Monday, November 19 2018
By Phil Schneider, President, Schneider Strategy Consulting LLC
In 20 years, certified and shovel ready site programs have evolved from a unique tool and competitive advantage to economic development table stakes. Site readiness programs in one form or another have become an established part of many, if not most, economic developers’ tool kits. Site readiness programs are established in over 30 states, developed and managed by state and local economic development organizations – both public and private – chambers of commerce, electric power utilities, railroads, port authorities, and other industrial development entities.
The reasons for their increasing popularity and ubiquity are clear: speed to market is increasingly critical in the site selection process, companies are no longer willing to bear the cost of extensive due diligence for multiple sites on their own, and the risk of site timing and condition unknowns has become unacceptable in the location process.
The value and overall importance of having ready-to-go sites is no longer seriously challenged. However, there is considerable debate, ambiguity, and disagreement as to what actually constitutes a certified or shovel ready site, how much and what type of information is required by companies to allay their timeframe and risk avoidance concerns, and if and how site readiness programs should vary by industry type or function.
In this article, I will briefly explore the background and history of site readiness programs, discuss the processes that economic developers undergo to get the sites certified or ready, discuss why these programs are important to companies and their site selectors, and finally explore some of the challenges and shortfalls of these programs and what, if anything, can be done about them.
Background and History
After New York kicked off the race, multiple states quickly followed suit, and soon after that, large regional electric power utilities. In the years since, numerous regional and local economic development agencies joined their respective state or utility programs and, increasingly, rail programs as well. Others formed their own programs when other suitable programs were not available or did not meet community needs and realities. Not only did the site readiness concept spread quickly, it diversified and specialized, with multiple approaches of various levels of size and industry focus, and various levels of robustness and comprehensiveness.
Site Readiness Program Essentials
Contact information for the site owners, representatives, and economic development organizations marketing the site. Site location and detailed description of the site and surroundings include brochures, photos, maps, drawings (size, dimensions), plans, pricing, site and adjacent current and past uses, site and adjacent zoning, restrictions, covenants, required and existing approvals, permitting processes, infrastructure and service ratings, various ownership rights, etc.
Detailed transportation access data, including access and distances to streets, highways, commercial and cargo air, rail, and ports.
Detailed utility infrastructure and service data, including access, service levels, and capacities for electric power, natural gas, water, waste water, storm water, and telecom/fiber access.
Site documentation and studies that have been completed, such as title commitment, survey, master plan, development permits, geotechnical/soil studies, flood plain designation, wetlands maps and delineation, air attainment status, environmental assessment, archeological and historical use studies, endangered species assessment, and traffic flow studies .
General community information, such as a detailed community and regional profile including workforce and demographics data, local emergency services serving the site, local industrial and business support services and amenities, and state and local incentives program descriptions.
The Site Readiness Process
Site readiness programs are typically a collaborative effort between the economic developer, the site owner or owner’s rep, and a third-party firm or consultant. Some organizations do certify or qualify their own sites, and while this can be perfectly viable, it can have less of an impact in the market place. Companies value the fact that a known site selection consultant, engineering, or construction firm has worked in concert with the organization and owner to ensure that the appropriate data are collected, reviewed, and verified. The third party will typically certify, sign off, and “badge” the site indicating that the data have been reviewed, verified, and meet program requirements.
Perhaps the biggest differentiation among site readiness programs is the amount and data and documentation that is required.
Other variations in site readiness process include size requirements and industry or functional specialization. When these programs began, a primary focus was on “mega” sites, often further focused on large-scale manufacturing projects, such as auto assembly plants, steel mills, or chemical processing operations. Because sites of this magnitude – often thousands of acres with very high utility and transportation infrastructure requirements – are rare and hard to assemble, states and utilities in regions contending for these projects sought to get ahead of the curve and assemble the required data and certify mega sites that would meet the thresholds these mega projects required.
Quickly, however, economic developers realized the value of site readiness and lowered the size threshold. Some programs still required at least 100 contiguous acres, while others lowered the threshold to 50 or less. Some have gone considerably smaller, particularly for specialized sites that appeal to specific industries or functions, which may require less land, but need capability in some other factor, such as an active rail siding, very high power or water capacity, or even immediate interstate highway access with visibility.
This in turn has created more demand for industry and functional specific certified sites. For example, a food processor may only require 25 acres of land, but they will typically have very high water and waste water requirements, and often fuel and power as well, that are not easily met. Data centers may or may not have large land size requirements, but they nearly always have very high extreme power, cooling water, fiber connectivity, and site security requirements that are difficult to find. A large distribution center may fit on to a 35-acre site without heavy power or gas capacities, but they will require near immediate access to limited access four-lane highways, often with high-pressure water systems for fire suppression and sufficient height allowances. Because of these differing industry and functional needs, specialized certified sites have sprung up to meet market demands.
The last and perhaps most important phase of the site readiness process is marketing. Otherwise good programs can fail by inadequately or inappropriately developing and distributing marketing materials. Some err by providing too little data on web sites or printed brochures, leaving the prospect unable to discern whether the site truly is ready, while others provide far too much, burying the prospect with data they have to mine to determine whether key criteria are met. Choosing the right, highly-descriptive maps, photos, drawings, and data tables to populate the site marketing materials and presentations can make a huge difference in the ultimate success of site readiness programs.
Value of Site Readiness Programs
The primary advantage of these programs, and why they were created in the first place, is to save time and cost – for all involved. Before the advent of site readiness programs, the process to identify and validate sites meeting project requirements could take months; for very large, complex manufacturing projects, often a year or more. Each new project required a re-creation of the wheel for both the companies and the economic developers. For the consultant or company, this required broadly issuing a detailed site requirements RFI, often not knowing whether or not an area had capable sites, and then as submissions arrived from economic developers, sifting through boxes of site binders – often scores of them – only to find a mishmash of half-baked site data, with many sites not even remotely qualified. An iterative process would ensue, followed by detailed field due diligence involving multiple experts and studies. More often than not, the consultant or expert would discover flaws – sometimes serious or fatal – resulting in more due diligence, an enormous waste of time and money, and sometimes hard feelings by the company and their consultant. And there was an equal waste of time and money for the economic developer, chasing down data, spending precious resources on studies, often for sites that were ultimately unworkable.
The raison d’etre of site readiness programs is to greatly reduce the resources it takes for companies to review sites and determine whether or not they will work, ultimately saving time and money – and face – for all involved. Properly conducted, the readiness programs demonstrate to the company that they can get in to construction and operation faster than other sites, without the additional cost and time required to do all of the legwork themselves for sites that may or may not be qualified. And for economic developers, the cost of developing these programs and sites is far less than getting no project opportunities at all. Fully-documented, ready-to-go sites also provide them the time and resources needed to focus on other project needs, such as workforce development and other specialized inducements.
Another key value of site readiness programs is data transparency. This is directly related to the issue of time and money identified above, but has the added benefit of reducing project risk. Companies and their consultants are risk averse during the location process. They work hard to weed out locations with unacceptable flaws, and to find locations where all operational and development risks are known and can be satisfactorily mitigated in a timely fashion. Site readiness programs, comprehensive and accurate, provide this needed transparency. Clear ownership, price, physical specifications, infrastructure capability, and detailed site and community characteristics, give the site selectors the knowledge they need to qualify the site and reduce the risk of moving forward toward further due diligence and ultimately, implementation.
Some economic developers, site owners, and even companies mistakenly believe that a key value of site readiness programs is to identify perfect sites for future investors. Finding perfect sites is not the goal, nor is it even possible. Since the banishment from Paradise, there has not been a perfect site. All sites have some flaws from a project requirement perspective.
A certified or shovel ready site does not, or should not, purport to be flawless, but it is imperative to the value of the program that the data are complete and transparent. The overarching goals of these programs are to better market, and ultimately sell, the site to a company providing jobs and capital investment; hiding or misrepresenting site data does not serve those goals. The program objective is to provide as much information about the site as accurately as possible. Whether the site is appealing to and workable for a prospective investor’s location project is up to the company and their consultant, providing complete and transparent site information will help them determine that much more quickly, saving time and resources both for them and the economic development agency and site owner.
Site Readiness Program Challenges
Site selectors and economic developers debate what certified or shovel ready actually means. Certified or Shovel Ready for what? Which industry, function, company, or even project? Project requirements, even within the same industry, can vary wildly; and they vary far more between industries and functions. A site may be certified, in that it is well-documented, but that doesn’t mean it will meet the needs of any particular project. Some sites are certified for specific industries and functions, but even that does not ensure that it will meet the specifications of the next project in that industry that comes along with double the requirements of the “typical” industry project for which the site was certified. Are the terms Certified or Shovel Ready misnomers? Do “document ready sites” or “fully documented sites” more accurately describe site readiness programs? But what constitutes “ready” or “full”?
Site readiness program definition and classification is ripe for organized discussion and debate amongst leading site selectors, economic developers, and other firms that certify sites. A common terminology and set of standards for different levels of site documentation and readiness would vastly increase the value of these programs, improve their effectiveness, and enhance the overall site selection process. Getting to consistency will likely be a long slog given the variety of approaches and vigorous debate as to data must-haves versus nice-to-haves, but there is growing interest within the profession to drive to an accepted approach and classification that would be meaningful across states and communities, if not the world.
This will require a meeting of the minds in the profession to thoroughly discuss and debate data needs, by industry and operational type, and processes that need to be followed. Standard terminology should be adopted so that site selectors and companies understand what program names and ratings mean, and what they can expect with regard to data robustness and applicability to their industry and project.
This may ultimately result in multiple types and levels of site certification or readiness, but if and when standard nomenclature and terminology are adopted, along with a common understanding of what level and kind of information to expect with various levels of site certification or readiness, consultants, companies, and economic developers will have greatly advanced site selection process and methodology, and will reduce risk while saving considerable time and resources on future location projects.
Bio: Philip Schneider, President, Schneider Strategy Consulting LLC
Schneider Strategy Consulting Overview
For over 30 years, Phil Schneider, the president of Schneider Strategy Consulting, has led global and domestic location, site selection, and economic development strategy engagements for some of the world’s leading companies and organizations. He has conducted over 350 location and development strategy engagements for clients across the industry and functional spectrum. Until his retirement from Deloitte Consulting, Phil was the leader of Deloitte’s GEO Location Strategy Group, the largest corporate location strategy practice in the world, serving as Lead Partner for the practice for 18 years, and previously was a Director with Fantus Consulting, the originators of the site selection consulting. Phil is a Board Member and Past Chairman of the Site Selectors Guild, the leading global association of site selection professionals.
Phil has led engagements throughout the US and the world, including location strategy and site selection projects in China, India, Southeast Asia, Central & Eastern Europe, Central & South America, and throughout Western Europe and North America. Phil has authored numerous articles, speeches, white papers, and presentations on site selection, location strategy, market entry, offshoring, and economic development.
Schneider Consulting understands how companies make location and expansion decisions, and through our site selection projects and our direct economic development strategy assignments, we have worked with many of the best-in-class economic development and investment promotion organizations in the world. Our experience provides high value by identifying the strategies and tactics that will best fit the specific assets and advantages of an area and resonate with the needs of expanding companies.