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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 and Robert Hess, Executive Managing Director, Newmark Grubb Knight Frank (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.

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About the Author

Doug Stachowiak, Global Location Strategy and Optimization, Chicago, NKF Consulting
Doug Stachowiak joined NKF Consulting with over 13 years of experience. His background includes location consulting, strategic real estate and incentive negotiations, labor, demographic, and industry-sector analyses, community evaluations, land and infrastructure assessments, operating costs and conditions modeling, researching and interpreting zoning ordinances, variance negotiation, and governmental affairs.

Robert Hess, Executive Managing Director, Newmark Grubb Knight Frank
Bob Hess leads the Consulting Group at Newmark Grubb Knight Frank Global Corporate Services and is responsible for strategy development, quality assurance, and leading business development activities on a global basis. Prior to joining Newmark Grubb Knight Frank, Hess was a Leading Partner in Cushman & Wakefield’s Global Business Consulting Group based in Chicago and Founder of the firm’s Global Supply Chain Solutions consulting practice. Other past experience includes his role as a Lead Partner with Deloitte & Touche for 18 years in their Fantus Locations Strategies service line, a specialty consulting practice known for industry leading strategic facility planning, location strategy, site selection, and corporate real estate advisory services. Aside from his supply chain planning and facility location strategy core competencies, other strategy and operations experience includes distribution network optimization, manufacturing rationalization and consolidation, relocation feasibility, strategic cost reduction, large capital investment program management, commercial and industrial site evaluation and due diligence methods, detailed labor market/workforce analysis, and complex financial incentive negotiations. Hess earned his BA in Economic Geography/Urban and Regional Planning, cum laude, from the University of Minnesota - Duluth, and an MBA in Marketing Management from DePaul University in Chicago. He attended Northwestern University in Chicago completing Executive Development Programs in Global Supply Chain Management and Factory Physics/Lean Manufacturing, and recently attended MIT for Creative Problem Solving/System Dynamics.

More articles by Robert Hess

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