During the Great Recession, retrofits emerged as the means by which building owners kept their inventory fresh, as well as an opportunity to take advantage of policies that offered tax deductions for the costs of improving buildings’ energy efficiency. While the downturn is in the rearview mirror,  mechanical retrofit activity remains healthy—and likely will stay consistent for the next five or so years. 

As it turns out, renovations aren’t just a reliable way to sustain staff. They have the beneficial side effects of earning firms more design-assist work, expanding contractors’ client list and leading to the adoption of technology to rise further above the competition.  

When the economy was in the throes of the recession, retrofit work kept many mechanical contractors afloat. By replacing older, degraded equipment with high-efficiency models, or optimizing the design and controls of an HVAC system, they helped shrink clients’ energy consumption by 20 percent to 50 percent, sometimes with a payback period of one to four years.  

Steve Huizinga, president of Allied Mechanical Services in Kalamazoo, Mich., has projects currently under way or starting soon that range from $2.5 million to $20 million. For his firm, retrofit work jumped because of federal tax incentives. 

“We sucked up a ton of work when the economy went down. My job switched from chasing work to figuring out how to get the workers to do the work. It allows me to keep more people employed. We only compete with two or three other mechanical companies.”

One of the benefits of retrofits over new installations is the contractor’s ability to keep facilities running during the process, especially for health care, municipal water and wastewater, pharmaceutical and food industry clients. 

“Number one in hospitals is patient care, so when you’re trying to renovate this space, you need to be not seen and not heard. You can’t shut down an operating room for three days,” Huizinga says. “The second main challenge is getting everything to fit above the ceiling, which, in a hospital, is filled with heating and cooling, medical gas, electrical and data. Space is limited.” 

For Allied Mechanical Services, this challenge disguises an opportunity. “We have our own in-house laser scanner, so we’re laser scanning above the ceiling and creating a 3D model of the area to be retrofitted. That helps us figure out how to route the area with minimal disruption to the hospital.”
Another side effect of the retrofit trend is that his firm is getting more design-assist work, such as a recent $31 million project. In fact, design-assist projects now account for 65 percent to 75 percent of Allied’s total revenue. 

Meeting Challenges With Due Diligence

Chris Claude, a partner at Mechanical Systems Company, Memphis, Tenn., which handles commercial clients such as FedEx, as well as distribution companies, schools and health care facilities, says he’s seeing more work, but not necessarily more competition. 

“There aren’t a lot of people who do the type of work we do. Many firms are so busy they can’t take more work, so that reduces competition,” he says. 

Another facet that helps the firm win out over the competition is due diligence. Failing to personally investigate a client’s mechanical system beforehand and throughout the project makes for imminent failures, especially when a firm is up against deadlines or yet another changed plan. 

“You can’t just rely on someone else’s opinion or the original engineering drawings,” Claude says. “You have to do the work. You have to look at the system yourself.”    

Due diligence undoubtedly played a role in the firm’s ability to win a $600,000, six-month project for the city of Memphis. For one of its extant buildings, the city wanted to update the antiquated steam heat and chilled water system. Claude’s crews replaced the boilers with a natural gas heat system and connected the new system to a building automation system (BAS). 

The benefits were multifold. For the firm, it opened a door to future projects with the city (a new client), and the city gained lighter utility bills and a cessation of downtime caused by the previous system’s repetitive breakdowns. 

“The city wanted the building to be occupied half the time, so maintaining comfort for the people who were there is extremely challenging. If we make a lot of noise, we have to come in at night, really early in the morning or on weekends. Or you have to section off your work with project vinyl to make sure there’s no debris or dust where office staff is working,” Claude says. “Every single retrofit is a bit different, but you have a better idea as you do more. One office may be more sensitive to smell, one to sound, one to comfort. Each customer has different priorities.” 

Just as retrofits inspired Huizinga to adopt a laser scanner, this type of work nudged Claude’s firm to adopt PlanGrid. The software allows users to mark up drawings digitally, write RFIs and make change orders in the field instead of waiting to get back to the office. 

What’s more, at least half of Mechanical Systems’ current retrofit projects entail building automation, either via an extant system, a system installed by a company the firm is working with on the project, or a system the firm has developed and installed. BAS accounts for 40 percent of the firm’s projects and 50 percent of its revenue.