June 15th, 2009 by Russ Leavitt, SET, CFPS
Part two of a five part series focusing on the rapidly growing residential fire sprinkler market and why plumbing contractors are best positioned to capture this opportunity.
To view part one of the series visit “Residential Fire Sprinkler Requirements Coming Soon!“
The incorporation of amendment RB64-07/08 in the International Residential Code (IRC) for fire sprinklers to be installed in all single family homes constructed after January 1, 2011 will have a dramatic impact on the demand for qualified design and installation technicians. In addition, the demand for licensed contractors will experience a corresponding rise since most states and jurisdictions have some form of contractor licensing requirements.
It is estimated nationally that approximately 7500 firms were actively engaged in fire sprinkler contracting during 2008. The vast majority of these entities were of the cottage variety with average annual revenues of $1 million and less than 10 full-time employees. Industry data indicates that approximately 42 million sprinklers were installed in 2008 with less than 1 million of these in single family homes. Estimates indicate that there are presently 15,000 trained installation technicians serving the fire sprinkler industry and the vast majority are focused on commercial applications. As the 2009 IRC is adopted by various states and local jurisdictions, the numbers of qualified contractors and trained labor needed will stretch the available resources to the point where demand will far outstrip the available supply.
Using HUD’s 40 year average for new single family home construction and considering when the code requirement will be adopted by virtually all jurisdictions, it is estimated over 7000 additional trained installation technicians will be needed to meet the increased demand. However, even when conservatively assuming that only one-half of the new homes are sprinklered, the number is still over 3000 additional technicians. The plumbing industry is well positioned to supply a good part of this demand for skilled labor. Sprinkler systems are essentially a piping system equipped with nozzles (fire sprinklers) having specific installation criteria. The average plumber can quickly develop the skills needed to install fire sprinkler systems. In fact, it is expected that the majority of single family residential fire sprinkler systems will be combined with the domestic systems and, in reality, the plumbing contractor is the only choice to effectively install these systems.
Even with the historically low numbers of single family residences under construction in the current economic downturn, this is a billion dollar opportunity that the prudent plumbing contractor cannot ignore. However, there are barriers to entry. Licensing, insurance, and access to training programs are the most daunting, but all can be overcome.
Entities installing fire sprinkler systems are required to be licensed contractors in most states. Just as with plumbing, the requirements run the gamut. Some states are as simple as filling out an application and paying a fee while, at the other end of the spectrum, there are states that require years of experience, exams, and certifications in fire protection technology. Fire Smarts, LLC, in partnership with the PHCC, is developing resources specifically to help plumbing contractors sort out these differences and identify licensing requirements for the states they service. One movement that is already underway is creating a license that is specific to residential fire sprinkler systems to recognize the simpler design issues and the economy of having plumbing contractors involved in the market. The states of Washington, Texas, South Carolina and Georgia among others are examples of states that have already created, or are considering creating, this separate category.
Insurance is a barrier that the market place will address. There are reports that plumbing contractors who contacted their brokers have been quoted extravagant premiums when adding fire sprinkler installation to their business coverage. Others report that some insurance carriers are beginning to extend coverage for fire sprinkler installation provided that a qualified third party is supplying an approved system design. The demand for this insurance will open the insurance market and the carriers will meet the demand as the market expands. In the meantime, in regions where residential fire sprinkler systems are common such as California and Nevada, the general contractors have rolled the fire sprinkler contractor’s protection under their umbrella when the contractor was not able to bind coverage.
Training is the remaining significant barrier. Programs are in development at this time that will be geared to take experienced plumbers and add the skill set for fire sprinkler installation. The manufacturers of sprinkler piping, sprinkler heads, valves, and multi-purpose systems also have training programs for fire sprinkler contractors that can easily be adapted to the plumber. In addition, apprenticeship programs can be updated to incorporate modules that specialize in residential fire sprinkler requirements.
The market demand is coming and those contractors who are prepared to take advantage of the opportunity will see a significant return on the investment needed. It costs virtually nothing to investigate. With a market that is estimated to be $3 billion annually, this once-in-a-lifetime opportunity is calling for your attention.
In Part 3 of this series, “Residential Fire Sprinklers: Plumbing Contractor Competitive Advantage #1”, Steven Scandaliato, SET, will discuss how the fire sprinkler industry has little experience in residential construction compared to the extensive experience and existing general contractor relationships that residential plumbing contractors have and how this creates a clear competitive advantage.
Russ Leavitt is a Fire Smarts Faculty member and CEO of Telgian Corporation. With over 27 years of experience he holds a Level IV certification from NICET in Fire Sprinkler Layout and a Certified Fire Protection Specialist (CFPS) designation. He serves on the NFPA 13 correlating committee, NFPA 25 technical committee and NFPA 5000 (building code) correlating committee.
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