Archive for July, 2010

Get Into Politics or Get Out of Business

Friday, July 23rd, 2010

The name of this blog is “Nuts & Bolts” – basic components of construction. One of the basic components of the business of construction is politics – and we all should be paying a lot more attention to that in the coming months. ABC hosted coffee hours with two candidates this week, neither of whom currently hold office. Both talked about what they were hearing from their constituents as they doorbelled their districts. No surprise…jobs, the economy, shrink the size of government (at all levels) and a “throw the bums out” mentality. They said people are finally “getting it” and are genuinely scared of what the future might hold if we don’t get government spending under control.

Jim Haughey, chief economist for Reed Construction Data, reported that Washington is one of only four states (Connecticut, New Hampshire and California) with negative reserves, and we will need to make immediate spending cuts. The other Washington has failed to send the $480 million for extended Medicaid funding that Gov. Gregoire and our state legislators (at least the majority) were counting on. Gov. Gregoire said she’ll order across-the-board cuts in state spending if the check isn’t on its way west by August 9th. She may also call a special legislative session, but that’s politically dangerous. And, the really bad news is the shortfall for the next biennium is $3 billion and climbing.

You can’t pay attention to the media without hearing about “we can no longer afford the government we have.” We have all “reset” our personal and company budgets and priorities, and now, finally, our governments have no choice but to do the same.

And the playground that all of this will play out on is the upcoming elections. We need to pay attention, get involved, meet with, contribute to and help out candidates who understand you can’t spend more than you take in….and we are going to take in less for the foreseeable future. We have to help throw out those bums who don’t get it and aren’t willing to make the tough and strategic decisions to shrink the size and expense of government. It gets back to the Priorities of Government, as first promoted by Gov. Locke: such as public safety, education, infrastructure.

Deep cuts will likely mean less spending for capital projects and maintenance. Just like government has underfunded its employees’ pension and benefit funding for years, it has long underfunded infrastructure and transportation, including maintenance of existing assets. Our public buildings, water/sewer systems and roads/bridges will be even more crumbling.

I don’t have any wise conclusions, but I do have words to the wise: Get into politics or get out of business. Find candidates who “get it” and support them with your dollars and time. Host a meet-the-candidate coffee at your home or office or help build/put up yard signs. We have nail guns and trucks that can be put to good use for a good cause. Helping elect the right candidates is good for your business.

Thoughts on the “Wheel of Blame”

Friday, July 16th, 2010

Back in my contracting days, we liked to call it the “wheel of blame.” The minute a project started to get a little off-track, the finger pointing generally began, with the owner, design team and contractors all working hard to minimize their perceived responsibility for whatever the problem was. The standard claims process then often served to further exacerbate the parties’ positions, making swift or amicable resolution really tough.

Back in the ‘80s and ‘90s we participated in “partnering,” which tried to get the project team to connect personally and professionally before the work began, in hopes that would engender a “kinder and gentler,” more cooperative and collaborative interaction when project problems arose. However, because the standard contract often still pitted the construction team against the design team and owner, partnering had limited success. The private construction negotiated/GMAX contract model seemed to work well to encourage people to cooperate in solving problems to everyone’s benefit, and so the GC/CM public works model tried (again, often not too successfully) to mimic the private model.

Now, the “Integrated Project Delivery” method of contracting attempts to take another step in the direction of taking the adversarial bent out of construction contracting. Obviously, leaping from the standard model to IPD takes a lot of trust between the parties. And though it’s still relatively new, those involved with it are optimistic about its future (for more info see the DJC’s December 18, 2009 article about its use for the Children’s Hospital Ambulatory Care Center).

If you doubt that doing away with the wheel of blame model is in the industry’s best interest, read the Wall Street Journal’s July 14 article about the construction of the Hamburg (Germany) Concert Hall. “Train wreck” would be far too kind a description of what that public works project has become. Clearly, it’s an ambitious project, both architecturally and acoustically. But, since 2005 the costs have ballooned by a factor of more than four, and the schedule is now years behind. Predictably, since nobody seems to be able to say when the work will be done or what it will ultimately cost, each party is heaping blame on the others, and the wheel of blame is spinning at enormously high RPM. With hundreds of millions of euros in play, millions more will be paid to lawyers and consultants, none of whom will likely help the fighting end quickly.

We have our own very ambitious public works projects underway and more on the horizon. It would be unusual if that those projects don’t cost more and take longer than was originally anticipated. And, in order to avoid our own Hamburg-like problems, perhaps it’s time for us to seriously re-think our delivery methods. We might want to ponder whether we are better served by concentrating more on creatively solving the inevitable project problems and spending less time, money and effort creatively avoiding having the wheel of blame point at us.

AGC Safety Team is 20 years old

Thursday, July 15th, 2010

Construction safety was a lot different 20 years ago, with L&I on the hunt for jobsite violations while safety perhaps wasn’t at the top of the priority list for contractors.

To address those concerns, the AGC and several of its members got together to form the AGC Safety Team. The idea was to share knowledge and help companies improve their safety records.

Twenty years later, that program has set the bar for safety.

Read about the program’s history and drop in on a Q-and-A session with four of the team’s members in today’s DJC.

Economic Forecast Still Not Looking Good

Wednesday, July 14th, 2010

While I would love to provide some upbeat news about construction employment, it is not to be. The state just released its most recent economic update with May data. The report states construction employment has grown by a whopping 800 jobs in May, with a surprising 700 in nonresidential construction. Since December, there has been a net increase of 300 new construction jobs, which is better than losing that many. Data from the state and Dodge predict that we are near the bottom of the unemployment trough for construction employment, so I guess that counts as positive news, too. Residential square feet put in place bottomed out in January 2009, then rose the rest of the year, but then flattened out again in 2010. Nonresidential construction declined sharply through July 2009 and remained flat. While we have survived the worst (again, we survived, so that’s good!), nonresidential employment will continue to decline through the third quarter of 2011 and only begin to show significant improvement in 2012. The weak residential recovery, faltering now with the end of the homebuyers’ tax credit, will not be enough to offset the continued dismal employment picture for nonresidential workers – and their employers. When the economy dropped, I don’t think any of us expected what we are now experiencing, but here we are. The reality for the foreseeable future is more competition for fewer jobs and lowered profit margins but the same or greater risk. And then when work does pick up, we will be scrambling again to find skilled craft workers, superintendents, project managers, and safety officers.

IPD or IPD-ish?

Tuesday, July 13th, 2010

Integrated Project Delivery (IPD) is a term that doesn’t yet have a universal meaning:  Is it a philosophy or a delivery method?  To parse the various meanings of IPD, the Construction Owners Association of America, AGC, AIA and other groups produced a new white paper, Integrated Project Delivery for Public and Private Owners.

Although ostensibly targeted to owners, the paper is interesting for all construction industry participants.  It distinguishes between IPD as a philosophy, when integrated practices are applied to more traditional delivery approaches such as CM at-Risk, Design-Build, or Design-Bid-Build; and IPD as a delivery method (or “true IPD”), when the owner has elected to sign a multi-party contract with the prime designer, contractor and perhaps other key members of the project team.  IPD as a delivery method is characterized by a contract that incentivizes collaborative behavior, team risk-sharing and other IPD principles and practices.

Among the steps the paper suggests for owners interested in moving toward IPD are:

Culture of Trust – Understand that the required commitment by all parties to see the project succeed and the contractual relations that tie the parties together necessitates a team culture bask on risk-sharing and trust like no other.  Plus, most buyers of construction services know that the easiest way to differentiate proposals is via cost.  So many other measurements are subjective in nature that it takes a significant amount of expertise to decipher the varied responses that can come from a request for proposal.   Any delivery method other than Design-Bid-Build means that the cost might not be known until sometime later in the project; in such cases owners must trust the builder and architect to treat them fairly.

Get Your House in Order – The first challenge is likely internal.  Selling the concept of IBD to legal staff, purchasing departments, facility managers and supervisors may be a huge challenge.  Facility managers may like the current process and some internal owner departments may find a false sense of comfort in the “risk” that has been contracted away. 

The Contract – If not managed well, the contract can easily turn an IPD project into a snowball rolling out of control.  Each party has different risks that need to be addressed.  Finding a contract that will satisfy all of the parties 100 percent is next to impossible.  The parties must develop a level of trust so they know that they will not be taken advantage of during the project even though all of their concerns might not be met in the contract.  This is easier said than done.

Here’s a link:  Integrated Project Delivery for Public and Private Owners.

Be careful in this heat, L&I warns

Thursday, July 8th, 2010
Photo by Claude Paris/AP
Photo by Claude Paris/AP

With temperatures expected to top 90 degrees today, the state Department of Labor and Industries is offering five tips for those working outdoors:

1. Start work well hydrated and drink as much as a cup of water every 15 minutes.

2. Watch co-workers for signs of heat-related illness, such as headaches, dizziness or nausea.

3. Pace your work and take scheduled breaks.

4. Wear lightweight clothing and remove protective gear when it’s safe to do so.

5. Avoid drinking caffeine or eating a heavy meal.

In the construction industry, the most vulnerable to heat-related illnesses are roofers and workers building highways and roads.

Two years ago, the state enacted a workplace-safety rule on outdoor heat exposure. It requires workers and supervisors to be familiar with the symptoms of heat-related illness and what to do if someone develops them. That rule can be viewed at www.Lni.wa.gov/Safety/Topics/AtoZ/heatstress.

Work safe!

Contractors Talk Sustainability Issues with European Visitor

Wednesday, July 7th, 2010

While a certain soccer tournament brought the world together in South Africa, an international meeting of a different sort was taking place at the AGC Building.  The similarities and differences with which European and American construction industries approach sustainability was the topic of a recent conversation between AGC members and a representative of the European Construction Industry Federation (FIEC).

While on a trip to the U.S., Frank Faraday, Director of Technical Affairs for FIEC, contacted us in hopes of gaining insight into American approaches to the broad topic of sustainability. Yancy Wright of Sellen Sustainability, Dan Barrett of Sellen and Scott Thomson of McKinstry compared notes with Faraday during a meeting at the AGC Building.

Faraday’s interests included energy efficiency standards of buildings, hazardous substances in construction materials and construction waste recycling.

With regard to the energy efficiency of buildings, Faraday noted that the European Parliament recently passed a directive requiring that all new buildings meet specific energy targets (among other things, it requires that all new buildings have to reach nearly zero energy standards by the end of 2020). The European Union, however, considered but did not establish targets for existing buildings, leaving it up to member countries to come up with their own initiatives.

The US contractors discussed the growing interest in energy efficient buildings in this country.  Thomson cited the stimulus package, which is providing significant funds for retrofitting of existing public buildings.  On the private side, Thomson noted that the promise of achieving efficiency goals has to be fulfilled.  Investment grade audits can pinpoint the greater efficiencies and the resulting savings that, in turn, can help project financing pencil out.

The group also discussed LEED and its significant impact on U.S. building.  LEED has only recently been exported to Europe where similar certification schemes have been in existence for many years – the first LEED-certified structure there is reported to be an Italian school completed in 2009.  Barrett noted that 90 percent of Sellen’s revenues are now from LEED projects.  A challenge is accurately estimating costs, and training project managers and estimators to realize that LEED-related costs have and are coming down considerably.

Regarding training, Wright described Sellen Sustainability’s activities with regard to training owners, contractors, architects and subs in green building, as well as its sustainability consulting for companies, owners and individual projects.

The American contractors discussed integrated project delivery as an important mechanism to advance green building practices; Wright described the Children’s Hospital project in Bellevue which is one of the first to use an IPD contract.  Thomson added that long term relationships between contractor and owner, rather than a build-it-and-out relationship, allow efficiency goals to be set, pursued and achieved collaboratively over time.  Faraday said that the European construction industry has yet to embrace such collaborative relationships on a large scale, with some contractors fearing they may lose out in an integrated approach due to insurance and liability concerns.

FIEC is headquartered in Brussels and represents 34 national federation members.  By the way, the organization released data indicating the continent is experiencing a downturn similar to that in the U.S. – overall construction spending declined 7.5 percent in 2009 and a 3.7 percent decline is expected for 2010.  And, as in the U.S., the biggest downturn in Europe has been in residential construction, with public construction (thanks to stimulus funding) up a little.  Visit www.fiec.eu for more info.

Tough times hang on for construction workers

Friday, July 2nd, 2010

Well, the news still isn’t good for construction workers – employment in the industry has fallen to a 14-year low.

In June, 22,100 additional construction jobs were lost and unemployment for that sector remained above 20 percent. That’s more than double the average of all workers.

“Employment in nonresidential building construction continues to slump, a reflection of the fact that momentum in the broader economy has yet to meaningfully impact many segments of America’s nonresidential building construction industry,” said Associated Builders and Contractors Chief Economist Anirban Basu in a statement.

Here’s Basu’s take on the situation:

“Many economists will be scrambling to interpret today’s employment release. It is in many ways the mirror image of last month’s initial jobs release, which reflected an overall gain in jobs largely because the federal government created a large number of temporary Census positions.

“Even interpreting June’s unemployment figures is difficult since the declining unemployment rate, in conjunction with overall establishment job loss, suggests that many who could join the U.S. labor force continue to sit on the sidelines. The fact is that when people stop looking for work they are no longer counted as unemployed.

“For those of us who work in the area of construction economics, the report is a bit less difficult to interpret and to label. However, it is clear that this represents another disappointing jobs report. Specifically, employment in nonresidential building construction continues to slump, a reflection of the fact that momentum in the broader economy has yet to meaningfully impact many segments of America’s nonresidential building construction industry. This is particularly true for privately financed segments, where a lack of momentum was also reflected in the July 1 data regarding construction spending.

“Nonetheless, hope remains that broader economic recovery will continue and eventually lift privately financed construction levels before the impact of the stimulus begins to fade. Unfortunately, it appears that the lack of momentum in the construction industry is a reflection of what appears to be happening now in the U.S. economy,”

The outlook for nonresidential building construction remains ominous, according to Ken Simonson, chief economist for the Associated General Contractors of America. In May, the latest month for which such data is available, architectural firms laid off workers for the 21st time in 22 months.

“If there’s less work for architects now, there will be less for building contractors to bid on and build in coming months,” Simonson said in a statement. “In contrast, engineering and drafting firms, which design infrastructure projects, added jobs three months in a row through May.”