications and your executive core to discuss your plans. Bring collateral materials and samples. Have a strategically crafted message about your company and how you can affect the market. Editors are frequently looking for articles, insights, and industry trends. It is always best if your company is helping to craft a message that serves the informational and educational needs of your audience.
  • Set up a series of architectural conferences. All of those architects who were too busy only a few months ago now have the time to spend with you. Assemble an agenda that allows the architects to participate and provide their opinions on your products and programs. Reintroduce your newest concepts. Coordinate these seminars with one or more of the media outlets so they can cover your conferences and promote the feedback from the design community.
  • Work with strategic partners. Your strategic partners are going through the same situations that you are. Look for areas in which you can work together and share costs, but still deliver a solid message to the marketplace and continue to increase your exposure.
  • Cultivate new customers. Now is the best time to aggressively go after those customers you often speak to but with whom you have never really developed a relationship. Assign your regional managers the task of identifying one potential new customer per region. Do your research. What projects have these potential customers completed in the past few years that you have not enjoyed? What is it about your competition that seems to favor them over you? Be prepared to earn their business and do what is necessary make a difference for them. What can you offer them as an incentive to come your way? How might their experiences have been better if they were working with you?

The U.S. has been in nine recessions since WWII and, while this assault is clearly different, our economy has always rebounded and it will again. While it may be some time before things return to some sense of normalcy, now is the time to think, plan, and act differently. You have limited dollars. Make them work for you. Share as many costs as you can. Be efficient in all of your efforts. Think before you act. Develop your strategy before your tactics. With a well thought out plan, this downturn can be a disguised blessing, allowing you to really stand out from your competition and gain market share.

The Author
Steve Collins president of Desana Partners Inc., a marketing and business consulting firm in the construction and building materials industry. Collins can be reached at scollins@desanapartners.com or 401.942.5640. Address is 68 Fox Run, Cranston, RI 02921

Have we found the economic “bottom?”

It seems that the economy may be at or near the “bottom” we’ve all been seeking. The stock market clearly has stopped its free fall and has been bouncing up and down for a couple of weeks. While layoffs continue, the don’t appear to be as frequent or as massive. Housing reports have shown some positive signs. Most indicative, at least to me, is that the doom-and-gloom popular media is being forced to report as many positive as negative signs. The real breakthrough, from my perspective, will be when the banks quit sitting on all of their hoarded cash and truly free up some credit so stalled projects can resume and new projects can get started. What are you experiencing? Have we reached the economic bottom? Are there any signs of improved credit availability?—Gary L. Parr

Economy good for security

It appears that nothing has changed. As the economy deteriorates, the need for security increase. Attendance at the ISC West trade show, Las Vegas, was solid on the first day and very strong the second day. Virtually all vendors with whom I met reported that business is good to very good. Many companies were introducing new or upgraded access-control systems designed for easy installation and integration with building networks. This movement will only grow stronger as the demand increases to better manage building systems and cut energy costs. In the CCTV world, IP-based systems and mega-pixel cameras were the primary focus. The software that drives these camera systems and the analytics that provide easy analysis of data is getting more powerful and user friendly than ever before.

The security industry is rapidly changing. While security is still the primary focus, it is quickly becoming the expected byproduct of the overwhelming effort to control access and monitor all aspects of building operations.—Gary L. Parr

How is the security industry handling the economy?

Today is the first day of the ISC West trade show, being held in Las Vegas. This is one of the largest shows for an industry that has been flying high in recent years, particularly as commercial operations seek to improve security and access control. The industry has been undergoing a change in the past couple of years as the demand has increased for better integration of security/access control with building computer networks. This change has been another shot in the arm for the industry by providing another area for growth. It’ll be interesting today to see how the economy has affected the security industry, which often has proven immune to economic downturns.—Gary L. Parr

Energy: What Steps are You Taking

The cost of energy is forcing every business to take a serious look at conservation measures. What steps are you taking to reduce building energy usage? If you have company vehicles, are they getting used less? Trips consolidated? Replaced with more efficient vehicles?

What have you done for your employees who are also feeling the pain of the cost of driving to work? Longer work days and shorter weeks? Telecommuting?

Share your tips and ideas with us.—Gary L. Parr

What Happened to ISO9000?

I had a recent exposure to the issue of ISO9000. This is a subject I covered extensively many years ago on another magazine, particularly the documentation of procedures and practices. As part of that coverage, I reviewed several software programs designed to keep documentation up to date and to track changes. Those programs were rather sophisticated at that time and many were quite effective at handling the job.

In the ensuing years I’d forgotten about ISO9000 because it was not a subject that affected me anymore. I also had assumed that ISO9000 practices progressed and, at some point, became ingrained in the corporate fabric. This recent discussion suggested that the issue of keeping company documents current and available to all of those involved is still very much an issue and may be more of a problem than it once was, even though many years have passed since ISO9000 was instituted.

This makes me wonder about those in the commercial construction industry, i.e., manufacturers, architects, contractors, owners. Is documenting practices and procedures a major problem/issue for you? Do you handle it routinely? Are you ISO9000 certified, but really don’t bother much with the nuts and bolts of the certification, i.e., it’s a nice label to hang near the company logo, but not really worth the extra cost and trouble? Did you simply never bother to get certified because it offered no value to your company? Let me know what you think.–Gary L. Parr