Picking an Architect I

After 30+ years of marriage, my wife and I decided to tempt fate. We are going to build a house. Despite well meaning advice from friends, we march forward into a task that brings to mind a phrase about fools and angels.



The first part is easy. Easy, that is, if you ignore the financial part of it. But getting land is the easy part. My lust for land knows no bounds. I look at "Land For Sale" ads with the same interest others might view centerfolds or Gucci handbags. But with land in hand, what next?



To build a house, you need an architect. How do you pick an architect? That is a question for me that literaly drips with irony. This is my money, this is my house and this is my wife that I want to be satisfied with the process and the end result. I must pick a professional to design something that is near and dear to my heart. If there are any clients reading this, they must be smiling.

In any case, I got a book for my wife to read called"How To Work with an Architect". There was a lot of talk about communication, as you would expect. And that is the essence of any design process. Those of us who want to build things know how to use them, in this case, we know how to live in a house. But we don't know how to design a house. A skillful architect needs to know how to listen to our conversation about living in a house, and then figure out what that means.

Our satisfaction with the house will be based on two things. First of all is our ability to articulate our most important information about how we live and how we want to live. Information about how much money we want to spend and what kind of time spans are involved. We need to as clearly as possible, tell the architect what our vision is for our house.

Second of all, and of equal importance, is the architect's understanding hearing of our vision. And then his taking of that combination of needs, money and time to produce a design that fits our needs.

The real heart of the book however was a series of checklists that served to define the contractual relationship between the owner and the architect. The checklists were all about setting very objective criteria in the design process. The architect was tied both financially and contractually to a very specific vision of a house. Before the first serious conversation took place between the architect and the owner, the architect was incentivized to spend as little time as possible on our house or with us. He was incentivized to produce as simple and as basic a package of drawings as possible. Because of the nature of our business relationship, the likelihood of the architect taking much ownership in the project is not high. He will want to get in and then get out of the project in the minimum time possible.

After the architect produces his design, we are going to be working with a construction contractor for some 9 to 12 months. Once we have committed to that contractor, we will be spending some 20 to 40 times the amount of money with the contractor that we spent with the architect. Once we have committed to that contractor, that contractor will have the power in the relationship not us as the owner. Every contractor we work with is going to be much more sophisticated than we are about where cost and quality can be cut without being seen.

Having spent my working life designing and building unique "one of" projects that were very important to the owners of those projects, I ignored the advice of the book and its checklists. Luckily my wife and I agreed on our choice of an architect. But I chose him for two basic reasons. First, because he had no set fee for the work, but simply charged by the hour. He is not going to be trying to economize his time to maximize his profit margin.

Secondly, he came across as someone who would listen to what we wanted. He talked about how the type of design would dictate what drawings were needed. He talked about the need for the architect to stay involved during construction to make sure that the design intent was followed and that no compromises in construction quality were allowed without our knowledge.

I have to tell you that he was preaching to the choir.

180 on Natural Gas

Is there any business that is as big a political football as the energy business? And is there any part of the energy business that is subject to such wild swings of emotional hysteria as that part of the energy business associated with natural gas? I suspect that the nuclear business might be, but natural gas is close behind. Like the Wilson sisters of Heart, they are the wild sisters of the energy business.

It was well within my working lifetime, the late 1970's, that our political establishment passed laws that forbade natural gas to be burned to generate electrical power. We were sure that we were running out of natural gas and we just knew we shouldn't waste it to generate electrical power. We had plenty of coal back then. And the climate threat that we were all worked up about was nuclear winter. Sober scientific opinion envisioned glaciers over most of the United States.

Now the political establishment, as well as Oprah and Al, is worked up about global warming. In 30 years our future has changed from freezing to death to drowning when all the glaciers melt. Instead of forbidding the use of natural gas to generate electrical power, it is now being mandated.

Is this just political theater, or should we be concerned? Everybody has an opinion, but facts seem to be in short supply. The facts haven't changed in the past 30 years, but their interpretation has completely changed.

It may be political theater, but it has real consequences. Assuming $ 30/ton PRB coal delivered, it delivers a kilowatt of electricity for just under 2 cents. Assuming $ 7/MMBTU natural gas, it delivers a kilowatt of electricity for 5 1/2 cents. This is only the energy cost of a kilowatt, but it goes up over 125%.

Given today's focus on reducing CO2 emissions, the two wild sisters, natural gas and nuclear, are the only game in town for truly significant energy generation. While solar and wind are the current darlings of the energy business, a 1,000 megawatts of either take up a lot of real estate with very unattractive mechanical structures. Also you don't pull a 1,00 megawatts of energy out of an ecosystem without altering its micro-climate. How can that not become a worrisome problem in the future.

Junior High Deja Vue

I just had a conversation in the hallway with one of our discipline managers. I had just come out of our weekly business development meeting, and he asked how it had gone. In a flippant mood, I answered that, "It had gone just like it always did. Business development meetings reminded me of bathroom conversations in Junior High."

He looked at me strangely, as you might imagine, and I am sure went back to his office and worried about the management of the company that he worked for. I hope he is not dusting off his resume. But I can't help it. I have been involved in the sales of engineering work for getting close to 30 years now. And it just fits. I can't help thinking about it in those terms because it fits so well.

The language is almost identical, with phrases such as "Do they like us? What do they think of us? Did we make them mad? How do we get them to like us?", being used all the time. The situation is similar as well. Our clients and ourselves are very similar, yet very different. We need each other but don't understand each other. Generally our meetings with each other are marked by emotional awkwardness and a certain tension.

We went to the same schools, to outward appearance we do the same work and are in the same industry, but we have become different from each other. We really don't understand what is important to each other in our business lives. Our distrust and fear of vulnerability to the other prevent us from virtually ever discussing or talking about the real issues that impact us.

The fact that we are technical people working in business compels us to think about our relationship in strictly objective measures. But who among you on the client side really believe that selecting an engineering service company can be done on a spreadsheet? Who among you on the engineering service side have found your best clients to be those with the highest profit margins?

A successful client/engineering contractor relationship is a powerful force that can accomplish great things. But that relationship is built upon what any other relationship is built on, i.e. trust, shared goals, openness, integrity, a willingness to believe in the righteousness of the other. Relationships don't happen overnight. They happen slowly over time, because relationships only happen when we make ourselves vulnerable to the other party. Being vulnerable takes time because we can get hurt when we are vulnerable. Client careers can be damaged. Engineering service companies can be put out of business.

And that is why business development is like junior high. In junior high, we begin to learn, as people, how to be vulnerable to each other.

CO2 Emission - Is it serious?

There have been a few interesting clouds in the sky the past few days. I think that they are important, but I don't quite know how or why. Cases in point:

• One of our regional electrical power utilities had a serious application for a large coal fired power plant to be built in our region rejected by that state's utilities commission. The reason stated for that application's rejection was its contribution to CO2 emissions. The power is needed and this plant's application has been moving forward for some time.


• The Governor of our state came out with a very public statement about how Colorado was going to be serious about CO2 emission reduction. Even more interesting was the presence of the CEO of our electrical power utility at the side of the Governor. That CEO runs an electrical power utility that is very heavily dependent on coal fired power generation, and is in fact mid-way through the construction of another 1,200 MW of coal fired power generation.


• A report on how our states utilities commission agrees with the concept that regulated utilities should be allowed to make an increased rate of return based on that utilities contribution the economic benefits resulting from enhancing Colorado's health and welfare. CO2 emissions were mentioned.


• At the Oil Shale Symposium hosted by the Colorado School of Mines recently, the major concern voiced by industry, academic and governmental participants was the anticipated increased CO2 emissions.

I don't know what this means. But I have some ideas. First of all, CO2 emission reduction is going to become important. No matter the science on global warming, CO2 emission control is here. It appears that the culture has decided that we need to control CO2 emissions and serious decisions with real financial consequences are going to be made on the basis of that concern.

On a very parochial basis, this is probably good news for ForeRunner for a number of reasons:

• Control of CO2 emissions means a lot more complexity to doing projects. This is obviously good for a company that does projects. On any energy project, the need for outside specialized project services goes up as project complexity increases. That rise in need for our services is not proportional, but exponential.


• In a world where CO2 emission needs to be controlled, natural gas is the fuel of choice. Since that is a very large part of our business, that is good for us as well.


• The Rocky Mountain Region is rich in untapped natural gas reserves. We are a major player in the Rocky Mountain natural gas service market. It looks like Rocky Mountain natural gas has another strong driver for its continued health and expansion.

Bronco Pipeline

The news today in the Rocky Mountain energy patch is the Spectra's proposed new pipeline, called the Bronco Pipeline. As I understand it, it will take natural gas from Meeker or Opal as the supply terminus of the line and move natural gas to the west coast, nominally the Malin Hub on the PG&E System in Oregon. This follows onto proposed extensions by various companies of the Rocky Mountain Express Pipeline to various points on the East Coast.

All of these projects are important because they move natural gas produced in the Rocky Mountain Region to markets for that gas. Energy development in the Rocky Mountains has always lagged, primarily because the price of the energy produced in the Rocky Mountains has almost always been low relative to that produced in other parts of North America. Not only has the price of the energy been relatively low, but the cost of producing it has been relatively high.

While the cost is high for a number of reasons, the low price of the energy is simply that the Rocky Mountians do not have much of a market for that energy. The local market is pretty small relative to the amount produced. As a case in point, most of the natural gas produced in the Rocky Mountains must be transported to the west coast or to the midwest to be used. So pipelines are very important. And we don't have enough of them, so plans for more of them are always to be encouraged. Particularly for those of us who build them.

The Barnett Shale around Dallas, Texas has become the hottest play in the United States, not because the resource is better than those found in the Rocky Mountains, but for many of the reasons that have held down Rocky Mountain production.

First of all the gas is accessible to strong natural gas markets. It can be moved to Gulf Coast or midwest markets without a need for costly new pipeline capacity. Secondarily, the local infrastructure is friendly to natural gas production. Plans for new production are met with a positive reception rather than hostility. As a producer, if you are going to get lower prices for your product and it is going to cost more to make your product, you don't really want to be everyones' enemy as well.

Procurement and Other Evils

In one of the many visits I make to what we hope to be new clients, I met with a group of the that Owner Company's people. One of those folks was the Director of Procurement. He was a very nice fellow and looked to be very competent with the best interests of his company at heart.

Most of the conversation centered around the great difficulty this client was having in bringing projects in on budget or schedule. These fine people were being savaged by their management because of their perceived inability to manage projects, i.e. costs were not in line with budgets and schedules were not being met.

Just as hammers see nails everywhere, the Director of Procurement was sure that better purchasing practices would be a large part of the solution. He was interested in how contracts and purchase orders could be better structured to achieve cost protection for his company. As is often the case with Corporate Procurement, the focus was on risk avoidance rather than risk management.

While the subject of why projects regularly overrun their budgets is something that we could talk about for days, (in fact I have, see my last two columns in the ForeRunner Precedent) I experience is that procurement is more often the problem than the solution. Projects revolve around two centers of activity; purchasing and construction. Everything on a project is subservient to those two activities. So purchasing is very very important to projects.

But like everything, projects need to be managed. That is the function of Project Managers. In my view, everybody and everything in a project reports to the Project Manager. When that is not the case, projects suffer. Projects especially suffer when the most important elements, purchasing and construction, are outside the control of the Project Manager.

Going back to my meeting at the possible future client. The organizational titles for the project people at the meeting were "Manager" and "Supervisor". The organizational title for the procurement person was "Director". The client was very open and honest about their difficulties in successfully executing projects. I think the titles of the people in that meeting say it all.

Are We Professionals?

One of our employees asked the question; "Why don't we stamp all of our drawings?" A simple question, but one full of implication. The statutes of our state, Colorado, are quite clear, at least to the non-legal mind, about the issue. Those regulations state that engineering drawings are to be stamped by a Registered Professional Engineer, registered in the State of Colorado. Very simple and very clear, again to the non-legal mind.



Of course, there is a standard litany of reasons why we don't:

• Standard practice; Working with a wide variety of engineering contractors over the past 30 some years, I have never seen it done as a standard practice except where required by a permitting authority or by the client.




• Owner Exemption; Owner's of engineered facilities are specifically exempted from the requirement to stamp drawings. As contractors to those Owners, we are exempted as well.




• Specialized Clientele; Since we do not work for the general public, but for a specific knowledgeable clientele, we do not fall under the rules whose intent is to protect the general public in the application of a specific body of knowledge, i.e. accountants, lawyers and doctors.

But I took the question to a lawyer whose practice is the engineering profession. He said that he had never been asked that question before. Imagine that!

In any case, he rendered an opinion for us that stated the rules were unclearly drafted, and that in his opinion, we were operating in a legal and ethical manner without stamping drawings. So the system works. The regulation says "Stamp your drawings." The lawyer says, "That isn't what the law says."

But the real question is whether engineering is a profession or is Engineering a Profession. If engineering is a profession, then we mean that we are white collar knowledge workers. Our interaction with the world, our projects and clients, is governed by contracts and generally accepted rules of doing business in the modern world. If Engineering is a Profession, then we are a Profession, and entitled to be treated as such.

As an example, a drug prescription cannot be filled without a Physician's signature. Should it be possible to purchase a pressure vessel or control valve without an Engineer's signature?

Buying up Engineering Companies

Headline this morning is that Jacobs Engineering, a 48,000 headcount company, is buying Carter Burgess, a 3,200 headcount company. Does it seem to you that engineering companies are being vacuumed up into a few large mega-companies? By most measures, a company with 3,200 professional knowledge workers is quite large. Yet its assimilation into Jacobs will barely nudge total employment in that company.

Seeing all these engineering companies being acquired makes me wonder, "Are these acquisitions the animal spirits that signal a market top?" As someone who spent a couple of years selling real estate in the eighties, I am very sensitive to any hint that the market for engineering services is going down. After all, the market wisdom that I subscribe to says that a hot market is good evidence that the top has been reached. And if a top has been reached, that means that the future is down.

Yet, in this case, I think that the people buying up engineering companies have got it right. Our society has under invested in infrastructure, especially energy, for so long that we have a lot of catching up to do. Most reasonable people would judge that the balance will change soon and investment in infrastructure will again be a driving force in the domestic economy.

Conditions certainly seem favorable for such a change. Our economy is awash in investment capital today, available at very low interest rates. Instead of investing in sub prime residential real estate, investment in solid investment return genereating assets is growing more attractive. That has got to be very positive for capital spending, which is what provides an attractive environment for engineering companies.

It is also true that our political establishment is coelescing around the idea of reducing US dependence on foreign sources of energy. It does seem to be an idea whose time has come. While the idea of complete energy independence is whistling past the graveyard, it is a fact that the North American continent can produce a great deal more energy than it does today. But to produce that energy in the safe and environmentally acceptable fashion will not only be expensive, but will require large sophisticated project organizations that can operate on a large scale with access to a broad spectrum of intellectual resources. Those organizations must also be sophisticated in dealing with the spectrum of public stakeholders who will be affected by such projects and who must be appeased for them to go forward.

Which brings us back to Jacobs, whose market is primarily large capital intensive energy projects, and their purchase of Carter Burgess, strong in infrastructure permitting and planning. Perhaps the market is indeed evolving in its mysterious way to create organizations necessary for the coming century. On the other hand, most evolutionary developments are dead ends. Put down your money and make your bets!