System design: first cost or operating cost?

HI Josip,

I started a new thread to continue the discussion on system design and maintenance..

I have seen a lot of systems being sold to owners that are supposed to be "energy efficient". Here is a highlight of the last one I heard about: Single suction pressure maintained by 4-5 big screw compressors (1000 HP +, +/- 750 kW) each.

Back pressure regulator valves on all of the higher temperature evaporators. Condensing temp. = 95F (35C) design for summer.

Most of the evaporators are operating at much higher temperatures than the lower suction pressure was being maintained at. The compressors were sized to operate at the low suction pressure for a very small percentage of the total loads.

The owner was told this is the most efficient system they could buy. So they did. Now they are beginning to wonder if it was true. Several big screws operating at part load!

To me this system falls in the category you labeled #1. Cheap for first installed costs. Expensive to run.

A much better job of engineering could have been done but... This seems to be the way most systems are being sold.:(

I think if the owners were more aware (and better informed) of the differences in operation and first installed cost they would make different decisions.

Hi,

I think all of this is depends on the application and the operating condition. Some application is variable load and some are fixed load.Sometimes the compressor selection needs different size to fit on the application. And also depends on the owner(client) multinational company or backyard company.

Regards,
Guapo;)

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Originally Posted by US Iceman

HI Josip,

I started a new thread to continue the discussion on system design and maintenance..

I have seen a lot of systems being sold to owners that are supposed to be "energy efficient". Here is a highlight of the last one I heard about: Single suction pressure maintained by 4-5 big screw compressors (1000 HP +, +/- 750 kW) each.

Back pressure regulator valves on all of the higher temperature evaporators. Condensing temp. = 95F (35C) design for summer.

Most of the evaporators are operating at much higher temperatures than the lower suction pressure was being maintained at. The compressors were sized to operate at the low suction pressure for a very small percentage of the total loads.

The owner was told this is the most efficient system they could buy. So they did. Now they are beginning to wonder if it was true. Several big screws operating at part load!

To me this system falls in the category you labeled #1. Cheap for first installed costs. Expensive to run.

A much better job of engineering could have been done but... This seems to be the way most systems are being sold.:(

I think if the owners were more aware (and better informed) of the differences in operation and first installed cost they would make different decisions.

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Hi Iceman:)

In my experience all plants are over sized:eek: They are sized for a peak load that happens much like Christmas:D for the warmest summer day that, well doesn't happen if you are in Ireland.

Compressors should be installed in differing sizes, to match all load profiles, not 3 large compressors. 6 compressors the same may work;) but two large compressors for all the load are a disaster.

Also I beleive that the suction and discharge should float, only being low enough to just about acheive temperature, so the controls must be smart with the load talking to the compressors, moving the evaporation up and down to suit applied load.

VSD's are a great way to control load matching:)

The best VSD applications are on Recip compressors, but complete due to the speed and the heads all loading up and down:confused:

Kind Regards Andy:)

HI guapo & Andy,

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Originally Posted by guapo

Some application is variable load and some are fixed load. Sometimes the compressor selection needs different size to fit on the application.

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Very true. All too often I see large compressors installed when several smaller sizes, or mixed sizes should be used.

For some reason, I keep seeing several large compressors being used to handle the total load at a common suction pressure. With the higher temperature loads being controlled by back-pressure valves.

Personally, I don't think very many people pay attention to load profiles or energy use. They do as Andy suggested... Install enough compressors to handle the one day condition.

The other thing I see a lot of is DX systems. I have heard many arguments that DX systems are cheaper to install. On this point I disagree. I believe a liquid overfeed system can be designed to provide almost equal installed cost as a DX system.

When you total all of the different equipment you have to use with a DX system (accumulators, transfer pumps/vessels, TXV's, etc) and compare this cost to a liquid overfeed package the cost differences are very close.

The piping will cost a little more + the additional insulation on the liquid lines (but if the DX system were designed with subcooling, the liquid lines would be insulated anyway).

The big benefit is that you can run low discharge pressures on the high stage compressors (with the liquid overfeed) and not have to be concerned with the liquid supply pressure (like you would on a DX system).

The best part is as Andy mentioned... Smart control systems that float the suction and discharge pressures, VFD's, and a control system that "talks" to the other components..

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Originally Posted by US Iceman

A much better job of engineering could have been done but... This seems to be the way most systems are being sold.:(

I think if the owners were more aware (and better informed) of the differences in operation and first installed cost they would make different decisions.

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Perhaps part of the problem is that it's "safer" to bid a cheaper project cost, rather than to try to explain the payback period. :confused:

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Originally Posted by Terp

Perhaps part of the problem is that it's "safer" to bid a cheaper project cost, rather than to try to explain the payback period. :confused:

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This could be one of the reasons. I have looked at some jobs from a "design-value-added" basis and in a lot of cases you can perform the same cooling with almost no significant differences in costs.

I think a lot of these jobs fall into a "cookie cutter" mentality. Once a job is done one way, it is easy to keep doing other jobs in a similar manner.

Nothing too creative to sell, but it works. Unfortunately, the customer thinks buying the low bid is in his favor (or at least the accountant reviewing the costs :D ).

I think a case could be made for value engineering the system based on a projected one year difference in energy savings. Now wouldn't that be interesting.

Gents, in your opinion; Do packaged chillers fall into an initial savings or longterm energy savings?

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Originally Posted by US Iceman

I think a case could be made for value engineering the system based on a projected one year difference in energy savings. Now wouldn't that be interesting.

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Hello iceman:
The different view from the different role.
For Commercial person, the "tender power" is his most important. and the Low price (Especially for the start cost) is first factor in the bid (Mostly measureable scale is that whose price low is who win).
For Technical designer, the "Safty" is his most important. and low trobleshoot is considered firstly. Especially, In the bid the measurable scale is if this design is safty or not? so the "future benefit" will stand by.
For owner, the start cost affact his application from his mother company. He must make the his top leader (mostly the persons that know little technology) from mother company invest money. But the leader take much care of cost effective for only one year (it will be directly show management up/down in the stock).
So according to the above, every person will follow the silent rule: Pay more attention for the initial bid than future cost from a high view. :mad:

On the other hand, The refrigeration load is always varied by many factors (Food quantity, Outdoor temperature, etc). so there is not a standard scale to measure the future cost (at least i dont know). we can't know how to calculate how many electric will be cost in the future year. we can only estimate this will cost more and that will cost low, but we don't know exact value. so this is a vague conclusion (Except for one-year-experiment after is bought :D ).:confused:

As andy said, the smart control is a good choice, but maybe we should programm by yourself.

Best regards Shylock.:)

Hi Shylock,

You raise some interesting and valid comments.

The big question is the cost. For people who do not understand refrigeration, the common denominator is the project cost. This is what they use the low cost as a means to determine the project award.

If all firms quote on the same performance aspects, then the owners feel the cost is a good way to evaluate the proposals.

On the other hand, if a proposal has two options: One very cheap (just enough to make the system work), and, one system that will save energy, the owner now has a different chance to evaluate the proposals from one firm.

The energy savings is an estimate, and it can be difficult (and time consuming) to perform.

However, if the owner understands you are trying to save him money and have his best interests in mind he will be more willing to think about it. At least this has been my experience.

If you try to compete on money/costs the owner is all too willing to make sure he only spends the lowest amount. This continues to drive your profitability down.

Look for some ways to increase the profitability by using value-added-engineering. If it was easy, everyone would be doing it.;)

Hi giovanni,

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Gents, in your opinion; Do packaged chillers fall into an initial savings or long term energy savings?

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Initial savings as a first time cost reduction.

Now if you wanted to look at a different point of view to include both initial and long term savings here is a point to consider.

Use a packaged chiller without a condenser. Carrier has these (but they use remote air-cooled condensers). Instead of using an air-cooled condenser, use an evaporative condenser.

The two biggest manufacturers of evaporative condensers (Evapco & BAC) are very close to you. They are down in the Baltimore area.

The HVAC package chiller will be cheaper than a custom built system, and the use of the evaporative condenser will reduce the summer energy use dramatically.

A win/win situation.:cool:

Do we also have to look at a possible legal aspect of providing energy efficient plant nowadays, global warming etc., against just getting the lowest install price?

With rising energy costs the customer should, I say should, be more concerned with the running costs than how much it is off the shelf.

Hi Brian,

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Do we also have to look at a possible legal aspect of providing energy efficient plant nowadays, global warming etc., against just getting the lowest install price?

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This brings up an interesting point. I would agree with your statement above. However, there will always be people who request the cheapest possible piece of crap and those willing to sell it.

This is not too far from allowing anybody to service or install refrigeration or A/c systems just because they have a set of gauges and a tank of refrigerant.

From my perspective I would prefer to inform the owner of the differences between energy use and HELP him to make an informed decision. In my mind, that is selling, not just taking orders.

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With rising energy costs the customer should, I say should, be more concerned with the running costs than how much it is off the shelf.

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Could not agree more...

I believe we can help the owner to make smarter decisions. His business is different from ours. But if we help him to understand the impact of his decisions (re: cheap versus cost effective) towards his business, we can win in the long run.

Maybe even make a few peso's along the way.:D

I understand that our supermarket managers here in the UK are paid a bonus for 'energy savings' (or similar expression). Therefore they are concious of a poor quality service or repair which results in increasing energy usage.

It tends to generate another call to the service provider and quite correctly too.

But as you say Iceman, a sensible discussion with the customer has got to be the best way forward.

First cost or operating cost ?

Here is my ten cents, for what it is worth,

In Canada, and I suspect in the states, the bigger the supermarket chain, the more stupid they are. The problem : each department has a budget. Each department head gets rewarded differently. The result is that nothing is optimized. They invariably end up buying the lowest cost and getting a system that consumes too much energy or is too costly to maintain in good operating condition.

Iceman is right. Your quote should show more than one solution. Always a cheap alternative, and one with added value. You have to make someone think twice about the lowest cost.

Why is it so hard? Quantifying precisely lower operating costs is difficult to prove. Even when you succeed in convincing someone, they will only look at a higher price if the payback is 6 to 9 months. Sometimes up to a year. Vary rarely 2. Yet they will operate these stores for years and years.

The buyer is usually a powerful guy within the organisation. He gets a bonus on cutting costs. So he always goes for cheaper prices. And he definitely likes to bargain things continuously. It makes him look good.

The chain maintenance guy (when there is one) wants a product that does not fail often, that is easy to replace, with great service, and easy to maintain. But he usually weighs less then the first guy. And he is not always focused on energy savings. Most of the time he focuses on simply making sure that things keep on running. Most of the time, he ends up having to live with the cheap stuff that they ended up buying.

The chain energy manager (when there is one) has a budget for reducing energy costs. But he only gets his say after everything has been purchased anyway. In other words, he has a budget to patch things afterward.

It is a bit sad that even if we work in the customer's best interest, we have to work so hard to make them understand that better products actually pay off.

Ok, said enough. I vented my frustration.

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Originally Posted by oldwolf

Why is it so hard? Quantifying precisely lower operating costs is difficult to prove. Even when you succeed in convincing someone, they will only look at a higher price if the payback is 6 to 9 months. Sometimes up to a year. Vary rarely 2.

Yet they will operate these stores for years and years.

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One thing I have noticed is that sometimes the use of the term payback creates problems. Just for the reason oldwolf mentions.

If you state this a little differently, a 6 month payback means you are recovering the additional money spent (for the improvements to the system) in six months. That's equal to a 200% return on investment (ROI) of the additional money spent.:eek:

A 2 year payback is equal to a 50% ROI.

Even a 4 year payback is still 25% ROI. That's darn good income from that investment.

Can the store generate this kind of money anywhere else? Maybe, but the store manager should really take an interest (pardon the pun) in this type of investment.

And as oldwolf mentioned, this keeps going on every year as long as the system is maintained (there's that dirty word again). It also assumes the ROI is constant, which it will not be. As energy costs continue to escalate, the ROI actually increases with the increase in energy.

Everything oldwolf said I agree with. Especially about the buyers. That takes a lot of time to develop their trust.

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Originally Posted by oldwolf

Here is my ten cents, for what it is worth,

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I would say that was worth every penny and them some.;)

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Originally Posted by US Iceman

However, if the owner understands you are trying to save him money and have his best interests in mind he will be more willing to think about it. At least this has been my experience.

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I think you are a perfect market developer. :D :D :D

Could you tell me which company you are working for?;)

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Originally Posted by shylockw

I think you are a perfect market developer.

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Thanks, but that's not exactly my goal. What I'm trying to describe is a way for a refrigeration firm(or HVAC firm too) to have some leverage in competing in a very strange business relationship.

In the last 15-20 years the business has started to have very small profit margins on projects. Somewhere/somehow the project costs have been driven very low most notably known as the "lowest cost wins".

After a certain period of time everyone starts to believe "I have to have the lowest price to survive". Doing this reduces customer service. This is what Dell computer is going through right now.

If a company does not make sufficient profits to provide good customer care, who wins? Certainly not the owners, nor the installing firm.

I'm interested in ways to make sure I win and the customer gets a good deal. This also forces the refrigeration/HVAC firm to be on top of it's game. More training, less callbacks, problem free start-ups, no warranty calls, etc.

It's not easy, but it can be done. The trick to this is to find ways to make money a "non-issue". That's not entirely correct as money will always be an issue. But if we can take the focus off of lowest cost we should have more latitude to develop business.

In my opinion. there is no way to make an honest $$ by selling in volume at cheap prices. Something suffers.

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Originally Posted by shylockw

Could you tell me which company you are working for?

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Sure...None. I'm self-employed.;) Now, my only boss is the customer. Before I had two bosses. One who told me what to think and how to do the job, and the other was the customer.:D

Hi Iceman.. thanks for the info. We are looking for both. Cost of initial package and long term reliability and energy savings. We have even discussed the issue with NYCERDA which is a NYS energy program and recommends options on long term energy savings and also some state grant money on energy savings equipment. Thanks again for the info.

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Originally Posted by US Iceman

In the last 15-20 years .......

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Iceman
Many thanks for making us share your experienced sense .
The facts prove that: If you want to get a bid, you should think it to help your old friend to solve a problem, in stead of considering this is only a deal.:o

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Originally Posted by US Iceman

More training, less callbacks, problem free start-ups, no warranty calls, etc.

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Maybe, this will be as a bible for every market developer, project designer and maintainance serviceman. :) Especially for Chief Operation Officer:D :D

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Originally Posted by US Iceman

Sure...None. I'm self-employed.Now, my only boss is the customer. Before I had two bosses. One who told me what to think and how to do the job, and the other was the customer.

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Wish you have a good bloosom deals.:p Welcome to China.:) :) :)

One thing I do know is that customers respond to those to look out for their best interests.

When I ran a large group for custom engineered refrigeration systems (chemical plants, refineries, or any other special system) The customers always responded well to short lead times, problem free start-ups of the system, and an honest discussion on their needs.

The last one is very important. How can you help them to succeed in their business?

When and if you get to have these conversations, the client begins to see you are trying to do your best job for him.

I've seen this work and within the span of two years we doubled our annual business for this department within the company.

There is no reason to believe this wouldn't work for commercial refrigeration also. Take a supermarket... How many more bags of groceries does the owner have to sell to make an extra dollar, Euro, or shekel?

Quite bit, because their profit margin is so small.

I really think the way to make this happen is to talk in terms of investment and return, rather than costs.

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From my perspective I would prefer to inform the owner of the differences between energy use and HELP him to make an informed decision. In my mind, that is selling, not just taking orders.

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yes, but people are suspicious; the customer will have to go to a designer/calculator who has nothing to do with selling refrigerating stuff. That will only work!

http://www.microturbine.com/applicat...generation.asp

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Originally Posted by donato

the customer will have to go to a designer/calculator who has nothing to do with selling refrigerating stuff.

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Not necessarily. Most of the information you need can be found on the net, the local parts supply, books, or here on the RE forums.

Why not try to learn how to do this and be self-reliant? It takes some time and patience, but I think it works.

Of course, not everyone (home owners, small businesses, etc.) will respond without suspicion, but I don't think it is impossible.

I will have to agree with US Iceman for the most part. I did learn alot from this site and knowledge is power... AT least if you have some background on what you are looking for you will have a good idea if you are getting Bull dozed by anyone. Also is it is good idea to ask some questions you know the answers to... so you can determine the quality of the people doing the selling and how much they know. In addition speak to other outfits and determine if the answers you are looking for are in line with your decision making. After all this stuff is expensive and once you buy its yours. :)

There are some big companies, and there system of selling is terrible. Firstly because of their brand names, the customer is overawed and do not realise the consequences. I have been associated with a project recently where a multinational firm in refrigeration offered the customer a refrigeration system at a very low price. The equipments were terrible. I was involved at a much later stage as a consultant. When their design engineer and the sales engineer came they openly said that to lower the cost they had supplied equipments which were not as per the requirement. Today the customer does not know as what to do as they are unable to attain the required conditions.

I personally feel that it is the operating cost that should be considered and as some one had earlier said in this forum that it is the duty of ours to educate the client, and even after that if they want to be taken for a ride let them go.

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Originally Posted by Samarjit Sen

...offered the customer a refrigeration system at a very low price.

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This is how the problems start...

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Originally Posted by Samarjit Sen

When their design engineer and the sales engineer came they openly said that to lower the cost they had supplied equipments which were not as per the requirement.

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At least they informed the owner what they were doing. My next question is...Did the owner ask if their proposal would work correctly for the intended requirements?

The one thing I keep seeing is the customers are very good at what they want to do (fishing, meat processing, bakeries, etc.), but they do not understand refrigeration.

This puts them in a position of trusting the supplier unless something about the proposal "smells bad". Most of the time this "smell test" works before the problems start. Not always though.:o

Then this next step occurs...

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Originally Posted by Samarjit Sen

Today the customer does not know as what to do as they are unable to attain the required conditions.

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By this time the owner does not trust anyone. And it is very hard to get him to fix the problems correctly, since he has already spent a lot of money to get this far.

I have seen this over and over, too many times. I am convinced you have to build up the owners trust in you so that you can do the right thing.

On the other hand, sometimes the owners know just enough about refrigeration to drive you crazy!:D

The firm did submit the proposal and very clearly stated all the parameters and attaining the desired conditions. The owners believing that it is a refrigeration firm of international repute put all their faith. After the equipments were supplied, some how their was a feeling of something is wrong, and it was then that I was asked to inspect.

In this particular case both the parties should be blamed. The owners are not supposed to know about refrigeration should have involved some consultant at the initial stages. On the other hand the refrigeration firm although a very reputable organisation should have supplied at least the equipments they had committed. More shocking is that this firm of such high repute does not have a proper design engineer nor are they aware of the basics of refrigeration. Even after this plant they on the basis of their brand name are taking up refrigeration projects and making a mess of the same.

It is a pity that people not being aware of refrigeration engineering try to act as if they know evrything in this field. This is what is happening in our country, and would like to know if the situation are similar elsewhere.

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Originally Posted by Samarjit Sen

On the other hand the refrigeration firm although a very reputable organisation should have supplied at least the equipments they had committed.

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That is committing a fraudulent transaction in my opinion, but then again, I'm not a lawyer.

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Originally Posted by Samarjit Sen

It is a pity that people not being aware of refrigeration engineering try to act as if they know evrything in this field.

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This happens a lot more than we would like to admit.;)

Hi All, first time to post but have been watching and laughing for a while with all of the threads and topics that have been covered. We are based just north of London and have been recently starting to win jobs by being honest. Scary I know. The details are as follows;

'Yes there will be a lot of noise and disruption to your working day whilst we work.';)

'Yes it will take us several days/weeks to complete the work.':o

'We have included for worst case scenarios.':)

'No we don't do electrical, we are not electricians.':(

'Yes it will work, because if it doesn't we will replace it with something that does.':D

This has allowed us to win work above competitors prices and a few well placed recommendations from existing customers helps. This is all about trust and recommendation. Unfortunately in this business because of the technical aspect and the general lack of understanding by customers we are left with no choice but to explain ourselves in as plain a version of english as possible using appropriate analogies to enable a small amount of understanding and possibly agreement to proceed.

And after all that we still get called when they accidently change the system mode to heating.:D

Take care all, good thread. MikeA

I was going through this thread after a long time. We all are honest and tell the plain truth to our customers. Even we do educate them. But then out of the blue some firm drops in and says that " I can do the job at 50% of the cost quoted by others " The customer gets carried away, as there is a thought that refrigeration business has a great profit and the person who is being honest is making a lot of money.

It is tough but then we have to try. Our past records are good and the references are good, so we are now finding a bit less difficulty in convincing the customer. But then how long will it stay, as there are always people having worked as a technician in one project becomes a contractor and an engineer and starts quoting absurd prices.

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Originally Posted by MikeA

Unfortunately in this business because of the technical aspect and the general lack of understanding by customers we are left with no choice but to explain ourselves in as plain a version of english as possible using appropriate analogies to enable a small amount of understanding and possibly agreement to proceed.

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That about sums up the problem. The owners normally hardly know what refrigeration is, except that it is expensive, makes noise, and costs them money every month.

Building a client base is difficult and takes some time. I still maintain the best the way to present a bid to a customer is by way of explanation and showing them you are working for them, not yourself.

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Originally Posted by MikeA

This is all about trust and recommendation.

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Absolutely. It is easier to keep existing customers, than finding new ones.;)

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Originally Posted by Samarjit Sen

" I can do the job at 50% of the cost quoted by others "

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Oh there are those types also. The way I look at this is: Those that sell on price, have nothing else to offer.:D

US Iceman,

It is indeed a pleasure to see posts like yours, MikeAs and others in this forum. It seems that there are still people in this world who are honest and sincere. I hope this feeling crawls into everybody who visits the forum as a guest and makes this field of refrigeration as the best in Engineering.

I lose a lot of business due to cost, but then at a latter stage the customers suffer and has no means to rectify the problems, as by that time they have spent much more than they were quoted as there were a lost of hidden cost which they did not want to see.

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Originally Posted by Samarjit Sen

I lose a lot of business due to cost, but then at a latter stage the customers suffer and has no means to rectify the problems, as by that time they have spent much more than they were quoted as there were a lost of hidden cost which they did not want to see.

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I certainly understand and remember what this was like. One way around some of this is to spend some extra time doing "value engineering".

There are usually some ways to keep the costs down, or alternate methods similar to a stepped implementation.

Value engineering takes some time to prepare and usually consists of a phased in approach, or suitable qualifications like ROI through energy savings, lower maintenance, etc.

The other "cheap guys" are just selling initial cost, nothing else. When one of these becomes involved it is always more difficult, since they are just selling on price alone.

In fact, you have to try to convince the owner you are working for them. The issues you raise are generic to the world. This will always happen.

I prefer to play my own game, rather than someone elses. I don't win all of the time, but enough to keep me happy!:D

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Originally Posted by US Iceman

Value engineering takes some time to prepare and usually consists of a phased in approach, or suitable qualifications like ROI through energy savings, lower maintenance, etc.

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I have managed very well from insisting on only doing the best I could and using all the best products available.
In the past I have gone and put right faults or problems others could not or would not find. I have done this after telling the customer that I refuse to be rushed or pressured. If the customer is not happy with that I tell them to go to a competitor and let them sort it. After a few days they generaly are back on the phone wanting my help.

taz.

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Originally Posted by taz24

I have managed very well from insisting on only doing the best I could and using all the best products available.

In the past I have gone and put right faults or problems others could not or would not find. I have done this after telling the customer that I refuse to be rushed or pressured. If the customer is not happy with that I tell them to go to a competitor and let them sort it. After a few days they generaly are back on the phone wanting my help.

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From my viewpoint, this should be the bare minimum. I'm in full agreement with what you said. Customers should be able to expect a certain level of care and respect, just as we should expect to see towards us.

I believe the "rush and pressured" syndrome might be alleviated by telling them up front how long it might take, etc. You might be already doing this, but I thought it worth mentioning.

Owners most of the time have no idea of what we do. So, I think if we try to tell them up front what to expect, it sometimes reduces the anxiety.

Not all of the time though.:rolleyes:

Another one of their favorite tricks is to try to talk you into cutting some corners (taking a shortcut) to save money or time. I would not advise this either.

Most of the discussions posted in this thread relate to business practices. The reason I started this was to try to help those who want to gain an upper hand in dealing with "low cost bidders".

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Originally Posted by US Iceman

I believe the "rush and pressured" syndrome might be alleviated by telling them up front how long it might take, etc. You might be already doing this, but I thought it worth mentioning.

Owners most of the time have no idea of what we do. So, I think if we try to tell them up front what to expect, it sometimes reduces the anxiety.

Not all of the time though.:rolleyes:

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Agreed:)

I personaly prefer to have a decent relationship with the customer built up on trust and reputation.

Unfortunatly it does not always work out the way you want but on the whole if you stick to your principles and follow them through it seems to turn out for the best. (like life I spose eh?)

taz.:)