Contracting and engineering firms develop new companies to compete in the electrical testing and maintenance field
At first glance, Kay-R Electric, Syracuse, N.Y., seems like a typical electrical contracting firm. The company specializes in electrical construction and service for the power, manufacturing, commercial, health care, and education markets. What sets Kay-R apart from most of its electrical contracting counterparts, however, is that the company also runs a high-voltage testing and maintenance division.
Staffed by 15 employees, consisting of dedicated engineers, project managers, safety managers, testing technicians, and equipment and vehicle maintenance staff, the high-voltage testing and maintenance division coordinates projects with the company's construction department. Currently, Kay-R is working on two wind farm projects — one that will support 112 wind turbines and another that will support 23 — where the construction division will deliver the utility-grade, high-voltage substations through the design/build process, while the high-voltage testing and maintenance division will manage all the testing required on the project.
Launched in 2004, Kay-R's high-voltage testing division realized a revenue gain of $450,000 in sales at the end of its first year to more than $1.2 million in 2006. To limit financial risk and help offset the significant investment it took to start the division — higher tooling costs and insurance premiums due to the dangerous nature of high-voltage testing work — Kay-R set up a separate company, what's referred to as a “captive equipment asset holding company,” which purchased all of the testing and maintenance equipment from manufacturers and now leases it exclusively to Kay-R.
“We basically started from ground zero,” says Phil O'Connor, one of the majority owners and COO of Kay-R. However, “ground zero,” is an understatement. Although Kay-R was essentially starting a new business, it could leverage its construction customer base into maintenance customers. In the testing and maintenance sector, repeat business is key. “To secure work in the industry, you really have to have a track record to develop any backlog in the industry,” O'Connor says.
Branching into the high-voltage testing and maintenance field was a natural evolution for Kay-R, where the staff considers testing one aspect — albeit a highly technical one — of the electrical contracting services it offers to customers. By being able to offer a single point of contact for services on any given project, Kay-R holds a unique marketing advantage over independent, third-party testing and maintenance agencies. “We can do the engineering, we can do the construction, and then after the construction phase, we can do all of the testing,” O'Connor says. “A lot of clients only want to deal with a single company. They want a single point of responsibility.”
However, some industry experts in the electrical testing and maintenance field argue that the single point of contact is better as a marketing tool than as a best practice. “You can't argue that it's not a good sales point,” says Matthew Reuter, business development/customer service, Burlington Electrical Testing (BET), Craydon, Pa., a NETA-certified independent agency. “But you shouldn't be certifying your own work.”
Reuter fears that contractors' small margins on bids may provide the temptation to overlook any serious problems discovered in the acceptance phase. Acceptance testing determines if each piece of newly installed electrical equipment is ready for energization, will operate as designed, and perform as an integral part of the system. Test personnel inspect the installation of the equipment, and energize and test each component individually, verifying the overall installation of the system.
“Not that people are out there running unethical businesses, but it could lend to that,” says Jayne M. Tanz, executive director of the International Electrical Testing Association (NETA), Portage, Mich. NETA is an accredited standards developer for the American National Standards Institute (ANSI), Washington, D.C., that also certifies independent testing companies and technicians.
Tanz compares electricians testing equipment they have installed to an author reviewing his or her own book. “It's healthy to have someone else do the reviewing of that work,” she says.
Statement of qualifications
In addition, electrical construction firms that launch testing and maintenance divisions carry a double burden of promoting their testing and maintenance work as well as growing their construction and installation business. Some industry experts fear these two goals run at cross-purposes, to the detriment of the company's testing abilities.
“Our members are testing generalists, in the sense that they are cross trained,” Tanz says. “They can work on transformers, switchgear, circuit breakers, motors, or batteries, and it doesn't matter what manufacturer. They are versed on the niche element of testing.”
Because of the complexity of the work and the ever-changing technologies and systems being introduced to the market, Reuter thinks it's impossible for firms to concentrate on both construction and installation and testing and maintenance. Firms shouldn't think of electrical testing and maintenance as a part-time business or something they run on the side, he says.
Reuter admits that even with daily exposure to the anomalies and problems inherent in electrical reliability testing, sometimes his staff is stumped. He can't imagine what a tester unfamiliar with a regular protocol would have to go through to diagnose an unusual condition in a cost-effective manner.
“You just can't get a run-of-the-mill person that's going to spend $50,000 on a piece of test equipment and expect them to understand it,” Reuter says. “Even the routine stuff, like cable testing. You'd be surprised at how many electrical contractors can't do cable testing — or do it incorrectly. You could blow it up and spend tens of thousands of dollars replacing cable if you have someone that's inexperienced.”
In Kay-R's defense, the company staffs its high-voltage testing and maintenance division with electricians that have at least 15 years of industrial electrical experience, recruiting senior electricians from its construction ranks and pairing them with testers with at least 10 years of experience in order to expand their skill sets (Labor Pains/Gains on page 39). In addition to its in-house training, Kay-R also sends its trainees to seminars and training sessions throughout the country.
“It takes about three to five years for a veteran electrician to become a highly skilled high-voltage technician,” O'Connor says. “First, we expose them to some of the low-level technical tasks so they become familiar with this part of the industry.”
Even Reuter admits that someone with an electrical construction background interested in electrical reliability would make a well-rounded tester. “With this type of background, you could walk into any industrial-type job, even at a top-level like a foreman or a supervisor, and be able to direct,” Reuter says. “If you have a construction background and then go into the testing, you're going to be really highly valued because you can do both. Even if you can't do all the testing, you have a thorough understanding of what it is and what the results can be to ask for it.”
It's imperative in the testing field to work at increasing the uptime of a plant's systems while decreasing the downtime of your staff. According to Reuter, chances are that an independent testing agency — one that solely focuses on testing — will be a safer bet, in more ways than one, when it comes to performing testing and maintenance duties. He feels the independent agency's expertise will override any electrical contracting firm's work when it comes to keeping a plant's equipment functioning, as well as keeping workers away from harm.
O'Connor of Kay-R disagrees. For his company, the issue of safety for its high-voltage division doesn't end with having to pay higher insurance premiums. Anyone working in the testing industry — especially with high-voltage — has to be willing to take things up a notch with regard to safety. “It's a very dangerous segment of the industry,” O'Connor says. “We take safety very seriously in every segment of the industry that we participate in, but in the high-voltage testing segment there's more risk. You're working around energized circuits. The voltage levels are a lot different than working inside a commercial building, for example. There's just more risk, so the awareness level is constantly very high.”
In general, Reuter doesn't think of electrical contractors as his company's competition. In fact, electrical contractors are some of his best clients. “Electrical contractors can look at us as being a supply house of technical services,” Reuter says. “As someone that's more readily available than a manufacturer that you might consult for technical questions.”
It's this relationship between electrical contractor and testing company that makes electrical contracting divisions that perform testing no different than the independent companies. Either way, the testing company is on the electrical contractor's payroll. “A lot of times, independent companies are hired by electrical contractors,” O'Connor says. “That's no different than hiring your own company to perform the work.”
Whatever the qualifications of the staff of testing and maintenance divisions, some plant specifications require that electrical contractors retain the services of an independent testing agency for acceptance testing. Some go so far as to mandate the services of a NETA-certified testing firm. “Over the years, NETA has managed to encourage the marketplace in such a way that when specifications are issued, often it will require either the company be accredited by NETA or their individuals be certified by NETA,” Tanz says. “That gives NETA-certified companies a marketing advantage.”
NETA accreditation for testing companies is two-fold. Not only do the individuals working for the company have to be certified, but the company must also adhere to rather “stringent-by-design” rules and regulations (NETA Certification Requirements on page 40).
However, NETA is not the only certification available. ANSI/NETA ETT-2000 is not a “NETA-only” standard. It is nonrestrictive with regard to certification, provided it meets the requirements of the standard. This means that in order to promote fairness, the standard allows other accrediting agencies to evaluate and confirm expertise of persons in accordance with standard certification criteria promulgated by the U.S. government, such as by The National Skills Standards Board in Washington, D.C. Probably the most common alternate certification is through the National Institute for Certification in Engineering Technologies (NICET), which provides nationally recognized certification programs in industrial instrumentation and fire protection. Many electrical contracting firms branching out into the testing field receive these certifications, in addition to the ones offered by manufacturers for specific pieces of equipment.
While NETA's bylaws discourage electrical contracting companies from becoming members, many of the testing divisions in these companies still follow NETA regulations for acceptance testing and maintenance. Kay-R's high-voltage testing and maintenance division abides by the organization's strict guidelines. “Whether a NETA member or not, there are specific technical procedures a testing division has to follow,” says O'Connor.
Perhaps if more testing divisions spring up from electrical contracting firms, NETA may one day change its stance on the origins of revenue for these companies, or a different certification may emerge. “I believe in the future a similar association will not deny membership based on where sales come from,” O'Connor says.
According to NETA, engineering companies are more likely to seek NETA accreditation for testing subsidiaries than electrical contracting firms. “The engineers have the ability to step in and say, ‘We're going to specify this, and then you're going to use our division to test,’” says Tanz. “There would be benefits to that with regard to wrapping up a market area and being able to give you a sales advantage, but I can't say I'm seeing a lot of that.”
As with the electrical test division formed by an electrical contractor, the engineering firm test division must be a wholly owned independent operation. One engineering firm testing the waters of testing, so to speak, is Hailey, Idaho-based engineering firm POWER Engineers, Inc.
In 2005, the company announced it had formed a subsidiary, POWER Testing and Energization (PTE), Vancouver, Wash., to provide testing, energization, maintenance, and repair services that promote long-term, efficient operation of electrical generation and delivery systems throughout the world. It services utilities, independent power producers, and industrial clients with power delivery systems from 480V to 500kV and generation systems up to 1,650MW.
This doesn't necessarily represent a trend, explains Tanz. Recently, developing testing divisions is more common as a result of mergers or acquisitions when, as part of the holdings, a testing company is folded into the new parent company. However, according to Tanz, this wasn't always the case. Just after deregulation, there were cycles where contracting firms, engineering firms, and even utility companies formed electrical testing and maintenance divisions, only to discover that perhaps they weren't the best agencies for the job.
Sidebar: Labor Pains/Gains
As an established electrical contractor, Kay-R Electric was used to the headaches involved with recruiting and retaining skilled workers, but it hadn't experienced anything like the difficulty in finding the staff for its electrical testing and maintenance division. “It was a significant investment,” says Phillip O'Connor, one of the majority owners and COO, Kay-R Electric, Syracuse, N.Y. “Not just from a financial standpoint but from a human resources standpoint. You really have to have technicians that have years of experience, and the cost to recruit that type of talent can be very expensive.”
To entice senior electricians over to the high-voltage testing and maintenance side of the company, which often requires extended stays out-of-town, Kay-R offers a variety of incentives. The company combines financial rewards with different benefits, such as extra vacation time.
With 30 technicians, Burlington Electrical Testing (BET), Craydon, Pa., is larger than most independent testing agencies, yet the employee turnover rate is low, says Matthew Reuter, business development/customer service. The company maintains a high rate of pay, but Reuter also gives credit to the demanding work required of its staff. “The work is a constant challenge,” he says.
To help with recruiting efforts, the company offers a seven-year apprenticeship program. As a union company, BET workers are eligible for basic training through the union. The rest of the training is left up to BET, which makes available its own program, outside programs, and sometimes even training provided by suppliers and manufacturers.
Sidebar: NETA Certification Requirements
Only independent third-party electrical testing companies that have been in business for two years (and can claim that 75% of their business comes from electrical testing and maintenance) or companies that are wholly owned subsidiaries that perform no more than 5% of their overall testing for the parent company can qualify as a NETA full-member company. Other requirements for membership are proof that the company is testing, employs at least one P.E., has a calibration program for equipment, and maintains a safety program, which are all peer-reviewed on a three-year basis.
To become a NETA-certified technician, you must be an employee of a NETA full-member company, meet the experience requirements outlined in the ANSI/NETA ETT-2000, “Standard for Certification of Electrical Testing Technicians,” and pass a broad-based technical exam. Before anyone can even sit for the Level III exam, he or she must have accrued five years of actual field experience in electrical testing as well as a minimum of 64 hours of safety training and 400 hours of technical education. A Level IV technician must have 10 years of field experience and have accumulated more than 100 hours of safety training and 600 hours of technical education.
For all the requirements, NETA membership does have its privileges. Members have access to the technical discussions fostered by NETA as well as its publications. In addition, NETA members are a vital voice in the ANSI standards-writing process.
In addition, non-member companies can sometimes have trouble getting the recognition they need to build a solid reputation. “They're just not recognized at the level that certified companies are recognized,” says Matthew Reuter, business development/customer service, Burlington Electrical Testing, Craydon, Pa., and NETA member. “Most owners and contractors are requesting a NETA-certified testing firm because it's the only organization available in the industry where we actively participate annually at meetings and help write papers. We work with IEEE, and we actually help develop the ANSI standards. We are ANSI certified. Because of what our focus is in our business, that's why we get requested to do these types of tests.”