Avoiding the Yugo of capital projects

Avoiding the Yugo of capital projects

The Yugo is known to be one of the worst cars ever made. In 1985, the Yugo arrived in the U.S. with a splash as the only sub $4,000 new car on the market. Almost immediately, owners started complaining of engine failures, jammed gear boxes, and their cars literally falling apart. While cheap to purchase, the Yugo was unreliable and expensive to keep on the road.

The Yugo equivalent of LED lighting is flooding the U.S. market as margins shrink and competition increases. These LED products are typically manufactured in the Far East and white labeled (i.e., rebranded) by U.S. contractors. They often do not meet U.S. safety standards and have high failure rates. When contractors go out of business, warranties may not be honored and property owners and managers are left to deal with the fallout.

The red flags

A deal that is too good to be true.  Manufacturers of low-quality LED products typically target markets with exceptional utility incentives like Los Angeles (LADWP). Your “Free LED Upgrade” can be very costly when products fail and the contractor is nowhere to be found for warranty claims.

Manufacturer history and reputation.  We are all familiar with reputable manufacturers like Phillips and GE and have confidence they will be in business tomorrow. Ask your contractors for product specifications. If you do not recognize the manufacturers, ask for more information on their US sales histories, the warranty claim process, failure rates, and lamp testing results. Consider paying a little more for higher quality products from reputable manufacturers with strong track records.

UL and DLC markings. LED products with Underwriters Laboratories (UL) and Design Lights Consortium (DLC) markings indicate they meet industry safety and reliability standards. However, not all markings are real. Go straight to the source and verify product certifications at UL and DLC.

A proven strategy to reduce risk

  1. Define the project scope. Inventory your existing lighting equipment and controls and identify the LED upgrades you need. Defining the scope upfront ensures an apples-to-apples comparison among lighting contractors and prevents scope creep. Consider grouping LED lighting upgrades across regions or your portfolio to increase buying power.

     

  2. Find qualified lighting contractors. Contact your peers, local BOMA and IFMA chapters, or unbiased operational/engineering professionals for lighting contractor recommendations. Request multiple references from the contractors for projects similar to your own and pick up the phone.

     

  3. Leverage the RFP. Send the message that you are seeking competitive pricing and others are bidding. RFPs prevent scope creep and can save you time and money in the long run. Require contractors to recycle used bulbs and process all available utility rebates. In our experience, lighting RFPs typically reduce project costs by 20-40%.

     

  4. Don’t always go with the lowest bidder. Evaluate the contractor’s past project experience, project management capabilities, proposed product specifications and UL/DLC certifications, manufacturer reputations, warranties, etc.

     

  5. Perform a lighting mock-up. Have the selected contractor mock-up samples of all proposed LED lighting products so you can evaluate lighting quality and performance before moving forward.

You have now set the stage for a successful LED lighting upgrade! 

If you need assistance executing a strategy for property- or portfolio-level LED lighting upgrades,

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