How To Select a Paint System Contractor-Part II

HOW TO SELECT A PAINT SYSTEM CONTRACTOR-PART II

By Chris Herr, HERR Industrial, Inc.

This two-part series is a guide for manufacturers and custom coaters on how to select a contractor to supply and install a powder coat system.  Part I covers preparing specifications and evaluating bids.  Part II covers qualifying bids from contractors.  The article lists information the owner should provide to the contractor and the contractor should provide to the owner, to get the most suitable powder coat system for the application.

Today’s finishing environment is one of rapid change in response to performance improvement, cost reduction and environmental concerns.  Today’s manufacturing engineer is encouraged to develop a team approach to paint system construction.  The system supplier will become an integral member of the paint system team, joining the engineer and his coating, chemical and special equipment suppliers and consultants.

The need for a new or upgraded paint system can be an effort to meet any number of goals but most typically; a desire to increase production, the start-up of a new plant or introduction of a new product, a desire to improve finish quality, a response to environmental regulation or replacement of old equipment.  Whether new or upgraded, a paint system project represents a major capital investment and a difficult exercise to integrate with ongoing manufacturing operations.   Careful evaluation and planning of the process and thorough investigation of the suppliers will assure that the project will go as smoothly as possible and meet project goals.

Construction of a new paint system involves the following four basic steps or phases.   The entire process can take from several months to well over a year to complete and care should be taken to allow enough time so as not to rush the process.

• Development of the Process and System Concept

• Procurement of the System
• Construction of the System
• Testing, Training and Commissioning of the System

The first step, the development of the process and system concept, begins by identifying the paint performance requirements and investigating the possible process methods available to meet that performance.  Paint and chemical suppliers are an integral part of this effort and couple their knowledge of the owner’s operation and product with the technical attributes of the available processes and relative advantages and disadvantages.  Testing during this phase of the project will determine the efficacy of the various processes examined.  Also during this phase, the owner or their material suppliers may involve a “systems house” or systems consultant to develop budgetary costs and a physical layout of the various process options.  A “systems house” is a company that designs and builds the paint system by fabricating and integrating equipment manufactured by others to meet the process goals.

Also during this first phase of the project, the project administration method should be determined.  The typical project structure takes one of the three following approaches:

• Turnkey
• Modified Turnkey
• Owner Built

Turnkey and modified turnkey are the most common approaches to paint system construction, especially today when downsizing has reduced the number of plant engineering personnel available to design and manage large capital projects. Essentially “design-build”, the turnkey concept can encourage the involvement of a systems house or contractor at an earlier stage to help with specification preparation, hanging arrangement, production estimates, budgetary costs, etc.

A true turnkey approach has the system supplier responsible for all aspects of the project including; design, fabrication and integration of all the process equipment, installation of the equipment, including utilities to source and building modifications, start-up and training.  Additional services may include completion of permits and financing.

Modified turnkey is similar to turnkey but involves the owner purchasing one or more pieces of the equipment or services outside the systems house contract, typically large single items such as a powder booth, as well as building modifications or construction and utilities from the building source to the equipment.  The owner’s decision to furnish equipment or services must be carefully considered and is usually based upon an effort to save money or compress project schedules.  The risks that the owner will face by supplying the equipment or service can usually be easily identified, however, the cost of these risks is not.  If the owner-supplied equipment is not delivered on time or to specifications the potential for a claim by the contractor for interrupted or delayed work is high.

Owner constructed projects involve the owner designing the basic system concept themselves or hiring an engineering consultant to design the project and prepare specifications.  The owner then purchases individual equipment components and utilizes a mixture of maintenance personnel and local contractors to install the equipment.  Professional project managers or paint system consultants are many times contracted for a percentage of the capital cost to oversee the project management aspects.

The selection of an approach depends upon the relative risk the owner wants to accept. Turnkey or modified turnkey approaches have the advantage of; preserving the owner’s personnel time and resources, providing a high degree of project coordination and limiting “finger pointing” between project entities.  These approaches pass the least liability along to the owner, however, they usually present the highest cost.  Owner constructed projects can save capital cost but represent the highest degree of liability although headaches can be avoided if a project manager or consultant is employed to oversee the project and act as the owner’s agent.  Most liability for owner-constructed projects primarily comes from mistakes arising from inexperience with paint system construction and unfamiliarity of the installation contractors with the equipment.

With any of the approaches, the best installation is achieved when the supplier installs the equipment with their own employees, familiar, experienced and trained to field install the specific equipment being installed.  It is also important that the crew be dedicated and used to working in the field, if a crew is pulled from the shop, most are not used to being on the road and may be in a hurry to complete the job and tempted to take shortcuts.

The second step to construct a paint system is the procurement process.  The procurement process can be broken into four basic steps and the information that must be gathered to procure the system is the focus of this paper.

• Qualifying Bidders
• Preparing Specifications
• Evaluation Bids
• Selecting the Bidder and Awarding of the Contract

The required information, while far from inclusive, is presented in the format of a series of questions and intended to serve as a “springboard” for ideas and a “checklist” of items to consider and add to when purchasing a paint system.

QUALIFYING  CONTRACTORS

System houses or installation contractors should be pre-qualified prior to soliciting bids for the project.  The contractors should be experienced with the system type, have a strong focus in mechanical contracting, be financially and organizationally solid, and match the owner’s expectations for quality, safety and operational efficiency.  If a turnkey approach is used, the design and fabrication capabilities and experience will also have to be evaluated.

A field of approximately six bidders should be peer-qualified with a goal to shortlist the field to three for bidding purposes.  Too few bidders may result in a less than competitive price; too many bidders confuse the process and waste the owner’s and bidder’s time and resources.  A quick word of mouth check with paint and chemical suppliers as well as a web site visit can help choose bidders to pre-qualify based on the expected project budget and process complexity.  The short-listed bidders should be comparable to each other, have a size and experience matched to the project scope and budget and able to meet the owner’s expectations with regard to workmanship, safety, professionalism, and understanding of the owner’s operations.

To pre-qualify bidders, a questionnaire or comparison spreadsheet can be formulated to gather the information in the areas listed below.  Examples of questions that may be posed have been provided covering; Organization, Experience, General Capabilities, Project Management Capabilities, Fabrication Capabilities, Installation Capabilities, Service Capabilities, Training, Safety, Insurance, Warranty, Financial, References and Site Visits and Additional Information.

Organization

The contractor’s organization should match the scope of the project and the owner’s infrastructure requirements.  Too small of an organization and the project may suffer from a lack of resources or overwhelm the contractor with detail.  Too large of a contractor and the possibility arises that the project will take a low priority to larger, higher risk projects and less experienced personnel will be assigned to the project.   It is also important to determine the relative risk that may be present in dealing with the contractor, have they gone out of business before and reorganized, etc.

• List website address and business headquarters address, how many years at this location?
• How is the company structured, for example; C-corporation, S-corporation, LLC, LLP, sole proprietorship, partnership, etc.
• Is the bidder owned or controlled by another firm and, if so, the owner’s name, address and telephone number.

• How many employees are in the company and how are they distributed (e.g. sales, engineering, fabrication, installation, service, etc.)

• How long has your company been in business under the current name?
• Under what other or former names has organization operated?

• Is the company bonded?

• Provide a description of typical project flow through the organization and identify the staff involved and how they interact.
• List background of staff to be assigned to the project, including number of years with the company and a brief scope of previous projects worked on for the company.
• Describe the quality assurance and continuous improvement programs.

Experience and Design Capabilities

The contractor ‘s experience should include projects similar in nature or scope to that being proposed.  The depth of experience with different types of systems should also be examined to limit the possibility that the contractor will try to “shoehorn” the system into their particular specialty rather than the best concept or equipment.

• What are your core competencies and capabilities?

• What do you consider the strong points for your company?
• What do you consider the strong points for your system installations?

• What is your typical project size in dollars, time, and resources? 
• What is the least expensive and most expensive systems built within the past five years.
• How many similar systems have you installed?

• How diverse is the contractor’s experience, please provide a list and description of systems built within the past five years including at a minimum a description of the product being finished, the equipment included, and date of the system’s start-up.
• How much engineering is conducted in-house, how much is subcontracted?
• How familiar is the contractor with the environmental issues faced by paint systems?

Project Management Capabilities

The contractor’s project management capabilities are important to assure that the project is completed in an orderly and timely fashion.  The project manager’s typical responsibilities include acting as the primary contact for the contractor, preparing and updating the project schedule, overseeing the contractor’s personnel and subcontractors for quality of workmanship and adherence to specifications, fielding and resolving any questions or concerns the owner may have regarding the project, processing change orders and preparing progress reports.  Having the same project manager involved from the beginning to end of the project, and, responsible for all aspects of the project, is the best option to maintain project continuity.

• Is a project manager assigned to the project that provides a single point of contact?
• What type of scheduling methodology and/or software is used?
• How are system design changes handled?
• How is the project progress documented?  Is a daily log of activities and problems kept?
• How frequently will the project manager be on site during the installation of the system?
• How often are progress meetings held?

Fabrication Capabilities

A paint system involves a varied array of equipment, not all of which will be manufactured by the contractor.  The owner should ascertain what equipment is designed and built by the contractor and what equipment will be outsourced.  The more equipment that is outsourced presents challenges to maintain project control by the contractor.  In-house fabrication capabilities also permits timely delivery of equipment or material resulting from the all too often changes or damage encountered during the course of the project.

• What components of paint systems do you actually manufacture and what is subcontracted?
• Where is your manufacturing facility located and what equipment is available?

Installation Capabilities

Top quality installation is important to the eventual success of the system to meet the intended process.  You can have the best equipment available, but if sloppy installation procedures are followed, if corners are cut, if the proper tools are not used, the equipment may not function properly, may require additional maintenance or may prematurely wear out.  You can buy the best equipment but if the workmanship is poor, if the contractor has the wrong tools, if the contractor is unfamiliar with the equipment, you, as the owner, will suffer the consequences for a long time.  Many installation shortcuts are not known for years and can cause problems expensive to correct.

The best option is to select a contractor that installs the equipment with their own, experienced mechanical and electrical field personnel.  Project control is the greatest when the personnel are familiar, motivated and trained with the equipment being installed, there will be no “finger pointing”.  The crews should be dedicated to installation and consist of trades such as millwrights, electricians, pipefitters, welders and riggers. They should be accustomed to working away from home and not be shop personnel temporarily reassigned.  If the crews are “in a hurry” to get home, workmanship can suffer.  The crews should be outfitted with the proper and adequate number of tools, inadequate tools will lead to shoddy construction and an extended timeframe.

• Do you use your own people for installation?
• In what areas do you not use your own people during installation?
• What tools do they have?
• What licenses does your installation crew carry?

The owner should be aware of the licenses required to construct the project to avoid possible project delays if the project is started without proper licensing.  If possible, the state’s web site should be consulted to establish what licenses apply as well as to check that the contractor’s license is current.  In some instances, licenses may be required for only a certain portion of the project.  In addition, the local municipality should be consulted regarding licensing requirements above and beyond the state.

Service Capabilities

Timely and experienced service after the sale is important to properly inspect and preventatively maintain the equipment.  Production downtime can quickly eat into the owner’s profits.   The following questions should be asked regarding the service capabilities.

• Do you have a service department?
• Do you offer a service agreement, if so what does it cover?
• What diagnostic tools do the service department utilize?
• Where are support personnel located?
• How long would the typical response time be in the event of an emergency?
• Are PLC controls supported with by an in-house programmer?
• What are your normal business hours?  Is there a 24 hour emergency service phone line?

Training

How well training is provided will determine how quickly the system will reach its full potential and how quickly problems can be diagnosed and resolved.  Having a thorough understanding of the system will also allow the operator to know the system limitations as well as how to adjust and adapt it to new processes.  The training should begin early in the project with operator site visits to similar facilities.  Training should continue with observation and discussion during installation to familiarize the maintenance personnel with construction details hidden in the final product.  Working side by side with the start-up technicians will provide invaluable experience with troubleshooting procedures.  After start-up, formal training on the equipment should be conducted using the operations and maintenance (O&M) manual as a syllabus.  Paint, chemical, and special equipment vendors should be included as part of the formal training process.  Here is the primary question to ask the contractors:

• Do you offer a training program?  If so, describe in detail, including materials provided, when training occurs and how many days of formal training are included.

Safety

In today’s litigious business environment, you can’t assume that the contractor will be solely responsible in the event someone is harmed during the course of the project.  In addition to verifying insurance policies are in effect, the owner must ascertain that the contractor has an active and adequate safety program.  The following information can serve as a guide as what should be gathered as a minimum:

·       Can a copy of their safety program and policy be provided?

·       What is their safety record for the past five (5) years including an enumeration of; total hours worked, total recordable injuries, number of cases requiring medical treatment, number of lost workdays and number of restricted workdays?

·       What is their “Experience Modifier?”

The Experience Modifier is a number assigned to the contractor by the state in which they do business that helps reveal the relative safety record of the contractor.  The rating typically ranges from 0.6 to 1.6 and is determined by a somewhat complex formula that combines the contractor’s payroll figures with the amount of losses, usually over a three year period.  A rating of 1.0 or lower indicates an above average safety performance.

Insurance

Insurance requirements will be an extremely important part of the project specifications and serve to protect the owner and owner’s investment.  The types and amounts are discussed later under the specification preparation section of this paper.  The contractor should asked the following:

• Who is insurance underwriter?
• What policies are in effect and in what amounts?
• Is an insurance certificate available?

Warranty

Warranties can vary widely between vendors.  Most cover workmanship only with the repair or replacement at the contractor’s discretion, labor and shipping to do the repairs are not generally included.   Most warranty periods are for one to two years and some can be extended.  The warranty description should be detailed with what it includes and does not include.  A simple statement that the equipment is warranted is meaningless.  The following questions should be asked during contractor qualification.

• What does the Warranty cover?
• How are Warranty claims processed?
• Who is responsible for Warranty of purchased parts?
• What is the size of your repair parts inventory? Location?
• What spare parts inventory do you recommend the Tenant have on hand?
• What is the dollar value of that inventory?

Financial

Financial stability of the contractor is important to insure that the contractor will be able to meet all their obligations during the project construction, during the warranty period and for years to come with respect to service, upgrade and spare parts.  The contractor should have a proper financial accounting system and good managerial know-how of the financial aspects of their business.  A full reporting of the contractor’s financial status can be collected with the following questions:

• Can a confidential financial report be provided that covers the most recent fiscal year and includes a balance sheet, income statement, cash flow statement, list of corporate debt, gross revenue, gross margin and profit/loss statement?
• What is the Dunn and Bradstreet (D&B) account number?

• Can the contractor provide a bond, and if so, what is the bond rate schedule?

Performance bonds are insurance policies that cover the owner in the event the contractor goes out of business or otherwise fails to complete the project contract.  The ability to get bonding is important because it is based upon prior project performance and current financial history.  Similarly, the bonding rate is based upon the bond company’s evaluation of the relative risk the contractor may default on the contract.  The cost of the bond will be passed along in the contractor’s proposal.

References and Site Visits

A list of all completed projects for the previous five or more years should be requested.  A short description of the scope of work should be included as well as a description of the product, project goal(s), approximate cost and contact person.   The list should be evaluated for diversity of projects, similarity to the owner’s project and similarity of process or product.

As the saying goes, “the proof of the pudding is in the tasting” and it cannot be more true when considering a paint system contractor.  During the pre-qualification stage, you should a request visit to previous projects similar to that planned for your facility.  The visit should include a tour with the contractor’s personnel to review process and construction features of the system, but should also include time with the system owner away from the contractor’s personnel for an “unbiased” opinion.

The reference contacts should be interviewed with the following questions:

• Were you satisfied with the overall performance?
• Would you hire the contractor again?
• Have you used the contractor on more than one project?
• Were there any changes were made during the course of the project? 
• What were the changes and how were they handled?
• Did you feel comfortable with the charges?
• Were there any disputes on the project and if so, what were they and how were they resolved?
• Was the project completed on time?
• Was the site kept clean and orderly?
• Were the contractor’s personnel professional, courteous?  Did they respect all site rules?
• How would you rate the quality of the work?
• How well did the contractor communicate with the owner?
• Did the contractor provide adequate training?
• Did you believe you received good value for the monies spent?
• What was their return on investment (ROI) goals and were they met?
• What is the reject rate and is it correlated to the equipment design?
• What would they do differently the next time?
• Do they consider system maintenance and service normal?
• How has the contractor’s service personnel performed?

In addition to contractor-provided references, agencies such as the state Attorney General’s office and the Better Business Bureau can also be consulted for any current or history of litigation or dissatisfied customers.   Also, trade organizations such as the Powder Coating Institute, Electrocoat Association, or the Chemical Coaters Association can be contacted for references.

Biography

Chris Herr is the Sales Manager for Herr Industrial, Inc., an industrial paint systems house and mechanical contractor located in Lancaster, Pennsylvania.  Prior to beginning work at Herr in 1992 as an application engineer, Chris spent 15 years in the environmental science and research fields and holds a B.S. degree from the College of FWR at the University of Idaho.  Chris became the Product Line Manager for finishing systems at Herr in 1996 and is responsible to oversee sales, conceptual designs, and estimating.  He is a member of SME, CCAI and the Electrocoat Association.