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Archive for June, 2008

Fire Protection: 30 Years Back and 30 Years Ahead

June 24th, 2008

There have been numerous changes in the past 30 years that centered on advances in technology. Manual hydraulics gave way to computer generated hydraulics; drawing boards and triangles turned to CAD. Design criteria choices expanded on the advances in sprinkler applications such as residential, ESFR, extended coverage, and special applications. However, I want to focus on how the “business” of contracting has changed in the past 30 years and what we may see in the next 30.

Labor

30 years ago virtually all fire sprinkler work with the exception of system layout was performed utilizing organized labor. In the 1980’s, the construction industry began an evolution to open shop that resulted in unprecedented growth in work performed by non-signatory companies. All regions of the country now have a strong open shop presence. Of course, all change has consequences. One benefit of organized labor is the training received through the apprenticeship process. The migration to an open shop environment placed a great responsibility on the non-signatory firms to train. This need for training was the main driver in the formation of the American Fire Sprinkler Association (AFSA). However, far too few open shop contractors take advantage of the tools available. Recruiting, training, and retaining qualified field technicians is on of the biggest challenge facing the fire sprinkler industry today.

The next 30 years may bring a whole new look as well as a return to the past. Moving from unskilled to skilled labor in the construction industry has long been a path for upward economic movement. Many of our parents and grandparents are proof of this. This movement continues today and is particularly evident with our immigrant population. The move from unskilled to skilled labor by first and second generation immigrants is especially strong in the Southwest and West regions and in the next 30 years will fill the entire country. The pipe fitter of the future will be second and third generation immigrants taking advantage of these good paying jobs which provide the foundation for solid middle class living. I am not making a judgment with this, just stating what I see. The return to the past could come as a resurgence of organized labor if the open shop portion of our industry does not do more to recruit, train, and retain qualified technicians. Business is dynamic and change always follows the needs.

Outsourcing

The trend to outsourcing has not escaped the fire sprinkler industry. Consider that 30 years ago virtually every fire sprinkler contractor had a fabrication shop. It was considered an essential component to be a successful company. Owners took great pride in the their shops and as welding became a prevalent part of the fabrication process much money was spent in designing good process lines, training welders, and investing in automatic machinery. However, many contractors came to view their shops as an “overhead eating machine” that must be constantly fed. It was and still is a challenge to keep a shop productive and cost effective. Outsourcing fabrication started in earnest in the early 1980’s and has experienced continuous growth. Today, the vast majority of contractors have little or no in-house fabrication capacity.

The outsourcing of sprinkler system layout (design) started a bit later but has accelerated in the last 20 years. Many small contractors in today’s environment outsource all design and even the largest contractors outsource to some degree. The reasons are varied but as with fabrication, there is a movement towards keeping fixed overhead costs to a minimum. The shortage of qualified fire sprinkler layout technicians, the increasing requirements for Professional Engineering oversight by some jurisdictions, and the ongoing investment in ever changing technology have also influenced many contractors to outsource the design and layout of sprinkler systems.

The next 30 years will see a continuation of this trend. In fact, we may see the day in the not too distant future when our industry is dominated by companies who outsource all operational functions. You may think not, but consider this–it was not long ago that General Contractors actually “built” projects using in-house labor and equipment. However, today, nearly all General Contractors simply manage the construction. Could it happen in fire protection? The future may bring a fire sprinkler industry made up of a relatively small number of managing firms outsourcing their fabrication, design, and installation labor to others specializing in each of these areas.

Maintenance and Service

30 years ago, sprinkler maintenance was not governed by a national standard. NFPA only published recommended practices (NFPA 13A) regarding sprinkler system maintenance. Most service and maintenance was reactive in nature and the majority of regular scheduled service performed was driven by the insurance industry to manage risk. The publication of NFPA 25 served notice that things were going to change, but the change was slower than expected. However, coupled with an ever increasing number of protected structures, the increased awareness of systems, and the greater focus on corporate governance regard risk we are seeing an accelerated growth of the inspection, testing, and maintenance market. The increasing number of jurisdictions enforcing the requirements of NFPA 25 and the adoption of laws calling for the certification and licensing of inspectors, maintenance and service is becoming a serious area of investment for many contractors. I do not see this trend slowing.

The next 30 years will bring a tremendous expansion in this market. The industry will see an increased number of companies dedicated to this service alone. Service and maintenance will be the catalyst for growth and the consolidation of our industry. In addition, I believe the ongoing reputation and success of our industry may be largely influenced by the care and maintenance of these systems. With the ever increasing number of sprinkler systems and as these systems age, failure rates will be watch closely. Without good maintenance, our industry runs the risk of a tainted public view the cost/ benefit of installing sprinkler systems. Big opportunity for our industry—big risk as well.

Consolidation

The consolidation of our industry is an interesting subject. 30 years ago, the fire sprinkler industry was dominated by a small number of large national and regional firms. Firms such Automatic, Viking, and Grinnell had the bandwidth to recruit, train, and develop professionals. Even today, most of the senior members of our industry can trace their roots to one of these large organizations. However, with the advent of broader sprinkler use and applications the number of sprinkler companies grew and with the open shop movement, the numbers soared. Today our industry is dominated by the “boutique” contractor.

However, we are seeing an active consolidation movement taking place. Our industry has been “hot” in the investment community for a decade. Investment firms are buying and consolidating companies to develop a national footprint. Large service companies such as Cintas have acquired a number of fire protection contractors to add to their stable of services. Much of this expansion is geared towards the service and maintenance opportunities but system installation also plays a part. Investors see the huge residential market exploding with the seemingly inevitable adoption of universal sprinkler requirements by the codes.

The next 30 years will see the emergence of a growing number of mega-companies whose focus will be service and maintenance. With the challenges of recruiting, training, and retaining, it may take large mega-companies with the capacity of making the required investment to supply our industry with the need numbers of skilled technicians. There will always be a place for the well run boutique, but I have no doubt that our industry will see a large “reconsolidation” on a national level.

There are lots of evolving and unforeseen circumstances that make any prediction fraught with uncertainty and these predictions are simply my “take on things”, but I believe one thing is certain. Our industry will continue to grow because we deliver a product that “means something.” I am proud to deliver products and services that contribute in meaningful ways to our way of life. It has been a great and exciting run for the past 30 years and the future will bring no less.