Industry Resolve: Change the Status Quo

Ronald L. King

Ron King is a Past President of NIA, the World Insulation and Acoustic Congress, and the Southwest Insulation Contractors Association. He was awarded the NIA’s President’s Award in 1986 and again in 2001. He is a 50-year veteran of the commercial and industrial insulation industry, during which time he held executive management positions at an accessory manufacturer and specialty insulation contractor. In 2004, he retired as the Chairman, CEO, and President of a large national insulation distributor/fabricator. He currently serves as a consultant to NIA on a variety of educational, outreach, and governmental initiatives, including coordinating many association alliance-partnership activities, serving as Chairman and Past Chairman, respectively, of the National Institute of Building Sciences’ National Mechanical Insulation Committee and Consultative Council, and as NIA’s liaison to the Federation of European Insulation Societies (FESI), which represents the European mechanical insulation market. He can be reached at RonKingRLK@aol.com.

April 1, 2012

Each
year our industry talks about the abundant opportunities for mechanical
insulation to make a difference in energy efficiency, in the “green” movement,
in helping our economy recover, in supporting our country’s effort for energy
independence and national security, and other areas of importance to all facets
of industry and government?and each year we nod our heads in agreement. We have
accomplished so much in the last 5 years, but mechanical insulation is still
like Rodney Dangerfield on the battle fields of energy efficiency and “green”
initiatives: We get no respect.

We humbly discuss our successes and we are well aware that
many factors and players are responsible for those achievements. Ralph Waldo
Emerson wrote, “There is no limit to what can be accomplished if it doesn’t
matter who gets the credit.” As an industry, we need to appreciate that there
is no limit to what we can accomplish if we band together to make a difference
for the common good and not worry about who gets the credit. We have made great
strides in our efforts to have mechanical insulation recognized and appreciated
for its value in the commercial and industrial segments, but the journey is
long and not always easy. It is time to change the rules of the game and
accelerate our efforts.

Our industry is small in comparison to many others, but our
impact on the nation’s economy on a dollar-for-dollar basis has to rank in the
upper percentile. Why does our contribution seem to be viewed as less
significant in Washington, D.C., in state capitals and by agencies, coalitions,
associations, and many in the engineering and construction communities? While
that question does not apply to every individual or situation, as an industry
veteran I am reminded daily that it applies to many more than some would like
to admit.

It is time for mechanical insulation?our industry?to have an
active seat at the tables of influence. It is time for all industry channel
participants to get involved. Individually, our voices are not always heard.
Together, they echoe off the walls of change and we accelerate in the race to
make a difference?a race that is less about crossing the finish line first than
about not being in the back of the pack. The danger of being left behind is
real and should not be ignored. 

Our industry needs to resolve to be recognized as a leader in
energy efficiency and other fields in which we participate and influence the
changing commercial and industrial construction environment. We need to
challenge the status quo.

Energy and Energy
Efficiency

Energy
is and will remain at the center of our economic future and around the world.
Energy independence, national security, climate change, and sustainable
development are all affected by energy. Advocates of increased use of
alternative energy sources increased production and use of nuclear and fossil
fuels; and a long list of similar initiatives seems to be in every publication.
Ultimately, probably all of the above needs to move forward at a faster pace
and scale.

Efficiency needs to be first on the list when it comes to
everyone’s discussion about our energy future. The End-Use Efficiency Working
Group noted in its 2003 report, “Efficiency can be a powerful tool in any
effort to accomplish sweeping changes in the use of fossil fuels, to make
industry more profitable, and to tame the emissions challenges of the 21st
century.” That applies to all energy sources and potentially is the easiest and
fastest goal to achieve, given the investment required for expansion or
creation of new facilities and technologies. However, we must realize that any
number of barriers prevent a high level of energy efficiency investments.

One such barrier is clearly evident in the maintenance of mechanical insulation. We have
heard many times, “common sense indicates you should replace or repair missing
or damaged insulation.” If that is the case, there is a tremendous lack of
common sense around. (Sorry, but it is true.)

NIA published two specific studies, among many others,
related to missing or damaged insulation.  Working with the Department of
Energy and Oak Ridge National Laboratories (May 2010), NIA and its partners
extrapolated the results of more than 1,100 assessments of large and medium
manufacturing facilities, which indicates that mechanical insulation could
deliver annually $3.7 billion in energy savings and reduction of 83.5 billion
lbs/yr of carbon emissions, with a return on investment in 13.1 months (95
percent annual return) and creating more than 27,500 sustainable jobs from
simple maintenance of mechanical insulation in industrial/manufacturing plants.

A mechanical insulation energy appraisal was conducted
(September 2010) on a variety of State of Montana facilities located in and
around Helena, Montana. The objective of the appraisal was to determine the
energy, cost and emission reduction opportunities available via the repair or
replacement?maintenance?of mechanical insulation systems in Montana’s state
facilities. The assessment addressed 56 mechanical rooms in 25 facilities.
Estimates indicate energy savings representing roughly 8 percent of the total
natural gas consumption of the facilities analyzed, with an annualized rate of
return of 24 percent.

Industry has been estimating for years that between 10 and 30
percent of all exposed mechanical insulation becomes damaged or missing within
1 to 3 years of installation. Over time, and depending on the operating
environment and exposure to the elements, that percentage is likely higher. With
the energy savings potential and the rate of return, the common sense truism
stated makes sense only if you employ common sense. Maybe the barrier is that
CEOs and CFOs, and others in the budget chain, need to employ a different
financial model. In the case of mechanical insulation maintenance, it is an
investment that delivers an acceptable rate of return or hurdle rate. It should
not be viewed as impairment to the short-term bottom line but as an enhancement
to the short- and long-term cost bottom line.

Education and
Awareness – the Best Way Forward

After
years of frustration related to realization that mechanical insulation is not
being recognized for its value in many arenas, I remain convinced the
fundamental problem is lack of sufficient and proper education and awareness as
to the design, installation and maintenance of mechanical insulation systems.

The need for basic and continuing education at the college,
university and trade school levels is a given. How to accomplish that
efficiently and cost effectively is the challenge. However, the magnitude of
the challenge should not be a deterrent to embracing the opportunity. If our
industry is going to fundamentally change how mechanical insulation is viewed,
education?at a minimum at the post high school level?must happen. Some would
argue the basics of thermal insulation education should begin at the grade
school level. The enormity of that challenge and opportunity goes far beyond
the scope of this article, however.

NIA has taken a leading role in the development of some great
educational tools that are free, generic by design, and available 24/7/365: the
Mechanical Insulation Design Guide (MIDG); the suite of simple calculators;
and, most recently, a series of
E-Learning modules. These tools were created to aid you in business and can
even help grow your sales. Has your company
taken the initiative to educate your employees about the value and use of these
tools and, more importantly, have you educated your customers?

The best marketing endorsement is word
of mouth. If industry participants are not using and encouraging others to
investigate and use the tools available within their own companies, and with
their direct and indirect customers, how can we expect meaningful industry
change to occur? It is the easiest, most cost-effective, and meaningful means
to influence change: educate your employees and encourage them to educate
others. You may be amazed. Improved employee and customer loyalty, increased
customer and market share, and product preference may result, all of which
translate to increased profitability.

The concept is similar to gossip, it just does not move as
fast. You tell 10 people, those people tell 10 people and so forth. Before long
you are educating a larger universe. If people hear continual information about
the value of mechanical insulation, you create behavior change and have
implemented one of the most effective marketing strategies?word of mouth and
endorsement.

Government
Initiatives – Support

We
are the only association solely focused on the mechanical insulation industry
and working for all its of participants?manufacturers, distributors,
laminators, fabricators, and contractors. Our industry is more visible than
ever on Capitol Hill. Just a few years ago we had no presence, and now we are
engaged on many fronts, including:

  • creating and passing tax
    incentives,

  • inclusion in multiple proposed
    omnibus energy bills,

  • working with agencies on
    specific objectives including educational programs,

  • membership on coalitions working
    for various legislative initiatives that would benefit the industry, and

  • looking for new appropriation
    opportunities.

We have accomplished a lot. It is not a bad record for
starting about 50 years behind; not having a full-time presence on the Hill,
millions of dollars to spend, or a Political Action Committee (PAC).

We have had several key successes on the Hill. For example,
in 2010 the $500,000 appropriation to the Department of Energy for initial work
on the Mechanical Insulation Education and Awareness Campaign, from which
multiple data-gathering projects were completed, the simple calculators were
improved and expanded, and the E-Learning modules developed; and introduction of the Mechanical Insulation Installation
Incentive Act of 2010 (MIA) and again in 2011 in both the House and Senate,
gaining support for potential inclusion in a future energy bill. We have
accomplished a lot in a relatively short period of time but we want more and,
as always, we want it now. To accomplish objectives in Washington, you need a
continual and active presence, funding and, above all, patience. Those
attributes are not something the industry is accustomed to. We should have
initiated these efforts many years ago. Hindsight is great, but it is the
lesson of hindsight that propels our industry to maintain and increase our
presence in Washington, D.C. and all state capitals.

MIA provides a tax incentive in the form of an additional tax
deduction for going beyond the levels established in ASHRAE 90.1 2007 in new
construction and retrofit applications, and for replacing missing or damaged
insulation in maintenance applications. It is designed to increase awareness of
mechanical insulation, similar to clipping coupons, and provide an extra
incentive to facility owners to increase their use of mechanical insulation to
save energy, increase profitability, help our environment and create jobs.
Nothing is wrong with that picture. All tax incentives cost money, though, and
generally the Joint Office of Taxation is asked to determine that cost?or, as
they call it, to score the bill. The score only looks at the cost, what they
refer to as static scoring. They do not consider the benefit or what is
referred to as dynamic scoring. With the current environment in Washington,
D.C. anything that costs money and potentially increases our country’s deficit
is headed for an uphill battle. When you personally invest in any energy
initiatives, do you only look at the cost without examining the long-term benefit
or the return? Of course not, but our government does. If the benefit of many
tax incentives were part of the equation, many may never pass and others would
pass immediately. Mechanical insulation is one of those that would be a shining
star on a fast track for adoption. If only common sense would prevail. You
don’t have to be frustrated over a lack of common sense. You can make things
happen.

You Can Make a
Difference

Do you want to influence potential long-term growth
opportunities or rely on others to do it for you? Do you believe the economy is
the sole driver of your business and nothing you can do will change that? Do
you want to differentiate yourself among your peers, or your company from your
competitors’, or do you want simply to rely on the events of the day? In short,
do you want to play in the game or stand on the sidelines?

Our industry has many sideline observers. Not everyone can
participate at the same level but not participating at any level is just not
acceptable. Participation and support do not have to be complex, time
consuming, require excessive expense or lead to robo-type calls for additional
participation. Participation is an investment that provides a return. The level
of investment is an individual choice, but by all means invest. The mechanical
insulation industry has proven to be a good long-term investment. In many
cases, it is the little things that matter. Here are a few examples:

  • ASHRAE 90.1 is the primary
    “standard” that is referred to in many specifications and/or codes. ASHRAE 90.1
    2010 provides for an increase in insulation thicknesses in most piping
    applications other than applications like chilled water. Do you understand the
    differences in the 2004, 2007 or 2010 editions? Have you educated your
    employees and your customers on the differences? Talking?educating others to
    implement those changes?will improve your business. No matter how you
    participate, assuming your margins are constant, your revenue would increase
    and your gross profit dollars would go up. Some have estimated it takes between
    3 to 5 years to implement these types of changes unless codes automatically
    change when the relative standard changes. That is the exception, not the rule.
    A building owner does not want to have a building behind current standards when
    completed, especially when those changes provide economic benefit, and the
    adoption of holistic energy building rating systems are on the horizon. Help
    drive adoption of ASHRAE 90.1 2010.

  • When pursuing legislative
    initiatives?federal or state?the voice that matters is yours?the voice of the
    constituent. A simple and timely letter or e-mail to your member of Congress or
    Senator can be the difference in obtaining that person’s support. That may
    sound overly simplistic, but in more cases than not a request from home is the
    deal maker. Whether you voted for the person or not, speaking up matters.

    Participation in this area
    could be extremely impactful. In most situations, a suggested draft
    communication document is provided for your review and use. It can simply be
    printed on your letterhead, easily personalized, signed and/or cut and pasted
    into an e-mail and sent. Timing is everything on this type of request. After
    meeting with Congressional Representatives or their staff, or when an event is
    about to occur, is when outreach efforts are of the most value. When the
    subject is fresh in their minds and is a “hot topic” is the time to act, not a
    week or month later.

  • In all industry channels,
    providing customer education and awareness of information and tools that can
    help them is of value to you and your company. Reach out to local association
    chapters of ASHRAE, ASME (founded as the American Society of Mechanical
    Engineers), Association of Energy Engineers (AEE), Refrigerating Engineers and
    Technicians Association (RETA) and others and ask to make a presentation at
    their chapter meetings. Show them the simple calculators, the E-Learning
    modules and new products or systems. You mingle with your direct and indirect
    customers and establish your company as the go-to entity while increasing their
    knowledge as to the value of mechanical insulation. There is no downside.

  • Support your employees and
    promote your customers’ participation in mechanical insulation webinars,
    podcasts and similar educational events. They are not expensive but provide an
    effective means of learning what is available and communicating the value of
    mechanical insulation.

  • Help
    with the development of case studies and data. Make no mistake, we are
    competing more with other industries than among ourselves. Our industry is
    starving for generic data on many fronts, including case studies that refer to
    actual events, projects, customers, benefits and applications. Many companies
    publish case studies that highlight their company and products and contain
    great information that is certainly of value in their marketing efforts.
    However, because they are not generic in nature, they are seldom promoted by
    others and end users/specifiers often view them with a jaundiced eye. Generic
    information developed by industry is looked upon differently. While many, if
    not most, competing industries have a wealth of information related to size,
    usage, patterns, geographical differences, comparisons and long list of other
    meaningful information, our industry struggles to come together for the
    development of similar data. Companies must have “super secret” information, or
    at least they believe they do, and fear that sharing data with a third-party
    source somehow would weaken their position and strengthen their competitor. For
    the good of our industry, we must find a way to overcome this barrier.

  • Support your association and its
    efforts. Membership and involvement, financial and personal, pays many
    dividends. You have a seat at the table to influence direction, change and
    strategic planning, and the opportunity for peer networking is invaluable. Some
    can and elect to contribute and participate more than others do. However, every
    voice has impact, regardless of the channel in which you participate, labor affiliation,
    company size, location or number of meetings attended.

The bottom line: Get involved; you can make a difference.
Your participation is needed and appreciated. Your impact may not be able to be
measured in dollars, but over time movement makes a difference. Industry
participants banning together with increased involvement is a movement, and it
will make a difference for the growth and prosperity of the industry today,
tomorrow and for future generations.

Opportunities and
Challenges Are Abundant

With
every opportunity there are challenges, and with every challenge there are
opportunities. The industry has an abundance of each. Some of the opportunities
and challenges of the future are:

  • As the development of holistic
    building measurements and codes continues to gain momentum, the industry?which
    has historically operated in a prescriptive environment?needs to address how to
    make prescriptive initiatives work in a holistic world.

  • Building simulation and energy
    modeling also are gaining momentum daily. Mechanical insulation needs to be
    specifically recognized in those endeavors. The industry may need to actively
    work with coalitions and similar groups that may be charting new ground and
    require data related to different building types.

  • We must become more involved and engaged on a continual basic with
    federal and state agencies to secure mechanical insulation’s place at the table
    with building and industrial initiatives that could impact the industry. As the
    political winds blow and continually change directions, that seat could be very
    important but one that will demand patience, flexibility and understanding.

  • To affect change, the industry’s
    education and awareness outreach initiatives must not only encompass the
    federal level but the state level. The human and financial resources to
    implement that effort are complex but ultimately essential to the success of
    the industry, especially within the changing business environment. Building
    coalitions and working with other industry associations, as well as commitment
    of our own association members at the state level, may hold the key to meeting
    short- and long-term goals in this area.

  • Developing data and related
    information as to mechanical insulation in the world of sustainability, the energy-water
    nexus, lifecycle analysis, the numerous and ever-growing “green” programs and
    similar types of initiatives is not an option but a requirement. The world is
    heading rapidly in those directions. While the potential of mechanical
    insulation’s contribution is great, it should not be taken for granted. Generic
    and industry-supported data/information is needed sooner than later.

  • The industry needs to fully
    embrace the reality that we are competing with many other initiatives for
    capital, maintenance, research, education and other resources in fields like
    energy efficiency, sustainability, modeling, stimulus programs, etc. Competing
    fields include controls, lighting, solar, wind, envelope applications, duct
    sealing, high-efficiency appliances and so forth. Each of these can negatively
    impact our industry if they are chosen over mechanical insulation. We need to
    understand and promote the mechanical insulation advantages over these
    competing initiatives.

There are so many areas of opportunity available they are too
numerous to list in this article. We should be defined by how we take advantage
of the opportunities rather than how we are stymied by the challenges. The
mechanical insulation industry for years has been dependent on the economy. In
reality, that dependency may always be the primary influence. Our industry
needs to accept and embrace whatever hand the economy deals us, but we can also
positively influence mechanical insulation’s role in that economy by simply
understanding and aggressively examining the changing marketplace and
addressing the opportunities where we can make a difference.

The Economy

You cannot talk about the State of the Industry without
discussing the economy. By no means can I predict where the fluctuating economy
is heading, nor would I pretend to know the answer. There are so many domestic
and global moving parts that even the so-called “experts” seem to regularly
change the forecast. There does seem to be some consensus, though, that
creating sustainable jobs is at the center of the answer.

Our industry was not unique in that we experienced a major,
27-percent (+/-) decline in 2009 from 2008.  2009 to 2010 saw a 5-percent
recovery, and I expect we will determine that we had a similar increase in 2011
over 2010. What will 2012 bring? I suspect we will continue to see a slow
recovery for the next several years in the 3- to 7-percent annual range. It is
hoped that increase will come from a reasonable combination of unit and dollar
growth. That said, so many factors are at play and the overall vulnerability of
the economy is such that that view could change by the time this article is
published. The primary question is: what is the long-term, sustainable growth
rate for industry in general, i.e. investor confidence?

A slow but solid and sustainable recovery is probably the
best scenario?likely a much slower recovery than we have experienced with
similar economic downturns. The industry is historically one of the last
sectors to feel the impact of a downturn and, unfortunately, one of the last to
reap the benefits of a recovery. The recovery cycle is even more visible when
the general economy is slow to recover and/or is continually hitting speed
bumps or taking undesirable turns.

With all of that, we will continue to see dramatic geographic
differences. Some areas and certainly individual companies may enjoy bursts of
recovery driven by project securement, mix of business among business segments,
product lines and an array of other unique or localized events.

Summary

There
is reason to be enthusiastic, passionate and opportunistic about the future of
the mechanical insulation industry, but the business/industry profile of the
future will not look like the profile of the past.

Our industry has responded to many past challenges and overcome
rough economic times, and we will again. We have proven our resiliency and
resolve time and time again. I continue to believe the NIA world is strong and
a good place to be, and the future will only strengthen the industry’s
foundation and secure the future for many generations to come. The
opportunities are there. We need to go after them, not wait for them to come to
us, and not be left behind in the changing business environment. Now is the
time for our industry to resolve to be heard, to influence and embrace changes
and not let others define our future. Together, let’s change the status quo.