Defining Key Siting Criteria Will Lead to a Perfect Location Match

May 15, 2019

Ron Crum

About Ron Crum

With 40 years of engineering experience, including 24 years of major project management experience, Ron Crum has been engaged in the site selection arena for 20 years. During his career, Ron has managed and overseen numerous large multi-year, multi-disciplinary projects for several global clients as well as major Fortune 500 manufacturing, refining and petrochemical clients in the Southeastern US. During his more than 40 years of experience, Ron has directed numerous complex projects throughout the U.S. and Europe. He has managed and directed over 250 projects ranging from 2 to 12 months duration and 18 multi-year projects. Mr. Crum has directed teams of 3 to 60 engineers, scientists, and technicians working in local and remote offices.

Ron Crum is also a member of the international Site Selectors Guild (SSG). Headquartered in Chicago, IL, SSG is the world’s leading association for location strategists.

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Have you ever gone on a dating site and tried to find a match? Let’s say you have and specified you didn’t want kids, a smoker, or someone who lived 500 miles away? And then, the dating site matched you with a chain-smoking parent of six, who lived four states away?? First you would swipe left — not a good match. Then you would immediately cancel the search! Delete the app! Why? Because of miscommunication. Someone, somewhere, wasn’t paying attention. Amazingly frustrating and unfortunately all too common…but it still isn’t as frustrating (or as expensive) as when site selectors receive three-ring binders full of data from EDOs and the sites are mismatched with the criteria — everyone’s time is wasted.

Establish the key criteria.
Each site classification (data centers, chemical plants, distribution centers, etc.) typically has a clearly defined set of key criteria, critical to the success of the overall siting effort. These criteria are typically listed in the site search materials. The key criteria are either going to show that the site has fatal flaws and should be eliminated or that it is suitable for further, more detailed review.

In a typical search, a large percentage of the submitted sites fail to match the key criteria. Oftentimes, site selection professionals are wondering if the submitting party even read the criteria at all. But, is it their fault? Sometimes the site selector fails to clearly state the importance of some criteria. And the turnarounds are tight, agencies are swamped, and everyone’s just trying to stay afloat.

It’s past time to pay attention to the key criteria. Is it exciting information? Probably not. Grab a pot of coffee, a highlighter, a magnifying glass, and get to work studying the RFI. Good due diligence could find you both — the site selection team and the EDO — the perfect match.

Achieving a win in site selection matching makes it incumbent upon EDOs to know the key criteria associated with each project classification and to only submit sites that explicitly meet them. Of course, every site will have one or more small deficiencies in infrastructure, utilities, or paperwork, but if the key criteria are met, that shouldn’t be a problem. All sites have issues, but it is critical to get the “big issues” right.

Likewise, the site selection team must clearly define the key criteria in order to achieve favorable results. If they fail to do so, when the binders come in — typically all of them on the same day via Fed-Ex or DHL — the frustration begins.

All that hard work for nothing?
So, what happens during the first round of a typical site search? A slew of boxes containing three-ring binders arrive from all the EDOs within the search area. The boxes are placed in a large conference room where clerical staff unbox the binders and arrange them in a designated order on a large conference table or empty bookcase. Later in the day, the site selection team begins a surface-level, quick-and-dirty review, site-by-site. Binders not meeting the key criteria are placed to the side. Bottom line, all of the effort, anguish, and long hours necessary to prepare the binder resulted in a three- to five-minute quick review by the site selection team before being dismissed.

Many sites, in fact, do not even make it to the initial spreadsheet stage when sites are initially ranked/scored! Why? Because of a failure to recognize/identify the “key siting criteria.” If the RFI does not clearly state the key criteria, ask for it! When preparing an RFI for submission to 5, 12, or 20 states, the site selectors want to make sure their search yields a good range of sites from which to choose so they may not write as tight of an RFI as they could. That makes it hard on the EDOs, who then have to ferret out the answers from the site selector or other sources. And it makes it hard on the site selector who has to sort through widely varying sites to identify the “best fits.” All too often, the site selectors are disappointed in the sites submitted and they share no small part of the miscommunication.

 

“In a typical search, a large percentage of the submitted sites fail to match the key criteria.”

 

Clarify the must-haves.
While it is incumbent upon the site selectors’ Request for Information (RFI) to innumerate the key siting criteria in their RFI document, this is not always done with the level of clarity required by the EDO. That is, the most important siting criteria may not be emphasized as strongly in the RFI as they should be.

On the other hand, some EDOs choose to overlook a clear statement of needs within the RFI and submit sites that clearly do not meet the stated key criteria, often due to internal politics at the state or local level. (“We need to submit this site because the owner is a friend of the Governor.” “We have not submitted a site from this region of the state in a while and they are upset.”) In both cases, the EDO submits a site that is unsuitable for the project, ultimately leading to disappointment by both the site selection team and the EDO.

As an example, if an RFI indicates “an existing building is preferred over a greenfield site,” the desire for an existing building is likely a key criterion. EDOs should strongly focus on sites with existing buildings and submit a greenfield site only out of desperation/necessity since the selection team is going to evaluate all of the existing building submittals and may never open the binders for the greenfield sites.

What are the industry-specific key criteria?
Site selection professionals are faced with a wide variety of new projects, including auto/aero, biomedical/pharma, food/beverage, data centers, corporate headquarters, distribution/logistics, “heavy” and process industries, etc. Every class of projects has its own special key criteria. Let’s discuss a few specific project classifications and the typical key criteria associated with that class of project.

Data centers — Data centers have exacting electrical demands (power redundancy, reliability, and low-cost), immediate access to low-latency data nodes and multiple carriers in close proximity to the site. A data center also requires a strong local IT workforce. A site missing any one of these criteria will be immediately excluded from further consideration. A site that does not meet all of these criteria will not likely score high on a site selector’s scoring/ranking spreadsheet. Results of submitting a subpar site — even if the RFI doesn’t specify it — will end in match-making failure.

Automotive parts manufacturers — Auto parts manufacturers typically want to be in close proximity to the automotive OEM facilities they supply. The best sites are located within a few hours’ drive of multiple OEM assembly facilities. The just-in-time (JIT) delivery requirements of most automotive OEM assembly facilities require parts suppliers to be able to deliver quickly and on-demand. These siting criteria typically drive the overall siting effort for a parts supplier, and submitting a site that is not appropriate from a logistical standpoint will lead to frustration, failure, and wasted effort.

Distribution centers — Distribution centers have similar siting restrictions that guide the site selection effort. Often, distribution centers want to be in close proximity to the major air shipping hubs of UPS, Fed-Ex or DHL. Alternatively, while the RFI may not explicitly state it, they may want to be in proximity to either Amazon’s or Wal-Mart’s distribution network. The facility should also be located with excellent access to the interstate highway system. Sites that fail to meet these key criteria will likely be disqualified immediately and will result in disappointment for the EDO.

 

“Achieving a win in site selection matching makes it incumbent upon EDOs to know the key criteria associated with each project classification and to only submit sites that explicitly meet them.”

 

Heavy industry — Siting a “heavy industry” project requires a more detailed search and fatal flaws are rampant. For example, identifying a site for a $2 billion facility that requires 1,000-acres and two million gallons/day of process water may be difficult. The number of sites that meet the above criteria are limited, but when you add the need for rail access, or access to a 12-inch–36-inch natural gas transmission line, the number of qualifying sites plummets, making a match even more difficult.

Similarly, the siting of a major petrochemical plant, another form of heavy industry, can revolve around the availability of a key chemical required in the process. For example, our team was searching for a site for a new $1.5 billion polycarbonate plant. The key raw material used in manufacturing polycarbonate is bisphenol-A, and our site search revolved around finding a 1,200-acre site within a few miles of a source of bisphenol-A. Recent cost data indicates a high-pressure steel pipeline (to transport the needed materials) costs $350,000/inch of diameter/mile. A 12-inch pipeline would cost approximately $4 million/mile. The pipeline cost limited the search to sites in one of just six small communities within the U.S. where bisphenol-A was manufactured: Baytown, Freeport, and Deerpark, Texas; Haverhill, Ohio; Burkville, Alabama; and Mt. Vernon, Indiana. Had the client site required a deepwater dock, the siting study would have been even more limited as only Baytown, Deerpark, and Freeport can accommodate deepwater draft ships.

Deepwater draft shipping — In another example, a Chinese client required a site with outstanding access to cheap natural gas and access to deepwater draft shipping. The goal of the project was to construct a $3.7 billion methanol plant and ship the finished product back to China via the Panama Canal. The cost of shipping and access to vast quantities of natural gas resulted in a site search limited to either the Texas or Louisiana Gulf coasts, where the client could buy natural gas from either the Haynesville Shale in Louisiana or the Eagle Ford formation in Texas. While cheap natural gas was available in the Marcellus Shale, the higher shipping cost from the East Coast was unacceptable to the client.) Ultimately, quality sites were identified in both Texas and Louisiana.

In Sum
As in the above examples, specific siting criteria apply to all project classifications. Almost every type of facility has one or two critical siting criteria that dominate the overall location decision, regardless of workforce, incentives, business climate, or quality of life criteria. A great workforce or incentives cannot overcome the lack of redundant power, low data latency times, a deepwater dock, proximity to a key client, or a key raw material pipeline.

The site selection team does not have the time or energy to review the site regardless of its other positive attributes or the strong incentive package offered by the EDO. The site selection team is always under a tight schedule and cannot afford the luxury of lingering over binders for sites that do not meet the most basic qualifications. Similarly, EDOs don’t have the time to waste filling out these forms and submitting binders full of information for sites that will be left on the side when the detailed site evaluations begin. So take the time to get the communication right. A little clarification can go a long way when you want to find your perfect match!

 

The following piece was originally published in Area Development Magazine.


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