Building expansion LEEDs to new biz opportunities

Construction contractor adds pipe fabrication with energy efficiency

By Tim Heston

June 30, 2010

Miller Bonded’s new pipe fabrication plant will have ample bicycle parking--no big deal, really. The 16,000-square-foot facility, to be operational by the first of next year, also will have parking spaces dedicated to hybrid vehicles. But that by itself is, again, no big deal. Neither are the solar panels, the evaporative cooling system, or the machines that filter and recirculate air from welding fumes.

It’s really about the combined savings they generate and the new business these green initiatives spawned. A mechanical contractor in Albuquerque, N.M., Miller Bonded has suffered through the commercial real estate mess. But unlike many, the company has found new opportunity amid crisis. Managers hope the new building will meet the gold level of the U.S. Green Building Council’s Leadership in Energy and Environmental Design (LEED) Green Building Rating System(tm). Miller’s managers have learned a lot from tackling a LEED project, so much so that the company now is selling services that help owners run their buildings as efficiently as possible. Managers hope all this has positioned the company well for the eventual upturn.

A Good Match

Miller Bonded Inc. started over a beer between longtime friends.

Keith Wilson, CEO, and Ken Otteni, president, have known each other for decades. A 39-year industry veteran, Wilson began at Miller Metal Co., a sheet metal company that his father-in-law founded in 1955. Otteni’s family owned Bonded Plumbing and Heating Inc., which was founded in 1932.

As Wilson recalled, “By 1994 we had grown to be friends. Ken was a mechanical contractor, and I was the sheet metal subcontractor. We sat down over a beer one night and asked, ‘What would happen if we put our two companies together and became a total mechanical contractor providing all the related services: heating and air conditioning, duct fabrication, plumbing and piping, and pipe fabrication?’”

As they both investigated the idea, they realized that, logistically at least, the combination wouldn’t take much effort, thanks to some startling coincidences. The two companies not only used the same accounting firm, but the same accountant. They not only used the same bank, but the same branch. They used the same accounting software, the same telephone system--the list went on. Clearly, it seemed a match that was meant to be.

The merger wasn’t so simple from a cultural standpoint, considering that essentially a subcontractor was merging with a customer. Bonded Plumbing’s workers had always just told Miller what they needed and when. A merged company would need more collaboration between the two sides of the business for maximum efficiency. It took a few years for the cultural issues to be ironed out, but once they were, the merged company, Miller Bonded Inc. (MBI), was ready to compete--just in time for a building boom the likes of which Albuquerque had never experienced.

Boom to Bust

In 2002 the combined company employed about 110 and brought in $20 million in revenue a year. By 2008 MBI employed 300 and brought in almost $70 million. Then came the plunge. In 2009 revenues dropped back to $45 million, and the company downsized to 175 employees. Managers expect the company to bring in only $40 million this year.

Although it hasn’t been a fun ride lately, it did allow the company to cut fat, which, as Wilson put it, “grows easily when times are good.” MBI had no choice but to downsize to some extent, but it also streamlined many of its processes. BIM, or building information modeling, also helped. The concept allows MBI to work off a comprehensive 3-D model to predict as many things as possible before construction. The more trades involved in BIM--be it electrical contractors, fire protection, mechanical contractors, HVAC, or anything else--the more efficient a project can become.

MBI also approaches fabrication differently. Borrowing from the kitted manufacturing concept, it now fabricates and assembles more components on the shop floor, then ships a large bundled kit for quick on-site assembly. The thinking is that, unlike the job site, the shop floor environment can be controlled.

Managers had purchased property adjacent to their existing facility in 2007, before the downturn, and had planned to build. But after business worsened, they halted the project and waited for the opportune time to start again.

Late last year they finally went ahead with the project, and by this March they had broken ground. Wilson said that they plan to have the building operational by the first of the year, mainly to get ahead of the curve. They expect the construction sector to climb out of its slump by 2012, and opening the pipe fabrication facility in early 2011 will give MBI a year to ramp up production.

Building now is a bit like buying after a stock market crash. Bargains are out there. Company officials said they’ve chosen good contractors to ensure good quality. At the same time, for anyone looking for good prices, now is a good time to build. Besides, Wilson said, it won’t be catastrophic if the building doesn’t operate at full capacity for some period. The building, after all, will be extremely energy-efficient.

The LEED Road

As Wilson recalled, managers didn’t initially set out to design a LEED building. “It started by accident with the things we were already doing--and by asking, ‘What if?’”

Why reach for gold-level LEED? As Wilson explained, the company was already in LEED silver range, and with a few extras they could take the building well into gold territory. They already had planned the building to be made of metal, which is recyclable. They also decided to be good neighbors and invest in a welding fume recirculation system (instead of spewing weld fume exhaust into the next-door property). And they knew that with a bridge crane spanning the building’s 80-foot width, they couldn’t suspend equipment or ductwork from the ceiling, so radiant heating and evaporative cooling made the most sense. Because the building was more than halfway there, it just seemed logical to strive for the gold-level certification.

The designs ultimately called for several innovative systems. First is a radiant heating system that will connect to about 30 solar panels on the building’s south side. The panels will mount vertically, an angle that protects them from the summer sun, when the building doesn’t need daytime heating, and puts them in a perfect position to capture the winter sun.

For cloudy days, the building will have a backup mechanical boiler system to heat the water to about 140 degrees F before it flows into plastic tubing inside the building’s 6-in.-thick concrete slab (so thick not only for radiant heating, but also to anchor the heavy machinery sitting on it). Solar power, however, has an added benefit when applied to a hydronic system like radiant heating. According to Wilson, the water need not be heated dramatically to attain the same degree of radiant heat. “I’m told the water will be much less than 100 degrees F” when using a solar energy source, Wilson said.

The system concentrates heat where it’s needed most, up to about 8 ft. off the floor, above which the heat dissipates until it gathers at the hot apex of the ceiling--where no one works anyway. No energy is wasted with mechanical blowers furiously blowing hot air down, only to have a good portion of that air immediately rise to the ceiling.

Evaporative cooling also works in concert with the natural flow of air. It wouldn’t be practical outside a dry environment like New Mexico’s, but it certainly will suit MBI’s new plant. Central to the system is a 12-in.-thick honeycomb pad. Water will be pumped from the base of the unit and distributed across the pads. A blower will push outside air across those pads and out the other end at a temperature between 60 and 70 degrees F. The air will be allowed to flow across the entire building and flow out open garage doors on the other side. The result: A continuous flow of fresh, cooled air.

The LEED recognition is a nice benefit. So are the government tax incentives, and the fact that the permitting and plan review process has become a lot easier. “You go to the front of the line,” Wilson said. “We had our plan review take place within two weeks, versus the normal four or five weeks.”

Numbers tell the story. According to Wilson, the changes to the $1.7 million project cost roughly $100,000 more, but savings from tax credits and reduced fees added up to $150,000. Talk about some simple math.

Over the long term the building will have lower maintenance and operational costs. But the project also indirectly spurred an idea that may be even more lucrative to the company: becoming an energy-efficiency consulting and service provider.

Spreading the Knowledge

One day last year Bill Chandler, the company’s general manager for the service and special projects department and current LEED AP, or accredited professional, had a brainstorming session with Otteni and Wilson. MBI had a problem. Not only was the local building market drying up, but companies with existing buildings were cost-cutting with gusto to reduce liabilities--and this included the company’s planned maintenance agreements, or PMAs.

What could fill the gap? Well, how about entering energy-efficiency measurement and consulting?

Company managers saw an opportunity after examining trends in Albuquerque real estate. Investors are extremely leveraged, and some are desperately looking for cash to meet debt obligations. In a last-ditch effort, some sell their buildings at incredible bargains to those who have the cash to pay in full. Chandler cited one recent office building that sold to a wealthy individual who paid cash for a third of the building’s already depressed market value.

“As people buy these buildings, we market ourselves to them, showing them how we can save them energy,” Chandler explained. “We can improve their bottom line even more. And they have the cash to put back into the building, because they bought the properties for such a deep discount.”

Today MBI offers three levels of Energy Services. The first involves benchmarking, which entails a single-page report showing utility bills and potential dollar savings if the owner would improve the building to an Energy Star rating. The next level includes a building energy assessment that entails MBI installing data loggers to measure the energy use for the HVAC system and lighting, taking into account humidity, ventilation, and temperature effects. The resulting report shows ways a company can save energy dollars through low-cost, or even no-cost, basic maintenance and operations improvements. The investment, according to Chandler, usually results in a payback of less than a year.

The third and most comprehensive level of service is a full energy audit. “This is where we do a full-blown review of all the company’s equipment, check for upgrade possibilities, and show the customer individual pricing for each improvement, rebates that utilities and state and federal governments are offering, and their return on investment,” Chandler said.

The upgrades can be provided by MBI or various companies it partners with, such as general contractors and temperature-control contracting firms. Upgrades can result in the building attaining an Energy Star rating and, if taken far enough, even a LEED certification.

Building a Showpiece

MBI plans to show its new facility to customers as well as local educational organizations. It will fill the “green showpiece” role perfectly, Wilson said, because the factory won’t have drywall or ceilings, so everything will be exposed and visible for demonstration.

Not only does the move help other companies become kinder to the environment, it diversifies MBI’s revenue stream and helps the organization build a name for itself in the growing green arena. By 2012, when managers hope the commercial real estate sector will finally recover, the company may well be in an enviable position.