Value Engineering: A Bit of a Rant

By Tom Stender -- VP & CTO of InfiniSys Electronic Architects

This post is a bit of a rant, but I feel there is a valuable lesson to be learned here for all multifamily property owners, builders and developers.

My company was recently asked by a customer to look at adding a new telecommunications system in his building. Since we (InfiniSys) provided the original low voltage design for the building when it opened, I felt confident that the existing design of the communications rooms and the spare fiber strands we had designed for the backbone would make the new system simpler and less expensive to install -- there would be very little new cabling required.

Until we walked the site.

An actual site walk-through discovered that the low voltage contractor had installed less than half of the fiber strands we had specified, most of which were already in use by the satellite company (a PCO) providing TV and Internet service to the residents. Needless to say, if the original specifications had been followed, the owner would now not have to pay for more fiber to be installed, no doubt at a greater cost than it would have been if were done when the building was being roughed in.

Many times this is the result of owner’s value engineering (VE) to cut cost. The need to cut costs is completely understandable. However, if you are paying a professional design firm to recommend and design the most appropriate networks for your building, you might want to ask about any potential ramifications before you decide not to install something to save money. That way you know why it was designed that way and can make an informed decision about making changes.

Here's another scenario: I’ve seen the low voltage contractor will often value engineer his bid to get it at the cost level the general contractor wants. Invariably, this never makes it to the proper people to discuss when the bid is submitted, unless the telecommunications providers and/or low voltage designer are part of that loop to point out the deficiencies.

With construction costs where they are, value engineering a design is quite common to get costs to fit the budget. However, any VE should be done in a way that causes the least impact on the functionality available to the property owner and residents, not to mention leaving room for future growth as technology evolves at an ever-increasing pace. There are many ways to bring costs down with minimal repercussions ... this conversation should always include the designer. Isn't that why you hired them in the first place?

Have you run into challenges because of a design that was value engineered? What have you done to address construction costs while still maintaining services that meet your residents expectations?

Top Technology Trends for 2009

Want to know the technology trends that will have the greatest impact on the multifamily industry this year? Yeah ... me, too.

That's why I'm glad I got to interview Richard Holtz of InfiniSys and Steve Sadler of Post Properties today as part of our first Multifamily Technology webinar. (I'll post the full recording soon.)

Both of these guys are experts in their field, and it was interesting to get the different perspectives from the consultant (Richard) and the property developer/owner (Steve). They talked about everything from fiber optic cabling to fitness equipment.

Lastly, I can't say thank you enough to the people who dialed into the call ... you all rock. There were so many great questions, I think it will definitely warrant similar events in the future. If you have any feedback, additional questions or ideas for future events (including format), feel free to contact me anytime or speak your mind in the comments.

Until I can get the full recording posted, here is the slide presentation these guys ran through today:

Multifamily Technology: Winning Ideas for 2009

View SlideShare presentation

Know a great speaker/expert with knowledge about multifamily technology that just blows you away? Give me a call (386.236.1530) ... we're looking for folks to participate in our future events.

Retrofitting Your Property: Taking a Different Approach

I'm late posting this, but I wanted to share the presentation I gave last week at the NMHC's Apartment Technology Conference.

The topic was "Voice, Video, and Data Infrastructure: Retrofitting Existing Properties" -- I sat on a panel with Mike Kolb of Cautela Solutions and Scott Skokan of Bozzuto. Mike knows a heck of a lot more than I do about the nuts and bolts and dollar figures that go into the actual upgrade of a property's network, but my job was to frame the conversation in terms of what residents expect when it comes to technology today.

Here are the slides:

View SlideShare presentation or Upload your own. (tags: nmhc apartment)

The basic premise is that our residents see advancing technology all around them ... except in their apartment, in many cases. When you're considering the retrofit of a property's wiring, make sure you are asking the right questions, considering your residents' expectations and most importantly, thinking about how long you expect the upgrades to last.

Wi-Fi and cellular coverage were major concerns throughout the conversation, and measuring the return on any investment in infrastructure is always a question. It also seemed as if there is a groundswell developing for a technology rating standard (similar to the LEED system) for apartment communities.

Of course, there's a whole lot more that goes into it than just these few items. Feel free to post your questions, comments or horror stories about property wiring retrofits in the comments, on the Multifamily Technology discussion boards, or contact Mike Kolb or me anytime.

Thanks to Larry Kessler and NMHC for giving me the opportunity to speak.

All Services on One Cable = One Bad Idea

Developers have some tough choices to make right now. Costs keep rising, but residents expect more than ever.

The question is: Are you giving your residents the technology options that they expect and desire?

As multifamily builders try to find ways to offset rising construction costs, I've seen recently that some companies are revisiting their specifications for low voltage wiring, trying to cut costs by consolidating all of their properties' communications services on only one or two wires to each unit.
This convergence is certainly becoming increasingly affordable, and it may sound like a promising way to control costs.

Well... While there are some systems that can be converged throughout your property, right now could be a really bad time to consolidate the cabling for your telecommunications services, especially considering recent rulings from the FCC. (PDF)

More players are entering the telecommunications business. New applications, major partnerships and other strategic maneuvers demonstrate that competitors within this industry aren't going to give up market share without a fight. Here are just a few examples:

:: Both major satellite TV companies are making major investments to provide their most advanced technologies to date in multifamily communities.

:: Cable operators continue to grow their on-demand services, and they're starting to test the first of many unique wireless applications that will come from their 20-year deal with Sprint.

:: Verizon and other FTTH providers are expanding rapidly, offering high-quality video services and extremely fast broadband services that are receiving high reviews from users.

Simply put, we are in the middle of what could possibly be a golden age of innovation among service providers.

There are more unique applications and functions than ever that are either available now or in the near future, and it's making this a tough time for anyone to try to pick the winners that you and your residents will want to do business with now and also 3-5 years down the road.

Consolidating your property's structured wiring will limit how many providers your residents can choose from, limit your options if you ever need to change providers, and limit your ability to upgrade your network when new services become available.

One wire per unit is not going to get the job done if you want to provide today's advanced services. Investing in a flexible, upgradeable infrastructure now will save you a lot of headaches later, and will allow you to deliver the technology options your residents desire today.

Are Exclusive Providers Still Revelant in a World of Consumer Choice?

Over the past decade or more, property owners have increasingly seen the advantages of partnering with an exclusive telecom provider to deliver TV and Internet services in bulk to their residents. It's worked very well for everyone in most cases - the service provider gets a guaranteed revenue stream, owners buy services at wholesale rates that allow them to create an additional source of ancillary income, and residents get competitive communications services at rates typically far lower than regular retail prices.

But now that customers have become accustomed to a world in which they can have everything customized and personalized, does the bulk model still fit within the principle of giving residents what they want? I can make arguments for or against bulk... it's certainly doesn't require as much thought or planning if you are only providing one option. On the other hand, there is no denying that owners, especially in extremely competitive markets, should consider using a wiring infrastructure that enables them to offer several different choices for phone, TV and Internet services. A number of owners in New York, New Jersey, and other parts of the country are now testing this model (to the dismay of telecom providers), dubbed "open access," and they're getting some very positive feedback from current and prospective residents.

Is it a powerful tool to tell a prospect that they can choose from DirecTV, Time Warner, or Verizon for TV? Only if the leasing staff uses it to their advantage as part of their pitch. Otherwise it's usually a forgotten question until after the resident has already signed the lease. We'll grant that partnering with an exclusive provider is still a good option in many cases, but we'll be keeping tabs on the open access trend as it grows, bringing you updates and feedback from the owners that are taking the plunge.

AT&T Accuses TWC of Network Sabotage

AT&T is alleging in a lawsuit that Time Warner Cable employees conducted a "methodical invasion" of AT&T's network facilities in apartment buildings. Time Warner had no immediate comment on the suit, which alleges millions of dollars in "willful, wanton and systematic" damage. Houston Chronicle

...And the saga continues. Although the names might have changed, we have noted this fight before, and it's something that is likely only going to get worse as long as apartment owners allow it to happen. If you're going to allow multiple providers onto your property, make sure that you have a plan and that you understand who is responsible for all those wires, especially if you're the one who owns them. Ideally, each provider should ride on their own network so no two companies have to share at the property level. Otherwise, stories like this one will persist, and your residents will be the ones that suffer because of it.