Commercial Realities For Lighting Designers

1
Commercial Realities For Lighting Designers

• Joseph M.Good III, LC
• IESNA IALD
• IESNA ANNUAL CONFERENCE 2001, OTTAWA

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What Makes A Successful Project?

• Loads of Expensive Luminaires?
• Generous Design Fees?
• Profit for Everyone?
• Meet Owners Objectives?

3
Why Use A Lighting Designer?

• Are Reps, Architects And Contractors Not
  Qualified?
  
• By Most Accounts, More Lighting Designed by
  Contractors than any other group

4
Lighting Designer Oath

• Lighting Designers Combine Their In-Depth
  Knowledge Of Lighting With The Time And Talent To
  Deliver Suitable Lighting Solutions ?

5
Players

• Owners
• Developers

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Players

• Specifiers
• Architects
• Engineers
• Lighting Consultants

7
Players

• Contractors
• Electrical Contractors
• General Contractors

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Players

• Manufacturers
• Factory sales force management
• Independent reps
• Factory direct sales force

9
Players

• Material Wholesalers (Distributors)

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Owners Interests

• Initial or First Cost
• Cost of Operation, Maintenance
• Meeting Programmed Performance, or Tenant Criteria

11
Specifiers Interests

• Architects Overall Building Function, Design
  Realization, Meet Budget
  
• Engineers Code Compliance, Design Integrity
• Lighting Consultants Requirements of Occupants,
  Design Realization, Energy Objectives

12
Contractors Interests

• Deliver Building for Bid Amount.
• Comply With Requirements of Documents in Most
  Economical Manner.
  
• Manage Project To Contract Schedule.

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Manufacturers Interests

• Approved to Provide Products
• Be Low Bid
• Positioned to Get Order
• Without Mistakes

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Distributors Interests

• Support contractors material needs
• Lighting fixtures, lamps, poles,
• Pipe, wire, switchgear, circuit breaker panels,
  and all misc. material.
  
• Manage paperwork for order
• Submittals, releases, returns, etc.
• Often finances material purchases

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How Paid?

• Owner Budget/ Bankers/ Tenants
• Design Team Owner via fees.
• Contractors Owner via bid.
• Distributor Margin on goods contractor
• Manufacturers Contractor via distributor.
• Sales Reps Commission from manufacturers.

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Normal Relationships

• Specifer led projects
• Spec-Bid-Build
• Budget is cost guideline
• Cost estimates at every stage.
• Costs are an estimate until project is bid.
• Guard against Program Creep, contain
  expectations to avoid budget busters
  
• Full, fierce competition at bid time.

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Normal Relationships

• Specifer Led Projects Problems
• Owner in difficult position of saying NO to
  their staff, to contain program creep
  
• Often Budget is insufficient, resulting in
  over-budget situation
  
• Contractor Loading at bid time is a serious
  consideration.
  
• Often apparent low bidder is asked for (de)value
  engineering ideas.

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Normal Relationships

• Contractor Led Projects
• Owner may have assurance of firm fixed
  Guaranteed Maximum Price.
  
• Budget can be determined at project onset
• Contractor works with owner to define / change
  project program.
  
• Contractor works with owner and influences
  selection of design team.
  
• Sub contractors may or may not be bid.

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Normal Relationships

• Contractor Led Projects Problems
• Slightly Higher cost per square foot.
• Pay for project management functions.
• Contractor has to guard against scope creep
• Contractor has budget responsibility.
• Fewer checks and balances on contractor responses
  to cost problems.
  
• GC Often relies on friends w/o bidding.
• Extras is another word for Change Orders

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Commercial Pitfalls for Lighting Designer

• Over design
• Lack of necessary design time
• Over budget
• Lack of competition
• Misunderstanding with Client on expectations

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Commercial Pitfalls

• OVERDESIGN, LACK OF TIME
• Clearly understand scope, programmed needs and
  budget.
  
• Overview of response targets, goals budget
• OVER BUDGET
• MIS-COMMUNICATION regarding required funding
• Scope creep
• Troubles at bid

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Commercial Pitfalls

• Designer mistakes
• Ignoring budget, feeling excess will be funded
• Expensive fixtures
• One-name specifications, without bid management
• Creating the opportunity for one-sided packaging
  by Lighting Rep.
  
• Not employing unit price bid form
• Not holding specifications

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Bid Management Measures

• Bid Allowance Prices
• In last Addendum, noted in base docs
• Circulate fixture schedule in advance
• Minimize last minute requests for approval
• Analyze potential bidders and their lines
• More difficult in distant markets
• Require unit prices with manufacturer list
• Summarize channels of distribution
• Reduces shopping by low contractor
• Arms architect with valid VE data

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Other Bid Management Measures

• Arrange pre-purchase of lighting by owner
• Arrange markup from lighting distributors, bid if
  necessary
  
• Specifiers shouldnt be tempted to act as
  lighting distributors, alienates distributors and
  frequently leads to financial ruin
  
• DO YOU HAVE THE TIME FOR THIS?

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Unexpected Issues

• Real overage is rare
• Increased sophistication and competition
• Basic awareness is often enough to limit
• Contractors shop prices to create profit
• Lighting reps and distributors are victim
• Lighting reps have to respond
• Often fund this by playing factories off each
  other.

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Unexpected Packaging Issues

• Factories with generous overage split policies
  get book priced order, funded by reps
  factories with less favorable overage policies
  
• One reason that conglomerates are acquiring
  specialty lines, control products, indirect
  lighting, decorative, etc.

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Lighting Reps are Squeezed

• Services are expanding to meet expectations
• Taking on more and more lines,and have to serve
  them, keep them happy
  
• Cant exist on real commissions, commission paid
  on book business looks good, but a 11 cut on
  strategic pricing hits reps disproportionately
  harder.

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Solutions

• Specifiers Do the job you are being paid to do
• Stay in budget
• Understand what you specify
• Do own design and computer modeling
• Bid projects fairly
• Hold specifications against unapproved
  substitutions and shopping

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Solutions

• Factories
• Pay reasonable commissions- even the white
  goods on a complex project requires more sales
  effort than if it were design build, or
  distributor sale.
• Resist direct selling
• Be very cautious with strategic pricing
• Higher prices fund higher commissions

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Solutions

• Lighting Reps
• Dont do Specifiers job
• Train them how to specify a product, Dont be a
  party to their laziness
  
• Resist direct sales. Develop a relationship with
  a distributor that will not encourage shopping
  
• Resist Value Engineering, particularly on
  projects you are aware of
  
• Cant turn back on gift horses, but
• Dont take on excess lines, (who are you fooling
  with 6 exit sign lines?)

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Solutions

• Contractors should understand what is bid
• Look at drawings early. Cant accurately bid a
  job with 2 days to pull it together.
  
• Leads to dependency on Packages
• Dont shop the job.

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Solutions

• Educate owners about need for reasonable design
  and bid time.
  
• Educate owners about desirability of using a
  prequalified contractor list.
  
• Recognize expertise in a field
• Low bid because of knowledge about job, not what
  did he forget?
  
• Educate Owner about the realities of change
  orders and value engineering.

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The Future

• Factories assume packaging control
• Is this in conflict with Clayton Act ?
• Or is it another example of team building to
  develop common expertise?
  
• This makes one stop shopping easier for
  contractors, but more complex for Specifiers
  
• In fact this could lead to more competition
  between Reps and Specifiers, watch out!

34
The Future

• Lighting is becoming less important to many
  electrical contractors, they like the revenue
  opportunities of voice and data.
  
• Lighting knowledge is falling off
• Is this an opportunity for lighting designers?

35
The Future

• We know lighting technology and choices are more
  complex than ever.
  
• Energy codes, building codes, and lighting
  ordnances are growing
  
• Most contractors and architects cant or dont
  keep up.
  
• Is this creating an opportunity for lighting
  designers?
  
• State licensing?
• NCQLP