6 Questions To Ask Yourself Before Hiring A Site Selection & Economic Incentive Consultant
by King White, on Feb 21, 2020 10:46:21 AM
The need to hire a site selection and economic incentive specialist has increased over the years as the entire process has become more complicated due to factors such as extremely challenging labor conditions, capital investment risks, and economic incentive complexity. The days of throwing a dart at the map or following your gut intuition have become a thing of the past as the risk of making the wrong location decision has become much greater. Millions of dollars and thousands of jobs can be at stake, not to mention your job, if you make the wrong location decision. Site selection has become far more of a science today and economic incentives are far more complex due to a more complicated economic incentive compliance process. To help you determine if you need to hire a site selection and economic incentive consultant, we have identified six questions to ask yourself before hiring an adviser to help you.
1. Do you have a person(s) experienced in site selection and economic incentives?
Companies will often have someone in-house who has previous experience with site selection and economic incentive projects. It might be a person in the real estate department, tax department or even in the c-suite. These are great internal resources to be involved in the project; however, do they truly have the experience of working on hundreds of projects and possess the knowledge of what is really happening across various regions of the U.S. or the world? Keep in mind that this isn’t just a simple real estate deal. Do you think they manage the project and cover all areas of the project ranging from advanced labor analytics, logistics analysis, tax implications, real estate and economic incentive market research, real estate and economic incentive negotiations, and on-going economic incentive compliance?
2. Do you have a person(s) in-house who is a specialist in your project type?
Even if you have someone in-house with site selection and economic incentive experience, the bigger question is if they truly understand all aspects of your specific project type. White collar projects such as a headquarters, call center, software development and shared service center have completely different location criteria and economic incentive needs than an industrial project like a manufacturing plant or distribution center. Data centers are even more unique. The most dangerous issue you face follows the classic saying that “You don’t know what you don’t know.”
3. Do you have the in-house data, technical capabilities and support staff?
One of the biggest challenges is buying and maintaining the latest demographic, labor, economic incentive, real estate and industry data utilized in site selection modeling tools as well as having the human capital to manipulate the data. A site selector’s unrecoverable costs on data is a minimum of $250,000 per year, which is making it more challenging or even impossible for corporations and even smaller site selection firms to afford it. Some companies will try to use free data from the Bureau of Labor Statistics and other similar free sites that don’t produce the level of analytics needed to make informed decisions. Furthermore, this free data is not providing the geographic depth and analytical capability that is becoming standard in the modern site selection process. As a result, companies need to closely evaluate what type of data, the data analytics platform and manpower that you have in-house to make sure you conduct the level of analytics needed to make informed decisions.
4. Is the risk of making the wrong decision worth the consulting fees or even losing your job?
Site selection decisions can put a significant amount of capital, jobs and your company’s profitability at risk. The professional fees for site selection and economic incentive consultants can range greatly depending on how you structure them. This can be a fairly complicated process subject to the scope of services, depth of deliverables and amount of risk the site selector takes. There are several different ways to compensate site selectors including lump sum consulting fees, performance-based fees and hybrid flat/performance fees. Some consultants can even fund the fees from real estate commissions or work on economic incentive contingency fees, so your out-of-pocket costs are minimized and based more on performance. Regardless, the last thing you want to do is to become the leader of the project, make a bad decision, and lose your job. You just need to look at the bigger picture and ask yourself how a site selection and economic incentive consultant can pay for themselves by uncovering the best locations and maximizing your negotiation leverage for both real estate and economic incentives. You will likely find that they easily pay for themselves plus some.
5. Do you have current market intelligence on the latest site selection and economic incentive trends for your industry and other industries seeking the same things you are looking for in your next site?
Assume you have the experienced staff, all the data in the world and an executive team supporting your efforts, you then need to ask yourself if you are confident that your team truly has current site selection and economic incentive market intelligence for both your industry as well as any other industry that might have similar needs to you. One of the advantages to a site selection consultant is that they have the pulse on market trends and they know what projects are being shopped around, where projects have recently landed and, more importantly, where companies are struggling to make a location work for their company. They also stay up to date on the latest legislative changes and how they may impact your eligibility for economic incentive incentives. Knowing these things early in the site selection process can make a huge difference during the filtering process that will save significant time, effort, money and ultimately land your company in the optimal location.
6. Do you have ability to handle the on-going economic incentive compliance?
As mentioned above, economic incentives have become much more complex as both companies and economic development officials have been under the microscope due to the failure of many projects to deliver what was promised, lack of compliance oversight and intense media exposure. We have found that Fortune 500 companies will often have dedicated economic incentive teams while other leverage their tax or real estate departments. Regardless, companies have huge financial and media exposure if anything falls through the cracks and you fall out of compliance. As a result, you need to ask yourself if you truly have the internal capability and capacity to manage the hugely burdensome compliance process, not to mention dealing with any internal staff turnover that can occur over what is often a 10-year economic incentive package in which your company is committed to delivering specific job numbers, wage thresholds and capital investments — all within defined timeframes.
Beyond the six questions above, there are many factors that come into play when trying to decide if you partner with a site selection and economic incentive consultant, do it internally, or do some combination of both. Regardless, if you do select a partner for any of these services, then select one whom you trust will help you find that perfect location company.