Friday, 30 July 2010

OSHA issues crane safety rules

The Labor Dept.'s Occupational Safety and Health Administration's (OSHA) sweeping new rule aimed at reducing deaths and injuries involving construction cranes, was reported this week by ENR.com.

OSHA says that the rule, released July 28, will affect about 267,000 construction and crane rental companies and certification organizations that together employ about 4.8 million workers.

The 1,070-page revised standard for Cranes and Derricks in Construction replaces a 1971 regulation and is "long overdue," says Labor Secretary Hilda Solis.

Most provisions of the new rule will take effect Nov. 8. One key provision, a new requirement that construction-crane operators must be certified, will become effective in 2014.

Eddie Buckner, CEO of the Buckner Companies, Graham, said the North Carolina-OSHA crane safety reulations which took effect October 2009, "almost mirror the new Federal regs." One of the differences, Buckner explained, "is that North Carolina only allows two years before operators are required to be certified. The feds allow four years."

"States, like ours that have created their own plans will be allowed to keep them as long as the state plans are at least as stringent as the fed plan," Buckner added.

Crane operators will be required to be certified for the type of equipment they are using. Other crane-related workers, including riggers, will have to be qualified.

The regulation includes new mandates for working around power lines. For example, the rule includes provisions dealing with synthetic slings. The new regulation requires synthetic slings to be used in accordance with manufacturers' instructions, during assembly and disassembly. Another new requirement in the rule is that tower-crane parts will have to be inspected before the crane is erected.

The rule has been long in the works. In 2003, OSHA assembled a advisory committee composed of 23 crane specialists, including representatives from various parts of the industry and from labor unions. Buckner Companies President Doug Buckner and Safefty & Risk Manager Chip Pocock served on the advisory committee.

That group produced a consensus on crane regulatory provisions in July 2004. But a formal proposed rule didn't come out until October 2008 and now, some 21 months after that, the final rule is out.

Click Here to view the OSHA revised standard for cranes and derricks in construction.

Thursday, 29 July 2010

Associations agree to work together to improve diversity in NC construction industry

In an effort to improve diversity and promote growth throughout North Carolina's construction industry, Carolinas AGC (CAGC) and the United Minority Contractors of North Carolina (UMCNC) have signed a Memo of Understanding. The signing, which took place July 24 at the Carolinas AGC Building/Utility/Specialty-Supplier Divisions Meeting, capped months of discussions between the groups and provides a win-win outcome for the entire construction industry.

Under the agreement, the two groups will continue working together to develop strategies for building minority contractor capacity in all aspects of construction, and develop strategies that facilitate relationship building and enhance opportunities for inclusion on construction projects. This is a win-win situation because it will help majority contractors meet Historically Underutilized Business (HUB) goals and grow small, emerging businesses.

"UMCNC is always looking for ways to bring more value to our members, project owners and other potential partners. Working closely with CAGC to leverage resources that are becoming more and more limited in this tough economy makes perfect sense. We're optimistic that our collaboration will create a win-win situation for the members of both organizations," said UMCNC's President Curtis Wynn of Roanoke Electric and co-signer of the agreement.

CAGC's Chair of the Board Mike Long, who is with Taylor & Murphy Construction Company, added: "This agreement documents CAGC's and UMCNC's commitment to partnering, and I'm honored to sign on behalf of CAGC."

CAGC's President and CEO Cynthia Mills, who was also involved in the strategic meetings, added: "Our industry is stronger when it is inclusive. We're looking forward to creating a dynamic partnership that will be of mutual benefit to our organizations and the construction industry in North Carolina."

Click Here to view the CAGC-UMCNC announcement.

Commercial construction spending improving; institutional spending worsening

Nearly half of the commercial market drivers are now positive or neutral,Reed Construction Data economist Jim Haughey reported last week. However, he adds, commercial construction spending is still slipping slowly although starts may have stabilized.

Retail, office and hotel starts all increased substantially in June. These developer financed projects that are built for lease entered the recession early and will begin to recover first. Other commercial sectors, such as stadiums and laboratories, recorded June declines in starts. The recession reached these sectors later so a later recovery is expected. Their late position in the business cycle is due to their specialized use and often a public role in their financing.

Most of the decline is now over in the commercial sector so there are spot upward spikes occurring. But none are yet sustainable at the national level. The improving items are the long lead drivers for credit conditions, consumer spending, office employment and industrial activity. The market drivers that are weak and still weakening are for rental and occupancy rates and construction starts. Real estate investors focus on this latter group so they still see low and still declining profit opportunities for new construction. But they also now see a market turnaround in their planning horizon with rents, occupancy and hence profits on the upswing by the time buildings started now are completed.

The decline is easing for the commercial market drivers that are still negative. The turnabout to recovery is underway although their may be a summer pause as in the rest of the economy. The initial recovery will not be fully in place until yearend.

By contrast, the market drivers for institutional construction are all weakening or neutral. Investment returns, which provide a significant share of construction funding, suffered a turnabout to decline in the last month although mid-July stock index changes suggest that this decline may be brief.

Normally at this stage of the business cycle, institutional construction would be weaker and would have a much weaker outlook. Federal stimulus plan funds for buildings, twice as much as provided for road work, are dampening the institutional construction recession. After a fifteen month political delay there has been a recent flurry of announcement of building stimulus plan money assigned to specific projects or allocated to specific states.

The economic environment for institutional construction is now weakening after holding up through the recession. Cash strapped state and local governments are being forced to cut spending and are generally choosing to save jobs and postpone building maintenance or expansion.

The state spending cuts will, in turn, force local governments, schools and public universities to trim construction spending to deal with reduced state aid. Bond funded public construction is also weakening. Although the issuance of federally subsidized “Build America” bonds is increasing, this appears to be a back door way to fund operating deficits rather than start new facility projects.

The Carolina Journal reported that about $909 million in Build America bonds have been issued for such projects in North Carolina as building schools, creating a toll road in the Triangle, and upgrading a nuclear power plant. Thirty-five percent of the interest costs are subsidized by the federal government, making it cheaper to issue long-term debt with Build America bonds than with traditional tax-exempt municipal bonds.

Click Here to view the RCD economic forecast.

Wednesday, 28 July 2010

Labor policy changes construction contractors should know about

Recent developments in construction labor policy will change the labor practices of construction contractors who work on federal projects according to a posting on Finance & Commerce.com by John Hickey, an attorney for Jordan Schrader Ramis PC.
Although Congress is unlikely to enact new labor legislation anytime soon, federal agencies are changing labor policy by adopting new regulations and reinterpreting existing regulations.

Employee Free Choice Act

If enacted, the Employee Free Choice Act would make it easier for unions to organize employees (through “card check”), remove an employer’s right in most situations to negotiate a labor contract with a union, and increase the penalties for unfair labor practices committed by an employer. The card-check provision is the most prominent part of the EFCA because it would often eliminate the traditional secret-ballot election to determine whether employees support a union. Under the provision, if a union got a majority of bargaining unit employees to sign authorization cards and the National Labor Relations Board validated the cards (its card check), the union would be certified as the employees’ representative.

Although it was expected that some form of the EFCA would become law in 2009, setbacks kept that from happening. Throughout most of 2009, congressional focus was on health insurance reform. Also, a handful of Democratic senators announced their opposition to the EFCA.

But union leaders have not given up and have recently disclosed a new strategy of looking for an unrelated bill to which all or part of the EFCA could be attached. That, along with the recent appointment of a former union lawyer to the NLRB, means that the battle is not over.

New Disclosures

The Department of Labor recently issued a rule requiring contractors and subcontractors on federal projects to display posters informing employees of their right to join a union and engage in other activities protected by federal labor laws. The posters, which are published by the DOL, must be placed in conspicuous places in and around contractors’ work sites and offices. If a contractor posts notices to employees electronically (e.g., on a webpage), the contractor must also post the labor notice electronically. The rule applies to federal construction contracts entered into after June 21. Penalties for noncompliance include contract termination and debarment.

The DOL also has proposed amending its interpretation of disclosure rules that would require employers to provide workers with written disclosures about how their pay is calculated and their right to overtime pay. For exempt employees, the employer would have to perform a written exemption analysis, disclose the analysis to the employee, and keep a copy available for DOL enforcement agents. The DOL says that the rule will enhance transparency and help prevent the misclassification of employees as independent contractors to evade minimum wage and overtime requirements.

Project Labor Agreements

The Federal Acquisition Regulation Council recently issued a final rule that encourages the use of project labor agreements on federal construction projects of $25 million or more. PLAs are agreements between prime contractors and labor unions that are sometimes required by owners (in this case, federal agencies). PLAs usually require the prime contractor and all subcontractors to abide by the terms of a common labor agreement for the duration of the project. Nonunion contractors subject to PLAs are essentially converted to union contractors for projects on which PLAs are used.

The new rule allows federal agencies to mandate that prime contractors submit fully executed PLAs when bids are due, prior to award, or after award. The mandate will give unions significant leverage in negotiating the terms of the PLA because failure to provide a fully executed PLA when mandated will be a breach of contract by the prime contractor. Although the rule does not require the use of PLAs on every project, it is expected to significantly increase their use.

Contractors who do business with the federal government should be implementing practices to deal with the new labor policy changes. Waiting until after award of a contract to consider these issues could result in contract termination or worse. Contractors should consult with legal counsel for advice on their specific situations.

Click Here to view the Finance-Commerce.com posting.

John Hickey, a professional civil engineer and an attorney, is one of several dual-professionals of Jordan Schrader Ramis’ Dirt Law practice group.

Free Seminar: Lifting Standards to A New Level

North Carolina contractors can attend a free crane safety seminar in Charlotte on Thursday, August 12. The training event, Lifting Safety To A New Level, will be held from 10:00 am – 2:00 pm at the Hilton Garden Inn, 9315 Statesville Road, Charlotte.

The program includes an OSHA update by Robert Jones, NC Department of Labor District Supervisor in the Charlotte office. Experts from Columbus McKinnon Corporation and Maxim Crane Works will discuss safe construction crane operations and proper rigging equipment. A Certificate of Training will be awarded all who attend.

For details visit www.cmcodepot.com. To register, call or email: Jessie Jones 800-477-5003 ext 6253; Email: Jessie.jones@cmworks.com.

The North Carolina Department of Labor operates the state plan for occupational safety and heath approved by the federal Occupational Safety and Health Administration (OSHA). The state has adopted state-specific standards that go beyond the requirements of federal OSHA standards for cranes and derricks.

These revised standards, which became effective October 1, 2009, update requirements for safety devices, operational aids, signals, specific types of equipment, inspections, wire rope, crushing and overall hazards, fall protection and equipment modifications.

Click here to view the revised crane standards on the NC Department of Labor website.

Tuesday, 27 July 2010

Construction starts stable in June

Reed Construction Data (RCD) reports June construction starts increased 4.7% from the previous month. This is approximately stable activity after discounting for the usual small seasonal gain and allowing for a cut in residential starts when the June estimate is released by the Census Bureau.

The current residential estimate is the average of the last three months which is biased up by the homebuyer tax credit. Total construction starts have been relatively stable for the last three months, but remain about 25% below the pre-recession peak level.

Expect an ugly summer for both the economy and for construction. The recovery is distinctly slowing after a spurt of temporary spending earlier in the year for home buying, Census taking and stimulus-funded construction. Heightened debt concerns will keep Congress from fully extending expiring stimulus programs. Federal fiscal policy is now much less expansionary and may turn negative later this year.

GDP growth will slow to near 2% and construction spending may dip briefly. Construction starts will drop temporarily for housing and possibly in the heavy sectors as states cut back in the new fiscal year.

Federal monetary policy remains stimulative, although less so than a year ago. The Federal Reserve Board will delay closing its emergency lines of credit in response to the summer slowdown and may add some funds for small business lending, which is still restricted even for some financially-sound businesses. More help for small banks which are struggling with defaulted commercial real estate loans may also be provided.

The major construction sectors are in distinctly different economic situations, at different points in the building cycle. Housing is expanding, although temporarily on hold. Doubledigit growth will resume in the fall. There is enough room for this in the depressed market before hitting the limit on starts imposed by low confidence and restricted credit access.

Heavy construction is still in the recession phase although the decline has been dampened by the stimulus funds. No significant gain is expected through 2011. The institutional building market is in a similar position. Several down quarters lie ahead before recovery begins in advance of the heavy market recovery.

The commercial market is about to emerge from a recession which was not softened by federal subsidies. Starts are again on the upswing and will lead to rising job-site spending by year-end.

Click Here to view economic forecasts from RCD.

Monday, 26 July 2010

Disparities on minority contractors participation evident

An opinion from the U.S. Court of Appeals upheld the state's program to encourage road building by companies owned by African Americans and Native Americans, but the court struck down provisions that applied the program to other minorities and women.

The News & Observer reported an opinion from the U.S. Fourth Circuit Court of Appeals arose from a lawsuit by H.B. Rowe Co., a contractor that lost a 2002 bid for roadwork in Iredell County.

The company submitted the lowest bid, but it didn't get the contract because the N.C. Department of Transportation determined that Rowe didn't do enough to try to get minority subcontractors to participate.

Rowe sued, claiming the state's program, which is currently written to "encourage and promote" the inclusion of minority and disadvantaged businesses, is unconstitutional.

A judge disagreed. The appeals court found that through repeated studies, the state has shown that businesses owned by African Americans and Native Americans are unfairly left out of road building projects. The state's law allows contractors a lot of leeway to prove they tried to get those businesses to take subcontracts.

By 2003, Rowe was one of 13 contractors out of 878 that failed to win a bid because of the minority requirement. But for other minority groups, the state's figures do not prove a disadvantage, possibly because there aren't enough construction companies owned by Asian-Americans or Latinos, the court found. And the state's study shows that businesses owned by women are actually overrepresented in subcontract awards.

Click Here to view the News & Observer article.

Thursday, 22 July 2010

Home construction sinks to lowest level since October

Home construction plunged last month to the lowest level since October as the economy remained weak and demand for housing plummeted, the Associated Press reported.

But driving the June decline was a more than 20 percent drop in condominium and apartment construction, which makes up a small but volatile portion of the housing market. Construction of single-family homes, the largest part of the market, was down slightly. It dropped 0.7 percent.

Overall, construction of new homes and apartments in June fell 5 percent from a month earlier to a seasonally adjusted annual rate of 549,000, the Commerce Department said Tuesday. May's figure was revised downward to 578,000.

Homebuilders are struggling to compete with a glut of homes on the market, many of them foreclosures or deeply discounted properties.

The number of foreclosures could rise even faster, according to a new report on the Obama administration's effort to help those at risk of losing their homes. More than 40 percent of those of those who have enrolled have dropped out of the program, the Treasury Department announced.

One bright area of the new home construction report was an increase in building permit applications, which are a sign of future activity. They rose 2.1 percent from a month earlier to an annual rate of 586,000, however this was also driven by apartment construction.

A slumping job market and competition from foreclosed properties have forced builders to limit construction, especially after tax credits that spurred sales expired at the end of April.

In a typical economic recovery, the construction sector provides much of the fuel. Not this time. While developers have cut back on construction and the number of new homes on the market has fallen dramatically, they still must compete against foreclosed homes selling at deep discounts.

Builders may be turning their attention away from new projects to complete those already in progress. Housing completions rose 26.2 percent in June, noted John Ryding and Conrad DeQuadros, economists at RDQ Economics. That could be a positive sign for future activity.

Still, builders have been feeling increasingly pessimistic of late. The National Association of Home Builders said that its monthly reading of builders' sentiment about the housing market sank to 14 - the lowest level since March 2009. Readings below 50 indicate negative sentiment about the market.

The rate of home building is still up about 15 percent from the bottom in April 2009, though it's down 76 percent from the last decade's peak in January 2006. More information on housing statistics is also available at: www.housingeconomics.com.

Click Here to view the Associated Press story.

Negative conditions persist in architectural billing index

There was a negligible increase in the Architecture Billings Index (ABI) last month. 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 June ABI rating was 46.0, up slightly from a reading of 45.8 the previous month. This score reflects a continued decline in demand for design services (any score above 50 indicates an increase in billings). The new projects inquiry index increased from 55.5 to 57.7.

“The steep decline in nonresidential property values has slowed investment in new facilities,” said AIA Chief Economist Kermit Baker, PhD, Hon. AIA. “Conditions at architecture firms continue to remain very soft, but we’re optimistic that they will improve before the end of the year.”

Key June ABI highlights:

◦Regional averages: Northeast (47.7), South (46.7), Midwest (46.3), West (43.6)

◦Sector index breakdown: commercial / industrial (50.6), multi-family residential (46.5)

◦institutional (45.0), mixed practice (44.7)

◦Project inquiries index: 57.7

The Architecture Billings Index is derived from a monthly “Work-on-the-Boards” survey and produced by the AIA Economics & Market Research Group. Based on a comparison of data compiled since the survey’s inception in 1995 with figures from the Department of Commerce on Construction Put in Place, the findings amount to a leading economic indicator that provides an approximately nine to twelve month glimpse into the future of nonresidential construction activity.

Wednesday, 21 July 2010

Nonresidential construction backlog expands to 7 months

The Associated Builders and Contractors (ABC) reports that its latest Construction Backlog Indicator (CBI) increased to 7 months in May – a 27 percent increase from January of this year. CBI is a forward-looking indicator that measures the amount of construction work under contract to be completed in the future.

"Construction backlog continues to edge higher and has generally been on an upward trajectory since late-2009," said ABC Chief Economist Anirban Basu. "But it's not clear whether this level can be sustained.

"While this latest data indicate a broader improvement in nonresidential construction activity, there may be several alarming reasons for the increase including the financial failure of competitor firms leaving more opportunities for surviving companies, or contractors accepting projects with lower profit margins," Basu said.

"Backlog in the infrastructure category remains relatively high and there was improvement over the past two months in the commercial/institutional and heavy industrial categories, as well. However, whether the nonresidential construction rebound will continue to strengthen and broaden for the remainder of 2010 remains to be seen," said Basu.

Industry Highlights

Backlog in the commercial and institutional category stood at 7.2 months in April and 6.9 months in May. These figures represent some of the best performances since late-2008.

Backlog related to the heavy industrial category is now at 7.86 months – the highest level in the history of the survey.

Infrastructure continues to report the lengthiest backlog an 8.75 months; however, the May backlog reading for this category was at its lowest level in nearly a year.

Industry Analysis

"The April-May report appears to be one of the most hopeful in the history of the series. For the first time, there is indication of a broadening nonresidential construction recovery, perhaps a reflection that credit conditions are beginning to thaw and that the broader economic recovery is finally being reflected in privately-financed nonresidential construction activities," Basu said.

Company Size

The firms with greater than $100 million annual revenue continue to enjoy the longest backlog at 9.4 months.

Firms with revenue between $30 million and $50 million saw their backlog drop just one half month between April and May 2010.

One year ago, firms with revenue less than $30 million reported a combined backlog of just 5 months. In May 2010, backlog in this category is up to 6.3 months.

"With the exception of firms in the $100 million or more category, average backlog is up on a year-over-year basis in every size category. However, there is still reason to doubt the sustainability of the emerging nonresidential construction recovery for a variety of reasons, including ongoing underperformance of commercial real estate. There will need to be at least several more months of strengthening performance before one can conclude that nonresidential construction is on solid ground."

Click Here to view the full construction backlog report.

Tuesday, 20 July 2010

AIA study predicts nonresidential construction recovery by latter part of 2011

Even with modest improvements in the overall U.S. economy, nonresidential construction spending is expected to decrease by more than 20 percent in 2010 with a marginal increase of 3.1 percent in 2011 in inflation adjusted terms.

Poor conditions remain because of an oversupply of nonresidential facilities in most construction categories, weak demand for space, continuing declines in commercial property values, and a strong reluctance to provide credit from real estate lenders.

These are highlights from the American Institute of Architects (AIA) semi-annual Consensus Construction Forecast, a survey of the nation’s leading construction forecasters.

“There are a number of factors at play here that are contributing to one of the steepest construction downturns in generations,” said AIA Chief Economist, Kermit Baker, PhD, Hon. AIA. “We have businesses nervous about expanding their facilities, a fragile financial sector, excess commercial space, and general unease in the international economy. Things should begin to turn around midway through next year with retail and hotels expected to see the strongest growth, along with health care and amusement and recreation facilities.”

The AIA Consensus Construction Forecast Panel is conducted twice a year with the leading nonresidential construction forecasters in the United States including, McGraw Hill Construction, Global Insight, Moody’s economy.com, Reed Business Information, and FMI. The purpose of the Consensus Construction Forecast Panel is to project business conditions in the construction industry over the coming 12 to 18 months. The Consensus Construction Forecast Panel has been conducted for 12 years

Click Here to view the full report.

Monday, 19 July 2010

June construction starts up from May

Reed Construction Data (RCD) announced that the year-to-date value of construction starts through June, excluding residential contracts, totaled $126.4 billion, 13.0% more than in the same months of 2009. Individual month of June starts were 2.9% higher than in May. This is a little more than the usual seasonal gain in June.

The value of starts has now been steady for four months after allowing for seasonality. Current starts are 46% above the low point last June but remain 25% below the prerecession peak. The value of starts is expected to be about steady in the coming months and then begin to rise at the end of the year.

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 economic environment for construction soured in June with declines in buyer confidence and weaker growth in consumer spending and business investment. The causes were the end of the homebuyer tax credit and the reversal of temporary hires for the Census. The recovery is not faltering, but briefly slowing, after two exogenous bursts in spending and the continued ebbing of the boost from the variety of federal stimulus programs which Congress has refused to extend at the same spending level.

June’s heavy construction starts fell 9.1% from a very strong May, but the year-to-date total is 16.4% above 2009. This reflects the surge and ebb of federal stimulus spending over the past year, plus recent cutbacks in state and local construction spending. Both federal and local funds will continue to shrink. So heavy spending will slip slightly lower through 2011. The drop will be restrained by increases in site development for expanded private construction beginning at year-end and small gains for private transportation and communications facilities.

Non-residential building starts rose 10.4% to nearly double the year-ago level. All major categories had significant gains. A billion-dollar-plus of extra military projects was offset by a similar drop in stadium projects. Private developers started 29% ($7.5billion) more “for lease” projects in June than in May. This suggests that they anticipate more profitable operating conditions when the buildings are completed.

Click Here to view the RCD news release.

Friday, 16 July 2010

New rule requires federal contractors to report subcontract information

Federal contractors must report award data for first-tier subcontractors that win subcontracts valued at more than $25,000 for publication on a searchable public Web site. According to an interim rule issued on July 8, 2010, prime contractors must report subcontractors’ office and jobsite addresses; DUNS Numbers; NAICS codes; subcontract numbers; subcontract dates and amounts; description of the products or services being provided; and prime contract information. Federal contractors and first-tier subcontractors for which “80 percent or more of its annual gross revenues from federal contracts and $25 million or more in annual gross revenues from federal contracts” must also report compensation data for the five most highly compensated executives of the company. The reporting requirements take effect as follows:

Until Sept. 30, 2010, any newly awarded subcontract is to be reported if the prime contract award amount was $20 million or more.

From Oct. 1, 2010, until Feb. 28, 2011, any newly awarded subcontract is to be reported if the prime contract award amount was $550,000 or more.

Starting March 1, 2011, any newly awarded subcontract is to be reported if the prime contract award amount was $25,000 or more.

Prime contractors must submit reports to the Federal Funding Accountability and Transparency Act Subaward Reporting System (www.fsrs.gov) by the end of the month following the month in which the prime contractor awards the subcontract. For more information, contact the American Subcontractors Association at (703) 684-3450, Ext. 1333, or GovernmentRelations@asa-hq.com.

Saturday, 10 July 2010

Building Information Modeling: A game-changer for NC construction industry - Part 2

Joe Sferrazza, BIM specialist with Lake Architectural, Charlotte, says one example of BIM’s momentum is the rise in membership of Charlotte’s Revit User Group. “In the last year and a half, membership has grown to well over 300 members, he adds.

“Charlotte’s Revit User Group is an excellent resource for AEC professionals interested in BIM, he explains. “You can get unbiased answers to your questions from actual users, not just someone trying to sell you a piece of software.” Lake Architectural has been using BIM software since 2004.

“BIM files create several other investments beyond the scope of 3-D software, one of which is a more robust information technology infrastructure,” says Zane Sharpe, who manages NextPlans, a subsidiary of Winston-Salem-based Sharpe Images. “Facilitating the communication and exchange of this information is what we’re built for.”

NextPlans’ web-based system manages construction documents from schematic design to project closeout, Sharpe adds.

With significantly larger electronic files that BIM entails, NextPlans helps all involved transfer information back and forth.

Marveling at BIM and its capabilities is Ned McNaughton, an attorney at Charlotte’s McNaughton & Associates, which focuses on construction law.

“BIM is a wonderful tool from an engineering and construction point of view,” McNaughton says. “I think it’s really going to improve construction and decrease defective construction.”

Currently, some harbor inflated expectations for BIM, McNaughton believes, based on 3-D modeling they’ve seen in Hollywood offerings such as “The Matrix.”

Though he hasn’t been involved in lawsuits involving BIM, McNaughton anticipates he will. He sees two BIM problems in need of solution.

“The first one is just figuring out who’s responsible for the design and who owns it,” he says.

“BIM is a cooperative system where everybody puts in their design,” he explains. This includes the trades such as HVAC, plumbing and electrical.

“But somebody needs to be responsible for the accuracy of that information and keeping it up to date,” he says. Who is that? “Well, that’s what we’re trying to find out. The logical place is whoever is in charge of the design element. Usually the architect.”

The second problem involves making what is built match what is drawn. If an HVAC firm installs ductwork in an unspecified spot, that usually results in adjustments in the field.

BIM is different. “When you have a BIM system,” McNaughton says, “you have to up fit with the computer model. It can have a ripple effect on the entire project. There’s a higher administrative cost.”

When something does go wrong, finger-pointing is based on who knew what and when, the attorney says. With dynamic, multi-sourced 3-D modeling, that’s going to be harder and more expensive to ascertain.

The federal Spearin Doctrine and its North Carolina sister “implied warranty of plans and specifications” will eventually factor in, McNaughton speculates. Both essentially hold that the contractor has a reasonable expectation that if a structure is built to specification, it will work. But if the contractor, subs and others participate in the design, that “just following orders” defense is harder to mount.

Matters such as that generally get hashed out in the courtroom.

“BIM is going to be a lot prettier 10 or 20 years from now,” McNaughton says.

Building Information Modeling: A game-changer for NC construction industry - Part 1

An accurate system that minimizes risk is how proponents characterize it. Expensive and cumbersome, skeptics counter.

Regardless, there’s general agreement among those connected to North Carolina’s construction industry that Building Information Modeling, or BIM, is a tool to reckon with.

Three-dimensional modeling of construction projects is what BIM offers. It can show details about a structure and help owners, architects, engineers, general contractors and subcontractors understand how they work together or, in some cases, clash.

Demolition and waste management professional Gary Olnowich hasn’t used BIM yet, but has been around people who like it. Olnowich is vice president of the Linda Construction Company of Charlotte, which is involved with the Queen City’s 32-story Bank of America tower and the 52-level Duke Energy structure.

“It’s going to take the participation of everybody to make it work,” he says, “which sounds like the hard part.”

Last fall, Linda Construction worked on a federal stimulus job at Fort Bragg and didn’t encounter BIM, but that experience may be an exception.

The director of professional services for the US General Services Administration Region IV, which includes the Tar Heel state, says his agency requires architects, engineers and construction people to use BIM on all new, major projects. A GSA project coming soon to Charlotte is a new federal courthouse, designed and constructed completely with BIM.

“Using BIM coordinates all the systems, mechanical, electrical, plumbing and architectural,” says Brian Kimsey from his GSA office in Atlanta. “Anecdotally, we think we’ve reduced errors and omissions and resulting change orders by 90 percent. That’s a pretty radical improvement.”

Contractors like BIM, and have accepted it faster than architects, Kimsey says, because it improves coordination and eliminates re-work in the field. For architects, the benefits are less obvious, he thinks, and it’s more a matter of using BIM to avoid competitive disadvantage.

Not so fast, say a couple of Greensboro construction professionals.

BIM is popular on construction manager at-risk projects that generally involve larger contractors, says Ron Kiser, vice president of Brooks General Contractors in the Gate City. He acknowledges that federal contracts often specify BIM.

But in the hard bid market, where his smaller firm tends to operate, “you rarely see it.” That’s because of budgetary concerns and tight time frames, he believes.

“I trust BIM to be accurate in the private sector,” Kiser says. “In the end, it’s going to give the client a better product. It takes a while for everybody to adapt. When they do, it’s going to be a great product.”

Not adapting yet is Jody Efird, the principal at Efird Sutphin Pearce & Associates, P.A., in Greensboro. Her boutique architecture firm concentrates on schools, medical office buildings and, lately, church work.

Efird is aware that the American Institute of Architects has studied BIM’s legal and copyright issues.

“BIM is very expensive,” Efird says. “And it is so cumbersome.”

Hit by unemployment of 25 percent or more, many architecture operations have put buying programs and computers on the back burner, she thinks.

Meanwhile, her company and its consultants are using a computer-assisted design tool called AutoCAD and her firm is considering an upgrade for it.

“From a contracting point of view, BIM may be working great, but to what extent does that translate into a design savings?” she asks.

With an answer is Michael Sproles, division manager of TPM in Charlotte. It’s a Greenville, SC, firm that sells BIM software and trains people to use it.

“BIM has the potential to eliminate or reduce inefficiencies in designing and constructing a project,” Sproles says. “In any project, there’s a lot of time, material and effort wasted on mistakes, errors that just weren’t caught before they got out in the field. BIM allows us to help reduce that impact through coordination, making sure that mechanical piece of equipment is not in the way of structural steel work.”

Acceptance of BIM has jumped, Sproles says. The drivers are large contractors and project owners. “We’re seeing a lot of Department of Defense projects specify BIM as well as universities and other institutional customers,” he says.

Younger people seem to accept BIM faster because they grew up with 3-D and video games, Sproles speculates, while the older generation shies away.

“Young guys who might be great in the technology don’t have the experience of how to put a building together,” he says. “You need to have the older, experienced crowd, as well, because they understand how this stuff is actually going together.”

Chiming in is Paul Zytnik, a TPM account executive who sells Revit software to facilitate BIM use. “It seems the ones that have been most successful in architecture are the project architects that have both characteristics – knowledge of technology and the practical know-how about building,” Zytnik says.

To be continue

Friday, 9 July 2010

H.B. 1035: Performance and Payment Bond Modification

The American Subcontractors Association of the Carolinas is asking its members to contact Governor Perdue to veto the section of HB 1035 that eliminates an important remedy for non-payment for subcontractors on some public projects. The NC House and Senate have already passed the bill which may apply to construction contracts awarded on or after October 1, 2010.

The legislation will increase the threshold for required payment performance bonds on state projects to $500,000 from $300,000. View a copy of the bill Here.

In a letter to its members, ASAC says, "The construction industry has been particularly hard hit by the current recession. Even the most experienced contracting firms have seen their credit worthiness erode. Further, many contractors that historically have worked solely in the private sector have turned to public work, which is the only sector that has not suffered a severe contraction. Such contractors may not have the financial stability to successfully complete a government contract, particularly as other parts of their businesses continue to deteriorate. In order to bid on government construction, a prime contractor must pre-qualify for a surety bond by meeting the surety’s standards for capital, capacity and character. The surety bonds required by G.S. § 44A 26 protect taxpayers, as well as subcontractors and suppliers."

In a letter to its membership, the Carolinas Electrical Contractors Association adds, "This bill is bad for taxpayers and for subcontractors. The burden of default by contractors on unbonded projects falls squarely on the taxpayers. Also, since subcontractors have no liens on public projects, eliminating the payment bond exposes the subcontractor on the project to nonpayment for work performed on the project."

Contractors are encouraged to write: Governor Beverly Purdue, Office of the Governor, 20301 Mail Service Center, Raleigh, NC 27699-0301

Thursday, 8 July 2010

The myth of the green-building premium

by Harvey Berman, Bodman LLP

One of the hottest issues in the green building world is whether there is a significant premium to building “green” as opposed to the use of standard building products and practices. It is not uncommon for some members of the construction industry to say that the cost of building “green” can add 10 percent or more to the cost of construction even though there are studies that indicate that this is not the case.

The chasm between perception and reality was highlighted in a recent study conducted by the Northeast Ohio Chapter of the United States Green Building Council and Sustainable Rhythm, a consulting organization that works within the commercial, office, residential, green-space and senior-housing markets.

The 24-page study titled “Opening the Door to Green Building” was issued June 18 and is based on the responses of 200 participations to an online survey.

The study focused on how the implementation of green building principles has transformed from a specialty market sector to one that is being considered across every building market. In doing so, participants were asked “if there is a significant cost difference between green building and standard building products and practices?” The results were:

•62 percent “Yes”
•26 percent “No”
•12 percent “Unsure”

However, according to the study, “those who have analyzed the market have found that in reality, there is a negligible premium or as low as a 1-2 percent premium dependent on level of green building design solutions and/or the LEED certification level pursued...

... According to the study, the perception of a high premium predominates at the highest level with participants identified as owners, facility managers, corporate real estate and real estate developers, and those involved in tenant leasing and finance.

Regardless whether based in fact, it is noteworthy that when asked about perceptions relating to the cost premium for “green” building, participants provided the following responses:

•1-2 percent more cost, 5 percent of participants
•3-5 percent more cost, 19 percent of participants
•5-10 percent more cost, 24 percent of participants
•10-25 percent more cost, 37 percent of participants
•More than 25 percent more cost, 9 percent of participants

Views on the cost of building “green” are also reflected in the responses of participants regarding factors motivating the industry to build green. According to the study, reducing overhead costs of energy and increasing energy efficiency seem to be “the strongest resonating arguments in the market.” When asked “what kind of information would you like to see more of on green building from your vendors,” the study states that 75 percent of respondents identified “return-on-investment” as the most desirable content information for enabling decision-making.

Harvey Berman, a LEED® Accredited Professional, is a partner at the law firm of Bodman LLP practicing in its Ann Arbor office. He is chair of the firm's Construction Practice Group and represents clients in construction, real estate, and business matters. Contact him at (734) 930-2493 or at hberman@bodmanllp.com.

NCSU economist upbeat on Triangle economy

The national economy may be in for a long and difficult recovery, but North Carolina -- and the Triangle in particular -- are in competitive positions for economic growth in the next two years, according to N.C. State University economist Mike Walden.

In today's Herald-Sun article,Walden forecasts that the state will net 70,000 to 80,000 new jobs annually in both 2010 and 2011.

Nationally, employment, retail sales, home sales, wage and salary income and state tax revenues have all registered gains in the past six to nine months, according to Walden, but most economic indicators are still below pre-recessionary levels.

"What I think is happening now is that we are looking at an economy in which we're going to continue to grow but at a slower pace," Walden said. "I do not see us falling back into a recession."

Walden's report contrasts with recent reports sounding alarms about the U.S. being in danger of falling into a double-dip recession, or worse, a depression.

North Carolina's unemployment rate will decline gradually for the rest of the year, according to Walden, falling to 9.5 percent by the end of 2010 and 8.5 at year end 2011.

The picture is particularly bright for the Triangle, which Walden forecasts will have the lowest unemployment rate of the state in 2010 and 2011, falling to 7.4 percent by the end of this year and to 6.7 percent in 2011.

As of May, unemployment in the Triangle stood at 8 percent. State unemployment for the month was 10.3 percent.

Walden said the Triangle's economy has fared well because it is based on higher education, technology, research and development and health care.

"We have an economic structure here that most experts think is really the economy of the future, so I don't think it's a surprise that we're doing well," he said.

"As far as what we need to work on, we need to work on keeping those positives positive," he added. "We have to make sure we address our infrastructure, roads, transportation, and make sure that businesses and people are able to move around. We need to watch our real estate costs, which are very competitive."

Walden said that at the current rate of job creation, employment in North Carolina will return to pre-recession levels in three to four years.

Walden said the state has advantages in high labor productivity, a modest cost of living, affordable higher education expenses, superior performance in recent national math tests for elementary students.

Click Here to view the complete Herald-Sun article.

Wednesday, 7 July 2010

Non-residential construction spending shrinks again

Construction spending shrank again in May, dropping 8 percent from a year earlier, although homebuilding and stimulus–funded public works increased from year–ago levels, according to an analysis of new Census Bureau data by the Associated General Contractors of America. “Stimulus has made a difference, but Congress needs to provide long–term funding for transportation and water projects to assure further economic growth,” Ken Simonson, chief economist for the construction trade association, said.

“Private nonresidential construction sagged 25 percent from May 2009 to May 2010, while public construction edged down 3 percent, and private residential construction rose 11 percent,” Simonson commented. “Federal stimulus funds helped keep public construction afloat and buoyed single–family construction.”

There were year–over–year increases of 5.6 percent for highway and street construction, 13.8 percent for other transportation, 5.1 percent for sewage and waste disposal, 5.0 percent for water supply, and 23 percent for conservation and development—all categories that have received stimulus funds, Simonson pointed out. In contrast, spending on all other public and all private nonresidential categories fell.

Simonson noted that new single–family home construction in May soared 31 percent from the depressed levels of a year earlier but new multi–family construction—condos and rental housing—tumbled 57 percent. “The first–time home buyer tax credit that expired at the end of April boosted demand for single–family and lessened demand for multi–family,” he said. “Those distortions have now ended, although Congress voted yesterday to extend the closing deadline until September 30 for families that had signed contracts by April 30.”

Simonson concluded, “It’s even more important not to let funding lapse for highway, transit and airport construction funding. Congress and the White House need to make these programs a priority, along with long–term funding for drinking water, wastewater and waterways.”

Click Here to view the AGC economic analysis.

Tuesday, 6 July 2010

Construction industry unemployment rate tops 20%

Seasonally adjusted construction industry employment slipped in June to the lowest total since July 1996 while the industry’s unemployment rate remained at 20.1 percent, more than double the average for all workers, according to analysis of new federal figures by the Associated General Contractors of America.

“The recession may have ended a year ago for most of the economy, but for construction, job losses and business closures continue every month,” said Ken Simonson, chief economist for the construction trade association.

“While the rest of the economy added nearly a million jobs in the first half of 2010, 114,000 construction workers lost theirs, joining the two million others who have become unemployed since August 2006,” Simonson observed. The industry added 49,000 jobs in March and April as homebuilders and highway contractors geared up, but 30,000 jobs disappeared in May and 22,000 in June as housing cooled and nonresidential building slumped further.

The outlook for nonresidential building construction remains ominous, according to Simonson. In May, the latest month for which such data is available, architectural firms laid off workers for the 21st time in 22 months.

“If there’s less work for architects now, there will be less for building contractors to bid on and build in coming months,” Simonson remarked. In contrast, engineering and drafting firms, which design infrastructure projects, added jobs three months in a row through May.”

Heavy and civil engineering construction—the category that covers most workers in transportation, power, water and wastewater construction—added 1,300 workers in June and has held roughly steady since last October, as federal stimulus funds have boosted construction in these categories, Simonson noted.

“The stimulus has helped,” said Stephen E. Sandherr, CEO of the association, “but any gains the industry experienced will evaporate unless Congress and the Administration promptly enact long-term spending bills for transportation, water, wastewater, rivers and harbors.”

Click Here to view the AGC economic analysis.

Friday, 2 July 2010

Construction spending dips after two months of gains

The Associated Press reports construction spending declined in May as residential building fell after a popular homebuyers' tax credit expired.

The report comes after government data released last month showed sales of new and previously-owned homes fell sharply in May. The federal government's tax credit for homebuyers expired April 30.

The renewed slump in housing indicates that the sector's recovery earlier this year was almost totally dependent on government incentives.

The Commerce Department said Thursday that construction spending dropped by 0.2 percent, after rising by a downwardly revised 2.3 percent in April. Analysts expected a steeper drop.

The decline was driven by a 0.4 percent decrease in construction spending on new homes and apartments. That followed a 5 percent jump in April. The department previously reported that new home construction fell by 17 percent in May, and new home sales plummeted 33 percent to a record low annual rate of 300,000.

Also on Thursday, the National Association of Realtors said the number of buyers who signed contracts to purchase homes dropped in May to the lowest level on records dating from 2001.

The Realtors' group said its seasonally adjusted index of sales agreements for previously occupied homes tumbled 30 percent. The index fell to 77.6 in May from 110.9 in April.

Commercial building projects also declined, the Commerce Department report said. Spending on office buildings, shopping malls, and other projects fell by 0.6 percent, its steepest drop since February. That followed an increase in April, the first rise in commercial building since March 2009.

The sector has suffered in the weak economy due to rising loan defaults and tighter credit. That has made it harder for developers to get financing.

Government spending on highway and other infrastructure projects rose by 0.4 percent, the third straight month of gains. But some economists worry that those increases could decline in coming months as state and local governments cut spending in an effort to close budget gaps.

State and local construction spending rose in May by 0.6 percent, to $275 billion, while federal spending dropped by 1.3 percent to $30.5 billion.

Click Here to view the article posted on ENR.com.

Thursday, 1 July 2010

RCD: Double dip recession unlikely

by Jim Haughey
Reed Construction Data Chief Economist


What might cause a second recession in 2011 when forecast models are broadly forecasting GDP growth of 2-4% in mid-2011? It is the belated recognition of loans in default or about to default. This includes commercial mortgages, European sovereign debt, state budget and pension debt, the soaring debts of state unemployment insurance funds, student loan bonds and more bad residential mortgages...

...Reed Construction Data believes that the current financially troubled debtors will be allowed to stretch out whatever they do to reduce their debt for long enough that reviving growth in the private economy will be strong enough to cover their negative impact on growth. GDP growth will continue at a subdued pace and construction spending will turn positive at about yearend.

But note that a decision to take our lumps quickly and get them behind us would push the risk of a double dip recession to near 50% and postpone the expected turnabout in construction spending for at least 2-3 quarters. There is little probability that Congress will do this four months before an election...

...There is little risk of a GDP decline until next spring because the current expansion momentum, while weakening, is strong enough to persist for at least three more quarters. Planned inventory expansion is continuing in manufacturing and distribution. It would take several quarters for the inventory additions to become “unwanted” and for production schedules to be cut to trim inventory.

Click Here to view the RCD Economic Insight and Analysis of Construction Industry Trends.