Consultants Discuss Biggest 2005 News

December 26, 2005
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It should come as no surprise that the issue of 13 SEER, the new energy efficiency standard taking effect in late January 2006, is the biggest thing on the minds of contractors these days. It's hard to pick up any HVAC trade magazine and not see an article about 13 SEER. But there must be other things that contractors have seen as big news in 2005, right?

That's what The NEWS' Contractor Consultants were asked recently. Although most agreed that 13 SEER is the big topic, other concerns facing the trade made their way to the surface, too. According to a recent survey of contractors by The NEWS, other topics include rising insurance costs, controlling overhead, and increased competition. The Contractor Consultants also discussed those subjects.

13 SEER Is The Big News

Vince DiFilippo left no doubt that he believes 13 SEER was the big topic in 2005 and will continue to be the big topic in 2006. He said that 13 SEER seemed to hit contractors in early spring even though the media was talking about it for two years.

"It is making contractors really think about how they are going to market now," DiFilippo added.

"It's not about efficiency anymore or really price, and that is making some contractors nervous. The good contractors will survive and prosper, as they always have, in the new 13 SEER environment.

"Manufacturers are also nervous because they realize some so-called HVAC contractors will not hesitate to install a 13 SEER unit on a 12-year-old evaporator coil" which may result in higher warranty claims and customer complaints.

DiFilippo is just as strong in his belief that the topic will remain the single most important issue facing HVAC contractors in 2006. "My concern is that some of the low-priced manufacturers do not have the capital, proper infrastructure, or a good R&D department to truly design a 13 SEER air conditioning unit and evaporator coil that will deliver a true 13 SEER. I have seen some 13 SEER evaporator coils with such close fin spacing that they drive the static pressure higher than the air handler can deliver!"

"The 13 SEER age will require more knowledgeable technicians because of the importance of the refrigeration circuit and airflow diagnostics."

Aaron York has the same line of thinking. The concern is not just in selling the end-user on the features and benefits of a 13 SEER system, it is also about how to properly install the new equipment to maximize efficiency and give the customer true 13 SEER.

"There seems to be massive confusion about application and performance and no one that I have seen is addressing this issue," added York. "Most people with whom I have discussed this issue do not understand the performance of thermostatic expansion valves in relation to capacity and pressure drop across the metering device. A three-ton coil is a three-ton coil regardless of what outdoor unit it is paired with. But the proper matching of a metering device is another issue."

Although Arthur Pickett sees the rebuilding efforts from devastating hurricanes as the biggest news in 2005, he acknowledged that 13 SEER is going to be the big news in 2006. "2006 will be about energy efficiency and how the contractors go to market with the 13 SEER," he added. "I think this will carry over to heating equipment, too. Massachusetts is trying to pass a law that basically states ‘no more 80 percent gas heating equipment.'"

There are many different spin-offs of the 13 SEER story and Scott Getzschman takes one of them. "The biggest challenge in 2006 is how everyone adapts to the changes of the new equipment and how that affects pricing," he said. "For the industry it should be a good thing because it is a great time to take a hard look at your company's numbers and what you charge, and to be able to adjust accordingly to fit the new equipment pricing structure.

"It is a great time to raise your prices and bring more dollars to the bottom line."

Besides the pricing issue, Larry Taylor sees a growing dissatisfaction from consumers who will be the recipients of some poor installations. "2006 will see the fallout and adjustments that will come from the 13 SEER conversion," he said. "Customers dissatisfaction will rise. Manufacturers' warranty claims will climb in the latter part of 2006 and into 2007-08 from the poor installations that will happen in 2006."

It's Not All About 13 SEER

Although 13 SEER dominates the conversations, other topics were on the minds of Contractor Consultants, too. Insurance and employee compensation came right after 13 SEER on the list of important topics. That's what Jeff Somers talked about.

"I see the biggest single concern being the rising cost of labor packages," he said. "With the cost of equipment and gas going up and the instability of fuel prices, people are looking for higher increases. Health care benefits have double-digit increases making it hard to keep labor rates competitive. Passing along these increases usually alarms customers and they go elsewhere for better prices."

Somers didn't stop there –– he also saw the fallout from hurricanes as a major topic, too. "The hurricanes of 2005 could bring us some problems with equipment delivery," he added. "There will be a big demand on the major manufacturers to produce record numbers of equipment."

Tom Lawson said that the hurricanes have had a big impact on the HVAC industry. And although the devastation and fallout has taken its toll in human suffering and on the local economies, there will be money available to victims to help rebuild, which could include replacing damaged or destroyed HVAC equipment.

"There will be up to $500 federal income tax credits, which will help offset the higher cost of air conditioning and heating systems," said Lawson. "This should help our complete system sales. Also, the 13 SEER standard will help system sales as opposed to condensers only, but could increase compressor only replacements."

With the economy on shaky ground, Hank Bloom sees a lot of different factors affecting HVAC contractors in 2006. "The economy is a real struggle, along with the increase in the costs of fuel, insurance, workman's compensation," he said. "Some overhead costs are running out of control."

Manufacturers were also on the mind of York, who said the recent acquisition of York International by Johnson Controls could signal the beginning of some significant changes.

"This consolidation will have long-term and lasting effects on the industry," he said.

"For 2006, I foresee further restructuring of the whole industry as more controls companies align themselves with manufacturers and as manufacturers become contractor competitors.

"Back in the 1990s when contractor consolidation became the big news along with utilities testing the waters of becoming our competitors, I then warned us that our real concerns were not contractor consolidation or the utilities but the manufacturers.

"Change is inevitable, and we can use it for our benefit if we plan and facilitate that change. But if we just let it happen to us, we are in danger of being swallowed up and consumed by it."

Publication date: 12/26/2005

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