Expedited Permitting: Time is Money
The results of Area Development's 2007 Corporate Survey reflect the growing importance of fast-track permitting as speed to market becomes more and more critical to manufacturers.
Doug Stachowiak, Global Location Strategy and Optimization, Chicago, NKF Consulting (Oct/Nov 08)

We are all aware of the many financial incentive programs pitched by state and local economic development authorities hoping to influence location decision-making processes across all asset types. The end game, of course, is often hundreds of jobs (either created or retained), an improved standard of living for citizens, and a productive stream of tax income.

Granted, these attractive tax breaks and meaningful bottom-line oriented programs can add up to millions of dollars, potential savings that make for lively discussions in the boardroom. However, the new world order and the frantic pace of business these days enhances the concept that time is money. Thus, expedited permitting is a determinant variable in the concept of "on budget and ahead of schedule" - a measured success factor in location decision-making.

In fact, in Area Development's 2007 Corporate Survey, expedited or fast-track permitting appeared on the list of important issues for the first time, receiving a 71.5 combined "very important" or "important" rating and ranking 16th on the list of location factors. Why the sudden interest in expedited permitting?

Corporate Survey 2007
Combined Ratings* of 2007 Factors
Site Selection Factors           2006 2007
Ranking
1. Highway accessibility 90.9 96.9
2. Labor costs 95.0 92.3
3. Energy availability and costs 82.4 89.0
4. Availability of skilled labor 85.1 88.7
5. Occupancy or construction costs 85.5 88.2
6. Available land 73.3 85.4
7. Corporate tax rate 90.8 83.8
8. State and local incentives 88.6 83.4
9. Environmental regulations 68.9 83.2
10. Tax Exemptions 86.7 82.8
10T. Proximity to Markets 76.9 82.8
11.
Availability of advanced ICT services
N/A 82.2
12. Low union profile 78.4 80.6
13. Availability of buildings N/A 79.3
14. Right-to-work state 67.1 72.1
15. Proximity to suppliers 49.3 71.8
16. Expedited or "fast-track" permitting N/A 71.5
17. Availability of unskilled labor 65.3 65.2
18. Availability of long-term financing 64.1 63.0
19. Raw materials availability 64.1 62.5
20. Training programs 56.0 56.6
21. Accessibility to major airport 61.4 54.4
22. Railroad service 20.8 38.1
23. Proximity to technical university 30.0 32.7
24. Waterway or oceanport accessibility 17.0 15.2
*All figures are percentages and are the total of "very important" and "important" ratings of the Area Development Corporate Survey and are rounded to the nearest tenth of a percent.
For starters, global competitiveness and innovation has made speed-to-market critical for manufacturers of electronics and high-tech goods like cell phones and laptop computers. As a result, it is crucial to get new facilities up and running quicker than ever before. Failure to do so because of a slowed permitting process, for example, could result in losses in the millions if a hot new electronic gizmo is late to market, something that could cause the product to be ruled obsolete shortly after hitting store shelves.

The same theory holds true for producers of food items and other perishable products. For example, a manufacturer of soy sauces needed to act fast to construct a plant on the West Coast after a foreign-based firm set up shop in Oregon and changed the whole competitive delivery dynamics for the industry. The company had only one facility in the Midwest and needed to act swiftly to build a new facility to serve its West Coast clients, or risk losing part of that business and leading market share. Finding a location with expedited permitting that was aligned with its particular production process (which involved significant pretreatment of effluent) was crucial.

The same held true for Germany-based ThyssenKrupp Steel when time was a critical factor in starting construction for its first U.S. plant in Mobile, Alabama. Since the company was already producing steel slabs in Brazil that would be sent to the United States to be used at the new facility, accelerated site selection became the theme of the project. So despite the enormous infrastructure development complexities of a $4 billion capital investment that would cover seven million square feet of space and house 3,700 employees, the company concluded its primary permitting processes in less than six months, allowing construction to begin sooner than expected. More importantly, ThyssenKrupp was able to put certainty around a defined window of opportunity to produce high-quality coil steel ahead of the competition.

Quite simply, the faster a community signs off on permitting, the quicker the building can be built or retrofitted, which expedites product to be shipped or knowledge to be leveraged - ultimately leading to a quicker revenue stream or to the desired competitive market impact.

Here is a look at some key strategies to utilize in order to get through the permitting process quickly and efficiently:

Do your homework; know your local officials; promote good information flow.
Spend time and get to know the leadership at all levels of government in the area in which you hope to locate. Observe the alignment of all municipal departments, and make sure they can deliver on what they promise, with no bait-and-switch tactics. It is imperative to have the local officials demonstrate the permit process, and the commitment letter should document how long it will take to obtain the necessary permits required to get the project under way.

On the flip side, companies need to solicit municipal plan reviewer's input to their civil and architectural drawings before submitting final design plans. Timely applications and regular written correspondence are a must - you don't want to fall behind on the process because you were slow to react to the requests of city leaders.


Measure potential speed to market.
Evaluate locations using permitting time frame as a heavily weighted, critical location criteria. Look for locations within the search area that have a history of offering a fast tracked permitting process and completed projects of similar complexity.

No community will throw out the processes they have in place to make sure buildings are built right - they must remain good stewards for their citizens and adhere to established building and zoning codes. However, certain communities have become more aware that they stand a better chance of landing the deal if approvals are processed quickly and efficiently. It is becoming common to have an ombudsman in place to funnel and coordinate all permit applications. With one agency in charge of shepherding the entire process, it resembles one-stop shopping and can shave months off the permitting process.

Know your real estate well.
Robust and thorough site due diligence is a must. Environmental concerns? You can be standing on a perfectly dry spot in a field proposed for your next manufacturing location, but still have wetlands issues that aren't evident to the human eye. You might need 220 acres for your project, and find out later in the due diligence process that 40 acres have wetland issues and significantly impact the proposed building layout on the site. Any discovery in the due diligence process can negatively impact the permitting process by months, if not years. The same holds true for existing buildings with outdated wiring and/or potential asbestos removal needs - even poor prior investments in the areas of ADA compliance, fire protection, and signage that are not flagged during due diligence plant the seed for inspector objections and conjecture.

Corporate Survey 2007
Combined Ratings* of 2007 Factors
Site Selection Factors           2006 2007
Ranking
1. Highway accessibility 90.9 96.9
2. Labor costs 95.0 92.3
3. Energy availability and costs 82.4 89.0
4. Availability of skilled labor 85.1 88.7
5. Occupancy or construction costs 85.5 88.2
6. Available land 73.3 85.4
7. Corporate tax rate 90.8 83.8
8. State and local incentives 88.6 83.4
9. Environmental regulations 68.9 83.2
10. Tax Exemptions 86.7 82.8
10T. Proximity to Markets 76.9 82.8
11.
Availability of advanced ICT services
N/A 82.2
12. Low union profile 78.4 80.6
13. Availability of buildings N/A 79.3
14. Right-to-work state 67.1 72.1
15. Proximity to suppliers 49.3 71.8
16. Expedited or "fast-track" permitting N/A 71.5
17. Availability of unskilled labor 65.3 65.2
18. Availability of long-term financing 64.1 63.0
19. Raw materials availability 64.1 62.5
20. Training programs 56.0 56.6
21. Accessibility to major airport 61.4 54.4
22. Railroad service 20.8 38.1
23. Proximity to technical university 30.0 32.7
24. Waterway or oceanport accessibility 17.0 15.2
*All figures are percentages and are the total of "very important" and "important" ratings of the Area Development Corporate Survey and are rounded to the nearest tenth of a percent.
Go green.
Many cities are becoming aggressive about building green, LEED-certified buildings, and are offering expedited permitting for companies that include green initiatives in their building plans. Chicago and Portland, Oregon, are examples of cities that are promoting environmentally friendly building design, and possibly these cities will accelerate the permitting process for green projects. In extreme cases, the permitting process for non-green building plans might actually be slowed, and companies could face additional costs.

It's no surprise then that the environmental regulations factor jumped from 15th to ninth place in Area Development's 2007 Corporate Survey, with an 83.2 percent rating. Most of the green initiatives to date have been for office space or commercial uses. However, there are examples of green industrial uses, like the environmentally friendly distribution center built by JohnsonDiversey just outside of Milwaukee, which received a gold-level LEED certification from the U.S. Green Building Council.

Beware of waived permitting fees.
Some municipalities will waive the permitting fee as part of an incentives package. Although the waiver could potentially save the company hundreds of thousands in one-time project costs, if the fee is used to hire an outside firm to speed up the process, any accelerated approval schedule benefit is lost. By accepting the waiver on permitting fees, you may save money up front, but the process could ultimately take much longer and cost you more money in the long run.

NKF Consulting, a Newmark Knight Frank Company, provides real-world business and project management solutions for companies throughout the world, helping to reduce risk, accelerate savings, and ensure a single point of accountability. Newmark Knight Frank is one of the largest independent real estate service firms in the world. Headquartered in New York, Newmark Knight Frank and London-based partner Knight Frank Newmark operate from over 165 offices in established and emerging property markets on six continents, with a combined staff of more than 6,300. Last year, transactions were valued at more than $47.6 billion with annual revenues of over $962 million.

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