64 CONTRACTING BUSINESS | SEPTEMBER 2005 www.contractingbusiness.com

Design/Build

DIRECT DIGITAL CONTROLS are the heartof the complicated HVAC system. If the controlsdont work, nothing works.

Because of the great value associated with con-trols and perhaps, due to a re-cent bad experience you maythink its time to establish a con-trols division in your company.What better way to ensure ultimate control overthis all-important facet of an HVAC project?

But before you leap, take a good look, and be sureyou know whats required, and what can go wrong.

The Risks of Subbing Out Controls1. Poor quality control reflects on you. Con-

trols have become exponentially more compli-cated in a short period of time, and a contractormust understand the functional implications ofwanting to have a hand in their installation.

Todays controlshave given us allkinds of convenience,and enable us to saveenergy, and very lim-ited human interac-tion is required. Youjust set the computerto gather the data andimplement the appro-priate measures.

But this conven-ience can be hard tocome by. As a princi-pal at Taylor Engi-neering, a consultingengineering firm, I of-ten oversee projects. Ican say without hesi-tation that there are a

disproportionate percentage of difficulties associ-ated with controls projects than with any otherarea of HVAC construction.

Every HVAC element now relies on the per-formance of the controls. If aproblem is found during thecommissioning stage, its usu-ally related to controls, as op-

posed to the sheet metal, piping or heating/cool-ing equipment.

You may have just completed the perfect proj-ect, from the sheet metal, right on down to thecompressor and piping. Theres no leakage, noother problems, and the installation looks great.But if the controls dont work, the customers nothappy. And typically, the mechanical contractorisnt sophisticated enough to step in and take overthe controls. Nor is it very easy to bring someoneelse in to perform a diagnostic.

2. Supplier attrition leaves you stranded.There are a lot of people getting into the controlsindustry who soon get out of it; or, a competitorbuys them out.

As an HVAC contractor, you must often winprojects based on fixed-price bids. Which means,that if your subcontractor fails midway through a$100,000 subcontract, you can be left high anddry, with a tremendous risk and responsibility.Youve already paid the first controls contractor$80,000 for the controls hardware and installa-tion, and now you have to find another contractorto complete the remaining $20,000 of program-ming and commissioning work.

I can almost promise you that its going to costyou a lot more than $20,000 to bring somebody into finish the job. There is also the distant, but real,possibility that you would have to use a differentmanufacturers product for the second half of theproject. Some of these products are geographically

BY GLENN FRIEDMAN, P.E.

Taking Controls In-houseTired of your controls subcontractors performance tainting yourreputation? Considering taking controls in-house? Beware the pros andcons related to quality control, training, dealer agreements, and staffing.

LEARNING PATH

For more information on this topic,go to: www.ctrlspecbuilder.com.

66 CONTRACTING BUSINESS | SEPTEMBER 2005 www.contractingbusiness.com

Design/Build

exclusive. If so, theres only one contractor in anarea licensed to perform the work, and the con-trols subcontractor may not be able to bring some-body on board in that exclusive territory with theskills on some other manufacturers controls tomeet your project commitments. It would likelybe very hard to find an alternative controls con-tractor who would be willing to provide controlsfor 20% of a job, and carry 100% of the warranty.

Therefore, you might be forced to remove theoriginal equipment, and start over with anothermanufacturers controls.

The Risks of Taking Controls In-house1. Cost control takes time. I would not say to

an HVAC contractor who is considering enteringthe controls world, You can do it cheaper than asubcontractor, particularly in the formative yearsof the venture. There is a long learning curve as-sociated with controls, the business is overly com-petitive, and it requires significant investments intime and money.

2. Considerable learning curve. Compre-hensive controls training includes education inAutoCAD design. Virtually 95% of what happensin direct digital controls is done with the aide ofcomputer drafting software.

Your controls people have to be well groundedin HVAC, so they can put together a points list:Are we controlling temperature or pressure? Dowe want to move a damper, start a compressor, oropen a valve?

You need people who understand controls,and understand or are able to learn compu-ter language.

Your would-be controls experts need to knowprefunctional testing, calibration and installation.

The bottom line educational requirement issimilar in volume to the training required to learnheating and air conditioning systems, but youmust decide which people on your staff will beyour controls experts. Even with your best peopleat the helm, it will be two to five years before yourcontrols business begins to show a profit.

3. Delegation can harm a service division.Generally, the people in your company who willhave the most aptitude and interest in controls arecurrently helping you run a profitable service busi-ness. The question then becomes: Is it better toleave those people in service, or bring them overto your controls department? Or, should you hire

new people, with the added payroll costs on top ofthe training?

4. Dealer agreements have tough quotas.Theres a lot of risk and difficulty in choosing asupplier. For example, suppose you commit your-self to an ambitious controls company, and theirbiggest competitor buys them and stops support-ing you?

Your choices of suppliers might also be limitedright from the get-go. Most of the big players aretaken, and are exclusive to another contractor. Soif theres already a dealer in your marketplace,theres a chance they wont split up the territoryfor little ol you.

If you do manage to land a dealer agreement,you will be expected to meet a quota, and prove tothe manufacturer that you have market advantage,a supportive client base, and a skilled work force.

If you choose the wrong dealer: you might not be able to meet your dealers pro-ductivity demands; they might become impatient with your com-panys learning curve; something could happen thats beyond yourcontrol, such as taking on too many other localdealers, or selectively cutting dealers to make theterritory more exclusive.

A workable solution might be to keep the con-trols business under the wing of another companyas a joint venture until you build it up to a pointthat you can spin it off, versus investing in anotherbilling group and infrastructure.

The only other viable way to hit the ground run-ning in controls is to buy another company. Ifyoure a large mechanical contractor, and doing$10 million of sales per year, you might be able tobuy a smaller control contracting company. Thatapproach gives you the people, the knowledge,and the dealer agreement, all in one. What it does-nt give you is control over that companys cul-ture, or an easy integration into your company,which can be difficult and unpredictable.

Remember, I said to look before you leap!

Glenn Friedman is a principal with

Taylor Engineering, Alameda CA. He

grew up in the family HVAC contracting

business, and earned a BS degree in engi-

neering from the University of California,

Berkeley. He is a past chairman of the Air

Conditioning Contractors of America (ACCA) and cur-

rently serves on the board of directors for the California

State ACCA Chapter. Glenn can be reached at gfried-

man@taylor-engineering.com.

The educationrequired to learn

controls issimilar in volume

to the trainingrequired to learn

HVAC systems. A contractormust decide

which people onthe team will be

trained to be thecontrols experts.

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