For a year characterized by lows—low project backlogs, low market activity and even lower employment numbers—the construction industry certainly wasn’t low on news.
It all began with newly inaugurated President Obama’s announcement that the federal government would begin doling out cash to help hundreds of public projects get off the ground.
With billions of dollars on the table, businesses wanted a say about who would get the money and how it would be spent. The open shop construction industry, for one, adamantly opposed provisions in the spending bill that were biased toward labor unions. Many criticized the pace of financial distribution as slow and bureaucratic, and complained the stimulus money would only reach a small percentage of contractors and fail to yield dramatic economic improvements.
But in the end, millions of dollars began trickling out of Washington, and the stimulus package may have kept the economy from plummeting into an even more severe state.
This year, global construction activity was expected to contract 3.7 percent, marking the steepest decline in spending in the last 20 years, according to IHS Global Insight Construction Services. The global construction market was expected to shrink to $5.6 trillion. Every region in the world except Asia was expected to see falloffs in spending, including double-digit declines.
While this meant stiff competition for jobs and many unwanted layoffs, construction firms used the opportunity to rethink old practices, refocus on different market segments and come up with innovative ways of doing business. Many companies entered the uncharted territory of public work or bid smaller contracts in order to keep busy. Others ventured into green building or enhanced their companies’ apprenticeship and training programs.
In contrast to a deep recession and record job losses came new investments in the nation’s infrastructure, which for years had received failing grades. At the beginning of the year, the American Society of Civil Engineers assigned it a cumulative grade of “D.” How the nation’s infrastructure fares next year after billions of dollars of investment will be interesting to monitor.
It also will be interesting to see where the nation’s construction backlog, which Associated Builders and Contractors measured at 5.9 months in September, will stand in 2010—and if the economic stimulus will have a real effect on the commercial, institutional, industrial and infrastructure construction segments.
Read on for a selection of the year’s biggest political, regulatory and business news.
Congress Delivers Stimulus Funding
President Obama promised contractors relief in the form of federal stimulus dollars through the American Recovery and Reinvestment Act (ARRA) of 2009 (H.R. 1). Construction firms across the nation braced for infrastructure funding for shovel-ready federal buildings, schools, highways and bridges, as well as workforce development and additional programs.
While some contractors were cautiously optimistic the stimulus money would help keep their businesses afloat, many were disappointed that the funding would be tied to Davis-Bacon Act requirements and potential project labor agreements (PLAs), which limit contractors’ ability to compete for federal and state jobs.
On Jan. 28, the U.S. House of Representatives approved H.R. 1 by a 244-188 margin. The Senate passed the bill on Feb. 10.
Final H-2B Visa Rule Takes Effect
The U.S. Department of Labor’s (DOL) final rule revising the H-2B temporary worker program, which permits employers to hire foreign workers to come to the United States to perform temporary nonagricultural work, went into effect Jan. 18.
The revisions made it easier for employers to hire workers for a one-time need between one and three years, and reduced the period of time H-2B workers must wait outside the United States before they are eligible to return. The DOL also revised a provision that would have mandated employers recruit workers through labor unions before qualifying for the H-2B program.
OSHA Considers Comments on New Crane Safety Rules
With the industry still buzzing about last year’s deadly crane accidents, the U.S. Occupational Safety and Health Administration (OSHA) began accepting comments from construction industry stakeholders on its proposed rule to update the 40-year-old safety standards for cranes and derricks. Only 15 states and six cities require third-party crane testing by a nationally accredited organization.
Eager for the updated standards, several industry organizations voiced opinions on how the new rules should take into account technological changes and current jobsite safety practices.
OSHA later held an informal public hearing in Washington, D.C., where interested parties had the opportunity to testify and present evidence related to the proposed rule.
Obama Signs Order Encouraging Federal PLAs
On Feb. 6, President Obama signed Executive Order 13502, which encourages federal agencies to require the use of PLAs on federal construction projects valued at more than $25 million. The order also repealed former President Bush’s Executive Order 13202, which prohibited federal agencies and recipients of federal funding from requiring contractors to sign PLAs.
Business groups like Associated Builders and Contractors (ABC) renounced the decision, stating it would open the door to waste and discrimination in the awarding of federal contracts, as well as drive up construction costs by as much as 20 percent.
Later, Rep. John Sullivan (R-Okla.) introduced the Government Neutrality in Contracting Act (H.R. 983), identical to earlier legislation introduced by Sen. David Vitter (R-La.), that would prohibit federal agencies from requiring PLAs on federal and federally assisted projects. It did not pass in 2009.
Stimulus Package Signed Into Law
On Feb. 17, President Obama signed the stimulus bill, authorizing $787 billion in federal funding intended to kick-start the stagnant economy and create millions of jobs through investments in energy, transportation, education and health care projects. Lawmakers said two-thirds of the stimulus dollars would reach states, businesses and taxpayers by the end of September 2010.
The ARRA included $27.5 billion for highway and bridge construction and repair; $8.4 billion for mass transit; $9.3 billion for high-speed railways and Amtrak; $20 billion for “green” jobs to make wind turbines, solar panels and improve energy efficiency in schools and federal buildings; and $12.3 billion in energy efficiency and conservation grants, as well as loan guarantees for renewable energy projects.
Within five months of the bill’s passage, the General Services Administration invested more than $1 billion—about one-fifth of its total appropriations—for 120 projects across the country to upgrade federal buildings, courthouses and border stations.
In addition, the U.S. Army Corps of Engineers allocated $4.6 billion in funds to 178 civil construction and 892 operations and maintenance projects. The National Park Service invested $750 million in 766 projects.
The U.S. Department of Defense began spending its $5.9 billion for new construction and renovation projects, such as family housing, child development centers, energy conservation projects and military hospitals.
The U.S. Department of Energy also received $6 billion for projects to clean soil and groundwater, dispose of waste and demolish former weapons facilities.
Industry Standouts Receive Top Honors
On Feb. 28, ABC presented awards to industry standouts during its 2009 National Convention in Honolulu.
Bryan Brown, a crane operator for Manhattan Construction Company in Falls Church, Va., received the Craft Professional of the Year award for excelling in his field, maintaining a lifelong commitment to training and upholding the merit shop philosophy.
Michael Pope, an insulation professional at ABC’s Saginaw Valley Chapter, was named Craft Instructor of the Year for possessing outstanding teaching credentials and demonstrating a commitment to preserving high educational standards.
Tim Horst, recently retired president of Becon Construction Company, Houston, was named 2008 Contractor of the Year for his work as program director of the Gulf Coast Workforce Development Initiative.
Mid-Atlantic Company Begins Work on First Stimulus Project
American Infrastructure, Inc., a Worcester, Pa.-based heavy civil contractor employing more than 1,800 people, began work on resurfacing Maryland State Highway 650—the first project funded by the ARRA.
President Obama announced that more than 100 other businesses received funds, and more than 200 construction projects would be launched across the nation in early March.
Employee Free Choice Act Introduced in Congress
Triggering a national debate on workplace unionization rules, Sen. Ted Kennedy (D-Mass.) and Rep. George Miller (D-Calif.) introduced the misnamed Employee Free Choice Act (EFCA) of 2009 (S. 560/H.R. 1409), or “card check” legislation, which would eliminate a worker’s right to a secret-ballot election when deciding whether to join a union.
Under the “card check” process, employees would be forced to indicate their choice of whether to join a union by signing a card in front of their coworkers, employers and union organizers, opening the door to coercion and intimidation. In addition, the bill would subject businesses to binding interest arbitration, where government-appointed arbitrators would establish a two-year contract setting all work rules without giving the company’s employees or owner an opportunity to approve or appeal the decision.
Jerry Gorski, 2009 ABC national chairman and president of Gorski Engineering, Inc., Collegeville, Pa., appeared March 11 on the Fox News Channel program “America’s Newsroom” to discuss the negative impact EFCA would have on business owners and workers.
Additionally, Frank Cannon, an employee of C.J. Coakley Co., Inc., testified at a hearing held by the Senate Republican Conference and the Republican Policy Committee on how eliminating the secret ballot would expose his company to union intimidation.
Business groups continued to battle the legislation throughout the year, with ABC sending a letter signed by more than 3,000 construction companies urging Congress to vote down EFCA.
Study Exposes Labor Union Slush Funds
A study conducted by George Mason University’s John M. Olin Institute for Employment Practice and Policy showed from 2000 to 2007, construction labor unions spent more than $1 billion in union wages to underbid open shop contractors in a practice called “job targeting.”
In job targeting programs, organized labor officials collect fees from union members and then funnel that money to union contractors to compete for projects on which they otherwise would not be competitive.
Jim Elmer, 2009 ABC national chairman-elect and president of James W. Elmer Construction Co., Spokane, Wash., and Greg Hoberock, president and CEO of hth companies, inc., Union, Mo., joined the study’s author to hold a national news conference on the findings.
Construction Material Prices Continue to Drop
Construction materials prices continued their downward trend, falling 0.4 percent in April, according to the U.S. Department of Labor. On a year-over-year basis, construction input prices dropped 3.7 percent.
The lower prices were a much-needed reprieve, helping to stimulate non-residential construction in some market segments.
Asphalt felts and coating prices dropped 10.5 percent, the largest month-over-month decline in 55 years. Prices for fabricated structural metal products fell 1 percent from March, marking the seventh consecutive monthly decline. Fabricated ferrous wire prices decreased 0.7 percent. Year-over-year, softwood lumber prices were down 10.2 percent. Average prices for construction materials would eventually rise 1 percent in August, but fall 0.4 percent in September and 0.2 percent in October.
New Contract Documents Debut
The Design-Build Institute of America released new model contract documents for owners and design-build firms that address industry advances such as sustainable design, building information modeling and electronic data.
In addition, an industry-wide coalition released ConsensusDOCS 752, which focuses on the complex contractual rules and regulations for federal government projects.
Later in the fall, the American Institute of Architects released its updated B108-2009, Standard Form of Agreement Between Owner and Architect for a Federally Funded or Federally Insured Project; as well as its Multi-Party Agreement for Integrated Project Delivery.
Support for Labor Unions Reaches Historic Low
A May 21 survey by the Pew Research Center in Washington, D.C., stated that public support for labor unions had reached its lowest point since 1987, and an increasing number of people think unions have become “too powerful.”
The percentage of people who agreed that “labor unions are necessary to protect the working person,” dropped from 70 percent during the past 10 years to 61 percent in 2009. Sixty-one percent of the public also agreed that labor unions are too powerful, up from 52 percent 10 years ago. In addition, 76 percent of those surveyed agreed that “the strength of this country today is mostly based on the success of American business.”
Members of Congress Introduce Anti-Salting Bill
Sen. Jim DeMint (R-S.C.) and Rep. Steve King (R-Iowa) introduced the Truth in Employment Act of 2009, which would amend the National Labor Relations Act to make clear that an employer is not required to hire any person who is not a “bona fide applicant.”
The legislation would put an end to the practice of “salting,” the intentional placing of trained union professional organizers and agents in open shop facilities to harass or disrupt company operations, increase operating and legal costs, and ultimately put companies out of business.
ABC Launches Green Contractor Certification ProgramABC launched its Green Contractor Certification program June 8 to document the efforts of construction firms that implement green practices in the workplace and in the field.
Participants must submit an application detailing their green efforts, undergo a third-party onsite assessment and complete 12 prerequisites. To date, 10 construction firms are certified. For more information, visit www.greenconstructionatwork.com.
New Programs Emphasize Diversity
ABC awarded grants to five ABC chapters—Eastern Pennsylvania, Massachusetts, Mississippi, TEXO and Western Washington—that demonstrated a commitment to developing long-term industry diversity programs.
In addition, ABC published its new Employer Guide for Diversity and Inclusion (
www.abc.org/diversityguide), which provides resources to help contractors start or enhance a company diversity program.
Highway and Rail Funding Comes to the Forefront
Transportation funding was one of the hottest industry topics this year. In a June 18 blueprint of the Surface Transportation Authorization Act of 2009, the House Transportation and Infrastructure Committee proposed a transportation investment totaling $450 billion over six years, a 38 percent increase over the current funding level.
It was a tall order, considering the Highway Trust Fund was expected to be short nearly $7 billion by September when the current funding policy (SAFETEA-LU) was set to expire.
The bill asked for $12.6 billion for highway and motor carrier safety, $337.4 billion for highway construction, $99.8 billion for mass transit and $50 billion to build 11 high-speed rail corridors connecting regional cities.
Education Foundation Awards 10 Scholarships
The Trimmer Education Foundation, ABC’s educational affiliate, awarded 10 scholarships totaling $40,000 to students in construction-related programs at colleges and universities across the nation as part of the foundation’s annual scholarship competition.
Scholarships were awarded to students from the following schools: Colorado State University, Georgia Institute of Technology, Middle Tennessee State University, Pennsylvania College of Technology, South Dakota State University, Southern Polytechnic State University, University of Cincinnati, University of Maine-Orono and University of Wisconsin-Stout.
National Debate Begins on Independent Contractor ClassificationRep. Jim McDermott (D-Wash.) introduced legislation July 30 that would significantly modify the rules for classifying workers as independent contractors.
The Taxpayer Responsibility, Accountability and Consistency Act of 2009 (H.R. 3408) was met with opposition in the construction industry due to the legislation’s potential to increase paperwork burdens and add new tax penalties.
Throughout the year, several states enacted or began to enforce new laws to penalize employers for misclassifying employees as independent contractors, including Colorado, Delaware, Illinois, Indiana, Maine, Maryland, New Jersey and Vermont. Legislation is still pending in the Pennsylvania Senate.
Industry Groups Receive Apprenticeship Training Grants
The DOL awarded $6.5 million in grants Aug. 12 to help unions and industry and employer associations update their apprenticeship programs as part of the Advancing Registered Apprenticeship into the 21st Century program.
ABC’s Trimmer Education Foundation received a $624,300 grant to help local organizations develop apprenticeship standards that incorporate time-based and competency-based programs combining on-the-job learning with classroom instruction.
Safety Initiatives Lower Construction Fatalities by 20 Percent
The construction industry welcomed news that construction fatalities fell 20 percent in a year. The DOL reported Aug. 20 that the total number of jobsite fatalities was 969 in 2008, resulting in a preliminary fatality rate of 9.6 per 100,000 workers. In 2007, the rate was 10.8 per 100,000 workers.
The industry credited voluntary employer workplace safety initiatives, third-party evaluation programs, as well as OSHA programs and training, for the decline in construction fatalities.
Updated I-9 Form Approved Until 2012Employers were presented with an updated I-9 form, approved by the Office of Management and Budget Aug. 27. The new Employment Eligibility Verification Form, which is valid through Aug. 31, 2012, can be downloaded at
www.uscis.gov/i-9.
U.S. Immigration and Customs Enforcement also upped its I-9 investigations this year, issuing 652 notices of inspection, compared to 503 similar notices in fiscal year 2008.
Contractors Required to Use Federal E-Verify System
After much debate, a final rule went into effect Sept. 9 requiring certain federal contractors and subcontractors to use the E-Verify system to prove their employees are legally authorized to work in the United States.
The rule’s implementation was delayed throughout the year in part because of a legal challenge brought by ABC that questioned the government’s authority to promulgate the regulation. The final rule implementing the order was set to go into effect Jan. 15, but was delayed until May 21 and then to June 30.
Although ABC’s Aug. 31 appeal of the decision is still pending, federal contractors and subcontractors now must comply with the rule by enrolling in the E-Verify system.
Construction Companies Rally Against PLA Rule
More than 900 construction companies and employees submitted comments opposing a proposed rule implementing Obama’s Executive Order 13502, which would, for the first time, establish a policy of encouraging federal agencies to consider imposing PLAs on federal construction projects.
In comments to the Federal Acquisition Regulatory Council, the companies argued the proposed rule did not support the assertion that PLAs promote cost saving and efficiency in federal procurement.
The effort was supported by data from the Beacon Hill Institute’s Sept. 23 study, “Project Labor Agreements on Federal Construction Projects: A Costly Solution in Search of a Problem,” which found PLAs significantly increase construction costs on federal projects.
Job Losses Continue to Mount
Despite reports that the recession was reaching an end, the nonresidential construction industry lost 13,000 jobs in September after private nonresidential construction spending fell 0.1 percent in August, according to the DOL and the U.S. Census Bureau.
Since September 2008, the nonresidential construction industry lost 107,800 jobs, bringing the number of jobs in that sector down to 710,700. In addition, total nonresidential construction spending (including both private and public) was down 4.7 percent compared to last year.
The only bright spot was residential construction spending, which rose 4.2 percent on a monthly basis, but was still lower than last year.
The nonresidential sector lost another 3,200 jobs in October. By year’s end, total construction employment had shrunk 15.6 percent in 12 months.
Data Shows Stimulus Money Created 30,000 New Jobs
The first reports submitted by recipients of ARRA funding revealed that more than 30,000 new construction jobs were created as a result of federal stimulus dollars.
The numbers showed approximately 9,000 prime contractors, awarded $16 billion, had spent about $2 billion as of Oct. 1, according to project data entered on FederalReporting.gov.
However, many analysts claimed the number of jobs created by the stimulus was grossly overstated due to mistakes in reporting and false estimates.
Transportation Appropriations Extended Until the End of the Year
State transportation agencies were disappointed when the Senate failed to pass a three-month extension of SAFETEA-LU, the transportation appropriations measure that expired in September. As a result, $8.7 billion was rescinded from highway contract authority.
President Obama signed a one-month extension Oct. 1, giving transportation agencies only enough funding to carry them through Oct. 31 at 2009 funding levels. Airport construction grants, however, received a three-month funding extension.
Congress came to the rescue with a short-term stopgap spending package to fund federal highway and transit programs through Dec. 18.
DHS Officially Rescinds No-Match Requirement
The Department of Homeland Security (DHS) published a final rule Oct. 7 that rescinded the controversial “no-match” regulation requiring a notice to be sent to employers when an employee’s name does not match the Social Security number the employer provided.
DHS first issued its final rule implementing the no-match regulation in August 2007, but a coalition of business groups, labor organizations and immigrant rights groups challenged the rule in the U.S. District Court for the Northern District of California. As a result, an injunction was issued, and the Social Security Administration suspended the distribution of employer no-match letters until the lawsuit was resolved.
DOL Strikes Down Rule that Encouraged Labor Transparency
The DOL’s Office of Labor-Management Standards Oct. 13 rescinded a final rule issued by the Bush administration that imposed additional financial reporting requirements on labor unions. The form, known as the LM-2, is the primary financial reporting document for unions with annual revenue exceeding $250,000.
Business groups maintain the rule was necessary to encourage union transparency and accountability and deter union-related corruption.
DOL Drops Job Corps Project in Response to PLA Protest
On Nov. 6, the DOL cancelled its solicitation for bids to construct a new Job Corps Center in Manchester, N.H.—the first public project attached to controversial government-mandated PLA requirements. The cancellation came in response to a protest filed with the Government Accountability Office by North Branch Construction, Concord, N.H., with support and representation from ABC.
The bid protest challenged the legality of the federal government’s shift in procurement policy, citing PLAs as discriminatory and costly. In what is considered a significant victory for open shop contractors, the DOL stated it is in the best interest of the public to further evaluate the issues involved in the PLA requirement, and the DOL is currently considering the next steps before proceeding with building the job center.
Congress Unveils Health Care Bills
The health care debate heated up this fall, with the House passing the Affordable Health Care for America Act (H.R. 3962) Nov. 7 by a vote of 220-215. The legislation would spend $1.05 trillion to extend coverage to 36 million Americans and require all but the smallest businesses to provide insurance for their employees.
A few weeks later, the U.S. Senate presented a similar health care overhaul package that would cost $848 billion to extend coverage to 31 million Americans.
The reforms would be financed through Medicare cuts and new surtaxes on high-income employees and high-cost insurance policies.
Business groups strongly opposed components of both bills, particularly the inclusion of a public option and employer mandates. The Republican National Committee called the reform package a government-run health care experiment that would increase families’ health care costs, the deficit, and taxes on small businesses and the middle class.
On Nov. 21, the Senate passed a motion to proceed with its official debate and amendment process after Thanksgiving.