Knowledge Is Power: Quantifying the Value of SBCRI through SP Design Value Changes

The SBC Research Institute (SBCRI), a subsidiary of SBCA, is an amazing tool we have at our entire industry’s disposal. In its first five years of operation, over $2.3 million was invested in over 250 industry-funded tests related to assessing building system load paths and bracing, measuring web forces, and analyzing fall protection loads. This investment also resulted in the creation of a significant amount of structural testing-related intellectual property, establishing a credible foundation for all future testing at SBCRI. Since then, SBCA has received an additional $1.1 million in net revenue from over 40 companies that have utilized SBCRI to conduct proprietary testing.

One of those 40 companies was a component manufacturer (CM) involved in a litigation case. The CM conducted forensic testing in SBCRI to replicate a real-world building, as it was constructed in the field, and ascertain the nature and cause of the construction issues that were witnessed. In conducting the forensic testing, SBCRI staff unexpectedly learned that the Southern Pine (SP) lumber in the tested trusses had up to 75 percent less strength than the properties expected per the published visually graded design values at the time.

Initially, SBCRI staff wondered whether the lower strength values of the SP in the trusses tested was an abnormality within the bunk of lumber used to build them, or whether these lower values were indicative of a more pervasive problem. Through lumber monitoring by CMs and subsequent testing at SBCRI of samples submitted by several CM members from throughout the SP region, it was determined the lower design values were not isolated and indeed a cause for concern.

This raised the possibility CMs were designing trusses with lumber that, by definition, did not have the strength values the engineering equations used in industry software programs were dependent upon for accuracy. Even worse, this was an issue completely out of the control of the components industry. This was a lumber industry problem, and it was clear they needed to address it.

In the beginning, the results of the SBCRI testing were privately communicated throughout the SP lumber producer community, with the hope they would find an effective solution to inaccurate lumber design values that appeared to be due to processing  “juvenile wood,” which was a problem identified and documented by the SP lumber industry as early as 1984.

Over time, timber growing regions that produce lumber have become more and more dominated by plantation forests, genetically enhanced to grow harvestable fiber as quickly and efficiently as possible. This change has enabled timberland owners to obtain a faster return on their forest inventory investment, but has also resulted in lumber from these plantations that contains a larger percentage of pith-center lumber. If you take a moment to walk through your lumber storage areas and look at the ends of the lumber, the percentage of pith-center lumber is easy to pick out (see photo). 

For the next 18 months, the Southern Pine Inspection Bureau (SPIB), the entity responsible for establishing, monitoring and publishing visually graded design values for SP, was silent on the matter. Then, on July 28, 2010, SPIB issued a notice that publicly announced SPIB had, “received information that some pieces of lumber have tested lower than the values assigned to the visual grade.” The source of that information was deemed “credible” and “justified an investigation into this phenomenon.”

Importance of Design Values

On its surface, SPIB’s July 28, 2010 memo did a remarkable job of not stating anything that should alarm the marketplace, specifically SP users, like ourselves, who rely on the accuracy of design values assigned to each stick of lumber. For an in-depth look at why our industry’s existence is predicated on reliable design values, please read, “Design Values Matter: Make Sure You Fully Understand Why” (SBC Magazine, April 2013).

Component design software relies on lumber design values published by SPIB and the National Design Standard (NDS) for every major lumber species produced and used in North America. That software allows users to input published design values into established engineering equations to output the expected performance of a particular component configuration. Every engineer, builder and CM in this business assumes the performance is reliable because the American Wood Council (AWC) and Truss Plate Institute (TPI) give us the assurance that the equations are accurate for use with the published design values.

Therein lies the big irony our industry faced in this situation. If the published design values of SP were no longer reliable, neither would the performance outcomes of the components we were designing, producing and selling to our customers. In other words, the fundamental value of the engineered framing solutions our industry provides suddenly lost considerable value and credibility as an alternative to the conventional stick framing industry (which seems to conveniently ignore that lumber design values equally apply to the framing they undertake).

Shock & Awe

After the July 28, 2010, memo, SPIB was silent on the matter for 14 months. The SP marketplace continued to function as it always had. CMs throughout the SP region designed and manufactured trusses per the published design values and entered into future performance contracts to do much the same.

At an open roundtable discussion held on the first day of BCMC 2011 in Indianapolis, a representative of the Southern Forest Products Association (SFPA), the marketing organization for SP, casually mentioned SPIB would be recommending an immediate 30 percent reduction in SP visually graded design values for dimensional lumber 2" to 4" in thickness at the then upcoming American Lumber Standards Committee (ALSC) meeting scheduled for October 20, 2011. This comment was confirmed by Tom Searles, then President of ALSC, the entity responsible for reviewing and approving all lumber inspection agency proposed U.S. lumber design value changes. This confirmation mobilized those of us in SBCA leadership to begin pressuring SPIB to let us, their consumers, know what they were proposing.

That pressure resulted in the arrangement of a special teleconference on October 4, 2011. That morning, SPIB informed lumber producers of the design value reductions they planned to recommend to the ALSC, informing us they were recommending immediate reductions to the properties listed in Table 1 for all sizes of SP lumber.

That teleconference was a virtual punch to the gut, given we had continually reached out to the lumber industry and advocated for the development of a joint strategy to address design value concerns for both lumber producers and users.

First, the reductions were quantitatively significant. Second, the changes were to be effective immediately. We thought about all our industry’s current executed contracts where we would be required to either use 30 percent more lumber, pay the premium on increasing the grade, or use machine stress rated (MSR) lumber, which did not exist in sufficient quantities. Extrapolate that circumstance to all CMs in the SP region, and millions of dollars were on the line. In fact, there were likely several CMs whose businesses were in jeopardy of financial collapse, depending on their cash position at the time.

Based on market share data from the National Association of Homebuilders (NAHB), 54 percent of the square footage of wood roof trusses installed in residential construction in 2012 occurred in the SP region. To the components industry, SPIB was, in essence, instituting at least a 30 percent increase in lumber costs to over half the construction industry overnight.

Alternately, think about our customers’ point of view. If SP design values suddenly decreased by 30 percent, wouldn’t alternate products look significantly more attractive? Suddenly, we faced a very real possibility we could lose our floor truss market to floor joists. According to NAHB data, 58 percent of the square footage of wood floor trusses installed in residential construction in 2012 occurred in the SP region. Based on SBCA’s financial performance survey data, floor truss sales in the SP region in 2012 totaled over $838 million. Losing even one percent of our collective sales would have been costly.

When you consider the lumber industry sells wood fiber to stick framers just as readily as they sell to us, it’s not a big surprise they don’t have a significant preference in how the lumber is installed in the building, so long as it’s lumber that is used (even if the lumber used is wasted or inefficiently applied). 

Last-Minute Reprieve

It’s important to point out that, had we not had the capability to conduct our own independent destructive SP lumber testing at SBCRI, our industry would never have known about these reductions ahead of time. At some point, maybe not in 2011 when housing was still struggling to recover but rather in 2015 when the impact would be much greater, these very real reductions in the design values of SP resources (again, they were known as early as 1984) would have been discovered by someone else, or unilaterally announced by SPIB. Under that scenario, the impact would have been immediate and our industry would have no time to react.

SPIB’s recommended reductions were reactionary and served primarily to cover the risk of SP lumber producers. Fortunately, because of SBCRI, we had empirical data that proved instrumental in convincing ALSC to not approve SPIB’s recommendation without further consideration. At its October 20, 2011 meeting, where it had been originally assumed ALSC would enact these immediate reductions, ALSC instead issued a 60-day comment period to give all stakeholders an opportunity to review the data and weigh in on the recommendations.

This postponement allowed us time to build a coalition of CMs, builders and even some SP lumber producers to make the case that an immediate reduction was unwarranted and would cause serious financial harm for wood construction in the SP region. At the Southern Pine Design Value Forum hosted by SBCA and SFPA in late 2011, 54 participants gathered to formulate recommendations to ALSC on how to best proceed in approving SPIB’s proposed design value reductions.

Those recommendations proved very useful for our industry. On January 11, 2012, ALSC announced it only approved SPIB’s recommended reductions to SP No. 2 2x4s (see Table 2). The reductions were still in the 25-30 percent range, and the dense and non-dense classification was eliminated, but the narrowed scope of the reduction was nonetheless significant. Further, ALSC set a precedent in giving a 60-day implementation period, something they had never done before, but was made possible through the building life-safety arguments our industry was able to make based, in part, on SBCRI test data.

By establishing an effective date of June 1, 2012, ALSC gave the marketplace a reasonable window in which to adjust. For us, that meant we weren’t stuck in longer-term contracts we couldn’t complete based on how we had bid and budgeted them. For our plate and truss design software suppliers, they had an opportunity to thoroughly update the software and issue patches. The extended implementation window also gave the SP lumber markets time to adjust, which, in the long run, probably saved some CMs from getting heavily gouged.

Moving Forward

Having a seat at the table is invaluable. It gave our industry of SP consumers an opportunity to receive advanced warning on a potentially devastating shake up to this resource. SBCRI’s credibility, and all the empirical test data it has generated, made that seat possible. More importantly, the test data also gave us a credible voice in the process, offering ALSC reason to limit the initial implementation to only No. 2 2x4s and requiring SPIB to conduct significant additional lumber testing. In other words, the test data allowed us to positively affect the outcome in a way that reduced many of the negative business impacts to our industry, instead of allowing the lumber industry to manage the process as they saw fit.   

It is not unreasonable to think that reducing the impact to 54 percent of U.S. roof truss sales and 58 percent of U.S. floor truss sales totaled in the hundreds of millions of dollars. Add to this the fact that between June 1, 2012, and June 1, 2013, when the SP lumber design values for all sizes went into effect, the final reductions were not as great as originally proposed. SP No. 2 dense was reintroduced, and the overall reductions to wider dimensions were not as significant. Even No. 2 2x4 values were revised upwards. If not for the SBCRI test data, it is almost inconceivable any of these revisions to SPIB’s original recommendations would have been made (a great comparison can be found in a SBC Industry News post from January 10, 2013).

Therefore, the difference in design values between where they were originally proposed (Table 1) and what they are today (see SPIB’s Supplement 13),  is value CMs in the SP region still capture every day. Just in case you don’t use SP and you think this issue doesn’t affect you, remember that the whole issue comes down to the way in which lumber is visually graded and how design values are assigned. The manner in which SPIB handled its monitoring and evaluation process is not unlike how the grading agencies responsible for Spruce-Pine-Fir, Douglas-Fir and Hem-Fir manage their processes. If SPIB had been allowed to do exactly what it had initially proposed, it would have set a harmful precedent for all of the other North American grading agencies.

Additional Challenges

Unfortunately, this issue was not fully resolved for CMs once the new SP design values were published. Two additional issues have come out of the process. One relates to the lumber industry’s stance on visually graded lumber design values and the other has to do with the prescriptive building code.

SPIB introduced new language to its Appendix A and made part of Supplement 13 to the 2002 Standard Grading Rules for Southern Pine Lumber (which contains the current SP design values effective June 1, 2013): 

That last paragraph presents a challenge to all SP lumber users and carries a significant weight for our industry. It essentially states that visually graded lumber design values are not reliable for any individual bunk of lumber. If published lumber properties are not reliable, it minimizes our industry’s core value, which is tied to creating engineered framing solutions for our customers.

The prescriptive building code exacerbates this issue. The ALSC ruling established an effective date of June 1, 2013, for the new SP design values. For SP users like us who rely on engineering equations to design and produce our products, those new values must be used upon the effective date. However, the prescriptive code relies on published span tables to guide conventional framing allowances. As a result, span tables based on inaccurate design values in the code give a competitive advantage to conventional framing practices. If building codes and building inspectors are not required to enforce the effective date for all buildings constructed with SP until updated building codes are adopted, a position advocated for by NAHB, how can our industry remain competitive?

These two issues are very real in our marketplace and represent challenges we still must address, individually and through the efforts of SBCA and SBCRI.

Changing Attitudes

Beyond the significant monetary benefits all lumber end users and CMs derived from what has been learned in SBCRI, as well as SBCA’s involvement in the SP design value change process, this experience has fundamentally changed our relationship with the lumber industry. In addition to the formation of SBCA’s Lumber in Components Council and the subsequent direct lines of dialogue it opened between CMs and lumber producers, it has also changed perceptions.

Take, for example, the fact Scott Ward was invited to sit on the SPIB Technical Committee. Through Scott, our industry has the ability to hear first-hand actions SP producers are considering taking and the issues they are attempting to resolve. At the most recent SPIB meeting, one of the largest SP producers in the room advocated for a position that protected CMs, running contrary to an SPIB recommended course of action.

It’s difficult to assign a dollar figure to examples like that one, but they, nonetheless, have a very real impact on our market and our ability to run our businesses competitively.

Conclusion

Knowledge is power when it comes to making decisions, so the more knowledge the better. SBCRI unequivocally gives us access to knowledge no one else has. In the case of SP design values, the work we accomplished has provided an exceptional return on investment. However, there are still unresolved challenges ahead of us. We encourage you to get involved with SBCA to help yourself and your industry address these issues with a united voice.

NDS for Wood Construction, 2012 Edition
ANSI/AWC NDS-2012 National Design Specification (NDS) for Wood Construction with Commentary
ANSI/AWC NDS-2012, was approved as an ANSI American National Standard on August 15, 2011. The 2012 NDS was developed by the American Wood Council’s (AWC) Wood Design Standards Committee and is referenced in the 2012 International Building Code.