With no way to put it lightly, the U.S. economy—and as a result, the construction economy—took a turn for the worse in the latter half of 2008.
According to the U.S. Commerce Department, real nonresidential fixed investment, which includes the purchase of nonresidential structures, equipment and software, decreased during the third quarter of 2008. All signs point to a recession. Because the volume of commercial and industrial construction often lags overall economic performance by one to two years, the 2008 financial crisis means contractors will be challenged to meet revenue goals in the next few years.
Although gas prices dropped in recent months, decreasing consumer confidence levels are worrying contractors across all building sectors. Many states and local governments slashed their budgets as retail, income, property and other tax collections fell well short of expectations—bad news for contractors depending on publicly financed projects.
The following summary shows a year marked by news of economic stimulus packages and election debates, along with immigration rulings, crane accidents and safety changes impacting contractors nationwide.
On a positive note, the industry continued to advance with new technologies like building information modeling and green construction techniques, and several construction companies stood out in terms of workforce development efforts and successful project completions. Read on for a recap of the year’s construction news.
On Jan. 1, the Legal Arizona Workers Act (H.B. 2789), the strictest immigration law in the country, went into effect. The two-strike law allows the state to suspend a contractor’s business license for 10 days for the first offense and revoke it for the second offense if the contractor is found to have knowingly employed undocumented workers. It also requires that employers verify the status of newly hired workers through the federal E-Verify employment verification program.
Various business groups, civic associations and nonprofit corporations filed two lawsuits in 2007 asking for a preliminary injunction preventing enforcement of the law on the grounds that it infringes on federal immigration powers and lacks protection for employers. On Sept. 17, the 9th U.S. Circuit Court of Appeals issued a ruling that the law is enforceable and compatible with federal immigration law.
Future challenges are expected, and the law has not been enforced against any employer since it took effect.
Gov. Jim Gibbons (R-Nev.) signed an executive order that encourages open and fair competition for state construction contracts, revoking a 1994 mandate that required owners to consider project labor agreements (PLAs) for state-funded projects. The governor’s revocation does not disband the use of PLAs altogether, but rather leaves the use of PLAs up to a project owner’s discretion.
President Bush approved legislation Feb. 13 aimed at boosting the sluggish U.S. economy. Under the $170 billion stimulus bill, taxpayers received up to $600 per person and married couples received up to $1,200, plus $300 for each child.
Additionally, the measure provided businesses tax breaks for equipment investments made in 2008, and allowed small businesses to expense $250,000 for new capital investments
—up from $125,000.
The Occupational Safety and Health Administration’s (OSHA) final rule requiring employers to provide nearly all personal protective equipment (PPE) at no cost to employees went into effect Feb. 13. Though it covers PPE such as hard hats, gloves, goggles, safety glasses, welding helmets, face shields, chemical protective equipment and fall protection gear, the final rule does not apply to “ordinary” safety-toed footwear, prescription safety eyewear or weather-related gear. Additionally, lost or intentionally damaged PPE does not have to be replaced at the employer’s cost.
The National Institute of Building Sciences’ Facility Information Council released the first version of its National Building Information Modeling (BIM) Standard for public use. Compiled by more than 30 experts in the capital facilities industry, the document provides an overview of BIM, as well as its principles and methodologies.
The National BIM Standard establishes performance criteria and standard definitions for building information exchanges. Implemented in software, it aims to reduce waste and inefficiencies in the building industry by supporting communication throughout a facility’s life cycle for improved operations, maintenance, management and long-term sustainability.
A final rule published by the Department of Homeland Security increased fines for employers that violate federal immigration laws by 25 percent. The maximum civil penalty for multiple violations is now $16,000—up from $11,000—and the maximum penalty for a first violation is $3,200.
Penalties are assessed on a per-worker basis. For example, an employer that knowingly employs, or continues to employ, five undocumented workers would be subject to five separate fines.
On March 15, a crane collapse at a Manhattan jobsite killed seven people and injured 24 people, prompting several crane safety investigations nationwide.
The 205-foot-tall crane, being used to construct a 43-story apartment building, split in half during a routine jump and crushed a townhouse across the street. New York City officials began inspections of all 253 construction cranes operating throughout the city.
A week later, a section of a 20-foot-tall tower crane collapsed at a condominium construction site outside of Miami, killing two workers and injuring five. In response, Miami-Dade County adopted a new ordinance that requires the certification of crane operators.
Subsequent accidents in Maryland, Texas, Las Vegas and other areas drew increased attention to the need for OSHA to release revised crane and derrick standards.
Associated Builders and Contractors’ (ABC) national Board of Directors unanimously endorsed Arizona Sen. John McCain (R) for president of the United States March 5 at the association’s National Convention in San Juan, Puerto Rico.
Despite a veto threat from President Bush, the U.S. House of Representatives passed the Renewable Energy and Energy Conservation Tax Act (H.R. 5351) by a 236-182 vote. In addition to featuring $18 billion in tax incentives to encourage the production and use of cleaner forms of energy, the measure would apply Davis-Bacon Act prevailing wage requirements to renewable energy and energy-efficiency projects financed with federal tax credit bonds.
ABC presented its Contractor of the Year Award to Napa, Calif.-based general engineering contractor Nova Group, Inc.—one of the nation’s premier government contractors specializing in hydrant fueling, waterfront and utility construction—at the association’s 2008 National Convention in San Juan, Puerto Rico. ABC presents this prestigious award to an ABC member or member firm that has demonstrated significant accomplishment for the association, the merit shop and the construction industry.
Pennsylvania contractor and lifelong champion of the merit shop philosophy J. Leon Altemose died April 11 at his home in Malvern, Pa., at age 68. Altemose became an advocate of labor rights law in June 1972 when one of his construction sites was destroyed following his refusal to hire only union labor. In a defining moment in the merit shop movement, the Philadelphia Building Trades Council launched what the Supreme Court of Pennsylvania described as "a virtual military assault" against an Altemose project to construct a Sheraton hotel in Philadelphia’s western suburb of King of Prussia.
In 1973, Altemose was named "Construction Man of the Year" by Engineering News-Record. In 2000, ABC recognized Altemose as a "Leader of the Century," one of the nine individuals having the greatest effect on the merit shop construction industry in the 20th century.
President Bush vetoed The Farm, Nutrition and Bioenergy Act of 2007 (H.R. 2419), a five-year, $301 billion law that would have expanded Davis-Bacon prevailing wage requirements to the bio-refinery loan guarantee program and subjected local entities and private employers to federal micromanagement.
The Woodrow Wilson Bridge Project in suburban Washington, D.C., was honored with the American Society of Civil Engineers’ 2008 outstanding Civil Engineering Achievement Award based on its contribution to the community, resourcefulness in planning, and innovation in materials and techniques. The new bridge replaced nearly 12 percent of the Capital Beltway (I-495/95) and created four new interchanges, resolving one of the worst bottlenecks on the East Coast while implementing programs to protect the local environment.
On June 6, President Bush issued Executive Order 12989 requiring contractors performing work under a federal government contract to use the U.S. Citizenship and Immigration Services’ E-Verify program to electronically verify the employment eligibility of its personnel. The executive order requires all employees of federal contractors, including existing employees, to be verified regardless of their involvement in a government project.
The executive order does not state if subcontractors also are required to use E-Verify and an effective date is still to be determined due to a number of unresolved implementation issues.
In a victory for merit shop construction, the U.S. Supreme Court ruled to allow employees in California to be informed by their employers about union organizing efforts. In the case, U.S. Chamber of Commerce v. Brown, the court struck down a California law that prohibited the use of state money by employers to educate their employees about unions in the workplace.
In June, the House passed the 21st Century High-Performing Public School Facilities Act (H.R. 3021) by a 250-164 vote. The $6.4 billion bill proposes the U.S. Department of Education provide grants over five years to local educational agencies for the construction, modernization or repair of public elementary and secondary schools. It also calls for $500 million for school repairs in the Gulf Coast.
Davis-Bacon prevailing wage requirements would apply to projects funded by the legislation, prompting open shop contractors and business groups to argue these requirements would drive up construction costs for taxpayers and school districts.
The National Center for Construction Education and Research (NCCER) partnered with the Sustainable Facilities and Infrastructure Research Team of the Myers-Lawson School of Construction at Virginia Tech University to offer a new 15-hour introductory course on green construction practices.
"Your Role in the Green Environment" provides fundamental instruction on activities that contribute to sustainable construction, as well as common pitfalls to avoid in achieving LEED certification. The NCCER is recognized as a U.S. Green Building Council Education provider; the curriculum also is endorsed by Green Advantage.
Boston’s Central Artery/Tunnel Project will cost $22 billion including interest payments, according to a July 17 story in the Boston Globe. The Big Dig, a massive federally funded project to build freeway tunnels underneath the city and Boston Harbor, ended in 2007 more than $12 billion over budget. Despite receiving federal funding, the project was subject to a union-only project labor agreement.
According to the article, in order to cover the cost of the project, Massachusetts will have to pay close to $600 million annually over the next several years, taking money away from the maintenance and repair of roads and bridges across the state.The project, which represents only 7.5 miles of an 11,000-mile highway system, has eaten up nearly 40 percent of the state highway funds during the last 17 years, according to the Globe.
In addition, the project’s largest construction contractor, Modern Continental Co., filed for bankruptcy June 23 just one day after the company was charged by federal prosecutors with lying about the quality of the work it performed on the project.
On Oct. 16, two former managers for McCourt Construction Co. who admitted to defrauding the project of $300,000 were sentenced in federal court. The scheme involved false billing of apprenticeship work at the higher rate of pay for journeymen, resulting in overpayments to the contractor between 2002 and 2005.
ABC Executive Committee member Michael J. Uremovich, founder, CEO and chairman of the board of STARCON International, Manhattan, Ill., and Kirk Pickerel, ABC president and CEO, met with President Bush at the White House to discuss the impact high energy prices are having on the commercial and industrial construction industry.
ABC’s Nominating and Certification Committee nominated Jerry Gorski of Gorski Engineering, Inc., Collegeville, Pa., a member of ABC’s Southeast Pennsylvania Chapter, to serve as national chairman of ABC in 2009. The committee also nominated James Elmer of James W. Elmer Construction Company, Spokane, Wash., a member of ABC’s Inland Pacific Chapter, for the office of chairman-elect.
During ABC’s first-ever construction industry Crane Safety Summit Sept. 25–26 in Houston, more than 80 construction experts met to discuss the causes of recent crane incidents and develop best practices that can be used by the industry to reduce the possibility of future accidents.
President Bush signed a law Sept. 15 that immediately transfers $8 billion from the U.S. Treasury’s general fund into the Highway Trust Fund, avoiding for the short term a revenue shortfall that would have delayed or cancelled infrastructure projects across the country and threatened more than 350,000 jobs.
The bill (H.R. 6532) came to the forefront in Congress after the U.S. Department of Transportation announced the 52-year-old fund, which depends on fuel taxes, would run out of money by the end of September—much sooner than anticipated.
With the support of Congress, President Bush signed the Emergency Economic Stabilization Act of 2008, which provides up to $700 billion to assist in stabilizing America’s financial markets and wavering credit markets. Included in the measure is an increase in FDIC insurance coverage, provisions to allow tax breaks for producers of renewable energy, an extension of expiring tax breaks and a limit to the alternative minimum tax.
After four years of debate, OSHA released a 1,000-page proposed rule intended to protect employees from the hazards associated with using cranes and derricks in construction activities. The existing crane regulations are more than 40 years old.
Under the proposed rule, employers would first determine whether the ground is sufficient to support the anticipated weight of hoisting equipment and associated loads. Employers then would be required to assess hazards on the jobsite that would affect the safe operation of the equipment, such as power lines, objects or personnel. Finally, employers would have to ensure the equipment is in safe operating condition via required inspections, and employees would have to be trained to recognize these hazards.
The proposed rule also mandates crane operators be certified by one of four groups: an accredited crane/derrick operator testing organization; an employer qualification program, which must be audited; the U.S. military; or a licensed government entity.
The House voted 236-189 to approve the Comprehensive American Energy Security and Consumer Protection Act (H.R. 6899), which would allow offshore drilling within 50 miles of U.S. coastlines and expand tax credits for clean energy. PLAs would be required for pipeline projects contained in the legislation.
Sen. Barack Obama (D-Ill.) celebrated a presidential win Nov. 4, with Democrats gaining at least 19 seats in the House and six seats in the Senate.
Amid a troubled economy and a growing federal deficit, the new administration has pledged to support initiatives to improve the nation’s infrastructure, create new jobs, and invest in energy-efficient construction and sustainable development.
One of the early tests of the Obama presidency will be pressure by organized labor to pass the Employee Free Choice Act—legislation that would make it easier to organize unions but likely place new burdens on employers.
A new Federal Highway Administration regulation went into effect Nov. 1 mandating that workers within the right-of-way of a federal-aid highway who are exposed either to vehicle traffic or to construction equipment wear high-visibility safety apparel. Contractors must use retro-reflective garments that have been tested and certified for compliance to meet Performance Class 2 or 3 requirements of the American National Standard Institute’s High Visibility Apparel provisions.