Volume 40,   Issue 3                                March 2005

DearUSG

Surcharge Experiences
Dear USG:
I just received and read the splendid article by Lyle Hill in the January USGlass magazine (see page 72). I had to chuckle. The descriptive dialogue, although humorous, encapsulates the mentality of our business climate today. Most products, such as glass, trucking and aluminum, have been reduced to a type of commodity purchase. The cheapest one wins. The sales office wants more sales. Shareholders and corporate want more profit. 

A good salesperson can almost always sell something he believes in. In the back of his mind he thinks his product has huge profits, corporate is getting rich and a few percentage points won’t hurt anyone. On the other hand, surcharges are fueled by the inability of the front line to truly understand it. I am sure most suppliers put out their first surcharges with much trepidation, wondering how this would affect their business. Will my competitors go along? Will I lose key clients? Can I sell it to sales? I can see it now … corporate held its breath while explaining to its front line the necessity of their surcharge. The corporate officer knew he had succeeded when, after his torrid, in-depth explanation, he looked out among his force, sporting blank stares, and someone asked, “Is there a simpler way to explain this?” 

Bingo, thought the corporate officer. 

“Yeah, it’s a pass-through expense. Nothing can be done about it.” The front line leaves the meeting in a daze but all believe to their core the necessity to recoup charges made against them.

The corporate officer leaves the meeting rubbing his hands together reminiscent of the Grinch.

Here is a true conversation I had with a major glass supplier a few weeks ago.

“So Mr. Vice President, I just received your letter indicating a change in the energy surcharge,” I said.

“Yes, Brad, we had to. We had no choice.”

“Can you tell me what makes up the energy surcharge?”

“Oh yes. Now Brad you know this isn’t our fault. It costs us $900 per truckload for raw glass. This surcharge just reimburses us for this.”

“Is there anything else, other than the $900 per truckload you are being charged for raw glass, that makes up the surcharge?”

“No. As a matter of fact we just concluded our nationwide sales meeting yesterday. I am in the airport flying back to … We went over this issue at the meeting. There is nothing we can do. We get in more than a thousand truckloads of glass a year nationwide, so you can see the necessity of it.”

“Yes I see. But have you done the math?”

“Uhh, what do you mean?” 

“A typical truckload of glass contains 26,400 square feet of 1/8-inch; or 17,160 square feet of 3/16-inch; or 14,300 square feet of 1/4-inch glass, right?”

“Yes, but what are you getting at?”

“Well if you divide $900 by 26,400 square feet it works out to 3.4 cents per square feet for 1/8-inch glass; 5.2 cents per square feet for 3/16-inch; and 6.3 cents per square feet on 1/4-inch glass. Now, if I take the price I pay times your surcharge and apply per square feet it works out to 8.4 cents per square feet on 1/8-inch, 9.0 cents per square feet on 3/16-inch; and 10.2 cents per square feet on 1/4-inch. This equates to $2,217.60 per truckload on 1/8-inch, $1,544.40 on 3/16-inch and $1,458.60 on ¼-inch. If you take just the average of $1,740.20 times your one thousand truckloads, it works out to a difference of $840,200.”

Pause. 

“I, I, I don’t think anyone has explained it in those terms. Uhh, can I get back to you?”

Before I could respond. Click.

As you might expect, I have not had a response to date.

No one is man (or woman) enough to stand up and place a price increase into effect. Yes, I will not deny these suppliers probably require and need better margins, but don’t hide behind added charges that have been misrepresented and misconstrued in biblical proportions.

Honesty is always the best policy. Sooner or later, it will come back to bite you.
Brad Squires
Vice President
Boyd Aluminum
Springfield, Mo.

More About Architects
Dear USG:
I am responding to the recent article written by Michael Duffy in USGlass (see January 2005 USGlass, page 44). I decided that someone should step up and defend the glazing professionals, related suppliers and the manufacturing base that supports the glass industry. 

Mr. Duffy, it seems you’re hunting flies with a shotgun. Put the shotgun away, sit back and have a cold one. You are not in a crisis and the glass industry is certainly not falling apart from a lack of information. 

First of all, any architect who takes on a U.S. embassy better have all of his ducks in a row before submitting a proposal to Uncle Sam. If your ducks were lined up, you would have assembled your partner team prior to submitting a proposal. Many of your complaints would have been solved before you were awarded a contract. 

Now that you’re in a jam, I’ll try explaining a few things. On any U.S. embassy, Uncle Sam, through the State Department, requires only pre-approved vendors that use DOS certified products. If you need a fenestration product, you will need to turn to one of these vendors. Odds are that they don’t have a product developed to meet the aesthetics of your 1960 building. However, they can certainly design a product that will be acceptable, but be prepared to pay the price of development and testing. 

I get the impression that you don’t want to do the dirty work of tracking down these companies yourself. I can understand your frustration because architects draw the dreams and rely on engineers, such as you, to resolve the unknown. You are being paid for this task. Don’t call on others for free advice when you are in a pinch.

The architects and engineers who I work with (I call friends) sometimes hire me and sometimes I hire them. It’s your responsibility to get out and network with the people in the know, don’t expect them to show up at your door or rent a booth at the AIA show. The people you need to get in touch with hide out in the nooks and crannies of back offices in factories scattered across the county. These people are troubleshooters. Use your telephone. I would suggest that you hire an independent consultant to work out the nitty-gritty details and take this burden off your shoulders. Don’t hire a blast expert since Uncle Sam has already taken care of this burden for you through his vendors (only as it relates to fenestration products). Hire a person to approach the approved fenestration vendors and iron out the intended aesthetics that you desire, if you don’t have the time to take care of it yourself. By approaching these vendors you will be able to broaden your options. Again they can manufacture the product you want and maintain compliance with Uncle’s requirements. 
Take a look at the Pentagon. This project required energy saving windows that maintained the historical aesthetics while providing blast mitigation. Masonry Arts was the company that provided the windows for the Pentagon and that company’s name has been in numerous articles and in the news. I imagine you could have contacted any number of glazing contractors and they could have pointed you toward Masonry Arts in your quest for information, and that’s just one example.

The simple solution is just name the factors for each: visible light transmittance, u-value, shading coefficient, CRF, blast load, ballistic threat, forced-entry level, window load, seismic load, radiation shielding, biological infiltration, air infiltration, RF shielding, water infiltration and on and on and on.

You are the design professional who makes the decision on what factors are incorporated into your projects, along with your customer. 

Years ago the glass industry had a simple selection of products. Designers asked for and pushed for more options. Well, the glass industry delivered. Now you have to decide what you want. You design it and the glass industry will build it. If you think it’s tough now to spec out a product, just wait for nanotech products to hit the glass industry full force sometime in the future.

In your article, you mention product cost, product cost, product cost. Sounds like you’re looking to buy a Rolls at a Chevy price. Not to mention, your article says nothing about quality. How many times did you mention cost in your article, anyway? Do you actually think that the big manufacturing players are going to spend money on research and development for a handful of U.S. embassy projects? These high-security projects don’t meet the bread-and-butter threshold of the glass industry and it’s an insignificant percentage of the total market. Now mid-level, blast-resistant fenestration products, on the other hand, are being used throughout the country, from high-rise curtainwall projects to offices with just a few windows. 

The manufacturing base is involved in these projects. Construction in general, as you’re certainly aware, is driven by the bottom line. When your projects hit the street for bidding, you are already getting the best price since construction has been, over the years, a reverse auction by default due to bid shopping (I do not condone it, but it’s a fact). You can be assured you’re getting the lowest cost of your project.

Naturally, the economics of supply and demand play a role in the cost of any project. A government building that has a high blast-load requirement is going to have a limited choice of product due to supply and demand. However, an office building in the city may not require the same level of protection, which allows for a greater product choice. Standard off-the-shelf laminated glass window films would provide excellent blast mitigation properties for a non-target building, depending on the customer’s preference.

I am sure you have read your article in USGlass and I would refer you to the article in the same issue on page 12 that Dez Farnady wrote about ice cream. Mr. Farnady made it very clear about choice: one only has to open his eyes and look at all the choices available in the glass industry. In closing, I am offended by the title you refer to as “superior glazing professionals.” Superior for a product is OK, but it’s arrogant in a reference to a person. Also, you should drop the use of the word “perfect.” You’ll build high expectations among your clients on which you can’t deliver, and, after all, we’re talking about construction.
Greg Pearson
Commercial Glass and Glazing
New Carlisle, Ohio


USG
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