The Game of Life Safety Procurement During a recent search on the internet I discovered countless blogs broadcasting hate mail about fire alarm systems. Some singled out their smoke alarms; others lamented some dreadful experiences with fire alarm systems specifically nuisance alarms and the disruptions caused in result. The major impression extolled by these people is that they find no use for the fire alarm, except to empty out buildings in the middle of winter. Some university dorm students remarked about the girls in their bunny slippers and men draped in towels fresh out of the shower. Still others complained about the fire alarm annual testing and the notion that building management advised everyone to stay calm (like they would in a real fire) despite the loud and jarring noise After reading these various fire alarm hatred posts, I visited the CFAA website and noted that the CFAA mission is: And it dawned on me that we have quite a few barriers to overcome, one of which just may be related to how the average fire alarm system is purchased. I call it The Game of Life-Safety Procurement. In Canada, the National Building Code and/or various Provincial Building Codes provide some direction as to the requirements for fire alarm systems. In turn, they reference ULC standards which provide more details regarding proper fire alarm installation and the devices used within a fire alarm system. There are ULC standards covering just about every type of fire alarm device, individually. Having such a detailed array of documents is wonderful; we are lucky to have such a robust Codes and Standards system but let s be realistic; these documents prescribe the minimum standard. There are a handful of different makes and many different models of fire alarm systems available in Canada as all of them are Listed to CAN/ULC-S527 Control Units for Fire Alarm Systems and each one of them is quite capable of providing fire detection and alarm to CFAA Ontario chapter Annual Technical Seminar 2015 Page 1 of 7
protect a building. If it couldn t, it likely wouldn t have a ULC Listing! But, although each one provides the capabilities to pass the S527 tests, none of them are very compatible with one another. Each one offers propriety technology as it was developed by a different company and in a different R&D lab. And, each system offers different features which may offer considerable value to different types of customers, depending on their needs. So how does the typical fire alarm system installation or replacement happen? As stated by Traci Velez in her article entitled: What Are the Code Requirements for a Fire Alarm System In My Building?; the reason is likely due to an event triggered by a fire or an inspection: Imagine a building manager asking the building owner to upgrade the fire alarm system; Once the building owner agrees and the budget is approved, the most common next step is to engage an engineer to assist with the process. Once the engineer is involved, there is much work undertaken to ensure the new system fits the building. Tasks such as confirming the latest codes and standards requirements; creating drawings; publishing a specification; even the task of pre-qualifying vendors is often left to the consulting engineer to complete. Once those are finished, the typical process involves an invitation for electrical contractors to bid their price to provide the new system. In this type of purchasing arrangement, building owners are most often likely to accept the lowest bid price to get the best deal. In result, electrical contractors often exercise their influence to play one system supplier against the other to reduce their costs as much as possible in hopes of being awarded the job. In some situations, this scenario intensifies the competition to such a degree that the system suppliers are forced to offer their equipment as a loss leader just to secure a sale. CFAA Ontario chapter Annual Technical Seminar 2015 Page 2 of 7
Once all the chips are down, one electrical contractor (more times than not it will be the one offering the lowest price) will be awarded the contract, and then..the RACE BEGINS. Consider that in today s intensely competitive business environment, no company can survive by selling its products at a price lower than their actual cost. So, if that does happen as part of the doing business scenario, those companies may be forced to take other steps to drive a cost recovery strategy. They could reduce the number of hours previously allotted to a project manager to reduce costs. They could switch the technician previously assigned to the installation to an alternate technician who may offer a lower hourly cost and thus, improve the burden rate. They could de-content an equipment list by replacing higher priced equipment in favour of less expensive products that could perform a similar function. And they could defer resolving issues where other trades are involved. They could be reluctant to provide software specific access codes which unlock system testing conveniences. Warranties may be voided if a service contract is not signed. System change orders may be very costly. System improvement upgrades may be very costly. These are many ways to impact a cost recovery strategy all of which seem to resemble a race to the bottom phenomenon. Unfortunately, cost recovery strategies often result in a negative experience for the building owner. It is no surprise that building owners give a sigh of relief when the system installation is complete and occupancy is granted. But, unfortunately for the building owner, the race to the bottom is not quite over. Once the system is turned over to the building owner or operator, they assume responsibility for system maintenance and testing. Around this time a shocking truth may be revealed: the system they paid for may have features which are good for installing contractors but the system likely has very few features to benefit a building owner. Rather, the system installed meets the minimum codes and standards and nothing more. The real tough reality is that the building owner has exhausted all capital expense funds and must live with this system for the next 20 years. CFAA Ontario chapter Annual Technical Seminar 2015 Page 3 of 7
To avoid the conundrum of having an installing contractor select the system to be installed, some bid/tender processes work differently than previously discussed. As described by Traci Velez in the article Why Do Fire Alarm Bids Vary So Much?, she sates: one contractor may provide a system that satisfies the minimum requirements and intent of code while another may provide features that are well beyond minimum requirements to meet the needs of the owner. For many electrical contractors, this owner-benefit side of the decision is never considered. Thus, for some owners, an alternate tendering process may be a better option. Similar to the first scenario, the end-user hires a consulting engineer to survey the site, create drawings, issue a spec, and wait for bids to arrive. However, in this situation, the bids arrive directly from the system suppliers, rather than via the middle-man electrical contractor. This strategy, often using a double-envelope tender, allows a system supplier to document features and functions to address specification items in one envelope, while another envelope contains the system cost. The double-envelope system avoids the merry-go-round pricing exercise where systems prices are driven to less-than-cost, and it also allows the end-user to evaluate the merits of each system based on their needs, instead of the needs of an electrical contractor, who is usually concerned with minimum code compliance. Period. On the end-user evaluation list, you may find other items such as Service rates, Parts pricing, estimated life-cycle of product, maintenance features, testing features, etc; all factors that may impact the cost-of-ownership of the system, rather than just the initial purchase price. To address system installation, a second phase of the bid process is published which requests a price to install a previously-selected system. This allows the electrical contractors the ability to accurately estimate the time to install a given system for which all technical documentation and wiring requirements are known. This 2 nd phase provides a competitive market for the labour portion of the installation (as well as wiring and material costs). In result, the building owner is able to select their preferred system based on the features available to meet their own specific needs. The selection of the contractor is completely independent from the selection of the system and for the most part, the race to the bottom is eliminated. CFAA Ontario chapter Annual Technical Seminar 2015 Page 4 of 7
Although these 2 previous procurement models are widely used, another method is also available. Rather than a bid process, this third method involves a discovery period along with a negotiation process. For an end user, this method can provide the most beneficial outcome. Consider that technology evolves every day. Consider that many fire alarm systems have become so complicated (and feature rich) that only the experts from the suppliers are truly able to understand the benefits available particular to their system. For this reason, consultation with the system manufacturer often pays dividends. In this scenario, the role of the consultant is vital to the success of the project. Rather than just conducting a site survey, creating drawings, issuing a specification, etc. the consultant needs to determine which new technology or new features may benefit the end user. The discovery must go far beyond codes and standards requirements. Once a needs analysis has been completed, the consultant can arrange technology information sessions with system manufacturers to determine how a particular system can address any technology gaps and hopefully fix customer complaints. Each system provider can be offered an opportunity to explain their technology and hopefully an appropriate system is available to solve the existing pain points voiced by the end-user. Considering the multiple layers of a given end-user, the involvement with each department likely becomes much more intimate than it did in scenario 1 or 2. The goal of the system supplier is to ensure all entities are engaged and in the end, are happy with the solution. This type of supplier-consultantend-user relationship often becomes more of a time-limited partnership rather than a parts-and-smarts drop-ship transaction. In the end, if all goes as planned, the building owner receives a system that is specifically catered to their needs, likely surpassing codes and standards requirements. Although the initial purchase price may not be less-thancost, they will likely receive a system that provides ease of ownership and lower cost longevity. In summary, we have explored 3 different procurement strategies. The first involves issuing a tender for electrical contractors to respond to. The system selection is often based on CFAA Ontario chapter Annual Technical Seminar 2015 Page 5 of 7
minimum code compliance and lowest price. The electrical contractor is the designated decision maker as to which system to use. The second scenario involves a two tender process. The goal of the first phase is to choose the system best suited to the end user based on a comparison of features vs. price. The double envelope system is often used to separate the two aspects of each submittal. The second phase seeks bids from electrical contractors to install the particular system that has already been selected. Each bidding contractor has full access to system installation details in order to be competitive. The result of this type of tender is that the building owner chooses the preferred system and the preferred installation contractor. The third scenario allows a building owner to take full advantage of the expertise available from each system supplier. Rather than publish a multi-bid tender, the owner and engineer would invite suppliers to take part in a discovery session to determine what new technology and or features are presently available with a given system. At the same time, the system supplier has an opportunity to discover any issues which are negatively impacting the building owner, which may be alleviated with more modern fire alarm technology. At a later date, the suppliers are invited to communicate their solutions to address the problems previously identified. The owner is left to decide which system serves their needs the best. Once the system supplier is selected, the owner, engineer, and supplier form a time limited partnership to work together toward the completion of the system installation. The price is negotiated and the system features are catered directly to match the client needs. Although the price negotiations do not normally involve less than cost totals, the building owner and CFAA Ontario chapter Annual Technical Seminar 2015 Page 6 of 7
tenants often receive a system that exceeds the minimum code requirements and due to added features, may provide a lower cost of ownership over the long term. Let s face it: The building codes and related standards continue to evolve to improve the level of fire safety in this country yet complying with them only guarantees a minimum standard. In addition, the fire alarm systems of today are much more feature rich than ever before; understanding these features to take advantage of those most appropriate to a given building is a smart option. So before you take the next step, choose the procurement model that best fits your needs! CFAA Ontario chapter Annual Technical Seminar 2015 Page 7 of 7