“There’s no such thing as mold prevention, only mold control. Mold is both a risk and an opportunity for the HVACR industry. The challenge is in prevention.”

Insurance

“A recent survey of PHCC members found that the rising insurance costs are the biggest issues facing our members these days,” said PHCC president Eddie Hollub. “Unfortunately, I also have found that some members are facing the prospect of no insurance.

“To help provide affordable health care insurance to members, PHCC is lobbying hard for the passage of Association Health Plan legislation. This legislation would allow trade associations like PHCC to provide health insurance to members at lower rates more comparable to what large companies pay.”

“Workers’ compensation is a huge cost, and the costs continue to rise,” said MCAA member Charlie Butts, president of Indoor Environmental Services, Sacramento, Calif.

“Insurance costs are also tied into IAQ issues, such as mold litigation. Liability insurance for pollution, of which mold is a part, is high, and most mechanical contractors don’t carry pollution insurance.”

Rebecca Gold, chairperson of the Quality Service Contractors (QSC) of Falls Church, Va., also focused on insurance costs. “Insurance costs are rising, and fewer and fewer insurance companies are handling contractors’ general liability insurance policies,” she said. “This is becoming more of an issue every day. The rates for employee benefits are becoming problematic as well.”

Changing Demographics

“One of the biggest issues facing the HVACR industry is the aging of the population,” said Paul Stalknecht, president and CEO of ACCA. “It’s an issue because it represents a huge opportunity if contractors can get their arms around it. Many contractors have sold their goods in the past based solely on price; now, if they want to achieve higher margin sales and gain a foothold in a population that is getting grayer, they need to focus on health and lifestyle.

“People are willing to spend more if they think it will improve their health or make their life easier. Contractors are going to need to tap into this market.

“The most important trend in the marketplace, and the one that will have the largest impact on contractors, is the consumer’s higher expectations. Consumers no longer compare contractors to other contractors in terms of their expectations. They now expect their local HVAC contractor to provide the same service as their favorite department store, their favorite restaurant, the Wal-Mart down the street, or Amazon.com.

“People today are impatient and they want convenience and they’re willing to pay for it. Contractors need to provide superior customer service. They need to answer the phone on its first ring, show up when they say they’re going to show up, get the job done in the time frame they say they’re going to do it, and not charge the consumer more than they said they were going to charge.”

Competition

Both Williams and Butts see retail competition as a trend in the marketplace.

“Retailers like Home Depot and Sears are trying to get into the HVACR business, but more importantly, manufacturers like Trane, Carrier, York, and McQuay are trying to get into the controls and contracting businesses,” said Williams. “In the end, it comes down to who owns the customer. This will continue to be a competition between contractors and manufacturers.”

Butts said the issue hinges on integrity. “Each manufacturer needs to state the market they are in and what their goals are, instead of negotiating around conflict,” he said. “[Manufacturers should] state that they are in the area and they intend to be a service provider.”

The Economy, War

Gold said that a downturn in the economy can benefit one market over the other. “For service and repair, I feel the sluggish economy can have a beneficial effect,” she said. “It tends to put underpriced contractors out of business, because, living hand to mouth, they cannot afford to ride out the slow times, leaving more business when times get better.”

“Also, people tend to lean towards service and put off remodels and additions until the economic climate rises. As far as construction, the market slows in tough economic times and running a tight ship is required.”

Hollub agreed. “A poor economy can actually stimulate the service and replacement business because most homeowners choose to remodel and rebuild instead of buying during tough times,” he said. “On the other hand, a tough economy can cripple new commercial and industrial work. The vacancy rate is up, and the trend of companies leaving the United States concerns me.

“For residential new construction, the outlook is hinging on one major factor: whether homeowners can lock in low interest rates. People who can afford houses have already bought them. Overall, people are not spending money because they are waiting to see how the war turns out, and how the economy is going to rebound.

“In my case, the war has helped my business. We have gotten some base work from the Texas Air National Guard that wouldn’t have happened if we didn’t have the war effort.”

“In the service and replacement market, contractors who are savvy about marketing are going to do fine,” Stalknecht said. “Consumers will spend money if they feel confident that they are making a good investment. It’s up to the contractor to instill that confidence.

“And it’s becoming more apparent that there’s more to a homeowner’s return on investment than merely dollars. Health will play a key role in the future. Contractors who are able to show consumers that enhanced indoor air quality will improve their family’s health will make more profitable sales.”

“In a poor economy, there seems to be more opportunities in service and repair because people tend to be fixing up rather than replacing,” said Butts. “But it also allows the opportunity to package a replacement or retrofit job if a contractor can offer good financing. If interest rates shoot up after the end of the war, the building industry will be affected.”

“We are more fragile than we recognize,” cautioned Williams. “The SARS [sudden acute respiratory syndrome] thing is bringing this out. The Iraq war and SARS are affecting travel plans, which affect the global economy.”

Labor Shortage And Training

Stalknecht said that the shortage of good, qualified workers remains the biggest problem for contractors.

“The labor shortage is the biggest issue this industry faces,” he said. “A lot of people talk about it, but it still seems as though many people would rather not face up to the needs of the situation. As our current chairman, John Saucier, said in his inauguration speech: ‘To those who complain that labor costs are too high, and then complain that they can’t find good employees, I say, wake up. Industries that offer high pay, good benefits, and provide solid training seem to be able to find plenty of employees.’

“We need more contractors to get involved in their local HVACR educational programs. Too often we hear from educators that they train young people to go out in the industry and perform at top level, but then the students report back to the instructors that the contractor they work for tells them, ‘Forget what you learned at that school, I’ll train you to do it the way I want it done.’”

Hollub said the trade must make itself more attractive to people entering the job market. “To get quality people on the job, we need to offer quality wages and training programs,” he stated. “The shortage is not going to go away.

“If contractors continue to promote professionalism, etc., qualified employees will seek them out. But, they have to be better than anyone else in town — in pay, benefits, etc. It’s not going to be business as usual anymore. More training will be needed to elevate the quality of the workforce. Contractors who are going to be successful have to offer ongoing training programs.”

Desmond said his organization is proactive when it comes to training. “As signatory contractors, SMACNA contractors have invested $50 million toward training the 150,000 union sheet metal workers located in the U.S. and Canada,” he said. “We have 165 training centers nationwide and train 14,000 apprentices annually. We graduate 3,000 apprentices each year, while more than 3,000 journeymen take continuing education training through our centers annually.

“The jointly sponsored International Training Institute oversees this training effort offering comprehensive instructor training programs, certification of joint apprentice training committee training and testing programs, and certification programs in the areas of welding, testing, adjusting, and balancing, as well as HVAC service.”

Stalknecht offered advice on where to find future workers. “We need to expand our horizons and recruit more immigrants and women into the field,” he said. “There are expanding numbers of minorities in the country, particularly Hispanics, and they represent a terrific labor pool of hard-working men and women.

“We need to go after nontraditional students and recruit a more diverse workforce, or else contractors will find themselves folding because they couldn’t find the employees they needed to stay in business.”

Publication date: 05/05/2003