Health care reform affects largest contractors

Contractors with 50 or more employees will have to provide health insurance under the health care reform law; those with fewer than 50 employees would be exempt.

While the requirement in the new health care reform law for employers to provide health insurance won’t apply to most contractors, the largest companies will have to provide insurance for their employees, the Journal of Commerce-Oregon reports. And they’ll be bidding on some projects against companies who don’t have to.

Sen. Jeff Merkley, D-Ore., had attached an amendment to the bill that would have required contractors with five or more employees and payrolls of more than $250,000 to provide health coverage. That amendment didn’t survive the reconciliation process between Senate and House versions of the bill.

As it stands, only companies with 50 or more employees will have to provide insurance. That applies mostly to the largest contractors. If the new law spurs companies below the 50-employee mark to drop their health care benefits, that could affect competition.

Brian Turmail, spokesman for the Associated General Contractors of America, said it’s hard to imagine droves of medium-to-large contractors dropping their health benefits because their larger competitors now can’t do the same in response. “That’s a bit of a red herring,” he said.

“If you cut benefits, you cut your ability to perform as a company,” Turmail said. “Everyone has the same construction equipment. There’s no secret front-end loader that’s going to beat out the competition.

“Where you’re going to compete is on the strength of your employees.”

Bart Eberwein, a vice president with Hoffman Construction, said the company wins jobs more on expertise than cost. “I’d like to think we compete on other things, complex projects that are like heart surgery in the middle of a busy campus,” he said.

Considering only health care costs misses the point, Eberwein said. The more the company spends on wellness, the less it has to spend on health insurance.

Programs ranging from smoking cessation to weight loss to blood-sugar monitoring help Hoffman keep insurance premiums low, Eberwein said. “It has already had a huge, huge, huge effect” on premiums, he said.

“Sometimes that means it just doesn’t go up when everyone else’s goes up in the double digits.”

While the Merkley amendment didn’t make the final health care reform bill, Merkley and union supporters still hope the concept will resurface in another bill. AFL-CIO President Richard Trumka said the organization will keep working to bring more contractors under the health-insurance requirement.

Tom Owens, spokesman with the AFL-CIO’s Building and Construction Trades Department, said he doesn’t know what the chances are of that happening. “There hasn’t been any discussion about how to proceed,” he said.

Owens stopped short of saying that reviving the Merkley amendment was a top priority. “We’re interested in seeing the issue revisited, but we don’t necessarily have a priority list.”

Julie Edwards, a spokeswoman for Merkley, said there’s no new stand-alone bill that does what the amendment would have, and it hasn’t been attached to another bill. She wouldn’t speculate on the chances of that happening.

“It’s really too soon to say,” she said.

Turmail said he doubts the Merkley amendment could pass as its own bill, especially after the controversy that arose after it was originally included in the health care bill. “I don’t have a sense that there’s any kind of base of support for this measure,” he said.

Click Here to view the Journal of Commerce-Oregon article.

NC to receive $159 million in federal housing aid

The Obama administration unveiled a $600 million financial aid package for five states, including North Carolina, that are plagued by high unemployment rates.

The News & Observer reported North Carolina is eligible to receive $159 million of the aid, which will go to housing agencies in states with counties where the unemployment rate is above 12 percent.

In addition to North Carolina, the other four receiving a piece of the $600 million are Ohio, Oregon, South Carolina and Rhode Island.

The money is intended to prevent foreclosures.

It comes on the heels of the Obama Administration pledging $1.5 billion in funding for states that have seen the biggest decline in housing prices: Arizona, California, Florida, Michigan and Nevada.

Click Here to view the News & Observer article.

Survey finds 'Measured Optimism' for construction industry recovery

The construction industry is signaling that industry conditions may begin to improve over the next 12 to 18 months, according to a survey in Engineering News-Record (ENR) magazine and on ENR.com, published by McGraw-Hill Construction. The ENR Construction Industry Confidence Index (CICI) for the first quarter of 2010 shows that construction and design firm executives are not confident that the industry recession will end in 2010, but a slow and steady recovery is expected into 2011.

The Q1-2010 CICI, which measures industry sentiment for market sectors and trends, is 34 on a scale of 100, where a value of 100 indicates an improving market and a value of 50 indicates a stable market. While still well-below an index of 50, the index shows a distinct improvement over last quarter (up three points from 31 in Q4-2009) and last year (up nine points from 25 in Q1-2009). The index is based on 705 responses to surveys sent to more than 2,000 domestic firms on ENR's lists of leading contractors and engineering firms.

When assessing the construction market, 68% of survey respondents say the current construction market is declining, 26% believe it had stabilized, and only 5% believe it is improving. However, survey respondents expect the picture to be different in 12 to 18 months, with 44% believing the construction market will be improving and another 44% believing it will have stabilized.

"ENR's CICI provides strong indicators for what is going on in the construction industry," said Janice L. Tuchman, editor-in-chief of Engineering News-Record. "What we are seeing is an optimistic outlook for a continued recovery. Of course it varies by sector, and there are clear winners and losers in today's market - the infrastructure, power and healthcare sectors remain strong, while there is less confidence in nonresidential building of offices, stores, hotels, and manufacturing - but overall, this year and next year, the industry will stabilize."

The CICI survey also asked participants to gauge changes in credit availability for financing projects, and found that securing financing continues to be a challenge. No respondents claimed that credit is much easier to obtain, and only 7.2% of respondents said it was somewhat easier to obtain. In contrast, 28.9% said it is much tougher to secure credit for project financing; 21.8% said that it is only somewhat tougher to obtain; and 42% said that credit availability is about the same.

Click Here to view the ENR Survey.

AGC leaders emphasize collaboration, 'being heard'

Engineering News-Record magazine said colaboration and "being heard" were the key themes at the Associated General Contractors of America convention in Orlando last week.

AGC has to be about “the industry, not about the politics,” said AGC’s new president, Ted Aadland, CEO of Aadland Evans Construction Inc., Portland, Ore. “We can’t afford to be a partisan organization. We need to work with elected officials in both parties on the issues.” Aadland said AGC is like “the sleeping giant”—members can “wake up” to influence those who make codes and regulations and reach out to other construction associations to “help the industry speak as one resounding voice.”

Collaborative activities like a coalition with the manufacturing and energy sectors were among the highlights called out by J. Doug Pruitt, chairman and CEO of Sundt Construction, Phoenix, as he looked back at his past year as AGC president. On March 17, AGC signed a partnership agreement with the Manufacturing Institute, an affiliate of the National Association of Manufacturers, to advocate for alternative pathways to graduation for the nation’s at-risk youth among other efforts. “We have to be loud and vocal,” Pruitt said.

The next generation of employees will expect companies to have environmentally friendly practices, said Jan Berman, president of MechoShade Systems Inc., New York City. In one of several panels addressing green issues, he noted that just as the Americans With Disabilities Act transformed from being an added factor to being integral in design and construction, so will Leadership in Energy and Environmental Design standards.

Scott Snelling, a bridge engineer with New York City-based Hardesty and Hanover, noted national efforts under way to create LEED-like rating systems for bridges and roads. Dominique Lueckenhoff, head of the Water Protection Division/Office of Watersheds for the Environmental Protection Agency’s Region 3, told attendees that the global market for environmental products and services is projected to double from $1.37 billion a year to $2.74 billion by 2020.

Click Here to view the ENR report.

NC lawmakers to look at allocation of road money

The Charlotte Observer reports a growing number of legislators want to rewrite the state's road funding formula to give more weight to traffic volume and congestion.

Many Charlotteans stuck in traffic snarls, such as the daily bottleneck on south Charlotte's still-unwidened stretch of Interstate 485, say they're getting shortchanged.

They insist that the city sends millions of dollars to the state capital and doesn't get enough in return for roads.

Mecklenburg, the state's most populous county, receives more money for road maintenance and construction than any other county.

But when spending is measured on a per-capita basis, according to N.C. Department of Transportation and census data analyzed by the Observer, Mecklenburg ranks 89th out of the state's 100 counties.

DOT spent an average $3,756 for each North Carolinian during the past 10 years, but $2,967 per person in Mecklenburg. That statewide average would have boosted Mecklenburg's share of DOT money since 2000 by 27 percent, or $721 million.

On April 6, a legislative transportation committee will hold a public hearing on whether the state should update its 21-year-old formula for apportioning most road construction money.

Mecklenburg and the state's other major urban areas have sought changes to the system for years. Now, a consensus for an overhaul seems to be building among urban lawmakers from both parties.

Over the past decade, Mecklenburg received 7.7 percent of the road funding. But it was home to 9.7 percent of the population last year.

N.C. Department of Transportation officials emphasize that transportation spending is not about matching dollars with head counts. It's about building a network that can move people and goods across the state.

The state has spent $1 billion on I-485 since 1989, DOT officials said, and more than $100 million in state funds for the city's light rail, emphasizing that transportation means more than paving roads.

The city also is counting on state dollars for roughly $75 million of the $300 million for a planned commuter rail line and, eventually, more than $250 million for light rail.

Charlotte Mayor Anthony Foxx said the city has received a disproportionate share of transit money, and applauded the administration of Gov. Bev Perdue for using a new funding mechanism, essentially installment payments to the contractor, to finish the I-485 loop.

"Things are moving in a much better direction," Foxx said, though he added that the state's urban areas historically have not gotten their due in road money.

The gripes of unfairness echo in the state's other large cities. Wake County, which includes Raleigh, ranked 90th in per capita spending over the past decade and got 7.5 percent of the road funding for 9.6 percent of the population.

"Road projects need to be built for roads that are used a lot," said Raleigh Mayor Charles Meeker. "Building four-lane roads where there are no people doesn't make sense."

Mecklenburg and the state's other major urban areas have argued for several years that the state's system of paying for roads shortchanges them. The list of critics has expanded to include members of both political parties whose comments, at least on this issue, are hard to tell apart.

"The No. 1 complaint we hear from citizens is congestion," said Rep. Becky Carney, a Charlotte Democrat and House Transportation Committee chair. "Why aren't we addressing that?"

Carney and Rep. Rick Killian, a Charlotte Republican are among those who want to rewrite the state's road funding formula, called the "equity formula," to give more weight to traffic volume and congestion.

The formula was created in 1989, under then-Gov. Jim Martin, a Charlotte-area Republican, with goals that included ensuring that nearly everyone in the state lives within 10 miles of a four-lane road, an intrastate system.

The formula cuts the state into seven districts and divides money among those districts. Half of the money is based on each district's population. A quarter of the funding is determined by the miles of unfinished road in each district needed to complete the four-lane intrastate system. And the last quarter is divided equally among the districts. Mecklenburg's district includes a dozen surrounding counties.

The equity formula does not affect urban loop funding. That is a competition among the state's largest cities. The equity formula has generated a competition between urban and rural areas.

Over the past decade, the county with the fewest people, Tyrrell, got the most road money per capita. Tyrrell, in Eastern North Carolina, had a population of 4,078 in 2009 and is best known as the last county that Outer Banks-bound travelers pass through before they get to Dare County's beaches.

Gaston County ranked 98th. It had 208,958 residents in 2009, including a healthy share of Charlotte commuters. Just ahead of Gaston was Union County, ranking 97th, with a population of 198,645.

Tyrrell County proportionally received so much money over the past decade in large part because of the expansion of U.S. 64, said Van Argabright, a top project manager at DOT. That project, though, mostly benefits other counties, he said.

"The primary reason you do that is to get people from Raleigh to the Outer Banks," Argabright said. Tyrrell's funding "is going to look distorted because of that. A lot of what they're getting is a statewide project...We try not to focus on the boundaries."

"The problem isn't with the money we get from the equity formula. The problem is the misallocation of the money we have. Fixing that would solve maybe all the congestion issues we have in these two cities."

State Sen. Clark Jenkins, an Edgecombe County Democrat, doesn't want to see the equity formula changed to take money away from rural areas. But he agrees that DOT needs to find new money to reduce traffic congestion in the cities.

"The bottom line is we need more money, and it should go into the congested areas," said Jenkins, vice chairman of the Senate Transportation Committee.

The other major proposal is to raise more money, most likely through taxes.

"It's that simple. We don't have enough money," said Allen Tate, chairman of the board and founder of Allen Tate Co., who heads the Charlotte Chamber's regional roads committee.

Several study groups have pushed proposals to raise revenue over the past decade, but lawmakers avoid pushing anything that remotely resembles a tax increase.

"If they want us to do more, provide a different level of service, we need to have a conversation about what it takes to make that happen," said Stephanie King, the transportation department's accounting director.

Like other urban leaders, Tate wants to see congestion factored into road funding, but he echoed state officials' emphasis on blurring the boundaries. The major traffic arteries in and out of Mecklenburg extend into neighboring counties, he said.

"Whatever we do can't stop at the county line," Tate said. "We have to take a regional approach to this."

Click Here to view the entire Charlotte Observer article.

Anyone who wants to speak or provide comments in writing for the Joint Legislative Transportation Oversight Committee April 6 meeting is invited to contact Bob Weiss of the legislatures's Fiscal research Division (bobw@ncleg.net or 919-733-4910) by March 31.

Business practices suffer during industry’s economic downturn

"The economic crisis has led to a crisis of values in the construction industry," American Subcontractors Association Executive Vice President E. Colette Nelson told participants at the annual convention of Women Construction Owners and Executives.

Nelson discussed how recent court cases, media reports and member reports to ASA indicate that inappropriate business practices such as slow or no pay, bid shopping and peddling, inappropriate termination for convenience, and misclassification of employees as independent contractors, are on the rise. Nelson pointed out that such illegal or unethical activities further erode the already difficult business environment in the construction industry.

"A well-managed, ethical contractor can compete legitimately with any competitor that is playing by the same rules," she said. "But an ethical contractor can find it inordinately difficult, if not impossible, to compete with a contractor that doesn't play by the rules established by the law and its contracts."

Nelson urged WCOE members to continue to work with ASA to promote ethical and equitable business practices, quality construction, a safe and healthy work environment, and integrity in the everyday business of construction.

AGC economist says construction industry not sharing in the recovery

AGC Chief Economist Kenneth Simonson (l) and Carolinas AGC Building Division Director Dave Simpson discuss the NC economy at the Annual Stte Construction Conference

Kenneth Simonson, Chief Economist for the Associated General Contractors, was the featured speaker at the 29th Annual State Construction Conference at the McKimmon Center in Raleigh this week.

The event, which attracted nearly 1,200 contractors, subcontractors, engineers, architects, landscape architects and representatives of state agencies, was presented by the State Construction Office (SCO) of the N.C. Department of Administration.

“The U.S. economy has turned the corner," Simpson remarked. "GNP was up 5.9% up from the third to the fourth quarter.”

“However the construction industry has not shared significantly in this recovery,” he noted. "Construction employment reported by the BLS fell in February compared to January 2009 in 314 metropolitan areas, was unchanged in 14 and climbed in nine. The inability of private developers to get credit is a major stumbling block for our industry."

Simonson sees residential construction starting to come back. Reed Construction Data reported that the value of nonresidential starts for the first two months of 2010 climbed 12% with building starts up 4% for the same period.

Simonson predicts public construction will hold its own throughout 2010 or may even increase by about 2%. Private nonresidential construction has fallen 20% since the beginning of the downturn. He predicts institutional construction will continue a its steep decline in 2010 and 2011.

Fortunately for the local construction industry, North Carolina has shown a steady population growth during the economic downturn.

Simonson predicts nonresidential construction will decline of 5% in 2010. Residential construction may go up 5 to 10 %. Total U.S. construction spending at the end of the year is predicted to be between -4% and +2%--a breakeven year at best.

NC individuals and firms honored at 29th Annual State Construction Conference

NCSU's Jack K. Colby recipient of 2010 Frank B. Turner Award


The Frank B. Turner Award was presented to a career state employee and Certificates of Merit were awarded to designers and contractors yesterday during the 29th Annual State Construction Conference at the McKimmon Center in Raleigh. Additionally, the Office for Historically Underutilized Businesses (HUB) presented four Good Faith Effort Awards to HUB leaders.

The event, which attracted nearly 1,200 contractors, subcontractors, engineers, architects, landscape architects and representatives of state agencies, was presented by the State Construction Office (SCO) of the N.C. Department of Administration.

The Turner Award was presented to Jack K. Colby, Assistant Vice Chancellor for Facility Operations at N.C. State University (NCSU). Given annually since 1983, it recognizes a state government employee for dedicated public service and outstanding professional contributions to the built environment.

The following designers and contractors received Certificates of Merit from the State Building Commission for outstanding achievement:

Designers
Pearce Brinkley Cease & Lee: Wake Technical Community College, Northern Wake Campus Building D

Stanford White, Inc.: UNC School of the Arts, Moore and Sanford Dormitory Sprinklers

Hipp + Best Architects: Brunswick Town, Fort Anderson Accessibility Project

LS3P Associates Architects: N.C. Department of Administration, Court of Appeals (Ruffin) Building Renovation

Little & Little Landscape Architects: N.C. Department of Administration, Capitol Square Site Improvements and Capitol East Entrance

Contractors

J.M. Thompson Company: Wake Technical Community College, Northern Wake Campus Building D

Metro Power, Inc.: East Carolina University, Health Science Campus Brody Generator Building Switchgear

American South General Contractors: Western Carolina University, Student Recreation Center

Cam-Ful Industries, Inc.: University of North Carolina School of the Arts, Moore and Sanford Sprinkler

Streamline, LLC: N.C. Department of Transportation, Newton Equipment Shop, Catawba County

Perry Bartsch Jr. Construction Company, Inc.: N.C. Department of Agriculture & Consumer Services, Arts and Crafts Building, WNC Agricultural. Center

Monteith Construction Corporation: Cape Fear Community College Cosmetology Building, North Campus

Lumina Builders, Inc.: Brunswick Town, Fort Anderson Accessibility Project

D.S. Simmons, Inc.: N.C. Department of Administration, Court of Appeals (Ruffin) Building Renovation

Paul Howard Construction Company: N.C. Department of Administration, Capitol Square Site Improvements and Capitol East Entrance

The HUB Office presented four Good Faith Effort Awards, a new honor introduced last year to recognize outstanding HUB leaders:

HUB Advocate: Garland Burton, former HUB director for UNC-Chapel Hill, now Director of Diversity Programs at Wake Forest University and a founding member of the United Minority Contractors of North Carolina, in recognition of his outstanding contributions and support of historically underutilized businesses.

HUB Firm: LSG, Inc. of Raleigh, Wayne Branch, president, specializing in reprographic printing services in recognition of its outstanding achievements as a historically underutilized business.

Professional Service/Construction Industry: Rogers/Russell, a joint venture Construction Management association recognized for its outstanding efforts for HUB Outreach and Utilization.

Owner/Agency: N.C. State University for its commitment to the HUB Program and Utilization of HUB firms.

February construction starts drop led by institutional projects

by Jim Haughey, RCD Chief Economist

Reed Construction Data (RCD) announced that the year-to-date value of construction starts through February 2010, excluding residential contracts, totaled $43.8 billion, 12.4% more than in the same months of 2009.

However February starts were 15.5% lower than in January. Both months suffered from unseasonably poor construction weather, but February’s weather was worse. The February decline is about two thirds due to the seasonal decline based on historical tracking, with possibly a few percentage points more due the unseasonably poor weather in this year’s period. Starts were about 6% higher in the latest month versus the same month a year ago.

The value of construction starts each month is summarized from RCD’s database of all active construction projects in the United States, excluding single-family homes. Missing project values are estimated using RSMeans’ building cost models.

The new data does not change the expected starts trend in 2010. The total value of starts is expected to be steady to slightly down in the next few months and then to begin rising slowly later in the year. February heavy project starts were the lowest in almost a year but essentially unchanged since January, after the usual seasonal adjustment. Nonetheless, this is encouraging since the month-to-month impact of the stimulus plan on heavy construction is ebbing. A small share of the February decline may be due to the several-day suspension of federal highway funding in February and the storm-related closing for several days of the federal office that releases funds.

February non-residential building starts fell slightly more than the usual seasonal decline. Excluding the nearly half-a-billion-dollar pickup in manufacturing starts after an unusually weak January, the non-residential starts total clearly weakened. Offices were an exception. Office starts jumped 29%, with the dollar gain equally divided between private and government offices.

Private office starts recorded a 16-month high. The surge in office starts is consistent with recent reports of better than expected trends in office occupancy and rental rates as well as office leasing trends. Education starts fell 30% back to the spring 2009 level. Possibly this fall was random, but it may also reflect the progressive negative impact of weakening state and local government budget positions.

Click Here if you would like to download the Reed Construction Data's Value of United States Construction Starts — February 2010 as a PDF file.

Merkley amendment out of House health 'corrections' bill

Sen. Jeff Merkley's amendment to the federal health care reform bill has been dropped.

An amendment to the federal health care bill that was geared toward contractors was dropped from final bill, according to Julie Edwards, a representative from Sen. Jeff Merkley’s office.

The Daily Journal of Commerce Oregon reports the $940-billion health care “corrections” bill that House Democrats passed last night does not include the Merkley amendment that has stirred controversy in the construction industry.

The language sponsored by Sen. Jeff Merkley (D-Ore.) in the Senate-passed bill would have required construction firms with six or more employees and a payroll of $250,000 or more to provide health care insurance to their employees or pay a penalty per employee. The measure's threshold for small businesses in all other industries was 50 employees.

The “fix” in the reconciliation package means that all small businesses would be treated equally, and construction firms would not be singled out.

Click Here to read the Daily Journal of Commerce Oregon article.

The Hill reports that after Congress finishes up the healthcare legislation, labor leaders have promised to push for the Merkley admendment again in a future bill.

According to a union official, the provision was removed last week because it could not be passed through the Senate via the reconciliation process. Instead, labor groups have secured a commitment from the White House that the administration will try to move the provision through another legislative vehicle once the healthcare bill is passed, said the official.

That will likely reignite heavy lobbying against it on Capitol Hill by business associations like the National Association of Home Builders and the Associated General Contractors of America. Contractors pushed against the provision, arguing it unfairly targeted construction companies.

Click Here to view the Hill article.

Obama signs jobs bill, with highway-transit extension

President Obama has signed a jobs measure that will extend the federal highway and transit programs through Dec. 31, add billions of dollars to the Highway Trust Fund and restore highway funding to its 2009 level, Engineering News-Record reports.

Obama signed the legislation--the Hiring Incentives to Restore Employment (HIRE) Act-yesterday. Just before signing the bill, the President said that the legislation "will encourage businesses to hire and help put Americans back to work."

He also said that the measure "will maintain crucial investments in our roads and our bridges as we head into the spring and summer months, when construction jobs are picking up."

The transportation provisions are perhaps the most important items for construction in the $17.6-billion jobs package.

Specifically, the new law will continue surface-transportation programs through Dec. 31 and also transfer $19.5 billion to the Highway Trust Fund from the general fund, more than enough to avert a $9-billion shortfall expected to appear in the trust fund this summer.

The $19.5-billion trust fund infusion isn't counted in the measure's $17.6-billion cost estimate, because the highway aid provision is categorized as a transfer, not an increase, in spending.

The HIRE Act also restores highway obligations to their 2009 levels, by canceling previous obligation-authority rescissions. Since Oct. 1, those cuts had reduced total federal road obligations by about $1 billion a month, compared with 2009 amounts.

Construction also should benefit from the jobs package's expansion of the federally subsidized Build America Bonds program.

Under the package, businesses that hire anyone who has been out of work for at least 60 days would be exempt from paying the 6.2 percent Social Security payroll tax on that employee through December. The government would reimburse the Social Security trust fund for the lost revenue.

Employers would get an additional $1,000 credit for each new worker remaining on the job for a full year.

The package also extends a tax break for small businesses that buy new equipment and expands an initiative that helps state and local government pay for transportation and infrastructure projects.

Click Here to view the ENR report.

Forecast: NC economy may finally grow

North Carolina's economy could grow this year, making 2010 the first of growth following two years of decline and job loss, one economist predicted in a
Charlotte Observer article.

Speaking uptown at his regular quarterly forecast for the state, UNC Charlotte economist John Connaughton said he expects the N.C. economy to increase by 3.5 percent, compared with declines of 2.8 percent in 2009 and a less-than-1-percent drop in 2008.

He also offered hope for N.C. job-seekers, saying he expected companies to add more than 36,000 net jobs this year, with the biggest gains occurring in wholesale trade, construction and services. The state jobless rate hit a record 11.1 percent in January.

"Once job growth begins, it will be very slow. It's likely to take several years for the state's economy to replace the almost 250,000 jobs lost over the last two years of recession," Connaughton told several dozen local businesspeople who turned out to hear his predictions.

Seven of the state's eleven economic sectors will grow this year, he said. The fastest-growing industries, which he estimates will increase by more than 7 percent, are construction and services. He predicts finance, insurance and real estate industries will grow 5.2 percent, with government and retail trade to rise by about 4 percent.

The state's immediate economic future, however, remains uncertain.

"The question now is, how strong and sustained will this recovery be?" Connaughton said. "I continue to see mixed signals concerning the strength of the recovery, particularly in the financial sector."

Click Here to view the Charlotte Observer article.

Growing economy absorbs surplus building space

Jim Haughey, Reed Construction Data Chief Economist, suggests contractors should shift their marketing focus from Washington to the private economy. Stimulus funds will keep flowing for several more years but are becoming a progressively less significant part of new contract opportunities. The probability of additional stimulus appropriations is now quite low. The president and his congressional allies seldom use the word stimulus anymore for fear of reminding people of the hundreds of billions of dollars hastily spend on projects that make bureaucrats smile and taxpayers enraged.

The Reed Construction Data (RCD) economist says public construction spending is now in a year long period of decline as the ebbing stimulus program is being overwhelmed by collapsing state and local government budgets. As expected, the stimulus plan – that is the shovel ready and state government budget subsidy parts of the plan – advanced the start of the economic recovery by several months last year. But most of the burden of sustaining the recovery, says Haughey, will fall, as always, on the self-correcting, cyclical processes in the private economy.

This is mostly the rebalancing of inventory and assets which occurs largely through huge price adjustments. The evidence is building that this process is well underway.
The latest report on wholesale trade, usually an obscure report, provides the latest evidence that these private economy cyclical adjustments have put major parts of the private economy in a sustainable expansion mode that is adding to demand for building space and facility capacity.

Wholesale inventories fell in January for the second month. But this is a different type of inventory cut than the ones most industries have been experiencing for the last eighteen months. These inventory cuts followed four months of substantial inventory gains and reduced the wholesale inventory/sales ratio to a record low level.

Wholesalers did not want to cut their already lean inventory in the last two months. They were surprised by stronger sales to retailers and manufacturers than they expected. And they were unable to get additional stock quickly enough from their suppliers. Wholesalers will be boosting their orders to their suppliers in the
next few months to augment their lean inventories and avoid losing sales for lack of stock. Some manufacturers are now in the same lean inventory position.

Most of the rest will be within a few months. Some retail sectors now have lean inventory. Inventory has returned to the normal range in most other retail sectors. Inventory restocking will be a major contributor to GDP growth during the rest of 2010. It is this turnabout that will quickly absorb the remaining surplus of building space and facility capacity.

Click Here to view the RCD economic trends analysis.

30 contracts totaling nearly $166M awarded for NC highway and rail projects

NC Gov. Bev Perdue announced that 30 contracts totaling $165.9 million have been awarded for highway and rail projects across the state, including eight projects funded through the American Recovery and Reinvestment Act. The NCDOT awarded the contracts to the lowest bidders, as required by state law. See a list of the projects Here.

“These projects will provide much-needed work for people across North Carolina,” Perdue said. “Not only will they stimulate the economy by putting people to work, they will have a long-term impact on commerce by improving critical transportation infrastructure.”

According to the Federal Highway Administration, every $1 million spent on transportation creates 30 jobs, and according to the construction industry, every dollar invested in transportation generates $6 in economic impact.

The eight recovery projects are located in Anson, Brunswick, Buncombe, Catawba, Clay, Dare, Jackson and Stanly counties.

The 22 other projects are located in Anson, Ashe, Avery, Beaufort, Bertie, Brunswick, Catawba, Forsyth, Graham, Granville, Greene, Guilford, Haywood, Iredell, Jackson, Lenoir, Rowan, Scotland, Swain, Union, Watauga, Wayne, Wilson and Vance counties.

The bids received on all 30 projects advertised came in 10.5 percent, or about $19.5 million, below NCDOT estimates.

For more information about funding for infrastructure improvements in North Carolina, as well as other NCDOT projects and activities, visit www.ncdot.gov.

NC construction contracts: 19% gain in January

Led by strong gains in both the residential and nonbuilding sectors, the value of new North Carolina contracts signed in January for future construction jumped by 19% overall, compared to the same period of a year ago, according to McGraw-Hill Construction. The value of the state’s January construction contracts was nearly $1.1 billion.

The nonbuilding category, which includes infrastructure projects, showed the biggest monthly gain, jumping 97% compared to the same period of a year ago with $218.9 million in new contracts. North Carolina’s residential sector also showed strong signs of life, improving by 30% compared to last January for a nearly $436.2-million total. On the negative side, the value of new nonresidential contracts fell 9% to total approximately $398 million for the month.

For McGraw-Hill Construction report click Here.

NC sees double-digit drop in construction jobs

The construction workforce was smaller in every state and the District of Columbia in January 2010 than it was just 12 months earlier, according to a new analysis of federal data released today by the Associated General Contractors of America. The data indicated that North Carolina is ranked twelth in the percentage decline in construction-related employmment over the past 12 months - a decline of 17.7%. The state lost 37,300 construction jobs in that period.

“Construction employment is dropping everywhere and plummeting almost everywhere,” reports Ken Simonson, the AGC's chief economist. “Looking at this data, it is quite clear that the construction industry has yet to hit bottom.”

Simonson noted that California lost more construction jobs, 128,700, while North Dakota lost the least jobs, 200, over the past twelve months. The five states with the largest percentage decline in employment were Nevada (29.9 percent); Arizona (26 percent); Colorado (22.2 percent); Idaho (21 percent); and Florida (20.4 percent). Meanwhile, North Dakota (1 percent); Nebraska (4.1 percent); Alaska (4.2 percent); South Dakota (5.9 percent); and Arkansas (6.2 percent) experienced the smallest decline in construction employment.

Even the monthly employment changes reflect the tough construction conditions, said Simonson, noting that 31 states lost construction jobs between December and January. North Carolina lost 5,000 construction jobs in January - a 2.8% drop. The economist said the January data was affected by unseasonable weather conditions that also are likely to affect February’s state employment figures.

Association officials cited the new state employment data in urging the Senate to pass a ten month extension to the nation’s surface transportation program and for the administration to accelerate stimulus-funded construction projects. “As privately-funded construction activity continues to decline, federal investments in infrastructure are often the difference between a job and unemployment for what’s left of the industry.”

View the state-by-state employment data HERE.

Davis-Bacon Act impacts ARRA projects

One of our favorite blogs in the construction law world is
Green Building Law Update. This blog discusses the application of the Davis-Bacon Act (DBA) to ARRA (American Recovery and Reinvestment Act) projects.

If you are working on a construction project funded by the American Recovery and Reinvestment Act (or you have any hint that you are), you need to be aware of your responsibility to pay Davis-Bacon wages.

Section 1606 of the American Recovery and Reinvestment Act (ARRA) sets out the Davis-Bacon wage requirements:

"Notwithstanding any other provision of law and in a manner consistent with other provisions in this Act, all laborers and mechanics employed by contractors and sub contractors on projects funded directly by or assisted in whole or in part by and through the Federal Government pursuant to this Act shall be paid wages at rates not less than those prevailing on projects of a character similar in the locality as determined by the Secretary of Labor in accordance with subchapter IV of chapter 31 of title 40, United States Code."

The Department of Labor (DOL) has broadly interpreted Section 1606 (pdf) of American Recovery and Reinvestment Act (ARRA):

"Section 1606 of ARRA plainly indicates that the Davis-Bacon prevailing wage requirement broadly applies to ARRA-appropriated construction projects. . . . [The ARRA] also extends the prevailing wage requirements to projects 'assisted in whole or in part by and through the Federal Government pursuant to this Act' thus encompassing any assistance provided for ARRA projects through grants, loans, guarantees, and insurance."

In short, if any ARRA dollars are funding your construction project, Davis-Bacon wages are required (barring very limited exceptions). If you are working on a construction project in 2010, particularly one funded by a governmental entity, it is important that you ask if the project is being funded in any amount by ARRA funds. If ARRA funds find their way into your project and you have not accounted for Davis-Bacon wage requirements, a change order may be necessary.

Click Here to view the complete article.

Hiring may improve slightly, survey says

Local job-hunting prospects are expected to thaw modestly in the second quarter, according to the latest survey of Winston-Salem area employers by Manpower Inc. However, local employment officials expect most employers to bring on more temporary help than permanent hires, reports the Winston-Salem Journal.

The survey, released on March 9th, found that 18 percent of employers in the Winston-Salem metropolitan statistical area plan to increase their work force. The MSA consists of Davie, Forsyth, Stokes and Yadkin counties.

That's up from a 7 percent projection in the first quarter and 12 percent in the second quarter of 2009.

Eight percent of employers said they expect to reduce their staffing during the quarter.

"Many companies continue to order temporary placements because it helps reduce their costs," said Carol Wooten, a staffing specialist for the Manpower office in Winston-Salem.

"There are more who are project-specific with their hiring, letting the temporary help go when the assignment is over, and requesting the same help when they have the next project."

Listed as promising industry sectors for local job-seekers were high-tech manufacturing, construction, wholesale and retail trade, professional and business services, and leisure and hospitality.

The slightly improved job outlook comes at a time when the unemployment rate for the Triad ended 2009 moving closer to setting another modern-day record.

Some economists said that it may be a matter of when -- and not if -- the Triad rate exceeds at least the 41-year high of 11.7 percent set last June. It was 11.3 percent in December.

The January rate will be released by the N.C. Employment Security Commission on March 19.

The commission said that unemployment rates before 1976 were not seasonally adjusted, so they are not comparable to data published since then.

Economists and employment officials have said for months that any incremental declines in the Triad jobless rate have had more to do with people dropping out of the work force than from significant job creation.

Some economists have said that if the underemployed -- those working in jobs below their skill level for the sake of earning a paycheck, the stay-at-home parent, the retiree and the discouraged -- are factored into the jobless rate, it could be as much as 2.5 percentage points higher.

The Winston-Salem MSA and Raleigh-Cary MSA had the highest level of employer interest in hiring of the state's five largest metro areas, both at 18%. By comparison, the survey found that 11 percent of the employers in the Charlotte-Gastonia-Concord MSA plan to hire new staff. See the chart below for the survey results in other NC metro areas.

The Manpower data is consistent with the prospects of a sluggish, potentially "jobless" recovery, said John Quinterno, a principal at South by North Strategies Ltd., a research company focused on economic and social policy.

"Employment conditions have stabilized but ... remain too weak to put much of a dent in joblessness," Quinterno said.

Click Here to view the complete Winston-Salem Journal article.


NC Employer Hiring Plans for the Second Quarter
(Rise - No change - Fall - Don't know)

Charlotte-Gastonia-Concord: 11% 81% 3% 5%

Durham 17% 73% 7% 3%

Greensboro-High Point 14% 77% 6% 3%

Hickory-Lenoir-Morganton 13% 74% 8% 5%

Raleigh-Cary 18% 78% 2% 2%

Winston-Salem 18% 69% 8% 5%

Women in Construction Week - March 7-13

Women in Construction Week is being celebrated March 7-13. WIC Week provides a unified time for more than 5,500 members of the National Association of Women in Construction (NAWIC) to raise awareness of the opportunities the construction industry holds for potential employees and to highlight women as a visible, growing force in the industry.

Every member is encouraged to participate in community projects, professional training, networking, mentoring and relationship building events set up by local chapters to encourage the continued growth of the construction industry.

The Piedmont Chapter recently held a clean-up day at Camp New Hope in West Jefferson. Camp New Hope is a privately owned, nonprofit, no-charge facility for families who have children with life-threatening medical conditions. The chapter will be hosting a community work-day event this Saturday at the Level Cross Athletic Association fields.

The Durham Chapter provided electrical and drafting supplies for the students and teachers at the Construction and Architectural Design Academy. The Durham Chapter and the Raleigh Chapter held Block Kids Contests. The elementary school children had a great time building their projects which had to relate to the construction industry. The Raleigh Chapter is also conducting CIT review classes to help members prepare for the CIT test.

The Charlotte Chapter is hosting a charity golf tournament and community benefits for the year. The Greater Greenville Chapter is busy working in the community and at Eastern Carolina University.

NAWIC has NC chapters in Asheville, Charlotte, Durham, Fayetteville, Greater Greenville, Piedmont and Raleigh.

To learn more about NAWIC, visit www.nawic.org.

Construction unemployment rate hits 27.1 percent

The construction unemployment rate jumped to 27.1 percent and construction employment dropped to a 14-year low as another 64,000 construction workers lost jobs in February, according to federal employment figures released last week.

Associated General Contractor or America (AGC) reports the economy would have added jobs had it not been for the declines in construction employment for the third time in four months. “While the broader economy may be recovering, the construction industry continues to decline at an alarming rate,” said Ken Simonson, the association’s chief economist.

Simonson noted that industry’s job losses in February were consistent with the prior six months and not mainly attributable to exceptionally bad weather. He added that construction unemployment is at the highest level recorded since the federal government began making the data available in 1976. And he noted that nonresidential construction experienced significantly more job losses than the residential sector in February, 53,500 jobs lost versus 10,600.

The construction economist noted that job losses appeared widespread across construction sectors, with nonresidential specialty trade contractors experiencing the largest monthly decline of 1.7 percent. He noted that even heavy and civil engineering construction, the sector most likely to be boosted by stimulus funded projects, experienced a 1.1 percent monthly employment decline.

“The industry has gone from being a symptom of our economic problems to a victim of them,” said Stephen E. Sandherr, the association’s chief executive officer. He noted that while the current Jobs Bill prevents declines in federal highway funding, it does little to boost overall infrastructure investments. “Until we see meaningful increases in demand for new infrastructure and private sector construction projects, our economy will continue to suffer.”

Click Here to view the AGC news release.

NCDOT proposes new method for funding state projects

The North Carolina Department of Transportation is taking steps to change how it decides which projects to fund for the state.

The department released lists that prioritize nearly 2,000 projects, as well as the data used to create the rankings. Information included concrete factors such as pavement condition, traffic congestion levels and crash rates.

"This new approach to project selection shows that we're dedicated to taking old-fashioned politics out of our decision-making process," Transportation Secretary Gene Conti said. "By basing our choices on proven facts, we ensure that our limited funding is used wisely to meet North Carolina's most pressing transportation needs."

The new project selection method is aimed at allowing NCDOT to deliver the projects in its work plan on time and on budget. Under the previous process, only 60 percent of projects were started and completed as scheduled. With the new approach, the goal is to increase that rate to 95 percent.

By relying on input from local transportation organizations, NCDOT looked at more than 1,100 potential highway construction projects across the state. Each project was given one score, based on a set formula.

The projects with the highest scores were placed at the top of the priority list.

The department also evaluated 900 non-highway projects, which include public transportation, ferries, rail, aviation, and bicycle and pedestrian transportation. NCDOT worked with local officials to prioritize these projects based on need.

According to the NCDOT, the department's needs hit $54 billion, but it has only $10.5 billion in available revenue to spend. After applying constraints, NCDOT will use the results to generate a new list, called the Draft State Transportation Improvement Program, which will show the projects NCDOT can afford to fund from 2015-2020.

The Draft STIP will be part of the department's 10-year work program. The N.C. Board of Transportation is expected to adopt it in June.

Click Here to view the NCDOT news release.

NAHB commends proposed energy efficiency incentives

Home energy efficiency incentives proposed by President Barack Obama will create much-needed jobs and help make America more energy independent, according to the National Association of Home Builders (NAHB).

Speaking Tuesday in Savannah, Ga., President Obama outlined a $6 billion proposal to provide cash rebates to home owners who make energy-saving home improvements.

He said construction companies, home improvement stores, suppliers and manufacturers of insulation products would benefit from the program.

“This has the potential to be a real shot in the arm for the home building industry,” said NAHB Chairman Bob Jones, a builder and developer in Bloomfield Hills, Mich. “It will help put America back to work and it will help families save on monthly energy bills.”

NAHB economists estimate that every $1 billion in remodeling and home improvement activity generates 11,000 jobs, $527 million in wages and salaries, and $300 million in business income.

Administration officials estimate that up to four million households could benefit from the program, officially known as Homestar, but dubbed "Cash for Caulkers" by many in Congress and the media.

“Making the existing housing stock more energy efficient is one of the most effective ways to achieve national energy conservation goals,” Jones added. “In the long run this can be an important step in reducing the nation’s dependence on foreign energy supplies.”

A program managed by the Builders Association of Minnesota (BAM) could serve as a model for the president’s proposed initiative, Jones said. That program has served as the conduit for federal stimulus program funds provided to the state for its energy-efficiency programs. The association has trained 1,000 remodelers and other residential contractors and funneled the money to 1,400 Minnesota home owners to help them make needed improvements.

Minnesota home owners got extra incentives for choosing projects like attic insulation, which some consumers don’t do because it’s something that’s not immediately visible, but when combined with incentives can bring a payback on utility bills within a year or two, depending on the climate.

“The president and Congress should look to the Minnesota program as an excellent example of how the proposal could work nationally,” Jones said.

While NAHB supports the president’s residential retrofit initiative, there are concerns about some of the implementing details as the program has been proposed in various legislative drafts.

“For this effort to be successful, the opportunities must be equally accessible to everyone,” Jones said. “We need to make sure that Congress does not put up barriers that would keep this program from reaching its full potential.”

Click Here to view the NAHB news release.

ABC unveils jobs proposal for the construction industry

The Associated Builders and Contractors (ABC) unveiled its 2010 Job Creation Proposal, a wide-ranging package of recommendations that will help to stimulate the construction industry and put Americans back to work.

"We believe these measures are a much-needed first step to get this nation’s construction industry moving again,” said ABC President and CEO Kirk Pickerel. “With construction in this country nearly at a standstill and the industry unemployment rate at a staggering 24.7 percent – more than twice the national average – it is imperative for Congress to enact meaningful job creation legislation."

In order to kick-start the lagging economy and put the men and women of the construction industry back to work, ABC recommends the following:

--Eliminating uncertainty in the business environment by calling on Congress and the administration to focus on free-enterprise initiatives and open competition instead of anti-business legislative and regulatory proposals

--Increasing access to capital for new construction projects and viable, low-risk projects/contracts that simply need funding in order for work to commence

--Providing meaningful tax relief and reducing the tax burden on hard-working Americans and small businesses

--Enacting a national comprehensive energy plan that includes new construction and upgrades to the nation’s insufficient and crumbling infrastructure

--Allowing the entire construction industry workforce to participate on federally funded or federally assisted projects

--Supporting construction training programs that will attract new skilled workers.

"We are all facing unprecedented economic challenges, and ABC members, both large and small construction firms, are eager to stimulate growth, spur job creation and get back to building America. Implementation of ABC’s recommendations will help to jump start the construction industry during this economic downturn,” said Pickerel.

To read the ABC 2010 Job Creation Proposal, click Here.

Significant drop in architectural billings

Beginning its third year of negative conditions, the Architecture Billings Index (ABI) had a drop of almost three points in January. As a leading economic indicator of construction activity, the ABI reflects the approximate nine to twelve month lag time between architecture billings and construction spending.

The American Institute of Architects (AIA) reported the January ABI rating was 42.5, down sharply from a revised reading of 45.4 in December. This score indicates a continued decline in demand for design services (any score above 50 indicates an increase in billings). The new projects inquiry score was 52.5, down more than seven points.

“Projects are being delayed or cancelled because lending institutions are placing unusually stringent equity requirements on new developments. This is even happening to financially sound companies with strong credit ratings,” said AIA Chief Economist Kermit Baker, PhD, Hon. AIA. “This serious situation is being compounded by a skittish bond market, decreased tax revenues for publicly financed projects and declining property values – all which serve as deterrents for construction activity.

Until these factors are resolved, the design and construction industry -- which accounts for roughly 10 percent of GDP and is facing unemployment figures in excess of 20 percent -- will continue to face deteriorating market conditions.”

Key January ABI highlights:

◦Regional averages: Midwest (48.0), Northeast (45.7), South (41.32), West (40.5)
◦Sector index breakdown: multi-family residential (50.1), commercial / industrial (44.9), institutional (43.1), mixed practice (40.3)
◦Project inquiries index: 52.5.

Click Here to view the AIA news release.

Raleigh-Cary and Charlotte frontrunners on 20 Healthiest Housing Markets for 2010 list

Which housing markets are the best bets to recover first?

The Builder Market Health Index, compiled by Hanley Wood Market Intelligence, predicted four NC metro areas will be among the frontrunners on their list of the Top 20 Healthiest Housing Markets in the Country for 2010.

Housing economists have long held that the housing rebound, when it comes, will be uneven. The markets that benefit first will be the ones with the strongest core dynamics; places where house prices never got out of hand, cities where a diverse and progressive employment base drives job creation, towns that continue to draw population despite the economic recession.

Many major cities along the Mid-Atlantic seaboard continue to benefit from a strong influx of people drawn by a comfortable way of life, affordable housing, and growing employment prospects. Not surprisingly, the Builders Market Health Index includes several NC metro areas: # 2 Raleigh-Cary; #3 Charlotte-Gasatonia-Concord; #9 Durham-Chapel Hill and #17 Wilmington.

Markets having within their borders a state capital and a big university along with a diversified economy--dominate the list of hottest markets. A strong base of government employment, whether it be from the state or the military, has helped stabilize some markets through the housing recession. In many cases, the government is the biggest employer among the 20 hotest markets.

Hanley Wood Market Intelligence, which took into consideration forecasts from Moody's Economy.com and other sources, is looking for several of these healthiest markets to break out this year. A few of them witnessed dramatic increases in building permits pulled in the fourth quarter of last year, momentum that is expected to carry over into 2010. Several of the markets on this list are poised for double-digit growth.

Click Here to view the top 20 healthiest housing markets in the country.