When
Construction Executive debuted in January 2003, it was with a vision for sharing insights on the business issues and industry trends that impact construction companies the most. Though the magazine’s first cover now makes staff cringe, it’s a great reminder of just how far the publication—and the construction industry—has come in the last eight years.
In this 100th anniversary issue,
Construction Executive revisits major changes in market segments, workforce development, health and safety, and technology. But there’s no sense reliving the past unless it frames an outlook for the future, so a handful of industry leaders chimed in to do just that.
Thanks to all the readers and contributors who have supported the magazine as it has grown and evolved—here’s to making the next 100 issues even better!
Given the climate of late, there’s no better place to start an industry review than with the economy. Some parallels can be drawn between today and 2003—tight lending standards and high vacancy rates on the commercial side, as well as state budget shortfalls—but the similarities end on the residential side. In 2003, single-family home construction reached its highest level in 25 years, and all housing starts (including apartments) surged to a 17-year high. Of course, that level of activity didn’t last forever, with home sales bottoming out in mid-2007 followed by declines in retail and recreation spending. Contractors are still recovering from the housing bust, though the
National Association of Home Builders reports residential activity should improve gradually this year, with more considerable gains in 2012.
Unemployment was a hot topic in 2003 as well, with the national rate reaching a nine-year high of 6.1 percent. Looking back, that pales in comparison to today’s 8.9 percent national unemployment rate and whopping 21.8 percent unemployment rate in the construction industry (as of March).
In terms of market segments, institutional and utility construction went from depressed to thriving between 2004 and 2007. Offices, manufacturing, warehouses and hotels joined the upswing in 2005, when public buildings began to decline, and most sectors (including infrastructure) held steady or grew until trouble started brewing for the national economy in 2008.
Despite President Bush’s efforts to stimulate the economy and stabilize the financial markets, ongoing deterioration signaled darker days ahead for the construction industry. Although President Obama’s $787 billion American Recovery and Reinvestment Act brought some attention to road projects and shifted the industry’s focus to competing for public work, losses occurred across all sectors. The past few years have amounted to sluggish stabilization and recovery without sustained growth, but contractors have a “fast and furious” pace of change to look forward to in the next eight years, according to Anirban Basu, chief economist for
Associated Builders and Contractors.
“First, there will be an increase in construction volumes as the nation recovers from the Great Recession and participates in a rapidly expanding global economy,” he says. “Second, there will be significant shifts in technology, with a vast array of electronics built into every wall, through the expansion of modularization and with the spread of green technologies and green construction processes. Contractors that understand these shifts will be best positioned to take advantage of the growth to come. Leading sources of growth will include power, medical offices, heavy industrial and conservation.
“At the heart of the industry’s transformation will be the need for massive retraining as the way in which construction services are delivered is fundamentally altered,” Basu says. “Part of the transformation already has started occurring—for instance, the design-build process represents a shift in the way construction services are purchased. More change is to come, and contractors’ workforces must be prepared for a dynamic and incredibly unpredictable future.”
Green BuildingThough many green buildings are unique, it’s no longer unique to build green. Six years ago, the green market accounted for only 2 percent of nonresidential construction starts, according to the
U.S. Green Building Council. It jumped to 12 percent in 2008, and more than doubled to about 30 percent in 2010.
With manufacturers and suppliers on board and new mandates and incentives popping up across the nation, the green movement has penetrated all market segments: government buildings, schools, mixed-use developments, multi-family units and commercial offices—not to mention all the advancements in efficient lighting and plumbing, geothermal systems, and wind and solar power.
“Green building has become part of our culture. It touches everybody and has a big social aspect,” says JJ McCarthy, principal with
JJMC, LLC, Rockville, Md. “Going forward, I hope people really concentrate on water and energy issues. You have to justify economic returns—that’s where energy and water savings come in.”
Although many contractors are training their staff members on green techniques and processes, the industry still has a long way to go to eliminate deeply embedded, wasteful building practices.
“If we were to apply many of the practices seen in other industries for continuous improvement and efficiency gains, the construction industry would change dramatically,” says W. Brewster Earle, president of
Comfort Systems USA Energy Services, Windsor, Conn. “I think we are at the beginning of the journey whereby the early adopters are seeing their adoption as a competitive advantage and others are seeing adoption as a competitive imperative.
“I hope that in eight years the industry evolves to where sustainable and efficient building practices are the norm; every trade and stakeholder has climbed the learning curve; and we start to think about the next level of efficiency gains,” Earle says. “The last 30 percent to 40 percent of efficiency gains are going to be much harder than the first 30 percent to 40 percent.”
Workforce development has been, and probably always will be, the construction industry’s No. 1 challenge. Even knowing that, training frequently doesn’t get the attention—and investment—it deserves.
It took the Department of Labor (
DOL) more than 30 years to release an update to the Fitzgerald Act, which regulates apprenticeship and on-the-job training programs. The revised regulations took effect in December 2008, but state apprenticeship agencies had until the end of last year to implement the necessary changes. Not only do the regulations call for the incorporation of technology-based learning, but they also provide additional pathways to certification and allow interim credentials and reciprocal registrations to be issued, among other provisions.
Up next, the DOL is revising policies and procedures to address equal opportunity in registered apprenticeship programs. The regulations could be proposed this summer, followed by a public comment period.
Overall, craft professionals today have access to a well-rounded apprenticeship path comprised of both on-the-job training and practical classroom education. The National Center for Construction Education and Research (
NCCER) boasts a network of more than 600 accredited training organizations that includes nearly 5,000 actual training locations. But unfortunately, says NCCER President Don Whyte, “the majority of these training locations sit idle during the day, yielding to the age-old methodology of only training in the evening, at night and on the weekends.”
In 2004,
Construction Executive reported a perfect storm was brewing in the construction industry, with three factors—a pending economic recovery, personnel shortages and licensing mandates—placing immense pressure on an already depleted workforce. Alas, the storm has yet to blow over. In fact, it’s regaining momentum.
As the economy again moves toward recovery and baby boomers continue retiring at an alarming rate, the industry is faced with an ongoing image problem that ultimately translates into a recruitment problem. Craft training often is sacrificed because of budget cuts, yet history has shown that investing in employee development during a downturn pays off when the industry rebounds.
“As the economy and our industry recover, it is highly likely that we will experience the most severe shortage of skilled workers ever seen,” Whyte says. “With the average age of the craft professional at 48, and the lack of interest in the construction industry we are seeing at the high school level, the time for action is now. As an industry, we have the programs and the capacity to meet this challenge, but we must elevate our desire to truly develop our workforce. Owners and contractors can no longer just pay homage to workforce development; they must commit to it.”
On the construction management side, many collegiate programs—especially at the graduate level—are stretched to capacity, signaling strong interest in the profession. Though the academic world is notorious for being slow to change, construction management programs have made progress in up-and-coming areas such as building information modeling, integrated project delivery and sustainability. But to remain truly competitive, most schools are in need of experienced faculty and input from local contractors on how to stay current and provide the skills that make a student hirable.
DiversityDiversity has come to mean a lot of things in the construction industry. First and foremost, it’s a matter of reaching out to women, minorities and young people to replace the growing number of predominantly white males retiring from the industry.
“The most profound change in the construction workforce is the increasing average age of our craft workers, leaving the question of where their replacements will come from,” says Tim Steigerwald, senior vice president of
Messer Construction Co., Indianapolis. “At the same time, the demographic changes in the United States suggest that the replacements will come from nontraditional sources. The latest census shows that half of the U.S. population will be non-white by 2050. The construction industry has to attract a diverse workforce, including women and minorities, to remain viable and competitive.”
In addition, companies are placing a stronger emphasis on working with a more diverse group of project partners. Especially given the government’s increasing requirements for women and minority business enterprise participation on public projects, partnering with a small or disadvantaged firm can open up new project opportunities.
Contractors’ dedication to following pre-task safety checklists, hosting regular toolbox talks and jobsite inspections, providing high-quality personal protective equipment, tailoring training to Spanish-speaking employees, and creating a culture of safety onsite and in the office has paid huge dividends in the last decade. The proof is in the numbers.
Craig Shaffer, owner of
SafetyWorks, Inc., Dillsburg, Pa., reports that in 1999, the fatality rate was 14. In 2009, it was down to 9.7—marking a 30.7 percent decrease industry-wide. Meanwhile, the Occupational Safety and Health Administration’s (
OSHA) incidence rate came down 50 percent in the last 10 years, and the DART rate dropped 45 percent.
“Are we headed in the right direction? Absolutely,” Shaffer says, noting OSHA’s new enforcement-driven approach is unfounded given the progress the construction industry has made in the more collaborative environment of the past eight years. “Obviously we all want to see zeros across the board. Companies are cont
inuing to emphasize the business aspects of safety. I’ve also seen a greater emphasis placed on pre-planning safety,” he says.
Still, much remains to be done, especially in firms with fewer than 50 workers. “When the economy improves, there may actually be regression as the number of construction projects increases and smaller companies are in greater demand,” says Rich Baldwin, corporate HSE manager for
PCL Construction Enterprises, Orlando, Fla. “Further, they may be forced to hire less-qualified craft professionals as the work increases nationwide.
“To improve, small and medium-sized companies must hire safety consultants or safety professionals to keep up with increasingly complex OSHA standards. For example, additional emphasis will be necessary to control silica exposures, meet fall protection requirements and control at-risk behaviors,” Baldwin says. “Smaller firms will have to emphasize the critical role of the first-line supervisor and do more supervisory training to influence project safety.”
Firms also are working to influence employees’ overall health via wellness programs. Employers are becoming advocates for healthy living, with a variety of new benefits—such as fitness facilities, weight loss and smoking cessation groups, and preventive physical checkups—serving to help companies retain employees, boost morale, and save on workers’ compensation and health care costs.
Crane SafetyAnother point of emphasis in the coming years will be crane safety—something industry members have been hearing about for quite some time. Back in the fall of 2003, OSHA launched a committee to revise its cranes and derricks standard, which was supposed totake up to 18 months to develop. Instead, it took six years to issue a proposed rule and nearly seven years to release a finalized version.
Meanwhile, numerous crane-related incidents made headlines, including two fatal accidents in New York City in the spring of 2008.
Now that the standard is out, contractors are getting on board with the new training and certification requirements.
“Going forward, I hope there’s more proactivity to do the right thing rather than relying onregulations to drive change,” says Bob Fitzgerald, manager of construction health and safety for
Southern Company Engineering and Construction Services, Birmingham, Ala. “Hopefully as new technologies become available, we’ll be able to go above the minimum regulatory standard—to be even better. It’s all about constructing our facilities safely, avoiding incidents and sending the craftsperson home safely each day.”
Construction professionals have a well-deserved reputation for being slow adopters when it comes to new technologies, but the industry has made some significant advancements in the last eight years. Less than five years ago, contractors were just beginning to reap the benefits of high-speed and wireless Internet. This newfound connectivity—even for remote jobsites—paved the way for paperless project management, web-enabled applications, and the ability to exchange and update information real time. Quick to follow were mobile handheld devices; imagine going without a BlackBerry, Droid or iPhone today!
Though many companies have replaced manual, duplicative processes with integrated construction-specific software solutions, that’s just the tip of the iceberg in terms of how contractors can use technology to reduce costs and remain competitive.
“One emerging trend that will dominate the industry for the next few years is customization,” says Bassem Hamdy, vice president of solutions for Toronto-based
CMiC. “We live in a world where people can control their environment through technology—access the Internet anywhere on a mobile device, build their own website—and this control should apply to the workplace as well. A new generation of graduates is coming to the marketplace with no experience with the static green-screen application of the past. In order for the construction industry to remain competitive, it will have to provide the same level of customization and control in terms of technology. This means users are able to modify and create their own screens or build their own applications to suit the needs of the individual and the business.”
Another major tech storyline of the past eight years has been building information modeling (BIM). What used to be paper drawings are now intelligent 3-D, 4-D and 5-D models whose time and cost savings sparked a tidal wave of adoption in the last few years.
“Both design professionals and contractors have made immense progress in BIM implementation, including making huge investments in software, hardware, training and expenses related to learning curve issues,” says Gary Roden, executive vice president of
Aguirre Roden, Dallas. “Many of the issues related to liability, the definitions of roles within IPD projects and software integration have been resolved. The ultimate validation of this concept occurs when contractors model projects that originally were designed using 2-D software. This investment confirms contractors are seeing the value of clash detection and that the cost of modeling is negligible compared to the cost of coordinating in the field. Ultimately, this will be the economic driver that forces full BIM implementation in the industry.”
As construction firms get used to operating in a more virtual BIM environment, social media has emerged as another opportunity to engage and collaborate sans face-to-face contact. Yes, even technology-averse contractors are joining the virtual conversation on Twitter, Facebook and LinkedIn—often using the social media platforms to build business, form new relationships and reach out to potential employees.
Construction Executive launched its own Twitter feed (
@ConstructionMag) in October 2009, and it already has more than 2,500 followers. Plus, magazine content is available directly at
www.constructionexec.com and via the ABC National Facebook page (
www.facebook.com/abcnational).
EquipmentIncreased productivity through technological innovations has been a major theme in the equipment market. Machine diagnostics and remote monitoring allow operators to perform preventative maintenance and lower fuel consumption, with more solar-powered and remote-controlled equipment on the horizon.
Looking ahead, remote monitoring of assets will allow construction equipment owners to outsource ownership of equipment to rental companies, according to Nick Mavrick, vice president of marketing for
Volvo Rents, Asheville, N.C. “This is similar to what is happening to car insurance today, whereby GPS monitors time and location, and insurance is priced on risk exposure. This enables greater distinction between short-term rental, long-term rental, leasing and buying equipment,” he says.
Mavrick also foresees field operators with visual displays overlaying their windshield or glasses so they can see specific instructions or navigate along specific routes. “As an example, an unskilled person could be turned into a skilled technician by using virtualization with instructions that walk the person step by step through repairing a machine,” he says.
Additionally, broadband security umbrellas will interface with personal RFID devices to check jobsite visitors and reduce theft, and lightweight polymers strengthened by nano-technology increasingly will replace steel.
From a historical perspective, political parties and the agendas they support come and go pretty quickly. Since January 2003, both a Republican and a Democrat have occupied the White House. Congress started out with a Republican majority in the House and Senate that lasted four years, after which Democrats took control of both chambers for the first time since 1995. The one-party majority lasted until Republicans regained a majority in the House in 2010. Several close elections and changes in political affiliation were thrown in for good measure, but as it stands today, there is dual-party control in Congress. Per usual, bipartisanship is still a work in progress.
Given all the back and forth, it’s not surprising that certain legislation and regulations keep resurfacing, often—for better or worse—with little resolution. The
Department of Homeland Security’s “no-match” letters caused quite a stir in 2007 (and the proposal didn’t officially die until 2009), and the E-Verify system remains contentious today. Remember all the talk about a new national energy policy? What about legislation dealing with the death tax, the 3 percent withholding requirement, Association Health Plans, health savings accounts and OSHA reform?
Here’s a look at a few of the political issues that have impacted the construction industry on a recurring basis during the last eight years.
Transportation Funding: Congress has a knack for putting off multi-year appropriations for federal highway, safety and transit programs. When the Transportation Equity Act for the 21st Century (TEA-21) lapsed in 2003, lawmakers agreed to disagree on a reauthorization package and instead relied on short-term funding extensions for the next two years. Finally, President Bush signed the $286 billion SAFETEA-LU in August 2005. It lapsed in 2009 and the whole rigmarole began again. Several extensions have come and gone—with the most recent one funding programs through the end of September—but the nation is no closer to a long-term fix for its failing infrastructure. Proposed solutions from the Obama administration, individual lawmakers and trade organizations are plentiful, but consensus remains elusive.
Health Care Reform: Back in the summer of 2003, a
National Federation of Independent Business survey found health care costs—not taxes—were small business owners’ biggest concern. It was a sign of the battle to come; yet, with the passage of the Obama administration’s sweeping health care reform package, costs are still keeping contractors up at night. Opponents remain steadfast in fighting the slew of regulations implementing the bill’s provisions. In a recent vote, both the House and Senate approved full repeal of the expanded tax reporting requirements included in the Patient Protection and Affordable Care Act (PPACA) mandating that all businesses submit a Form 1099 to the
Internal Revenue Service for any transaction for goods or services exceeding $600 a year. And while House Republicans made good on their promise to vote to repeal the PPACA in January, the Senate and president maintain full repeal is off the table. Meanwhile, the constitutionality of the law is under review by several courts, signaling the end is far from near on this controversial issue.
Project Labor Agreements (PLAs): The prevalence of PLAs seems to yo-yo along with the presidency. Like his father, President Bush signed an executive order forbidding recipients of federal money from requiring or prohibiting the use of a PLA. In February 2009, President Obama rejected that policy with his own executive order encouraging federal agencies to require PLAs on federal projects exceeding $25 million. In response, proponents of free enterprise and open competition continue working for passage of the Government Neutrality in Contracting Act (H.R. 735/S.119), which was re-introduced in February. States and localities concerned about the increased costs associated with PLAs have taken action as well, with several cities and counties banning the pre-hire agreements on city- or county-funded construction projects.
Employee Free Choice Act (EFCA): The first introduction of EFCA in 2003 launched an impassioned, ongoing debate on whether unions should be allowed to opt for recognition through a card check process instead of a secret ballot election. Despite public opposition and research refuting the alleged benefits of EFCA, the bill was re-introduced and passed the House in March 2007. However, it didn’t have enough support in the Senate to make it to an up-or-down vote. Amid pressure from unions suffering from dwindling membership, Democrats revived the legislation in 2009. It hasn’t gained much momentum of late, with support still lacking in the Senate, and Republicans continue to push back through the Secret Ballot Protection Act.
Immigration Reform: In January 2004, President Bush unveiled his plan to revamp the U.S. immigration system and allow millions of illegal immigrants to obtain legal status as temporary workers. Two and a half years later, with a comprehensive reform bill in hand, senators caved under political pressure and chose not to bring the legislation to a final vote. Frustrated by inaction at the federal level, states began taking matters into their own hands, with Arizona passing controversial immigration laws in 2008 and 2010. In his 2011 State of the Union address, President Obama again called on lawmakers to pass an immigration reform bill, but it’s likely an uphill battle given Congress’ focus on the economy and job creation.
-- Joanna Masterson