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Rising health care costs present another huge problem for contractors. Air Conditioning Contractors of America (ACCA) recently released its study on health benefit costs, and the results were startling: In 2004, 69 percent of HVACR contractors saw their premiums increase more than 10 percent, while 22 percent of survey respondents saw increases of more than 20 percent. In response to these price increases, many contractors are reducing benefits for employees.
These two issues make it difficult for contractors to become - or stay - profitable.
Just about every industry organization is working with its members on how best to tackle these problems. Hopefully, by banding together, a solution can soon be found for these issues and other problems as well.
Finding Qualified WorkersThe most common problem facing contractors today is attracting and maintaining a qualified workforce, stated Ann Kahn, president, Kahn Mechanical, Dallas.
"We offer interesting and meaningful careers, but our educational system isn't preparing students to take us up on those offers. We have a responsibility as business people and taxpayers to support our educators and to partner with them in solving this problem."
She added that learning doesn't stop at graduation, so contractors need to continue offering educational opportunities for current and future employees.
"We have a further responsibility to market our industry better so young people will be attracted to it and want to be a part of it," she said.
"We're going to have to become more involved in our industry as a whole," he said. "We're going to have to become involved in the training and education of people, and we're going to have to become more involved in the training and educating of our own people."
D.L. "Ike" Casey, executive vice president, Plumbing-Heating-Cooling Contractors - National Association (PHCC), noted, "Finding qualified workers is a big issue that keeps PHCC members awake at night. PHCC is doing what it can to help create a qualified workforce, and training the future workforce is one of the top priorities for the association this year."
To that end, PHCC members talk at student career days about the value of entering the plumbing and HVACR industry. They also distribute a construction career booklet to high schools and vocational schools that promotes involvement in the trades. PHCC also offers an apprenticeship program that it is in the process of updating.
York believes that people coming here from Mexico and Puerto Rico could help solve the worker shortage. York would like to see trade schools reach out to the Hispanic population in order to train them for the HVACR industry. He would also like to see contractors hire them while they're in school, so they can learn English on the job while obtaining the technical skills they need.
"This is an incredible opportunity for the HVACR industry to bring the Hispanic population into our industry and alleviate our shortage of qualified workers," York stated.
InsuranceAnother issue that contractors are talking about at virtually every association meeting taking place this year is the rising cost of insurance. Contractors have seen some very large increases in the price of health insurance, as well as surging premiums for liability and other business insurance. In some cases, contractors' policies are even being canceled.
ACCA noted that health insurance costs have continued to rise dramatically for HVACR contractors over the past two years. In response to growing premiums, more and more contractors are reducing benefits for employees. According to the ACCA survey, in 2003, 50 percent of participants reduced available health benefits; 56 percent lowered them in 2004. In contrast, only 10 percent of the participants increased their health benefits in 2004, noted ACCA.
"PHCC is tackling this in several ways at the national level," noted Casey. "We're lobbying for Association Health Plans, which will allow trade associations like PHCC to offer affordable health insurance to members. Also, we're advocating for tort reform that would halt the rising number of frivolous lawsuits that are driving up business insurance costs."
Associations have been encouraged by President Bush, who has vocalized his support for legislation that would allow national trade associations the opportunity to band together to purchase affordable health benefits for members, their employees, and their families. Unfortunately, some of the larger insurers are lobbying against the legislation, so only time will tell who will be the victor in this battle.
Becoming ProfitableMaintaining profitability is the biggest issue facing HVACR contractors, noted Stanley Berger, president, Mechanical Contractors Association of America (MCAA).
"In good times and bad, if a contractor is unprofitable, he won't stay in business long. Issues like health care, labor relations, productivity, and information technology become secondary if you're not maintaining profitability."
Not surprisingly, regional differences can determine whether or not a contractor is profitable. The Sheet Metal and Air Conditioning Contractors' National Association (SMACNA) recently released its predictions for 2005, and the forecast varies greatly from the West Coast to the East Coast.
For example, SMACNA members believe they will see a 5-percent growth rate in Washington state, but they note that their members are turning away from traditional HVAC work and are depending on long-term service and maintenance contracts to pay the bills. Colorado, Chicago, Indianapolis, and Iowa SMACNA members all predict increased hours, but things are not as bright in the Northeast.
Northern New Jersey members of SMACNA believe they will see a boost at the end of 2005 and a healthy 2006, but the Southern New Jersey members report that a lack of work will result in a 10-percent decrease in hours. Philadelphia predicts flat hours and scrambling forward to stay even, although this market is experiencing growth in commissioning and light commercial markets.
It's obvious that contractors will definitely have their work cut out for them in 2005 and beyond. The good news is that help is always available in the form of trade associations, which will help provide them with the right tools, education, and programs.
"Contractors can turn to trade associations because that's where they receive the best return on investment for their dollar," stated Berger. "World-class education, focused advocacy, and the opportunity to connect with other important industry players are just a few of the tools and services they receive in return."
Sidebar: A Manufacturer's ViewThe good news for contractors, stated Tom Huntington, president, York Unitary Products Group, Norman, Okla., is that the trend in home remodeling continues to grow, which is great for the add-on and replacement business.
"HVAC products that appeal to consumers because they are efficient, â€˜green,' quiet, provide better IAQ, and look better from an aesthetic viewpoint will attract a higher portion of those remodeling dollars," he said.
For contractors to take advantage of this trend, however, they need to change from technicians to retailers. "We think there's a window of two to five years for independent HVAC contractors to make this transition," said Huntington. "The technical expertise and skill have to be there, too, of course, but the retail mindset has to take hold in order for equipment dealers to compete with mass retailers and gain more of the home remodeling dollars available."
This may be a scary prospect to some contractors, but it may be essential if they want to stay in business. Many manufacturers, such as York, plan to help contractors make this transition by providing business and market training and tools, as well as differentiated products.
- Joanna R. Turpin
Publication date: 03/28/2005