November 12, 2008

Value Engineering

Mechanical insulation important to long-term costs

DON PROCTER

correspondent

In an era of high energy costs and environmental accountability, it’s surprising, but not unusual, for building owners to trim mechanical insulation from building budgets.

Joe Fabing, president of Custom Insulation Systems, said that 75 per cent of all the commercial projects, and many institutional ones, which his company bids are value engineered post tender.

Owners and generals are squeezing out some of the mechanical insulation in his quote to meet a leaner construction budget.

It’s not an unfamiliar claim, said Chris Ishkanian, president of the Thermal Insulation Association of Canada.

In one cost-cutting case in British Columbia, an $85,000 contract to insulate mechanical ductwork at a community college was cancelled, he recalled.

“The payback for one-inch duct insulation is two years, so the tenant will be paying about $42,500 in extra heating costs each year for the life of the insulation.”

The cost of insulated heating pipe is often gained back within the first year of installation, said Ishkanian.

That quick payback applies to insulation applied to two-inch copper domestic water lines and two-inch heating lines typically seen in today’s commercial buildings.

Value engineered savings are generally initiated by a project’s owner when bids come in over budget, says Doug Smith, principal of Smith and Andersen Consulting Engineering, a Toronto-based mechanical engineering firm.

“It normally affects big ticket items like pipe, valve quality, equipment efficiency, equipment quality and system type,” he said.

He added that owners don’t generally get all the benefits of VE savings unless the process is done before the project goes to tender.

“Doing this process afterwards usually only recognizes a portion of the savings,” he said.

Fabing said that in light of these facts, project owners may continue to cut insulation contracts because they don’t know the numbers.

Owners don’t have a vested interest unless they plan to occupy or manage the building post construction, he adds.

What is driving value engineering is unrealistic budgeting at a project’s conception, says Smith. “If, say, a smaller office building is budgeted at $100 million and the tendering process brings it in at $150 million, well, guess what? They have to ‘value engineer’ it to bring the costs down.”

“We (insulating contractors) are always the first victims because insulation isn’t critical to the process,” said Fabing. “If insulation was a life safety issue, it would be perceived differently.”

Smith said his company rarely sees insulation thickness compromised on its projects.

“Sometimes the quality of insulation or insulation covering is, however,” he said.

Fabing added that often one of the first casualties of value engineering is the protective finish applied over insulation.

A finish is made of anything from PVC or canvas to aluminum or stainless steel.

The perception is that finishes are strictly esthetic but protective finishes can double the lifespan of the insulation, said Fabing.

Custom Insulation is currently installing a protective finish over insulation at a major job in Windsor. It is money the owner shouldn’t have to spend now if the finish wasn’t value engineered out of the original contract at post tender when the building was constructed 10 years ago.

“We normally fight pretty hard for items that have a good payback,” said Smith.

“Other items that are a ‘nice to have’ are harder to justify when it comes to budget overruns.”

Andre Pachon, president of Kelowna-based C&G Insulation Limited, said in B.C.’s Okanagan Valley most often value engineering crops up in multi-unit condo complexes in particular.

“The developers aren’t the end users of the building, so it’s no big deal for them to reduce or eliminate insulation.”

Pipe insulation on heating systems, he said, is often the first to go.

A half-inch is typically removed from a 1.5-inch wrap around pipes.

It is short-sighted thinking, Pachon argued.

“If they want to save money on their project, they should add more insulation, not take it away,” he said.

Ishkanian said even though some provinces and cities have building codes that specify insulation requirements, those codes aren’t always followed. Take the City of Vancouver, for example, which has adopted ASHRAE 90.1 standards.

“Cutting insulation still happens quite often even though it violates the city building code,” he said.

ASHRAE 90.1 specifies the minimum insulation standards for chilled water, heating, steam and other mechanical insulation needs.

“Every specifier (in Ontario) bases their specifications on the standards, but when value engineering happens the standards are thrown out the window,” explained Fabing.

“Between the engineer and the owner, they decide that less stringent specifications are suitable.”

Ishkanian said not only is cutting insulation out of construction budgets financially unwise, it also contributes to increased greenhouse gas emissions.

“At a time when the world is looking to reduce emissions, our construction process allows for the reduction of insulation at the expense of the environment,” he said.

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