Commercial Art

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The difference between building residential pools and spas and their commercial counterparts "is like the difference between sitting down at a poker game with your friends in the kitchen vs. going to Vegas and sitting in on a high-stakes game," says Doug Salvia, president of Richmond, Va.-based Douglas Aquatics.

No matter the location, the essentials are the same in both poker and pool building, but Salvia illuminates a couple of major differences: In Vegas, just as in commercial pool building, there's more money to be made, yet the risks and levels of expertise involved are greater.

However, the poker analogy does not address the other major difference between the two applications: the paperwork — and the various steps, such as licensing, bonding and contract signing, that fuel the volumes of paperwork.

But before builders have to worry about the legalese of a commercial contract, they have to get their first commercial job. Having a solid reputation as a residential pool builder is a good start, but there's more to do. "You want to get to know all the architects in your area because those are the people that are going to design and specify these commercial jobs," says Dave Acklin, manager of the commercial pool and home builder divisions for Patio Pools & Spas, Tucson, Ariz. "And you have to get to know all the big general contractors in your area because those are the guys that are going to need to hire a subcontractor to build the pool."

Acklin suggests contacting or joining a local builder's association and/or the American Institute of Architects. "Here in southern Arizona, 185 architects belong to the local chapter and they have meetings and newsletters, so I just joined it," he says. "I have their mailing list because of that and I send them e-mails, etc.

"If you do the research, you'll get to know the players in your area and they may offer you opportunities to bid commercial work."

The good news is that, depending on your market, this group of GCs and architects may not be that big. "In this market in Tucson, there's typically 10 or 12 general contractors doing this work," says Acklin. "So it's not like you have to find hundreds of these guys."

Knowing the local GCs and architects is helpful when it comes to bidding for publicly funded projects, but it's essential for privately funded work, since the latter does not need to be announced to the general public. "Privately funded jobs may never show up on a construction reporting service like the Dodge Reports," says Acklin. "Sometimes those are already wrapped up and finished before anybody else knows about them."

In fact, some builders arrive at a point where they can get most of their commercial work via word-of-mouth referral. Says John Jacob, construction manager for Jefferson City, Mo.based Vaughan Pools & Spas, "I just got a call this morning from a guy over in Illinois who has seen our work in the Lake of the Ozarks area. And now he wants us to build a big country club pool up there."

While getting to know the local GCs and architects, builders should also find out what licenses they'll need to do commercial work. "Check in with the local registrar of contractors," Acklin says. "It may be that a builder has to go to a school, or maybe he has to take a test to get another certification in order to have a license in place so he can bid commercial jobs."

Another piece of the puzzle is bonding. "Before you actually start bidding commercial pools, you need a line of credit with your bonding company," says Richard Vaughan, president of Vaughan Pools & Spas. "They frequently require bid bonds and performance bonds, and you can't get them on the spur of the moment."

To get bonded, builders need to provide the surety (the insurance company financing the bond) with certified financial statements. "You're going to have to show them that you're financially responsible and capable of doing the job," says Vaughan.

According to Salvia, performance bonds typically are equal to 100 percent of the cost of the job, but bid bonds are much less, around 10 to 20 percent.

The fee builders pay the surety to get the bond (which is a fraction of the cost of the bond itself) is something they'll want to include in the bid. But since this cost can't be recovered if you're bid is not chosen, being able to finance the bid bond yourself is ideal. "If you can bid bond jobs yourself, you'll get your money back," says Salvia. "If we're bidding a $100,000 job with a 10 percent bid bond, we'll write a certified check for $10,000. If we don't get the bid, we get the $10,000 back."

For the builder just entering the commercial market, bonding will most likely be mandatory. For moreexperienced commercial builders, however, bonding can be negotiable depending on the parties involved and the scale of the project. You may not need to get bonded "if you've been around for a long time and you have a track record of completing projects, and if the general contractor is comfortable with your ability," says Frank Milam, semi-commercial division manager for Phoenix based Shasta Pools & Spas. However, bonding is almost always required for publicly funded jobs or large-scale heavy commercial work.

Before The Bid

Since many jobs require that the builder has a certain amount of experience, either in years of building commercial pools or total number of commercial vessels built, those just breaking into the industry will want to focus on bidding light commercial work. "You almost need to start small in order to get qualified for the bigger commercial jobs," says Jacobs. Salvia agrees: "Start with small, outdoor apartment and hotel pools."

Before drafting a bid, builders will want to find out about any local codes and regulations they'll need to comply with. "On a commercial application, the guidelines are much stricter and you have to follow them," says Jacob. "So whether it's federal, state, county, city or health department regulations, you need to find out all those regulations before starting a commercial pool."

If you're not familiar with the equipment needed to comply with commercial applications codes, from safety features and depth markers to bigger pumps, filters and PVC, you'll want to get familiar with them because the bid must specify all equipment needed for the project. Acklin suggests taking a look at the equipment room of a commercial pool in your area. "Have the aquatics director of a local city pool give you a tour of the equipment room so you can see what's going on, because it's totally different equipment.

"Some backyard pool guys may be surprised because they're walking by a filter that's the size of Mack truck, and they're used to this little filter tank that's about 2 feet in diameter. It's a good idea to see the equipment room just so they're not intimidated by it. Everything is on a much bigger scale."

And it's more expensive. "The control boxes and chemical feeders for a commercial application could be a $15,000 price point, and that may be an entire backyard pool," says Acklin.

"There's a level of sophistication on the commercial stuff that just isn't found on most backyard pools."

Complying with these codes and regulations also means there's little room to deviate from plans later on, says Milam. That's yet another reason builders need to know them and be in compliance from the beginning.

The Big, Bad Bid

Besides being in compliance with federal and local codes, the key to writing a good bid is making sure it covers all costs. Simply put, the bid is a detailed report of all the parts and labor for the job and how much all that will cost.

And though many residential pool builders already have experience writing bids for homeowners, identifying every cost that must be included in the commercial bid can be a painstaking task.

Builders need to include insurance, permitting and bonding expenses, as well as interest that may be accrued over the life of the project (since many commercial applications take months or years from start to finish). Forgetting these costs may make a builder's bid the lowest, and may get him the job, but if he doesn't make a profit, why do all the work.

Builders must also consider the Davis-Bacon Act when writing their bid. This act mandates that employees working on federally funded construction projects are paid "prevailing wage" rates. Employers must file certified payroll, which proves that the company has paid the prevailing wage and benefit. And prevailing wages can vary substantially from one county to another.

Even armed with all this information, hidden costs can crop up. "One thing that I would really stress," says Vaughan, "is know who you're dealing with and know who is doing the inspections, because they could eat your lunch. If you're ready to pour concrete, but you can't pour concrete until the city inspector comes out to inspect the steel, for instance, and they have a law that says they've got 48 hours from the time you call until when they have to make an inspection, then you've got two days in there where you might end up sitting around doing nothing.

"So, that means you can't call them until you're ready, because if you call them and they show and you're not ready, they're going to get upset. Sometimes when you go into an area where there are local contractors that feel they should have gotten the job, the inspectors may make it tougher on an outsider. So you have to know who the inspectors are, and if you feel you're going to get unfair inspectors, you have to cover that in your costs."

The Chosen Few

Just as every builder's approach to getting residential work and conferencing with clients varies, so does each builder's approach to bidding and consulting with property owners and general contractors. Some meet with the owner or GC before drafting a bid in order to customize it, which they feel enhances their chances of getting chosen; others leave the specifications of their bid more generic so the owner can buy equipment from a variety of vendors.

Ultimately, though, the goal is to be bidding with every GC that's bidding the project. Says Acklin, "There might be eight general contractors on that great big commercial project, and those eight general contractors may be getting prices from four to six pool contractors. So what you're trying to do is convince those guys that they ought to hire you if they're the successful, low bidder."

However, says Milam, "The general contractors are pretty particular about who they get the bids from. They're not going to get them from just anybody. They're looking for expertise and accuracy. After your bid has been accepted, they don't want you to come back and say, 'Now that we're looking at this more closely, it ends up that it's going to cost $20,000 or $50,000 more.' That's going to be a real turnoff.

"And they're looking for expertise because they're managing the construction of the whole structure, so they're looking to you to make the pool experience go easily. They need somebody that can deal with their architects, their owners; somebody that can deal with making sure the pool is going to meet all the codes and regulations, and not create more problems for them. And then if you have a solid relationship with a general contractor, so that they think of you as their pool guy, they know you'll be on the team and you'll have a better shot of getting that work."

Once your bid has been accepted and you've landed a job, there's a contract to sign. "These contracts can be anywhere from a few pages to a book," says Milam. "You really have to read them because there can be all kinds of little caveats in there. You don't want to just take it and sign off on it.

"We want to get the contract from the general contractor as early as possible so that we can review it, and if we have anything we have to talk about in terms of issues, we can get those resolved early on. There's a lot of legalese in there and they'll talk about delays and when the work's supposed to start and when it's supposed to be done. There can be all kinds of little areas where now instead of you being in control using your own contract, they're in control using their contract."

However, if you've got the experience and/or reputation, terms can be negotiated, and some builders even attach their own terms to the GC's contract. In his bids Salvia includes the specifications for the pool, a price, a schedule of values, which indicates exactly how much his company will get paid at each stage of the process, and a list of the general contractor's responsibilities. "In that list, we are telling the general contractor what they are going to do before we arrive at the site," says Salvia. "We're telling them they're going to provide all utilities. That they're going to provide a preparation of the site to within 8 inches of finish elevation, and so forth.

"Also on that list will be what happens if we get into additional charges. On ours we say if there's unforeseen expenses, such as we hit water or we have to form up the pool, we're going to charge them our cost plus 20 percent. The general contractor's contract will say he'll pay us cost plus 10 percent." But with Salvia's contract attached as an addendum to the GCs, his company will get the 20 percent.

"In a commercial environment you never want ambiguity," says Salvia. "So the best thing is to clearly state your intentions of what you expect each party to do."

After the contract is squared away, builders generally need to create shop drawings and procure permits, if that's their responsibility. Some builders AQUA spoke with said they always provide shop drawings, which indicate the size and shape of the pool as well as all its plumbing, while others said they were provided to them. Be sure to know what's expected, and then deliver. And keep in mind the drawings for commercial applications will be more complex.

Says Acklin, "For a commercial application, the drawings are at a higher technical level. They have more information on them, and they have to include all the information that would be related to the health department issues and the Americans with Disabilities Act concerns."

Once the drawings are approved, it's time to put together and distribute submittals, which are a booklet of all the specification sheets for all the products that will be used to build the pool. The architect and general contractor approve the submittal book or make any changes if necessary, and then "hand it back to you as the Bible on what you're going to buy and provide for that job," says Acklin.

Time To Build

In terms of the actual building process, it is similar to building residential pools, but everything is bigger, and so mistakes, if made, are also bigger and more costly.

"On a gunite pool, for instance," says Jacob, "you still have to tie your steel in there, you've still got your plumbing. You're still going through the same steps that you do on residential pools.

"The biggest thing to understand on commercial pools is hydraulics: the size of the motor, the filter, the pump, the flow rate. You cannot use a 4-inch line where you should have a 6-inch line."

Milam concurs: "When you're plumbing, you're typically dealing with larger pipe sizes and that can get real challenging. So just because you're successful at plumbing residential pools doesn't mean you're going be able to breeze right through it for a commercial project."

Proper hydraulics are so critical for a couple of reasons. First, turnover rates are regulated by local health departments. Says Acklin, "It's part of the health department permitting process that you have documented that you can turn the pool over in a certain number of hours and turn the spa over in a certain number of minutes and that requirement is going to be a local jurisdiction thing."

Vaughan errs on the side of caution when designing hydraulics for his pools. "If you design for a six-hour turnover, then as the filters get dirty, you get somewhat less than a six-hour turnover because you're not moving that water as quickly. So why not design for just a little bit more so that as the filters get dirty, you're still getting a six-hour turnover.

"Clean water is what you're selling, really. If you have yucky stuff, nobody is going to get in it. But if it's clean, sparkling and attractive, people are going to use it. And not only are people going to use it, they're going to brag about it and you'll get good referrals."

Decks are almost always going to be much larger, as well. "You can get into more elevations," says Milam. "You can have a lot more different buildings you're tying into vs. just the house or a patio. So drainage becomes real important.

"You'll want to look at soils reports and get a good sense of what you're going to be dealing with. You don't want to start the pool and then find out there's expansive soil and go back to them and say, 'We need to do something different with this deck and it's going to cost more.' At that point, whatever you think you need to do to build the pool successfully, you're going to be footing the bill for it."

Ending The Paper Trail

If at any point during construction, something does change slightly, this needs to be documented in "As Built" drawings. Builders need to provide the property owners with an accurate record of what they will find on the site so that in the future they can locate and fix a leak or make other necessary repairs.

Hopefully, the last major piece of documentation builders will need to present to the property owner is the operations and maintenance manual. According to Acklin, "This is a book you make up that has a breakdown of all individual parts you might have and components that you put on, and instructions about how to operate and take care of the features. The owner, pool contractor, architect and general contractor all get a copy, so that if something breaks four years later, they can pull this book off the shelf, open it up and find out what part they need to buy."

This includes labeling every valve — there will usually be a series of four to five valves on the filter system — and instructions explaining how to backwash the system.

Risks And Payoff

With all this extra paperwork and potential headache involved in commercial work, builders may wonder, "Why would I want to do this." Well, if everything works as it should, the payoff can be big.

Vaughan says his profit margins are better for commercial jobs because "I make them that way." He bids for an 18 to 20 percent profit and typically ends up with that. He's also been building pools for 30 plus years. "I'm now building a lot of second-generation pools," says Vaughan. "I built their folks' pool and now I'm building their pools."

Other builders may not necessarily see a better profit margin on commercial jobs, but when time and money are both considered, they still come out ahead. Says Salvia, "If we do a $200,000 commercial job and we end up with a 20 percent profit margin on that, we end up with $40,000. Now I could go out and build 10 residential jobs and make maybe make a 30 percent profit, or $60,000, but I could stay on that one commercial job and do it possibly faster than 10 residentials."

Salvia notes that his margins for commercial renovations, however, are almost always more profitable than residential work because there are fewer skilled contractors who do large-scale commercial renovations. "We're working on a YMCA where we're putting in a new filter system, new pump, automatic water level controller, etc.," he says. "The contract is in excess of $100,000 and we have turned it in three weeks. Boom. In and out."

Milam agrees that profits can be substantial, "but you're also taking a much bigger risk, and you're putting a lot more money out there: during bidding, getting permits, etc. You have to think long and hard about your cash .ow and whether you can weather that, and then the more commercial jobs you do, that can really spread you thin."

Financial stability is also critical since pool contractors may not get paid until months after they've been awarded the job, and they may not see a profit from the job until months after they're finished since it's standard practice for the GC to keep a 10 percent retainage.

To assist with this cash-.ow crunch, veteran pool builders usually negotiate retainage down to 5 percent once the pool is built, or they demand retainage be paid within 60 days of completion of the pool. One way or another, they negotiate to receive their profit within a reasonable amount of time.

Not only are the financial risks more substantial, but the pool contractor also has less control on the commercial site. Salvia explains how this creates risk: "The general contractor tells us when to start, but we might have 20 residential jobs to go. But if we don't start, he can bring in another contractor and backcharge us. That's risk. Now, we're working but he wants us to work on Saturdays and Sundays because he's behind schedule. If we don't do it, he can bring in another contractor and backcharge us. Risk. Now, he wants us to finish by a particular time and again we're tied up in other jobs, so we have to pull people off of other jobs in order to meet his schedule. Risk."

With less control, builders must also be able to change quickly. Salvia recently saw firsthand just how flexible a commercial builder needs to be: On a recent project, he was told only five days before excavation that the design of the pool had to be changed. "You gotta be able to move," says Salvia.

Final Thoughts

When AQUA asked a few veteran commercial pool builders if they had any advice for those who may just be venturing into the commercial frontier, the builders shared some words of wisdom.

Milam suggest making a long-term commitment to the commercial market, rather than just dabbling. "For all that you would go through to figure out how to do this — all your permitting, etc. — it may not be worth it if you did just one job once in a while. So if a builder was large enough to have somebody on their staff that can specialize in commercial work, I think that's a good way to go."

Salvia stresses that it takes time to grow into commercial work, especially heavy commercial work. A massive job his company completed earlier this year included three indoor pools and a spa. "We couldn't have done this job 20 years ago. We wouldn't have had deep enough pockets nor enough knowledge to do it," he says.

Vaughan encourages builders to ask questions. "Call somebody like me. I love to talk to people. If somebody's in New York, it doesn't bother me to talk with them. I'll tell them anything I know because the better we can get people trained, the better people understand what a good job is, and the more work everybody is going to have."

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