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Archive for June, 2009

Plumbing Contractors Needed for Residential Fire Sprinkler Work

June 17th, 2009

Part two of a five part series focusing on the rapidly growing residential fire sprinkler market and why plumbing contractors are best positioned to capture this opportunity.

To view part one of the series visit “Residential Fire Sprinkler Requirements Coming Soon!

The incorporation of amendment RB64-07/08 in the International Residential Code (IRC) for fire sprinklers to be installed in all single family homes constructed after January 1, 2011 will have a dramatic impact on the demand for qualified design and installation technicians. In addition, the demand for licensed contractors will experience a corresponding rise since most states and jurisdictions have some form of contractor licensing requirements.

It is estimated nationally that approximately 7500 firms were actively engaged in fire sprinkler contracting during 2008. The vast majority of these entities were of the cottage variety with average annual revenues of $1 million and less than 10 full-time employees. Industry data indicates that approximately 42 million sprinklers were installed in 2008 with less than 1 million of these in single family homes. Estimates indicate that there are presently 15,000 trained installation technicians serving the fire sprinkler industry and the vast majority are focused on commercial applications. As the 2009 IRC is adopted by various states and local jurisdictions, the numbers of qualified contractors and trained labor needed will stretch the available resources to the point where demand will far outstrip the available supply.

Using HUD’s 40 year average for new single family home construction and considering when the code requirement will be adopted by virtually all jurisdictions, it is estimated over 7000 additional trained installation technicians will be needed to meet the increased demand. However, even when conservatively assuming that only one-half of the new homes are sprinklered, the number is still over 3000 additional technicians. The plumbing industry is well positioned to supply a good part of this demand for skilled labor. Sprinkler systems are essentially a piping system equipped with nozzles (fire sprinklers) having specific installation criteria. The average plumber can quickly develop the skills needed to install fire sprinkler systems. In fact, it is expected that the majority of single family residential fire sprinkler systems will be combined with the domestic systems and, in reality, the plumbing contractor is the only choice to effectively install these systems.

Even with the historically low numbers of single family residences under construction in the current economic downturn, this is a billion dollar opportunity that the prudent plumbing contractor cannot ignore. However, there are barriers to entry. Licensing, insurance, and access to training programs are the most daunting, but all can be overcome.

Entities installing fire sprinkler systems are required to be licensed contractors in most states. Just as with plumbing, the requirements run the gamut. Some states are as simple as filling out an application and paying a fee while, at the other end of the spectrum, there are states that require years of experience, exams, and certifications in fire protection technology. Fire Smarts, LLC, in partnership with the PHCC, is developing resources specifically to help plumbing contractors sort out these differences and identify licensing requirements for the states they service. One movement that is already underway is creating a license that is specific to residential fire sprinkler systems to recognize the simpler design issues and the economy of having plumbing contractors involved in the market. The states of Washington, Texas, South Carolina and Georgia among others are examples of states that have already created, or are considering creating, this separate category.

Insurance is a barrier that the market place will address. There are reports that plumbing contractors who contacted their brokers have been quoted extravagant premiums when adding fire sprinkler installation to their business coverage. Others report that some insurance carriers are beginning to extend coverage for fire sprinkler installation provided that a qualified third party is supplying an approved system design. The demand for this insurance will open the insurance market and the carriers will meet the demand as the market expands. In the meantime, in regions where residential fire sprinkler systems are common such as California and Nevada, the general contractors have rolled the fire sprinkler contractor’s protection under their umbrella when the contractor was not able to bind coverage.

Fire Sprinkler Labor Needs

Training is the remaining significant barrier. Programs are in development at this time that will be geared to take experienced plumbers and add the skill set for fire sprinkler installation. The manufacturers of sprinkler piping, sprinkler heads, valves, and multi-purpose systems also have training programs for fire sprinkler contractors that can easily be adapted to the plumber. In addition, apprenticeship programs can be updated to incorporate modules that specialize in residential fire sprinkler requirements.

The market demand is coming and those contractors who are prepared to take advantage of the opportunity will see a significant return on the investment needed. It costs virtually nothing to investigate. With a market that is estimated to be $3 billion annually, this once-in-a-lifetime opportunity is calling for your attention.

In Part 3 of this series, “Residential Fire Sprinklers: Plumbing Contractor Competitive Advantage #1”, Steven Scandaliato, SET, will discuss how the fire sprinkler industry has little experience in residential construction compared to the extensive experience and existing general contractor relationships that residential plumbing contractors have and how this creates a clear competitive advantage.

Residential Fire Sprinkler Requirements Coming Soon!

June 6th, 2009

Part 1 of a five part series focusing on the rapidly growing residential fire sprinkler market and why plumbing contractors are best positioned to capture this opportunity.

On September 21, 2008 the International Code Council (ICC) adopted amendment RB64-07/08 to the 2009 International Residential Code (IRC). This amendment mandates that beginning January 1, 2011 all new one and two family residential dwellings along with townhomes be equipped with fire sprinklers. Although the amended model code must ultimately be adopted at the state and local level, it is undisputable that the use of fire sprinklers for front line fire protection in residential structures will accelerate at a rate never before experienced. The timeline from now to the widespread adoption of the code is subject to debate, but given the fact that nationally over 400 local jurisdictions already have some level of single family sprinkler requirements in place, the momentum for mandatory residential fire sprinklers will certainly advance.

There is also no question that the passage of RB64-07/08 will accelerate the adoption of local residential requirements before 2011. The first comprehensive residential ordinance was adopted by the city of San Clemente, California 30 years ago. The growth of the single family residential fire sprinkler industry after that time was slow, but steady, with a noticeable increase in the last decade. Each ordinance was typically sponsored by local fire prevention officials and faced well financed opposition from the home builders lobby. However, with the most widely used model code in the world slated to require the installation of fire sprinklers in single family houses, the path for the adoption of a local residential ordinance now has the backing of the national code making community.

It is predicted by many in the industry that the number of communities specifying residential fire sprinklers in single family homes could double ahead of the IRC mandate in 2011. There is no doubt that strong opposition remains, but the passage of RB64-07/08 will make it difficult for jurisdictions to “amend” the requirement out of the code when it is adopted. The liability is high and public officials have little appetite for the potential risk that will come with the first fire death that occurs in an unsprinklered home that otherwise would have been protected as required in the IRC. As a result of these factors and the clear groundswell of support, the resolve of those opposed to residential fire sprinklers is weakening. Many home builders are now turning their attention to the task of how best to incorporate fire sprinklers into their marketing strategies and construction practices.

The impact on the fire protection industry will be profound. Using the number of housing starts and residential fire sprinklers sold for 2007, the current market size for sprinklered single family homes is placed between $90 and 100 million annually. The numbers are certainly noteworthy, but miniscule compared with the market potential. Based on HUD data, the 40 year average (through 2007) of single family houses built is 1.169 million units a year. The average size of a single family home constructed in 2007 was 2479 ft². When coupled with a conservative national installation cost of $1.00 per ft², the market value is a staggering $2.9 billion. When measured in terms of sprinklers, it is estimated that when the requirement is fully implemented, over 29 million fire sprinklers will be installed annually in single family homes.

Residential Fire Sprinkler Market

The impact on the existing market size is huge. Up until the last few decades, fire protection requirements have been centered on property protection in commercial buildings. With the introduction of fast response fire sprinklers in the 1980’s, requirements have been extended to multi-unit residential occupancies, with a particular focus towards multi-story buildings. As a result of the small market, single family residential fire sprinklers have typically been the domain of a few specialized contractors.

The coming mandate for residential fire sprinklers in single family homes will change the look of the industry. Once the 2009 IRC is implemented, residential fire sprinklers will account for nearly half the fire sprinkler market. There are simply not enough qualified contractors, design technicians, and installers to meet the coming demand. The opportunity for growing your business is enormous and those contractors who are prepared have that once in a lifetime chance to transform their business. The numbers of contractors specializing in residential fire sprinklers must expand. The market will demand it and it is clear that plumbing contractors are in the best position to absorb this growth. Don’t procrastinate on investigating this opportunity. It is too good to ignore.

In Part 2 of this series, “Plumbing Contractors Needed for Residential Fire Sprinkler Work”, Russ Leavitt will discuss how a labor shortage in the fire sprinkler industry creates a critical need for plumbing labor, including an overview of the common “barriers to entry” that plumbing contractors need to consider when preparing to provide residential fire sprinkler services.