38th Annual Plant Construction Survey: Fast track project delivery
There’s more money available, but it’s already earmarked for automation, sanitation, operational efficiency, utilities—and sometimes a new facility.
No question about it, the numbers of reportable food and beverage projects in 2014 hit a nine-year high—a total of 635 compared to 555 in 2013, according to Food Engineering’s 38th Annual Plant Construction Survey. That’s an increase of 14.4 percent. In fact, 2014’s number edged out the previous highest numbers in the last nine years (613 in 2006 and 600 for 2012). Reportable food projects are those that have been made public by the processor itself, a government entity (including local or state economic development groups) or the architectural and engineering/construction (A&E/C) firms responsible for the project. The survey includes projects that were begun, announced or completed in 2014.
- What's hot...what's not
- Automation tied with FSMA
- Efficiency—anyway you look at it
- How fast can you design and build it?
- Money: Spend it wisely?
- FSMA: New ways of thinking
- Automation where it fits
- Energy and LEED: Still a big deal
- Where are we headed?
There seems to be good news on all fronts. In the case of renovations and expansions, processors are spending money on food safety and automation to make their operations more productive and food safe, while improving production flows and environmental air quality. When it’s impossible to meet all these needs with existing facilities, the move to a new plant provides processors with the amenities and functionality that an older facility can’t.
But one thing is for sure: Processors are gravitating toward fast-track, design/build projects because they need the uptick in production a new project can provide, and they need it yesterday. This demand puts pressure on architectural and engineering firms to design, engineer and build concurrently. Consequently, A&E/C firms must work with the latest software tools to allow concurrent design and build, often with collaboration across the continent and/or overseas.
Money is generally becoming more available, with some banks loosening up funds, particularly for sound investments. In addition, several economic development authorities have been kicking in funds to draw processors into their communities, helping them build new facilities and putting the locals to work. Our survey’s numbers show greenfield projects in 2014 edged out 2013 by 23 projects, a gain of 11.7 percent and 15.3 percent higher than the nine-year simple average of 191 projects—though it didn’t beat out the highest number of 253 new projects recorded in 2007, just prior to the start of the recession in 2008. Greenfield projects accounted for 34.7 percent of the total number of projects (635) in 2014.
Expansions and renovations, however, did beat out all the other years in the period from 2006 to 2014. The 415 projects in 2014 registered 16 percent higher than the number of projects (358) recorded in 2013. Expansions and renovations also showed a 20.8 percent increase over the yearly average of 344 projects per year during the nine-year period. Expansions and renovations accounted for 65.4 percent of the total number of projects in 2014.
New, expansion and/or renovation projects geared specifically to warehousing (refrigerated, freezers or ambient) and distribution were up over the preceding year by 71 percent (53 projects compared to 31 in 2013). The number was 8.4 percent higher than the yearly average of 49 projects during the period of 2006 to 2014. Distribution and warehousing projects in 2014 accounted for 8.4 percent of the total number of projects (635).
For the last couple of years, we’ve been tracking the number of projects dedicated to the production and/or warehousing/distribution of alcoholic beverages. In 2012 and 2013, the number remained steady at 42 projects. In 2014, the number of projects nearly doubled to 82. Of course, not all projects are large like Constellation Brands in Mexico; many are microbreweries and macrobreweries, and there has been some action in the distilled spirits segment as well.
The two hottest trends—or perhaps food processor concerns—described by A&E/C experts are, not surprisingly, food safety/sanitary design and automation. (See “Hot 11 trends for 2015” on page 52.) Food safety and sanitary design are being pushed along by the FSMA requirements for FDA-regulated facilities. But it’s not just FSMA that’s driving the increased emphasis on food safety, says Mike Cowgill, project manager of food plant engineering, The Hendon Redmond Group. “Manufacturers also are trying to meet third-party GFSI audit requirements such as SQF and BRC.”
“More projects are being built to British Retail Consortium [BRC] standards,” adds Mark Moore, CMC Design Build president. He believes designing and building to these standards produce a facility that operates at a high level of food safety. “While much of this push is a result of retailers demanding these standards of their suppliers, it makes good sense to meet them. It is only a matter of time before all customers demand it.”
In the US, the BRC zoning model has become increasingly popular, both for its distinctions between ambient and chilled/frozen product and its transparency to consumers, says Mark Di Gino, E.A. Bonelli + Associates marketing manager. “Posted floor plans indicating hygiene zones may soon become as commonplace in food manufacturing facilities as emergency exit plans.”
Now that sanitary design is clearly the major prerequisite of any facility, there is some discussion as to whether older structures can be rehabbed to support FSMA “clean.” Consultant David Dixon suggests his clients are less willing to try to retrofit, not only due to the food safety risk during construction, but also because the final result is less clean than a greenfield plant. “Even after a retrofit, some less-than-perfect conditions can remain, such as cavity walls, imperfect room pressurization and airflow control, product drain networks not as isolated per risk area as one would prefer and interstitial spaces too constrained to operate in safely.”
But not every processor can afford to move into a greenfield site. “For plant construction, there is a significant trend toward renovation and expansion in projects,” offers Steve Tippmann, executive vice president of the Tippmann Group. “Food processors are striving to meet and exceed food safety standards and guidelines, which drive the need for plant enhancements and updates. Compliance with government regulations is also playing a major role in renovation projects.”
“We have seen a number of companies focused on sanitation and improving process flow,” says Zach Norris, ONESource Facility Solutions director, business development. With the number of recalls and some issues with sanitation, many companies are taking a step back to really evaluate their existing flows, not only to improve from a sanitary perspective, but to increase overall production rates and efficiencies.
Rather than renovate one’s own plant, another option is the adaptive reuse of non-food facilities as food processing plants, suggests Andrea Velasquez, Epstein vice president of business development. “Our clients that undertake this type of project cite a number of reasons for their decisions. Location is certainly a critical factor, as is a potentially shorter schedule than with greenfield construction.”
Automation has come a long way since robotics was first implemented in the automotive industry. “The integration of automation to increase productivity and reduce errors is the biggest trend in the [food and beverage] industry,” observes Tim Gibbons, ESI Group USA vice president of design. “Previously, automation did not have the durability and capability to do what end-users needed without huge capital expenditure. In today’s world, with the increase of wages teamed with the advances in motors, sensors and equipment, automation is becoming a more realistic alternative.”
“For the past few years, there has been tremendous growth in fully automated [AS/RS] distribution facilities, especially in the food and beverage market,” says Tyler Cundiff, Gray Construction senior manager business development—food and beverage. “Of the 18 AS/RS distribution facilities we’ve designed and built, eight have been completed in the past couple of years, and multiple others are in progress. In short, this growth can be attributed to dynamic inventory levels, an increase in SKUs, complex customer orders and the need to build vertically vs. horizontally.”
Another trend is the increased demand for more automated facilities and customized, highly technical equipment, adds Cundiff. Because of this demand, equipment manufacturers have invested heavily in R&D to develop advanced food production and packaging equipment. “Our customers consistently express the importance of and need to solve bottlenecking problems and deliver quality products to the market as quickly as possible.”
Of course, one of the more important reasons for automation is to eliminate the physically rigorous demands of some jobs, says Ed Wright, The Austin Company project executive. A major benefit of eliminating people from doing these back-breaking jobs is the minimizing of compensable injuries.
Energy efficiency and operational efficiency are other hot trends. Both contribute to getting more product out the door at a lower production cost. “Energy efficiency, labor efficiency and food safety remain the most prominent concerns of our customers,” states Mike Golden, Food Tech Inc. vice president. “These trends are directly attributable to food companies needing to operate as cost effectively as possible and differentiate themselves from their competitors whose operations and sanitation practices may not be up to current regulations and consumer expectations.”
“The trends we’ve observed are primarily in energy efficiency and automation/production efficiency,” says Stuart Jernigan, A M King director of preconstruction. The use of energy-efficient lighting systems, natural lighting where applicable, high-efficiency motors and daylight harvesting is the norm now, not the exception. Energy efficiency and automation/production efficiency efforts are increasing primarily due to a growing awareness of sustainable issues, economic incentives and the move for companies to use these assets as marketing tools as well, adds Jernigan.
Sustainability also continues to be a focus in plant construction projects, says Brian Kappele, Stellar senior vice president, food group. It is driven by facilities’ desires to reduce costs and increase margins, as well as consumers’ increasing awareness of the importance of reducing energy consumption.
According to SSOE Group’s Business Development Executive Joe Badalamenti, efficiency, automation, energy consumption and environmental impact are key drivers. Efficiency can be created through design and by employing lean design principles (LDP), which emphasize minimizing waste and improving efficiencies in production and operations. Automation is also related to LDP in that it increases production and reduces fatigue. Factors such as government regulations and mandates, cost to ROI and availability have led to many processors increasing their use of renewable energy, which has reduced environmental impacts, adds Badalamenti.
In recent years, the concept of design/build has gradually replaced that of design/bid/build. Why? Food processors want to get a new facility or project up and running as soon as possible to stay ahead of the competition. Skipping the bidding process and letting the A&E/C firm take over a project put it on the fast track to early completion.
“Fast-track delivery is expected,” says Chris Jarc, Hixson vice president and project manager. “Projects must be done faster, even though clients don’t always know what they want when the design phase begins.” Consequently, concurrent design and construction is more prevalent, and design must accommodate multiple possibilities while staying ahead of construction. It’s speed without a client’s final thoughts. “You’re still designing, even though construction has begun,” adds Jarc. “The risk is the potential to miss the details because you get so focused on getting the big stuff done first.”
With this new reality, it has become more important to have the contractor onboard early. All parties (e.g., site manager, supervisor, owner, subs, etc.) have to be in every meeting and take notes to know what’s going on each step of the way and be able to meet client expectations, Global Food Safety Initiative requirements, etc., explains Jarc.
There is an emerging trend toward providing a single source of responsibility for the building and manufacturing process and packaging equipment in new plant and plant renovation projects. According to Paul Tyler, The Haskell Company senior vice president, this is often referred to as an “EPC” (engineer-procure-construct) project delivery model, with one entity taking full responsibility for the design, construction, installation, commissioning, startup and performance of food and beverage manufacturing facilities and equipment lines. This sole responsibility enables food and beverage processors to shift the risk of project implementation from themselves to contract service providers, reducing processors’ risk, as well as in-house engineering and project management resources.
“Design/build turnkey solutions are becoming more prevalent as clients seek simplicity in contracting and project performance responsibility,” says Lloyd Snyder, Woodard & Curran senior vice president. “Increasingly, engineering firms are being selected to lead design/build projects because the innovative technical solutions drive the project execution.” While Snyder notes that equipment manufacturers and contractors don’t have the same innovative expertise as an A/E&C firm, perhaps more important is the A&E/C firm’s birds-eye view or system view of the entire project, whereas other participants have a limited view based on their own expertise.
Spending their money wisely describes the numbers in FE’s 2014 survey and what most A&E/C firms say their clients are doing. In relation to total projects, greenfield projects accounted for 34.6 percent in 2014. In 2013, greenfield projects represented 35.5 percent of total projects, while greenfield projects counted for 36.3 percent of total projects in 2012. In the nine-year period, the highest ratio of new to total projects was 41.3 percent in 2007.
“A modest increase in new construction has taken place, but the need for renovations and additions remains strong,” says Redmond. Since money can be an issue for smaller processors, they are concentrating their efforts on equipment and expanding lines; larger processors are more capable of getting the funds for greenfield sites.
More capital seems to be available for projects, based on the requests for proposals Case, Lowe & Hart has coming in, says Rita Peterson, secretary-treasurer. “We don’t see an increase in new construction, but lots of renovations and remodels.”
“Capital is freeing up for companies with strong balance sheets and a strong market presence,” according to Jack Michler, ESI Group USA regional manager. “However, lenders’ due diligence processes remain daunting.” The food distribution marketplace remains extremely robust throughout the US, with many firms expanding their geographical presence with greenfield projects, adds Michler. FE’s research also shows distribution/warehouse projects increased by 68 percent over the preceding year.
“Processors have been looking at expansion. However, their price points remain competitive, limiting the amount of working capital available to pursue this work. Plus, construction cost indices are rising annually as high as 7 percent,” says Michler.
Epstein’s Velasquez notes much more activity across the board, i.e., new projects, renovations and expansions. But many of these projects are driven by the need to increase production capacity.
Gray Construction’s Cundiff reports a significant increase in both capital project spending and new construction. Over the past few years, the trend has slowly been moving from retrofit and smaller expansion projects to larger expansion and greenfield projects. Larger projects are often driven by geographic needs and a growing market demand. Processors with larger, more complex projects on the table have a high interest in efficiency, flexibility and innovations in facility design, the latter made possible by virtual reality and building information modeling (BIM) technologies.
In the recent past, most food industry members expanded by streamlining their processes and jamming more production into less space due to economic uncertainty, says Ed Wright, Austin Company project executive. “We have reached the limit of this type of expansion, and an increase in bricks and mortar expansion is occurring.”
Mike Golden points out that when dollars are spent, new construction or renovations to new “spec”-type buildings make more sense than trying to apply Band-Aid fixes to older facilities that have reached the end of their lifecycle.
“When asked, our clients have indicated savings due to energy cost reductions are driving incremental capital allocations,” says Bill Sokolowsky, Burns & McDonnell business development manager. However, the projects must still meet financial hurdle rates, and in some cases, reduced energy costs make the justification more difficult. “More so this year versus others, small businesses are venturing into operations expansions.”
Several A&E/C firm representatives note that when money is being spent, it often is on equipment and automation that can reduce manufacturing costs. Capital spending has grown due to regulatory challenges, equipment reliability and obsolescence and logistics improvements, says Stellar’s Kappele.
“Food and beverage plants are focusing on plant enhancements, additions, logistics and minimizing transportation and distribution costs,” says Tippmann. “ Many processing facilities are adding warehousing and distribution to their existing plants to help reduce transportation and distribution costs and greatly increase their ability to maintain cold chain integrity of their products.”
While most processors are looking at process efficiencies, many are focusing on projects to aid in the reduction and reuse of water and energy resources, observes Haskell’s Tyler. These are important considerations for expansions/retrofits and new construction, especially in areas where water is scarce and energy costs are high.
With FSMA becoming final law in the near future, most FDA-regulated processors have spent a great deal of time preparing for a potential FSMA audit. Auditors and consultants also have been poring through the regulations, while equipment makers have been making sure their wares will pass muster, and A&E/C firms have been preparing to serve as consultants and to be able to design and build FSMA-ready structures. In fact, A&E/C firms will be expected to have a top-notch FSMA/food safety specialist on staff, says Timothy Keating, R. C. Stevens Construction Company president.
“Food safety awareness is affecting how we plan and execute projects,” says Gray’s Cundiff. “For the past few years, we have implemented a specific hygiene best practices system for food plant construction with the objective of raising the food safety awareness and clean construction practices of our internal teams and subcontractors. Recently, on a new 600,000-sq.-ft. beverage production facility project, we teamed with our customer to develop a site-specific GMP guideline for site-wide construction hygienic practices.
“We’re also exploring the long-term strategies to ‘separate’ various building spaces such as wet to dry or allergen to nonallergen to reduce the potential for cross-contamination or microbial growth,” Cundiff continues. “Formerly, the strategy may have included segregation of space versus separation.
“Along with our customers, we are scrutinizing traditional facility layouts in terms of people, product, waste and airflows to ensure layout efficiencies are maximized, but with food safety as the top priority. Plus, we’re pricing more viewing corridors so the process is transparent and easily viewed while maintaining separation and food safety,” concludes Cundiff.
Things that were elective before FSMA will now be a necessity. For example, Mike Golden points out that although hygienic makeup air units for use after washdown were luxury add-on items in the past, they are now standard operating procedure.
According to Stellar’s Kappele, some of the best practices emerging from FSMA include zones of control, temperature and moisture control and cleanability and maintenance. (See “FSMA best practices: Zones of control” on page 50.)
While plants like the Mars Topeka, KS and FAGE’s Johnstown, NY facilities can run close to “lights out,” not every plant can do this. “Automation works well when it can be applied to an operation that produces products with minimal variation in volumes to justify the investment,” says Redmond. “Automation can reduce the flexibility of an operation, so it must be applied where flexibility is not a factor.”
“On the processing side, applications of more automated and robotic equipment are increasing,” says Cowgill. “We have seen this occur on a more granular level where it has not significantly affected the flexibility of the process.” An example would be adding an automatic loader to a machine that previously had to be loaded manually. Automation can also work well in packaging and palletizing, especially where repetitive and back-breaking motions occur. Pick-and-place robotics for primary and secondary packaging is another good use of automation.
Besides the robotics aspect of automation, several related technologies make a facility more agile and competitive. These include keeping products consistent and reducing processing/packaging bottlenecks, eliminating the potential for humans touching food products, using wireless and Ethernet technology to let operators interact with the process from anywhere, automating and integrating plant environmental controls with process and packaging controls, and providing automated tasks in cold, wet environments or in dangerous slicing/cutting operations.
With the lower cost of natural gas, it would seem energy concerns are not as important as they once were. But most A&E/C leaders like Mark Redmond believe energy efficiency is always a consideration in designs. But while food producers want sustainable operations, sustainable solutions must also be cost effective. In other words, sustainability has to make sense on the bottom line.
“These days, terms like sustainability, environmentally friendly and energy efficiency are more than just buzz words; they’re part of running a successful business,” says ESI Group’s Tim Gibbons. “At the heart of this is the LEED building certification process. The environmental impacts of the design, construction and operations of a LEED-certified facility are enormous. Reducing energy use is not only socially responsible, it makes economic sense.”
Though LEED has grabbed most of the attention for projects where sustainability is important, Case, Lowe & Hart’s Peterson notes a new approach called “Green Globes” is getting some attention. She’s not the only one taking notice.
“While LEED still has a place in the food and beverage industry, interest in the Green Globes system is growing,” says Stellar’s Kappele. “The Associated Press says the US General Services Administration recommended that Green Globes be used alongside LEED for new construction and renovation projects, with projects achieving dual certification. Sustainable building practices are becoming the norm nationwide, and California has already implemented CALGreen, the first statewide green building code in the US. In addition, the International Code Council [ICC] has published the International Green Construction Code [IgCC], which is already in use, or has been adopted by, 13 states.”
Judging by this year’s survey results, food and beverage plant renovations and expansions, plus new projects, are healthy in spite of a limited amount of ready cash. Food processors are seriously looking at energy usage and sustainability, and making their plants ready for FSMA.
The following companies and individuals assisted Food Engineering in compiling this survey:
A M King
Burns & McDonnell
Case, Lowe & Hart, Inc.
CMC Design Build
David Dixon LLC
E.A. Bonelli + Associates, Inc.
Mark Di Gino
ESI Group USA
Food Tech, Inc.
Gleeson Constructors & Engineers LLC
Harlan Vande Zandschulp
Mike Follmer, RA
ONEsource Facility Solutions
R. C. Stevens Construction Company
Timothy M. Keating
Shambaugh & Son
The Austin Company
The Haskell Company
The Hendon Redmond Group
Woodard & Curran