EP #144: Concrete Isn’t Too Expensive — The System Around It Is

Seth Tandett (00:00)
And welcome to another episode of the Concrete Logic Podcast. And I have Rich Saechi back with me today. He's CEO of Big Town Concrete. And if you don't know, he's in the center of the largest concrete market in the country. So he's a busy guy. So I appreciate Rich coming back on. We're going to talk about something I think we've talked about in a roundabout way.

But we're going to talk about ways to reduce the cost of concrete and make it more competitive to other building materials, some ideas that we can all use together and work together. So I thought that'd be an interesting discussion. I'll give you more into my thoughts and why I came up with that bug rich about it. But before we get started, I just want to make sure you guys know how to support the podcast. You're listening to this.

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go into the same home page, bottom right hand corner, there's a little microphone down there. And this is how the actually the Dan Baker episode was created was someone clicked on that microphone and left me a voicemail and said they want Dan Baker on the show. And that's how we got the idea for that. So yeah, you can click on that microphone and leave me a voicemail, give topic or guest suggestions as well. And then also,

I guess I like there's more than three. If you check out the show notes, there's resources in there for you click on that there's concrete logic Academy if you like to listen to the podcast, please check out the Academy especially if you're a professional engineer and you need professional development hours and you enjoy the podcast, we make it very easy for you to get your professional development hours you got to check that out. Alright, rich. I'm done. I'm done selling. Alright. Yep.

Rich (02:27)
Ha! All right, well, Seth, thanks again for having me. It's always

a pleasure and your audience is vast and wide. you, I appreciate that you are not afraid to poke the bear on things. And in a competitive environment like we are, keeping an eye on reducing cost is always important, particularly when comparing concrete structures to other material types like wood or steel or those kinds of things. And

I think before we dive in, the other thing to recognize is those groups are doing the same thing. They're having the same podcasts, they're having the same conversations and discussions about how they reduce cost for a steel structure in comparison to wood or concrete, and wood is doing the same in comparison to concrete and steel. So to me, I always find it fascinating. We think that we're the only ones doing it. Well, they're doing it too. And my point about that is,

we have to constantly be having that conversation because we're not just competing against a contractor versus a contractor, producer versus a producer. We're competing against an entire different material type. And they are doing the same thing. So it's an important conversation to have continuously. And I know you mentioned we've done it before, but I think it's really important because

⁓ You're seeing this now more people focus on system improvement, particularly with respect to reducing carbon, and I know that's not what we're talking about, but that perspective is giving us a much better umbrella to have this conversation, because if we can have a conversation about ⁓ reducing carbon in a concrete system, we should be able to have the same conversation about reducing cost in a concrete system.

I'll give you great example. Years ago, there was a product that was developed called self-compacting concrete. Self-compacting concrete. And the promise of self-compacting concrete was you could reduce your labor input in placing and consolidating that concrete by adding an admixture, by designing the mix design a certain way. It would come out of the back of a truck. We didn't even measure slump. We measured spread.

And I have a feeling a lot of your listeners are used to this or have heard this before. But what we did was we said, what if the cost of the concrete goes up by 10 % to do that? Cost of the concrete. Well, I can't buy that because the cost went up of 10%. Well, what if we reduced the cost of installation by 12 %?

Well, wait a second, the cost of concrete went up by 10%. I can't buy it. Yeah, but I reduced the installation cost on a per yard basis by 12%. Well, did I make money in that situation? The answer is, well, wait a second, yeah, the total cost went down by 2%. Why wouldn't I do that? And it's because at that time, and I still think to a certain extent while you're asking this question, we begin to look at things, and I've only looked at things, in a discrete

cost matrix or discrete cost chain. This ingredient costs this and when I do this with the ingredient it costs why. When I do this with those two things it costs something else. The other reason we look at it that way is Seth you're a contractor I'm a producer. And I'm going to also call you the purchaser who's the contractor. You buy from me. I have no idea who you sell to.

I don't have access to that contract. I don't have access to what is required under that contract. I don't know how you've quoted that job or how you've assigned costs. I just know that you and I have a contractual relationship in which to manage the cost between the two of us. And that's the other part that is interesting. Go back to my carbon example. Hey, we want to reduce the carbon of this entire project.

Well, that means everybody in the contractual food chain has to do that too. It can't be the burden of one person in that food chain. Hey, I want to reduce the cost of this structure for the owner. Everybody in the contractual food chain has to do that. Now, you asked a very specific question at the beginning of this, which was how do we do that for concrete.

Now, when you purchase concrete from me, you provide me, I'm going to go past the purchase order, I'm going to say you provide me a specification. You say, want my soup to taste this way. Rich, I want you to sell me soup that tastes this way.

Along the way though Seth, you don't just tell me you want it to taste that way, you tell me I have to use specific ingredients in my soup. I want coarse black pepper in my soup supplied only from this Mediterranean source. Or I want the tomatoes that go into my soup from this farm only. And all of a sudden now, anybody who's making that soup realizes, well wait a second, he doesn't just want soup to taste a certain way.

He wants the ingredients in it to make it taste a certain way. And then the other thing is we have what I'm going to call environmental concerns. And they're not the way you think. So you're sitting at your table waiting for your soup to be delivered to you. Well, what happens if the person delivering the soup has to go outside, down the street, around the corner, up the stairs, and in through the front door of the restaurant just to get to your table as opposed to

you go to the restaurant next door and they can just deliver it direct from the kitchen to your table. is the soup the same temperature when it arrives for you as it is for the one next door? Now let me put that in real terms. Let's imagine, in fact I'm doing this right now, I have a job where we ⁓ sent out a submittal. It met the specifications but the engineering group came back. Remember, engineering group not connected to our contract.

It went from you to somebody else to somebody else and they said, the air content needs to be measured a different way. We don't want the air content in that concrete measured that way. Comes all the way back and says, well, wait a second. And I said, well, we quoted it the way that the specification said. And and by the way, we were told by our purchaser, hey, Rich, we really want to get this job. Is there any way that you can help us reduce the cost out of this concrete? Sure.

measure the air content the right way at the right amount, I don't have to put as much cement in there to offset the strength loss, and I have a feeling that that will impact the cost of the concrete. Well, we can't do that because they said, and I'm not pointing directly at them, but somebody not connected to our relationship has said, we're going to ⁓ change the cost structure of that concrete. And you and I, Seth, as the purchaser and the supplier, we're arguing with each other over how to improve

of the financial performance of this contract between the two of us and somebody somewhere else is impacting that. That's, think, our biggest challenge. I can work it out with you all day long and say, hey, Seth, I'm going to do this or I'm going to change this mix design. I'm going to optimize. I'm going to improve. I'm going to reduce costs through either one of those two choices. We've heard that for years. We can both do that. You and I are aware of that.

What do we do when somebody else not connected to our agreement is impacting that? And that to me is our biggest challenge. It's not you and I. You and I can do this all day. It's the people outside of that. How do we fix that part of this? And now I will even, I'll complicate this with one more step. Before we used to make these decisions locally and to a certain extent regionally.

Seth Tandett (09:10)
Mm-hmm.

Rich (09:22)
But I've got somebody where you are right now in the Carolinas telling me in Texas that this is how we do things in the Carolinas because of our climate conditions or available materials. It should be the same where you are.

What about the engineering group that got hired onto the project that's out of Vancouver and has never seen a black limestone like we have available in Texas? Or somebody from the Northeast that doesn't build anything that's not made of granite as a coarse aggregate because there's no limestone.

How do we get past that when they start saying you have to use a coarse ground pepper from this Mediterranean island and it's the only place I've ever bought pepper and it's worked every time.

Seth Tandett (10:01)
Your analogies are the best. So what I'm hearing is we all know, we've all heard this for last five years, everybody's moving to Texas. So you got a lot of folks from, not from Texas, coming into the area, which requires a lot of infrastructure. And then those folks that are the owners, developers, whatever of that infrastructure, those buildings and everything else.

Rich (10:03)
You

Yeah.

Seth Tandett (10:27)
They're hiring folks from somewhere in another region and they don't understand what's available as far as the raw materials for concrete in your area. And so what I'm hearing is maybe I'm skipping a step. I was trying to figure out how a contractor and producer can figure out how to reduce the cost of concrete to make it more competitive with wood or steel or whatnot.

But what I'm hearing is, need to go upstream a bit and maybe bang on the engineer's door and say, hey, we need to look at your specifications. I think we've talked about this on other episodes that we've had this gold rush of building all these different, mean, first it was the big box warehouses, the Amazons, all that.

was coming through, everybody was busy to the gill in early 2020, and then everything else that was going on with shutdowns and all that. And then behind that glut was the data centers, and the data centers have been nonstop ever since. So everyone's so busy, don't, you know, no one's taking the time to actually scrub these specs. We're just, we're...

pushing out numbers as quickly as we were asked. So what I'm getting from all your great analogies, is that we need to spend more time looking at these specifications or come up with a way for us to spend more time on these specs and raising a flag ahead of time. ⁓

Rich (11:58)
Yeah, so

let me, you've hit on something and I'm gonna give you another analogy. I'm not sure if it's great, but I'm gonna give another one. So we went to go visit ⁓ a medical doctor about an illness and the doctor says, hey, what's going on? These kinds of things and he said, hey, here are my symptoms. I've done a little bit of research and I have found out that these symptoms are attributable to this and here's a couple of treatment therapies.

Now, under normal circumstances, you might think the doctor would be offended. You didn't go to medical school. You didn't do this. You don't have a license. The doctor actually gave us a very different response. He says, thank you. He says, I see 40 patients a day in 10-minute increments. After I see those 40 patients a day, I have to do case notes. Then I have to make sure the right paperwork is filed with an insurance company. And then goes, and then sometime I'm supposed to go home to my spouse and kids.

and enjoy their soccer game, piano recitals, and time at home. He goes, now with the advent of the internet, he goes, I've got educated patients who come in and are already two steps ahead and say, hey, here are some things to think about. I think we're in this exact same point you were just making, Seth, which is the construction pace is so busy and so demanding.

that the people who are involved in making those decisions don't have time to look up and find out what's the latest, greatest, newest research, cutting edge materials that you and I have both faced this. In fact, most of your listeners have. There's something, a spec they've read in the last year that specifies something that doesn't exist anymore. Well, that product doesn't exist. That material classification doesn't exist. That raw material source went out of business or

was mined out or just doesn't exist. We, you and I, your listeners have a responsibility to be raising our hands on a regular basis going, we have better ideas, please listen. We've got better ideas in the project. Well, you we can't change that. That's going to require an RFI and take three weeks to review and update and I need a three-point curve. Stop. You and I can do a podcast.

2,000 miles from each other, you're going to post this 15 minutes later and information is available. There's nothing more frustrating than somebody who tells me it takes three weeks to get a response in an RFI.

Seth Tandett (14:07)
Well, I'll hit you up with why that doesn't happen more often too is when you share ideas to improve something or to localize a project like you're saying, the fear of a concrete contractor is those ideas get shopped. So you figure out and you scrub the specs and you go, hey, Mr. GC, we got a problem here.

We don't have access, for instance. We don't have access to anything but type 1L cement. There's type 1-2 in the spec. This is a very, very easy one. A very easy example. But I'm saying, so you point that out, not saying that it should be shared all around, so everybody's pricing the same thing.

Rich (14:44)
Yeah, I don't know. It's a real one.

Seth Tandett (14:53)
But if you come up with some kind of value engineering idea or something like that, the fear as a concrete contractor and you're competing against everybody else that's chasing that job is that GC shares that idea with everyone else. So I think there's that fear there. it's like, I'm going to price what they give me. so at least that's level. And that happens.

Rich (15:16)
So.

Seth Tandett (15:18)
I did have an idea when you were on your rant there. And maybe there's something like this out there already. So there is benchmarks by region for low carbon concrete, NRMCA did that for all the different regions because they recognize it's different for each region. Has anybody come up with the idea to make a Division III spec?

Rich (15:22)
Yeah.

Yes.

Again.

Seth Tandett (15:42)
that is for each region? And would that help?

Rich (15:44)
So let's use your example on the NRMCA one. I'm not going to pick on them. I'm just going to tell you what the results are. that region, the region I'm in, Texas, includes surrounding states. Let's say that Texas produces 60 million cubic yards of concrete a year. And the surrounding states are less than a quarter of that.

Seth Tandett (15:50)
Maybe that.

Rich (16:04)
But of the data that was collected, let's say the majority of it was supplied out of Missouri. So you were going to take an average of 100 data points that came in and 90 of them came out of Missouri. Is that an applicable statistic for the state of Texas? I would argue probably not. However, somebody also is going to argue, well, you didn't put any data in, so it's your own fault. Right? So to me,

Seth Tandett (16:16)
No. Yeah.

Eheh

Rich (16:26)
The whole thing about, I want to go back to the point you made about fear, because I think it's an important one. You and I are sitting on here having this conversation in an effort, in an attempt to improve things, to change things, to be change agents. Fear is not part of being a change agent or trying to improve.

Because the opposite of the counter to that is, Seth, OK, you're afraid to do that, then please don't tell me that you want to have things changed either. Because failing to do that means things stay the same. And there's, of course, everybody's familiar with the Einstein quote, right? Definition of insanity is to expect improved results by changing nothing. I do it all the time, Seth. I run that risk as a producer.

Hey guys, you want to reduce your cost in your concrete? Here's the three things I would give you to do that within that spec. Well, we can't do that. OK, but you asked me how to reduce the cost. So here are the three solutions I've given you on how to reduce cost. Low carbon concrete is a great example. Hey, Rich, we want to reduce the low carbon concrete on this. No problems. We can do that. Unfortunately, it didn't reduce cost. It added cost.

well that's out of scope, that's out of range. We'll do that on the next project. Okay. But you asked. So, Seth, as a contractor, a purchaser, you're going to come to me and say, Rich, we've got to drive cost out of this. Seth, here's five ways we can do that. We've got to make these changes. Well, we don't want to make any changes, but we want to reduce cost.

Ever been in that conversation, Seth? A free day.

Seth Tandett (17:48)
every day.

Rich (17:50)
So that to me is we are that proverbial car stuck in the mud. We want to reduce costs, but we want to change nothing. Or can we change a few things and reduce a little cost? You've heard me say this before, and I'll say it again. Do not let perfect be the enemy of good enough.

It's okay to reduce some. We don't have to change everything. But I'm down here doing the work. You're down here doing the work. We've got ideas on how to do this. How do we get people to listen to us and say, hey, you don't have to reduce prices by 20 % or sorry, costs. I didn't mean to say that. You don't have to reduce costs by 20%, 18%. What if I just saved 1.5 %? Is that okay?

Well, if the project's 10 million, I bet you 1.5 % is a decent number.

Seth Tandett (18:34)
Yeah.

Kind of the genesis of this question, Rich, was, I don't know if you read it or not, but that book, Magic Powder, that it was the history of, was it Universal Portland Cement?

But anyways, I might be getting the company wrong. But I've talked about the magic powder before, but it's an old book, you know, early 1900s, I think. And they were talking about, you know, why concrete became so popular in the US and why it was used. And it was because it was cheap. It was cheap compared to the other building materials ever used at the time. So my...

My fear of what's going on right now is there's entities out there that are trying to drive the cost of concrete higher because they feel like they're not getting it. I don't know. There must be some magic number out there they're chasing or maybe it's infinite. And to me, we're kind of doing the opposite of why concrete became a preferred material in the United States and around the world.

That's why that came up in question. then I've lately I've seen a couple proposals come back out of projects that are like, believe they're both multifamily projects. And at one time they were designed to be concrete frame and now they've came, they've come back out and there's like two floors of podium and then it's stick on top of it would would frame on top of it. Yeah, yeah.

Rich (19:57)
Yeah, the infamous two plus six.

Yeah.

Seth Tandett (20:00)
And

it was because and the reasoning is because that that's all they could afford the you know, they couldn't afford the concrete framework Yeah, you know

Rich (20:09)
So let me give a caveat there because I think it's an important one. ⁓

You've mentioned the word several times about local or localities. ⁓ Building codes, local building codes, are a huge driver behind some of those decisions. ⁓ Some states have a state building code. Others do not, and the building codes are determined at a very, very local level. Some places, like the 2 plus 6,

Seth Tandett (20:17)
Mm-hmm.

Mm.

Rich (20:36)
The entire state building code governs that and if they make the change at the state level, that is or is not an acceptable means of construction. Say for example in Texas, we don't have a state building code, we have local municipal codes. In some cities that might be an acceptable method, in others it may not. And this is the other part about this is these changes, these things you're talking about. I'll give you a great example. I'm in Dallas, Fort Worth. I have 57 different municipalities to contend with.

57. It's not just Dallas, it's not just Fort Worth. There are 55 other municipalities here. Each one of them has the ability to set their own building code. Each one has their ability to set their own municipal building specification for pavements. Magically, when two pavements touch, three feet on either side of it, somehow the environmental conditions are different. Because one city says the air content

shall be between 3 and 6 percent. The other city says it shall be between 2 and 4 percent. Now how is that possible when, you know, but each city does that. So when you were talking about costs, can you imagine as a taxpayer having to understand why the roads in one city cost more than the other city and yet they have the same amount of drivers and they're exposed to the same environmental conditions. But the local building codes.

also have just as much influence as we think these giant specifications do that come out of this ⁓ ubiquitous and obtuse kind of master spec that everybody copies and edits. I would argue that some of our local building specs and codes have just as much influence. There was a project I was doing just outside of Las Vegas in the county there. County!

outside of Las Vegas had a specification that said all concrete placed in the county, not just for county work, but private work, shall contain fly ash. That was their commitment. And to get a permit, building permit, or construction, sorry, construction permit in that county, and if you used concrete, you had to show you used fly ash. County had that authority. Walmart at the time had a specification that said

No fly ash will ever be used in concrete for Walmart, ever. And that was their specification. What happens when Walmart wants to build in a county that says mandates fly ash? Well, to get a construction permit, you had to use fly ash. So we did. And we did that Walmart with fly ash. And I was at a conference about a year ago, and somebody from Walmart stands up, head of construction, and says, we build without fly ash. I beg to differ.

construction project outside of Vegas. We've never used fly ash. Well, I begged a different… My point is something different happened. That Walmart didn't fall apart. It was still in place. But the local authority had more impact on that than the national specification for the owner. So sometimes that change can happen at a very local level without people knowing. So again, I go back to my doctor analogy.

doing the homework for them, doing the research for them in front of the right person can actually move the needle more significantly than you think.

Seth Tandett (23:29)
Yeah.

Okay, well, I think we'll pause there today. Do we, I know we didn't cover everything. I think we pointed more problems than solutions today, Rich.

Rich (23:39)
I think it's important sometimes to understand which questions you need to ask. It's not so much a problem, I think, Seth, as it is knowing what questions to ask and when in the process. And it's OK. A lot of times I'll go back to the point where somebody said, hey, can you reduce cost? Yes, I can. Here are four different ways we can do it. We don't like any of those ways. OK, then the cost isn't going to be reduced.

Seth Tandett (23:44)
Yeah.

Rich (24:01)
But it didn't mean I didn't answer it, didn't mean I didn't provide a solution. It was knowing where and when to do that, ⁓ part of that process. I think understanding what questions to ask and when are just as important as identifying the problem.

Seth Tandett (24:14)
That's fair. Yeah. All right, Rich. Well, folks, make sure you look up Rich. He's going to be at, he was sharing with me, he's going be world of concrete, giving all kinds of talks. So look him up. He's always ⁓ enjoyable to listen to Rich. And we got past podcast episodes of Rich too. So I'll put the link ⁓ to his profile in the show notes. So check that out. Rich, thanks for coming on the show again today. Appreciate it. It's good.

Rich (24:26)
Yeah.

Now, you

bet. Thanks for having me on Concrete Logic. It's always a pleasure to be on the top podcast out there. So thanks again.

Seth Tandett (24:45)
Thank you and folks until next time, let's keep it concrete.