Your company is weighing its options for plant construction. Should you build new or retrofit?
American Laundry News recently invited several engineering, construction and consulting firms with laundry services expertise to respond to some questions about this debate, and identify some of the factors in making the decision.
Is total project cost the single most important factor distinguishing new construction from retrofitting? What other significant factors come into play when comparing the two?
Elliot J. Mata, Laundry Division manager, ARCO/Murray National Construction Co., Oakbrook Terrace, Ill.
Up-front cost is by far one of the largest factors when distinguishing new construction from retrofit. However, cost is sometimes unfairly the most important factor that is considered.
The term “value in lieu of cost” may be more appropriate when trying to compare new construction to retrofit. You’re able to access the overall value of a particular design solution not only from an economical standpoint, but perhaps an operational, lifecycle, or even personal standpoint. For instance, the value you receive from designing and building your new plant with an ideal production flow that will increase efficiency, as opposed to compromising due to limitations in a building retrofit, may be tenfold the cost. One might say value is the single most important factor distinguishing new construction from retrofitting.
Some other factors to consider are schedule, availability of land/buildings, local market conditions, and local climate.
Schedule. Does time allow you to build a building from the ground up, or does time restrict you to a retrofit? An average-size laundry built for new construction might be 50,000 square feet and take eight months to complete from the time the first shovel is put in the ground until the time the laundry is operating. Conversely, a retrofit may take four months for a similarly sized project. This is a significant factor that a laundry operator may consider when thinking about how soon these improvements will be complete and start producing revenue.
Availability of land/buildings. Often, retrofitting an existing building is simply not an option due to the lack of buildings that could successfully be converted into a laundry. This is often the case in more rural markets. Conversely, in dense urban markets, land may be at a premium and may not permit the ability to pursue new construction.
Local market conditions. These conditions will determine the availability of land or existing buildings. In a down economy, you may find several buildings available below market cost. Similarly, when the demand is higher, the increased cost of buying or leasing a building could persuade you to build from the ground up to get the exact facility that you desire.
Local climate. A retrofit may seem much more feasible and cost-effective if you’re looking to build in a climate that has a short building season. The cost of winter conditions in a cold-weather climate can grow quickly. However, if the building shell construction can be completed during favorable months, then this may not be a concern. This factor is normally coupled with the issue of timing and schedule.
Glen Phillips, president and senior associate, Phillips & Associates, Minneapolis, Minn.
Not only is the cost of a project a contributor to the decision-making process, so too is the time element. Frequently, the time projected to plan, design and mobilize contractors and equipment suppliers is a miscalculated component of the planning process.
This is when unreasonable expectations start to foment and the project hits its first hurdle. There are seven distinct phases to a project, and each phase must be meticulously planned and executed for the project to stay on budget. Lack of planning and weekly meetings can and will cause serious disruption. It cannot be stressed strongly enough that weekly meetings with all owner’s representatives, contractors, architects and consultants be held and the timeline should be a major category in those discussions. If the planners did their jobs correctly, a program evaluation and review technique (PERT) chart showing the critical path items must be carefully tracked and reconciled.
Doug Rose, business development manager, Turn-Key Industrial Engineering Services, Charlottesville, Va.
No, but the project cost is usually the most obvious factor. The most important factor distinguishing which project you choose should be the expected ROI. Here are some important questions to consider:
Gerard O’Neill, president/CEO, American Laundry Systems, Haverhill, Mass.
Cost is a huge factor when making this decision. In the last 12 years, we have built or retrofitted 51 plants. The majority have been retrofits of existing buildings or operating facilities. We have estimated that going with existing buildings can save as much as 50%, depending on geographic location. In today’s economy, and with the downward shift in property values, I’d estimate that there is more than 50% to be saved by retrofitting.
Expandability should also be factored in when making these decisions. Can you expand the existing building? Is there enough acreage available to expand in 5-10 years and build a new building?
Matt Alexander, president, Pertl & Alexander, Jamesville, N.Y.
In today’s stressed capital market, total project cost can trump all other concerns. Some clients simply don’t have the cash available to select the alternative they most prefer. In most cases, however, if cash is available, the facility’s lifecycle cost is more important than the total project cost.
While it seems that most clients have different hurdle rates relative to the desired ROI, the analysis includes not only the total project cost, but also the long-term operating costs.
This cost analysis includes the productivity per labor hour, per square foot, and per utility unit (therms, kilowatts, gallons of water/sewer), and also the cost of real estate, taxes, labor and transportation. Ultimately, it’s a complex study of all these factors, plus the client’s view of their investment. A client with a five-year view may reach a different interpretation on the value of alternatives than one taking a 25-year view.
Is it easier to plan for new construction or a retrofit, or are the planning requirements equal?
Alexander: The snowflake principal applies to planning new construction or retrofit — every project can be unique. Generally speaking, retrofits are less involved than new construction, but existing conditions sometimes unknown until construction commences (behind walls, over ceilings, or underground) can create complications, delays and costs that are difficult to predict.
Rose: It can often be easier for business owners to plan for new construction since they are starting with a clean slate. You could begin operations in a new location while transitioning out of the old one. The limitations are fewer, usually dictated by how much you’re willing to spend on the project. Retrofitting could mean having to compromise on things due to the space available, access to critical areas, existing layout, or outside demands (such as the city not wanting you to build over or across the alleyway separating your two buildings). You are also constricted in moving equipment and renovating while continuing operations during a retrofit project.
From our perspective as licensed professional engineers, the approach to design is the same. We still begin the process by developing a production model that tells us what the operation should look like. Then we move through the design process to develop the facility layout that best serves the operational demands, financially and in terms of production flow. It may be a little easier to put things wherever you want (new construction), but it may be a little easier to start with an existing drawing (retrofit). It really comes down to what is in the best interest of the client business, what they want to achieve, and what they can afford.
Phillips: The planning processes for both types of projects are fairly similar; a new project design process takes longer to complete because there are more steps.
When it’s decided to embark on a new-construction process, the design team has to deal with a greater number of design and regulatory issues: new utility services, site planning considerations, regulatory objectives, environmental issues and the like.
If the project is a retrofit in an existing building, many of the regulatory requirements have already been met. But the project takes on a different complexion in that demolition issues come into play. If the building is an older property, asbestos remediation must be considered. It’s necessary to bring in an asbestos consultant to survey the property and plan the removal and remediation process. This requires an asbestos removal permit; furthermore, nothing can be done in the building until the asbestos is removed. Many times, older buildings don’t have adequate super-structure to carry the additional load of a monorail system, so planning for that comes into play.
The two processes are similar, but experience has shown that new construction takes more time.
O’Neill: New construction is more complicated and can be a minefield. Existing conditions and new environmental standards can be a huge pitfall, adding unanticipated project costs. Access to water rights is becoming a problem in many parts of the country. You’re set to build a new building, only to discover that you can’t get enough water for the proposed facility. Now what do you do? Existing buildings will have the water rights in place and will not be as environmentally circumspect.
Mata: From a planning perspective of the laundry facility layout itself, it’s almost always easier to design for new construction. You have a blank easel and can design your building around the most important aspects of your laundry. A retrofit often requires engineered solutions to unique constraints or variables within the existing building.
For instance, on a recent retrofit project completed for Handcraft in Richmond, Va., maximum production floor space was desired. As such, the dryers were elevated on a mezzanine and a shallow concrete pit cut beneath it to achieve the level of automation required and to maximize floor space. Building limits required this design that may not have been implemented in a new construction project.
Similarly, on a retrofit project for Brady Linen in Las Vegas, the process water equipment and wastewater collection were designed to be placed outside. This provided added square footage in the building required for current and future production space. The facility’s location and local climate allowed such a design and compromise.
Planning requirements for a retrofit and new construction can have their own unique challenges. A new construction project may have site constraints, flood plain issues, environmental issues, or perhaps easement requirements. On the other hand, a retrofit might have existing hazardous materials such as asbestos or antiquated building materials that require some unique design solutions. In either situation, it’s best to hire a design and construction professional to help.
Matt Alexander, Pertl & Alexander, can be reached at 888-419-3444, firstname.lastname@example.org.
Elliot J. Mata, ARCO/Murray National Construction Co., can be reached at 630-599-9100, email@example.com.
Gerard O’Neill, American Laundry Systems, can be reached at 978-373-1883, firstname.lastname@example.org.
Glen Phillips, Phillips & Associates, can be reached at 763-231-9950, email@example.com.
Doug Rose, Turn-Key Industrial Engineering Services, can be reached at 434-227-2613, firstname.lastname@example.org.