Follow The Money On Development Deals

?Follow the money? became a household phrase after the 1976 movie that told the story of Watergate, All the Presidents Men. Personal experiences over four decades in the consulting industry, working to create sustainable developments, often bring the phrase to mind.

In a meeting a few weeks ago concerning a potential collaboration between our planning company and large engineering consulting firm, I was coached to tone down the fact that the design methods we invented and utilize reduce infrastructure. You might ask, why would reduced infrastructure (one key to a more sustainable world) be a negative condition for an engineering firm whose main purpose is to design the infrastructure that society must rely upon?

Follow the money? Large engineering projects, as well as many architectural structures, are often quoted as a percentage of construction costs. The incentive is to increase, not decrease construction costs. We have the ability today to reduce the world?s infrastructure possibly up to 30%, which would be a major step towards reducing initial costs of commercial building and residential housing. It would have massive environmental benefits, and reduce the continual maintenance costs to the governmental authorities (forever) up to 30%.

Follow the money? If the income of consulting firms is based upon construction costs, the consultants' gross dollar billings would also be reduced by 30%. Firms that supply concrete, steel, pipes, etc would also have their gross income slashed by 30%. Does our world have a chance of becoming sustainable? Dream on!

Follow the money? A decade ago I met with the president of one of the largest engineering firms in Minnesota. He wanted to know how our firm can produce so much work with so few people (I personally design all of the developments and had a drafting staff of two people). In ten minutes I designed a development of about 15 lots that showed homes, driveways, and all the final geometry, using the commercially available technology we had developed. ?Oh my,? he said, and paused. I thought he would say, ?We could reduce our staff by half,? but instead said , ?You must put the plans on the shelf a few weeks, to justify the billing hours?. Then the enlightenment came to me. I had developed a software technology used in my own consulting business to produce engineering-accurate layouts in a fraction of the time of a CAD (Computer Aided Drafting)-based technology, but started to understand that this might be a hard sell.

Follow the money? Large consultants often look at the floor of employees as a multiplier, meaning that each workstation will bring some multiple of profit. Suppose a technician costs $50,000 a year, and the multiplier is 3.5. After overhead, that technician represents $100,000 in potential profit. At a 150 person company, replacing one third of the staff by using more efficient technology and methods in the above example reduces the potential consulting income by five million dollars!

Follow the money? Liability is another roadblock to sustainability. Why try something new when the old tried and true has worked for decades or centuries? In the consulting industry, licensed professionals risk their careers if a new concept causes a major failure, so they're more likely to discourage anything without a proven history. The loss of a license to certify plans would have a devastating effect on a consultant's personal finances. It is far safer to claim that the new method cannot work and talk the developer or municipality out of the idea.

Follow the money? Today, few consultants are making any. Most are either hanging on (barely) or have shut their doors. The unemployment rate among architects, engineers, draftsmen, technicians, planners, and related occupations is very high. The exceptions are those lucky few that have won lucrative government contracts and are holding their own, or even thriving.

Follow the money? The market reacts to design, innovation and value. The first Toyota Prius was an ugly miniscule car based upon the Echo, but it was highly efficient. Gas was cheap when it was first introduced, and sales were dismal. The first generation Prius had innovation, but lacked design. The next generation Prius came out as gas prices soared. When an attractive interior and exterior design was combined with innovation, it quickly became a symbol for a new era of green thinkers. Rising fuel prices turned the hybrid technology into an increasing value which fueled ? so to speak ? its success. Before the I-Pod there were many digital music players that were innovative. When players were combined with an attractive package design and the ability to download from the same vendor, the overall value created its success. Like the Prius and the I-Pod, land development itself is a ?product?.

Follow the money? The housing market crashed and many believe the commercial real estate crash to come will also be devastating. Funding for infrastructure keeps many consultants employed when the private development and building industry flounder.

Those of us in the consulting industry must make some significant foundational changes if we are going to have a sustainable future, and claiming "Sustainability!" on the corporate web site is not enough. Unlike building construction, where being ?green? typically increases costs, in land development, environmentally sound design and construction can cost significantly less if done right. That said, it does require more design effort with a greater attention to detail. It is possible to decrease both construction costs and environmental impacts say, 30%, but it could mean the consultant doubling his or her design efforts to do so. Not only does the firm lose 30% of its gross income if billing is based upon a percentage of construction costs, it must make a huge increase in effort to do so.

Follow the money? In this new age of engineering and designing sustainable development, it is no longer possible to get the best result by simply using an off-the-shelf software to calculate the hydrology of the site (the drainage) within sewer pipes. Using surface flow along with natural materials that can filter pollutants from the run-off before drainage leaves the site requires a botanical engineering solution that blends knowledge of natural and manmade engineering. This requires a specialist, and the complexity that's required to successfully design these systems with fail-safe methods goes far beyond pressing a software button. Small errors could have devastating results, and the consultant will be liable.

For example, I installed a no-mow ? low watering ? fescue lawn, instead of sod, when my home was built last year. This landscaping worked great during the first year, giving us the look of a lawn look without having to mow it. We were told to water twice daily to get it established by the landscaping firm that claimed to be experts on this exciting new low impact landscaping. Well, watering fescue twice daily, it turns out, is the worst thing you can do, according to the prairie restoration consultants. We inadvertently turned our lawn into a fast growing prairie that needs more mowing than sod! But this is just one example of what can go wrong in this new era of sustainability. I was willing to invest, and I believe mistakes can be corrected and documented to reduce future errors. My landscape contractor installed something quite new in the industry, and took on a risk compared to suggesting safe sod. After the bugs are worked out the company will have a market edge and an example to show (but maybe not this year).

So how can we force an industry to change?

Lead with Money? Cities and developers hire firms assuming that they are going to use the latest techniques available to get the most efficient design possible. If the bidding process changed from seeking the lowest bidder to looking for the most advanced and efficient bidder, the industry would be rewarding innovation, competition, great design, and risk. Give priority to solutions that exceed the specifications. Contractors and consultants could be rewarded for coming up with revolutionary solutions.

Lead with Money? The reward could be in the form of a bonus for innovation: For example if a plan saves 100 million in right-of-way purchasing, give half of the savings to the winning contractor and consultant. If the consultant is being paid a percentage of the construction costs (lets use 5% as an example) on a 100 million dollar project, then he or she would gross five million dollars. If they could win the consulting (engineering) contract by demonstrating the most efficient design instead of being the lowest bidder (or the most politically connected), and be paid a percentage of the demonstrated benefit, they would be making more for providing a higher degree of effort and perhaps taking on more risk. In the above example, if 30 million dollars is demonstrated to be a savings or increase in functionality, and 20% of the savings is rewarded back to the consultant, then the consultant would make 5% on the 70 million dollars (3.5 million dollars) and 20% on the 30 million in savings (6 million dollars). The gross revenue to the consultant would almost double.

Lead with Money? Our military often awards bids for those projects that exceed the specifications. Vendors should compete not just on price, but to demonstrate how they exceeded the specifications. Governments as well as private developers could pick and choose based upon innovation, design, and value. Those taking the extra effort would flourish, and eventually the new higher standards would become the norm.

How about forcing change through regulations? Regulations can only control minimum standards, pretty much guaranteeing monotony and stagnation. Instead, follow the money: To create a sustainable world, we need to exceed minimums, and foster innovation by rewarding risk, effort, and investment.

Flickr photo, "George Is Keeping An Eye On You," by peasap

Rick Harrison is President of Rick Harrison Site Design Studio and Neighborhood Innovations, LLC. He is author of Prefurbia: Reinventing The Suburbs From Disdainable To Sustainable and creator of Performance Planning System. His websites are rhsdplanning.com and performanceplanningsystem.com.