Manufacturing plants and commercial facilities hit hard by the recession are laying off their maintenance electricians and hiring hourly workers
Mammoth maintenance departments have shriveled down to skeleton crews as more businesses are searching for ways to cut corners in the tough economy. Companies that once had full-time electrical staffs are now outsourcing their electrical work to outside firms so they no longer need to pay full-time salaries, provide benefits, or keep electricians busy year-round.
“Having your own staff can be very costly,” says Joe Lagana, a project manager for Trammell Crow, a Hartford, Conn.-based property management firm. “You have to worry about their vacation, their sick time, and their benefits — basically, the whole package that makes up an employee. If you don't need a full-time electrician, outsourcing makes more sense.”
While it may help a company's bottom line, outsourcing can be detrimental to electricians who may lose their full-time jobs to temporary workers. By no longer being able to rely on a team of in-house electricians, supervisors are also faced with a new host of challenges. Managers must now bring in outside contractors, train them on their work practices, closely monitor them on the job, and keep track of their labor and material charges.
Despite the challenges associated with outsourcing, though, it can be mutually beneficial for plant managers and the electrical contractors they employ, as a Washington fruit concentrate company, a Massachusetts insurance company, and a Connecticut contractor discovered.
Washington fruit and wine country.
Overseas competition and abundant crops have forced Pacific Northwest fruit companies like Milne Fruit Products to make some tough choices. The Prosser, Wash.-based juice concentrate company is struggling to compete with countries like Chile that can offer high-quality products for low prices.
“Four years ago no one would want to buy Chile raspberries because the quality was so poor, but they've hired plant managers to go down there and set up plants to today's production and quality standards,” says Bruce DeJong, plant engineer. “Now you can buy a gallon of concentrate for less than the cost of the raw fruit. Trying to compete with that is hurting us quite a bit.”
To make matters worse, Washington, which is establishing a reputation for its wine vineyards, now has to compete with California's bargain grape prices after farmers in that state overplanted red and white grapes. To survive in the competitive marketplace, Milne Fruit Products slashed its production staff from 50 to 33, which forced DeJong to do more work with less people.
The plant had two full-time electricians on staff six years ago when DeJong started as a manager at the company. One of them left shortly after his arrival, and now only one journeyman electrician is responsible for the plant's electrical and general maintenance work. While the maintenance electrician can handle many of the smaller tasks, some of the larger-scale projects require additional manpower, DeJong says. To handle the extra workload, Milne Fruit Products has occasionally hired outside firms. With the shrinking of the maintenance department, local contractors have played a more active role in the installation of new equipment at the plant.
“Layoffs and cost savings have forced me to use contractors more often,” DeJong says. “When it comes to the electrical work, I probably would have to hire an outside contractor anyway. Our one electrician couldn't keep up with all the things that we were doing.”
DeJong hired Power City Electric, a local electrical contractor, to install a combined PLC and SCADA system, which controls almost all of the plant's machinery. The electricians also replaced a poorly installed 230V system with a new 480V system, installed 35 motors, built the panels, and wired in all the sensors. Now that some of the processes have been automated, the Milne workers no longer have to sit in front of panels to monitor the on/off switching of the equipment and opening and closing of the valves. The production process not only runs more smoothly, but it's also more efficient. DeJong says that due to the automation, the plant experienced a record run on cranberry juice concentrate, which is one of its main products.
The automation project wound up taking a year-and-a-half, and at least two of the Power City journeymen were stationed at the plant on a full-time basis. DeJong says he cultivated a relationship with the contractor when he worked at Welch's 10 years ago.
“I had one electrician who knew the plant standards, and now there are four of them who I would trust to run a job,” he says. “While they may be a little more expensive, you don't have to fix their mistakes three to five years later. We use some pretty aggressive cleaners here at the plant, and it will cause us grief on our electrical system if it's not done right.”
Power City Electric has hundreds of electricians, but DeJong says he prefers to work with the team that is familiar with the plant rules and safety procedures. Many tasks, such as pulling wire, only require two electricians, but for bigger jobs DeJong tries to get all four on board.
One of outsourcing's key long-term benefits to a plant or facility owner is typically cost savings. But on short-term projects that last less than a year, the plant's cost is about the same for in-house and outsourced electricians. The full-time plant electrician earns about $17/hr to $18/hr plus fringe benefits like vacation, sick time, and medical insurance, which can add as much as 30% to 40% to the electrician's base salary. An outside electrician typically earns between $26/hr to $36/hr plus overhead and profit. As a contractor, it's important to note this factor as it will have an effect on the type of jobs you might be able to secure.
“Our problem with trying to hire one of the electricians full-time is that we don't pay enough,” DeJong says. “The one thing that we could offer them is the fact that they will have a job tomorrow and don't have to worry about going on unemployment. Our wages don't compare. They can work for three weeks and stay a week on unemployment and still make more money than working all four weeks for us.”
By outsourcing, however, DeJong can successfully finish large-scale jobs like the automation project without hiring a full-time staff. A major disadvantage to not having a team of in-house electricians, however, is that you can't guarantee that you'll be able to find help when you need it. For now, however, DeJong can rely on a dependable quartet of Power City electricians to help the Washington wine country continue to thrive.
The practice of trimming maintenance departments isn't just a West Coast trend. Travelers' corporate campus in Hartford, Conn., once had a team of 10 electricians on-site to maintain eight buildings. Due to the downsizing of its maintenance department and ultimately outsourcing the work to a property management firm, the company lost almost all of its electrical workers.
“We're down to a minimum amount of people to maintain the properties,” says Joe Lagana, of Trammell Crow Co., a property management company based at Travelers. “All the electrical work that we typically did in-house is now done by task labor.”
Trammell Crow invited local electrical contractors to submit competitive bids and offered a one-year service agreement to Electrical Contractors, Inc. (ECI), a Hartford, Conn.-based electrical contractor that specializes in new construction, maintenance, design/build, and fiber optics. The company selected ECI because of its low negotiated rates for daytime, overtime, and weekend work. Businesses typically pay a higher rate for a one-time call to an electrician, but by taking the time to negotiate rates beforehand, companies can increase reliability and lower labor costs, Lagana says.
The outsourced electrical crews work under a full-time foreman who has more than a decade of experience working at the corporate campus, which was built gradually over the past 100 years. Because he's familiar with the history of the buildings, he can teach the outside electricians the most efficient wiring runs.
“The campus started around the turn of the century,” Lagana says. “The oldest piece — the Travelers Tower in Hartford — was built around 1900, and the others went up in the '30s, '40s, and mid '50s. The last one was built in 1982.”
With eight buildings to maintain, the workload often fluctuates on projects, Lagana says. Outsourcing enables Lagana to ramp up the electrical staff at a moment's notice.
Cliff Nelson, service division manager for ECI, says his company employs about 150 full-time electricians. When his clients need a lot of manpower, he can pull some of the 120 electricians from the construction division to meet the demand. Otherwise, he can send a few of his 30 maintenance electricians to local construction jobsites. For now, however, some of his electricians are working full-time on projects at the Travelers corporate campus and are handling about 80% of their work.
“We have electricians there every day and can send as many as they need,” Nelson says.
Lagana says the company not only saves money through outsourcing, but it also has built a relationship with local electrical contractors like ECI.
“We seem to have a good rapport with the companies that we've used, and that's the reason why they've been around for so long,” Lagana says. “We've gotten to know most of their foremen and the apprentices, and they've gotten to know our practices and procedures, which makes it very attractive for us to use them.”
The experiences of Milne Fruit Co. and Travelers show that outsourcing electrical work can be beneficial to a variety of applications and locations. After losing some of their in-house electricians, the companies have discovered ways to hire local firms to meet new construction demands, launch new automation systems, and maintain century-old buildings without supporting full-time electrical staffs. Due to the slowing economy, increased outsourcing will be inevitable among larger corporations, Nelson says.
“More and more companies are outsourcing their electrical work and hiring us,” Nelson says. “They can't afford to keep their own people on board — especially maintenance electricians. If they have a large project where they need a lot of manpower, they may not be able to afford to hire workers full time, pay them benefits, and then not have enough work year round for them. That's when they'll turn to outsourcing to get the job done.”
Sidebar: The Ups and Downs of Outsourcing
A company can easily adjust the size of its workforce to meet the demands of a project through outsourcing.
Outside contractors are often responsible for buying their own materials and supplying their own tools and equipment.
When companies outsource, they don't have to provide fringe benefits like insurance or vacation time to their outside contractors.
Many outside contractors charge for time and material, rather than just labor, so plant managers need to review the charges very carefully.
Managers must devote extra time to training outside contractors on a plant's or building's safety procedures, standards, and regulations.
Coordinating in-house and outsourced crews can be enough to give a plant manager a migraine. If the two teams have overlapping responsibilities, they might step on each other's toes, which will ultimately lead to inefficiency and higher job costs.