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On the Bright Side


As the industry enters 2014, many AGC members seem more optimistic than in years past about prospects for new building construction and opportunities to work more efficiently and collaboratively. Yet workforce issues weigh heavy on leaders’ minds, and road builders remain concerned about future funding for new projects.

“It looks like there’s going to be more activity in 2014 than we saw in 2013,” says Mike Bolen, chairman/CEO of McCarthy Building Cos., headquartered in St. Louis, a member of multiple AGC chapters. “Things are not great but better.”

McCarthy is working on several large healthcare projects, including the $890 million Southeast Louisiana Veteran’s Health Care System Replacement Medical Center in New Orleans, La., a $650 million hospital at Fort Bliss in Texas, and an $800 million new Stanford University Medical Center in Stanford, Calif., all in partnership with Clark Construction Group of Bethesda, Md., a member of multiple AGC chapters.

“2014 will look better, but it will be a slow growth,” agrees Philip Warner, research consultant for FMI Corp. in Raleigh, N.C., a member of Carolinas AGC. “That’s mostly due to the gross domestic product being slow, politics abysmal and investors sitting on the sidelines.”

“The big hot spots are Texas, California, the Southwest – Arizona, Nevada – places where the recovery of the housing bust is going on,” Bolen adds. “There’s a lot of pent-up demand for things that didn’t happen in ‘10, ‘11 and ‘12, once people have confidence that this is really a recovery.”

Eric Hedlund, building group manager and chief operating officer at Sundt Construction in Phoenix, a member of multiple AGC chapters, reports, “The private sector is coming back. People are starting to open their eyes and wake up.” However, he says many projects have yet to break ground, except in Dallas, in which construction starts are “robust.”

In Wisconsin and the Midwest, Rick Andritsch, a partner and vice president of VJS Construction Services in Pewaukee, Wis., a member of AGC of Greater Milwaukee, agrees. “A lot of private money is coming back into the market,” he says.

That includes offices, healthcare, senior living facilities, apartment buildings, schools and renewable energy, including biodigestors. Angus Leary, vice president and chief operating officer for Suffolk Construction’s Commercial, Education and Government divisions in the Northeast region in Boston, a member of AGC of Massachusetts, reports pent-up demand has led to more construction starts in Boston, with more projects in the pipeline.

“We see continuing improvement in multifamily residential, residential with mixed use, hospitality and assisted living,” says Bud LaRosa, chief business performance officer at Tocci Building Companies in Woburn, Mass., adding that biotech, life sciences, healthcare are growing rapidly in Massachusetts, as are student residences, including developer-driven projects.

Hedlund also reported a strong education market in California and Texas, particularly fee-based projects and developer-led student housing, and Andritsch indicated a similar trend in the Midwest.

Data centers are going up, while retail centers are slower, as the Internet offers greater shopping options, Warner added, suggesting that contractors will need to look at new markets or dominate an existing market.

While excited about the new activity, members also are concerned about having the right people to build and manage the projects. “The development of our workforce, particularly at the trades level, is a challenge for the whole industry,” says AGC of America Senior Vice President Al Landes, president of Herzog Contracting Co. in St. Joseph, Mo., a member of multiple AGC chapters.

Without enough skilled people, productivity in the industry has fallen, Warner adds. “People need to work smarter,” he says.“One of the ways is prefabrication. Those things are going to grow fast.”

The accuracy and detail available with building information modeling (BIM) is making prefabrication an option for more projects, says Marc Goldman, director of strategy for The Blue Book Building & Construction Network in Jefferson Valley, N.Y., a member of multiple AGC chapters.

“Buildings will come together like Legos,” Goldman adds. “The building industry is learning from the expertise of manufacturing.”

Consigli Construction Co., in Milford, Mass., a member of AGC of Massachusetts, has found that prefabrication allows it to put large pieces of work together before the building would traditionally be released, says Kimberley Maul, Lean coordinator at Consigli.

“It allows us to put people in a safer environment and minimize waste,” Maul adds. “We’re going to see a lot of it in the industry. A lot of people are doing it now, but in 2014, we are going to see more of it. It’s exciting for the industry.”

Warner also expects a fast growth of prefab. Hospitals, schools and other structures with repeatable rooms make good candidates for prefabrication. Optimally, prefab decisions should occur at the earliest possible stage, with multiple trades’ collaboration.

“We think it will go further, and a lot of construction will start looking like manufacturing and assembly,” Warner says.

To make that happen, contractors will need to plan and manage the logistics, such as finding warehouse space for assembly or using regional prefabrication shops, either run by contractors or companies with prefab expertise, and facilitating oversize transport of the finished product.

“It takes a tremendous amount of coordination, and right now the industry isn’t patient enough to allow the trades do that,” says Andrew Patron with FMI.

“Although it’s a great idea, and would increase quality and could reduce cost and make construction a little more predictable, it requires upfront buy in from everybody.”

Balfour Beatty Construction has successfully employed its offsite manufacturing initiative for hospital and data center projects and has found it improves quality and safety at less cost.

“This is something we expect will take over the industry in a similar fashion design-build did a couple of decades ago, where it will be normal and popular with the owners once the benefits are well recognized,” says Nancy Novak, national vice president/operations, Capability Center, at Balfour Beatty Construction, headquartered in Dallas, a member of multiple AGC chapters.

Many contractors have embraced Lean construction practices, to increase efficiencies and reduce waste in the process. Consigli employs Lean principles throughout its organization and is now applying the tools to the technology it uses, Maul says.

“We want to take a look at processes, understand where the value is and streamline that value,” Maul adds. “If it works great in the field and in manufacturing, we want to bring that in house and build a culture around Lean.”

Sundt has employed Lean for operations in the last eight years, and Hedlund says the company is now moving to the next level, building off its initial success to bring Lean to other parts of the company.

“There is a huge payoff,” Hedlund says. For those new to Lean, Maul recommends finding a mentor and joining a community of practice. AGC has education courses and is launching a Lean certification program due to increased demand for it.

“There is significant interest,” says David Stueckler, president/CEO Linbeck in Houston, a member of multiple AGC chapters, and chair of the AGC Lean Construction Steering Committee. “There’s a need for all of us to be more efficient and effective. Market pressure on margins and fees and [the need] to make a better work environment for employees are pushing the momentum.”

Some firms have begun combining Lean with integrated project delivery (IPD) and collaborative methods.

“Where we’ve seen the most benefit is when IPD is coupled with a Lean construction philosophy,” says Douglas Lee, regional preconstruction director at Brasfield & Gorrie in Birmingham, Ala., a member of multiple AGC chapters. “From the contractor’s perspective, this alignment helps ensure that we provide value, meet the client’s expectations, and identify best practices that can be shared with the entire team. Besides, the work is a lot more fun when everyone is going in the same direction.”

Linbeck also is combining Lean with IPD, because it has found less interest recently in standard contractual IPD.

Everyone from subcontractors to the owner engages in the Lean process. Participation requires a great deal of trust, and the individuals involved must be able to set aside bad habits and support the new team approach, Stueckler says.

”It’s about changing culture,” Stueckler adds. “Your profit is put in a common pool at risk. Everybody shares in one another’s pain or gain.”

In addition to IPD, Tocci is using highly collaborative project delivery, which is similar to IPD but with more conventional contractual agreements.

“As people collaborate more, we should be able to remove some infighting within the industry, and that will create efficiencies that translate to lower costs for contractors, architects and owners,” LaRosa says.

New technologies are affecting contractors in a number of ways. Many have made investments that will make their businesses more productive with less staff, Goldman reports.

“Change and innovation are becoming normal for our industry,” says Novak, adding one of the most significant trends is the increased use of BIM.

“You can tie together how we execute projects from cost accounting to quality programs to design management, document control and not have multiple tools to manage that,” Novak says. “It gives us more accuracy and predictability.”

Goldman expects BIM will become the standard work process for large and small firms, with more sophisticated users incorporating higher-end capabilities, such as tying the model to billing for earlier payment.

Already some firms are employing BIM for more than clash detection. Tocci uses BIM to model safety exposures and protection, improve installation sequence operations and identify opportunities for design optimization.

BIM is moving from the desktop to the field, putting models in the hands of people on-site with mobile devices, adds Andrew Deschenes, BIM manager for Consigli, which uses the model to monitor quality and safety and to track construction progress.

“A major trend in 2014 and ’15 is a huge improvement in the quality of close-out documents we provide to the owner, and the facilities management deliverable,” Deschenes says. “We can link all of the information to the model that an owner thinks is important to maintain the facility afterwards, an operating manual or as-built documents or training videos.”

The owner then will be able to scan a barcode with an iPad and pull the information up.

Modeling and digital plans also are occurring on the civil side of the industry and will continue to gain steam in 2014, suggests AGC President Paul Diederich, president of Industrial Builders in Fargo, N.D., a member of five AGC chapters. “That’s a giant leap forward in productivity eliminating the need to resurvey,” Diederich says.

Additionally, more companies are moving to the cloud and will continue to take advantages of the resulting efficiencies, LaRosa says.

“You are able to access your data from any device,” LaRosa says. “You can share data between entities on a project, and that increases collaboration, another trend that will see more activity.”

Cloud computing allows for seamless sharing of large files in any kind of format and offers the ability to complete significant work with limitless computing power, says Goldman, adding that people will expect things to happen immediately.

“Interoperability is becoming more and more expected,” Goldman adds. “Software developers and users are making information flow in ways folks only dreamed about.”

Goldman credited AGC with helping to make that happen. 2014 will see the introduction of agcXML, which will promote interconnectivity and smoother sharing of data and collaboration.

Also on the horizon, a new .BUILD Internet extension for domain names will pop up. Plan Bee in Santa Monica, Calif., has applied for the .BUILD generic top-level domain and is working with AGC on early adoption efforts. Companies with trademarked names should register them at trademarkclearinghouse.com to receive the first right to new names, says George Minardos, with Plan Bee. By February, other entities can start scooping up desirable names, such as MyCompany.BUILD.

Federal Moving Ahead for Progress in the 21st Century (MAP-21) funding for road construction will end in September. Landes expresses concern that without more funding, states will be limited to maintaining existing infrastructure. Capacity projects will have to wait.

“We have a big hill to climb in regard to enacting transportation infrastructure funding legislation,” Diederich says. “We need some bipartisan action. We’ve been crying for 20 years that the user fee has not changed.”

Vehicle miles traveled, with electronic devices monitoring and reporting how many miles a car is driven, offers a potential way to allow those who use the roads most to pay more and everyone, even those in electric vehicles, would pay their share, but Landes doubts most Americans want their driving tracked continuously.

“You are talking about a privacy issue,” Landes says. “I go with the concept, but how do you convince people?”

Meanwhile, governments are looking at alternatives, such as public-private partnerships (P3s). “If we fail to get funding coming through legislatures, private industry will step up and provide infrastructure opportunities where it makes economic sense,” Diederich says.

Hedlund reports more frequent design-build- finance projects moving forward, or at a minimum, with contractor gap funding. “If people aren’t educating themselves about how public-private partnerships work, they are moving backwards,” Landes says. The AGC puts on educational programs about P3s.

Hedlund indicates some local initiatives to rebuild infrastructure and rail are trending well, due to an increased demand to deliver goods by train.

“They are double tracking and upgrading track for higher concentration of use, and they put switching stations in to drop goods off to head north or whatever,” Hedlund says.

Additionally, passenger rail is happening across the country, from San Diego’s expansion to Orlando’s new light-rail system, and development is occurring near stations.

“Labor is going to be an issue in 2014,” LaRosa says. “During the last downturn, a lot of labor dropped out of the construction workforce. Most of those people are not coming back to construction. Finding and maintaining personnel will be an issue in 2014 and beyond until we get back to the old normal.”

Ron Kubitz, recruiting manager at Brayman Construction Corp., in Saxonburg, Pa., suggests that once transportation funding is secured, workforce shortages will exacerbate and smarter firms should begin hiring before that happens to lock in talent.

“There is a need to recruit new people into our industry,” adds Diederich, suggesting meaningful immigration reform as a potential solution that could happen this year. Additionally, increased activity by the nonprofit American Workforce Development Initiative (AWDI) may persuade young people to enter craft trades.

“They have had meaningful success in increasing the number of students interested in vocational education, and the pipeline is beginning to fill,” Diederich says. “I am encouraging chapters to implement AWDI in their states.”

Diederich adds that companies and chapters need to do a better job of educating people about meaningful careers in the industry, because of a shortage of skilled workers even in regions not recovering as quickly from the recession. He cautions against poaching from other contractors, saying that will only increase prices.

Kubitz has found high school vocational tech programs are on the rise in Pennsylvania and adjacent states.

Additionally, enrollments in civil engineering programs are up. “This is an industry that within the next three to five years will take off,” says Kubitz, who predicts a greater use of social media, videos and blogging to attract younger workers to individual companies and to the industry.

Bolen adds that in addition to recruiting good workers, contractors will need to work more efficiently, doing more with fewer people as the market heats up.

Prefabrication and modularization will facilitate that, says Andritsch, acknowledging VJS is being selective about the jobs it pursues to ensure it has the talent to complete them properly.

The workforce issue is not something contractors can solve on their own, with a half-million unfilled skilled labor jobs nationally, Patron says. FMI has worked with companies on professional development, particularly teaching superintendents, now in their late 50s, coaching and mentoring skills, because of the poor quality of the labor pool.

“We cannot find enough guys who are good, and [superintendents] are having to teach and run jobs,” Patron says. “They have to relearn and retool.”

Superintendents are feeling the heat and being squeezed, he adds.

“That is where the profits are made and lost,” Patron says. “A lot of general contractors and owners are asking to see, meet and interview the superintendents, and that’s a change. We are teaching them how to participate in meetings.”

Additionally, there is a great need for succession planning, Patron says.

“There’s a lack of pipeline [in construction management], and starting wages are starting to go up,” Hedlund says. “We need more. People are starting to look at business grads and industrial engineering.”

Some firms are offering sabbaticals, educational programs, and health programs as enticements to workers. Linbeck has a career development program and a health and wellness program.

Tocci has created an individual development program, which allows employees to grow laterally or vertically within the company’s goals. It pays for education, training and outside coaching, which helps with retention.

“The war for talent is on all of our minds,” Stueckler adds. “It’s a tough business, and we want to make it as positive a work environment as we can.”

Photo: The $800 million new Stanford University Medical Center in Stanford, Calif. is currently being built by McCarthy Building Companies, Inc., in a joint venture with Clark Construction Group. Rendering courtesy of McCarthy Building Companies, Inc.