Thursday, 31 March 2011

Construction industry shows modest signs of growth despite tough environment

With modest signs of economic growth, tough conditions will permeate the construction industry for at least two more years, the chief economist for Portland Cement Association said at ConExpo-Con/Agg 2011 in Las Vegas. Edward Sullivan said he's optimistic about construction overall because of pent-up demand being generated across both the residential and nonresidential sectors.

Construction spending will show meager gains in 2011 and into 2012, but Sullivan said he doesn't expect to see any significant increase in real construction spending until 2013. The economist is projecting a 2.7 percent growth in gross domestic product and 1.5 million jobs being created this year, compared with most economic forecasts of 3.5 percent GDP growth and 2 million jobs.

"Our industry never wants to be surprised on the downside," Sullivan told about 150 people attending his economic outlook at ConExpo. "They like to be surprised on the upside. That's why I layer my projections with conservatism."

The economy was shedding 750,000 jobs a month not long ago and business crashed to the lowest level of any recession. More than 8.5 million jobs were lost. Had it not been for federal policy, the economy could easily have dipped into a depression, Sullivan said.

The office sector lost 2.4 million jobs. As office occupancy declined, net operating income and return on investment for commercial property plummeted. Office vacancy is at 17 percent nationally. Office employment would have to grow by 500,000 jobs to stabilize lease rates and by 5 million to fill the vacancy, the economist estimated.

On the residential side, homeowners face mounting foreclosures and excess housing supply. "These are huge impediments that must be overcome before we see recovery in construction," Sullivan said. "Look at it as a wound: the deeper the cut, the longer the recovery."

Concrete consumption has declined by 50 million tons a year and the imbalance between supply and demand dwarfs that of any past recession by multiples, going back to the Great Depression, Sullivan said. "We shut down 16 plants, eight of them permanently," he said. "Even when the economy recovers, the cement industry will not."

The credit crisis that was sparked by subprime mortgage defaults spread into consumer spending, which accounts for two out of three GDP dollars, Sullivan said. That led to job losses, state budget deficits and rising energy prices. The credit pendulum has swung from being too loose to too tight, though lending standards are starting to ease at certain credit rating levels, he said.

With very little private money funding construction, recovery will have to start with public works, Sullivan said. The American Recovery and Reinvestment Act provided $5 billion in spending in 2009 and $11.5 billion in 2010, which leaves about $9 billion to be spent, most of it this year. Composition of the spending is getting away from resurfacing roads to widening and building new routes and bridges, he said.

The political reality of the proposed $1.1 billion highway construction bill is that everyone recognizes the need to improve the nation's infrastructure, but few leaders in Washington will vote for the 5-cent fuel tax required to fund the projects, Sullivan said. Read More.

Wednesday, 30 March 2011

Consumer confidence drop weakens construction industry recovery

Reed Construction Data chief economist Jim Haughey writes the decline in consumer confidence is largely due to rising inflation, especially energy, together with a small contribution from the Japanese tragedy. The Consumer Price Index has risen at almost a 6% annual pace in the last two months. Inflation is beginning to creep into non food and energy price with the core inflation rate, excluding food and energy doubling to a 2.5% annual pace in the last two months. Fear of future inflation sharply cut consumer expectations for real income and job availability six months ahead while consumer estimates of current economic conditions slipped only marginally.

Confidence is not likely to rise in April and is more likely to slip lower when the full impact of recent event in Japan and Libya will be incorporated in the monthly survey.

Housing has already taken a hit from falling confidence. All of the housing market reports for February were negative except for a slim gain in pending home sales. The negative spillover for nonresidential and heavy construction will come in the spring but will be less negative .This is because business confidence will suffer less than consumer confidence and the small impact on tax collection will be spread out over the next year. Read More.

Tuesday, 29 March 2011

Construction employment increases in North and South Carolina

Construction employment increased in 30 states between January and February while 19 states added construction jobs during the past 12 months, the Associated General Contractors of America reported in an analysis of state employment data released by the Labor Department. Association officials cautioned, however, that it was too early to tell whether the relatively positive report reflects improving economic conditions or the benefit of warmer weather much of the country experienced in February.

“These are certainly some of the best state-by-state numbers the industry has seen in quite some time,” said Ken Simonson, the association’s chief economist. “But it is too early to tell whether this is the start of a positive trend or the rebound that comes with a February thaw.”

California (15,500 jobs, 2.7 percent) added the most construction jobs between January and February, followed by Georgia; North Carolina (4,500 jobs, 2.7 percent); and Florida (4,400 jobs, 1.3 percent). South Carolina added 1,900 jobs (2.6 percent).

Association officials cautioned that with total construction spending still declining and the prices contractors pay for most construction materials still rising, the construction industry remains fragile at best. They urged officials in Washington and in state capitals to review and act on the group’s recently released construction industry recovery plan “Building a Stronger Future.”

“It is hard to see how the broader economy will be able to grow significantly while the construction unemployment rate remains above 20 percent,” said Stephen E. Sandherr, the association’s chief executive officer. “If we can find ways to stimulate private-sector demand, cut red tape and address aging infrastructure, we will put millions to work and boost overall economic growth.”
View construction employment figures by state and by rank Here. Read More.

Monday, 28 March 2011

Construction industry price escalations may lead aggressive bidders to default

Engineering News-Record magazine reports rising materials prices coupled with aggressive bidding in a down economy have raised concerns that a new wave of contractor defaults may be on the horizon. While the contracting community proved more resilient during the downturn than some had predicted, many firms that bid aggressively in recent months and slashed profit margins face considerable hardships as prices for materials and consumables continue to rise.

“The trends we’re seeing show that the vise is tightening on contractors,” says Ken Simonson, chief economist for the Associated General Contractors. Construction prices rose 6.1% between February 2010 and February 2011, according to the U.S. Labor Dept.’s Producer Price Index. During that same period, prices for finished buildings remained nearly flat, with new office, industrial and warehouse structures up less than 1% and those in education sectors up just 1.4%, according to the data.

“Contractors were reportedly already bidding jobs at costs,” Simonson says. “This means that a further 6% rise in their input costs, unmatched with any pass-through to owners, is certainly going to push some firms out of business.”

Five years ago, when the construction market was rapidly expanding, trade contractors and general contractors had more leverage to put escalation provisions in their contracts with owners, says Scott Trethewey, executive vice president for risk management and finance at Moss & Associates, Fort Lauderdale, FL. With the market now at the bottom, more contractors are willing to retain that risk if it helps win work, he points out.

“There are people making bets that they will be able to procure materials within the context of their budgets,” Trethewey adds. “As prices go up, only time will tell if those were good decisions or bad decisions.”

Don Nabor, vice president and director of risk management at Gilbane Building Co., Providence, RI, says while the contractor works to build escalation provisions into its contract, in many cases it gets “a great deal of pushback” from owners. “We’re trying to work closely with owners to make sure they understand that there is escalation exposure out there, and they can’t leave that exposure with the contractor and subcontractor in this environment,” Nabor says.

Concerns over contractor defaults percolated when the recession began, yet losses have been limited, says Fred Schwait, chief underwriting officer for construction services, bond and financial products at Travelers Insurance. “There was an expectation of losses by the industry, but so far they have been limited,” he says.
“The trends show that the vise is tightening on contractors.”

In the first nine months of 2009, the surety industry incurred $957 million in losses on $3.9 billion in written premiums, up from a ratio of $706 million to $4.3 billion during that period in 2008, says the Surety & Fidelity Association of America. In the first nine months of 2010, however, the surety industry incurred $654.5 million in losses on $3.9 billion in premiums, bringing loss ratios back in line with pre-recession figures.

Ed Littleton, vice president of risk management at Balfour Beatty Construction, Dallas, says that many subcontractors stayed solvent by feeding off of working capital built during the boom years. “A lot of contractors put on fat for the winter,” he says. “Working capital was at a good level going into this recession, and that has paid off for them.”

Littleton notes that contractors with significant fixed costs—such as fleets of heavy equipment or in-house production facilities—suffered the most, while most of those companies that could lay off labor survived. But in today’s economy, many subcontractors are bidding aggressively and could pay the price for those decisions in the near future, Nabor says.

“Everyone’s concern going into 2012 is that the backlogs of contractors are much more thinly priced than they were in 2008 and 2009,” Nabor points out. “So now, all of a sudden, we’re seeing escalations kick in. If defaults do happen, the ability to manage those defaults within the original contract value will be very challenging. The feeling is that you’re going to see a larger financial impact from potential defaults.” Read More.

Tax deductions for energy efficient improvements available to contractors

The General Services Administration (GSA) issued a reminder that the Energy Efficient Commercial Building Tax Deduction for government-owned buildings can be allocated to those who are responsible for the design, creating an incentive for contractors to exceed energy reduction requirements.

The deduction was authorized by the Energy Policy Act of 2005 and was extended through Dec. 31, 2013 by the Emergency Economic Stabilization Act of 2008. Contractors that wish to take advantage of the allocation of the deduction can submit a request to the agency that owns the building.

The Energy Policy Act provides a tax deduction for the cost of improvements that reduce energy and power expenses by at least 50 percent above the Energy Standard for Buildings Except Low-Rise Residential Buildings (ASHRAE 90.1) up to a maximum of $1.80 per square foot. A partial deduction of up to 60 cents per square foot is also available for improvements that don’t meet the 50 percent cost reduction threshold.
For more information on this deduction, visit the GSA website Here.

Thursday, 24 March 2011

Awards presented at 30th Annual State Construction Conference

The Frank B. Turner Award was presented to a career state employee and Certificates of Merit were awarded to designers and contractors during the 30th annual State Construction Conference at the McKimmon Center in Raleigh. Additionally, the Office for Historically Underutilized Businesses (HUB) presented five Good Faith Effort Awards to HUB leaders.

The event, which attracted more than 1,100 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 Frank B. Turner Award was presented to Frederick (Fred) A. Patrick, the Director of Facilities Design and Construction at the University of North Carolina at Greensboro. Given annually since 1983, it recognizes a state government employee for dedicated public service and outstanding professional contributions to the built environment. Before joining UNC-G, Patrick designed nuclear power plants and various other building types, including ski resorts in California and Colorado. At the University, he has overseen approximately $453 million dollars of new and renovated construction equating to over 5 million square feet.

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

Excellence in Project Implementation (Less than $5 Million): LS3P Associates LTD, and Harrod & Associates Constructors, Inc., for the VisitorCenter and Picnic Area, Raven Rock State Park, N.C. Department of Environment and Natural Resources, Division of Parks and Recreation

Excellence in Project Implementation(Greater than $5 Million): Hobbs Architects, PA, and Daniels & Daniels Construction Company, Inc., for the Visitor Center, Fort Macon State Park, N.C. Department of Environment and Natural Resources, Division of Parks and Recreation

The HUB Office presented five Good Faith Effort Awards to recognize outstanding HUB leaders. A new category, Industry/Agency – Individual Award, was introduced this year.

HUB Firm: Dr. Vinod K. Goel, President of A-1 Consulting Group, Inc. (formerly NFE Technologies), which has provided engineering and consulting services for more than 40 years, in recognition of its outstanding achievements as a historically underutilized business.

HUB Advocate: Zack Abegunrin, Associate Vice Chancellor for Facilities Management at N.C. Central University, in recognition of his dedication in promoting and advocating for historically underutilized businesses.

Professional Service/Construction Industry Company: Wexford/Whiting-Turner Contracting Company, joint venture, in recognition of its outstanding efforts for HUB Outreach and Utilization with the Piedmont Triad Research Park.

Public Sector Owner/Agency: Winston-Salem State University: Owen Cooks, Associate Vice Chancellor for Facilities, and Brenda Fulmore, HUB Coordinator, in recognition of its commitment to the State’s HUB Program and Utilization of HUB firms.

Industry/Agency – Individual Award: Mark Collins, Project Manager, Skanska USA Building, Inc., in recognition of his exemplary diligence and accomplishments in promoting the HUB Program. Read More.

Architectural Billing Index shows slight increase

The American Institute of Architects (AIA) reported the February Architectural Billing Index (ABI) score was 50.6, up slightly from a reading of 50.0 the previous month. This score reflects a modest increase in demand for design services. Any score above 50 indicates an increase in billings. The new projects inquiry index was 56.4, compared to a mark of 56.5 in January.

AIA said during the first two months of 2011 the ABI is not exhibiting the strength of business conditions that were seen in the final quarter of 2010. 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.

“Overall demand for design services seems to be treading water over the last two months,” said AIA Chief Economist Kermit Baker. “We’ve been preaching patience and cautious optimism for a full recovery because there continues to be a wide range of business conditions for architecture firms that are also influenced by firm size, practice specialties and regional location. We still expect the road to recovery to move at a slow, but steady pace.”

 Regional averages: Midwest (55.3), South (50.1), West (49.1), Northeast (46.4)
 Sector index breakdown: commercial / industrial (55.0), mixed practice (51.3),
 multi-family residential (49.7), institutional (48.9)
 Project inquiries index: 56.4.
Read More.

Wednesday, 23 March 2011

NC DOT wins federal funds for high-speed rail

The U.S. Department of Transportation made available $461 million this week for North Carolina to begin work on high-speed-rail projects. North Carolina moved up to fourth place among states that will spend federal money for faster passenger train service, reports the News & Observer.

The construction is expected to create 4,800 jobs over the next two years and cut the train time from Raleigh to Charlotte below three hours.
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"President Obama's historic vision for a national high-speed rail system will link 80 percent of Americans in the next 25 years and lay the foundation for an economy that moves people, goods and information more quickly, safely and reliably than anywhere else in the world," U.S. Transportation Secretary Ray LaHood said in a statement.

"We have made significant progress towards that goal with the signing of a cooperative agreement between USDOT and North Carolina DOT that makes $461 million available for the State of North Carolina to begin work on projects that will reduce travel times and increase reliability for rail passengers, create jobs, and spur economic growth."

Engineering News Record says the federal funds also will help the state buy and restore equipment to provide a third daily round trip between Charlotte and Raleigh and station upgrades in Cary, Burlington and High Point.

"With this agreement in place, North Carolinians will soon be working on 24 rail projects in 11 counties, including the construction of double tracks between Charlotte and Greensboro and 12 new bridges that will eliminate 30 highway-rail crossings," LaHood said. Read More.

Tuesday, 22 March 2011

Annual State Construction Conference to examine NC building concerns

There is still time to attend the March 24 Annual State Construction Conference at NC State University. For those who are unfamiliar with the conference, the conference brings together state agencies and institutions, architects, landscape architects, engineers, contractors, and subcontractors to discuss mutual concerns relating to the planning, design, and construction of state projects.

Topics for the 30th conference will include:

• Double payment of contractors
• NC Board of Examiners for Engineers and Surveyors
• HUB overview
• Pre-qualification of single prime contractors
• Geothermal
• Special inspections
• Life cycle cost analysis

Click Here for a copy of the current agenda

Click Here for the registration form

The Conference will be held from 8 am to 5 pm at the
McKimmon Conference & Training Center, NC State University, Raleigh. There will be be a free networking reception and expo sponsored by the Office for Historically Underutilized Businesses from 5 - 7 pm following the conference sessions. Click Here to register.

Builder confidence rises in March

After four consecutive months hovering at the same low level, builder confidence in the market for newly built, single-family homes improved by a single point in March, rising to 17 on the National Association of Home Builders/Wells Fargo Housing Market Index (HMI). This is the highest level the HMI has reached since May 2010, when the survey period corresponded with the final days of the federal home buyer tax credit program.

"While many home buyers are still holding off on making a purchase, builders did indicate slightly increased optimism about the future with a two-point gain in the HMI component gauging sales expectations for the next six months," added NAHB Chief Economist David Crowe. "In fact, prevailing indicators portend some improvement in the overall economy, which should generate modest housing market gains later this year." But, he added, "Unfortunately, most small builders report that they are no more able to obtain credit for new construction today than they have been in the past year, and this is a major impediment that is keeping them from putting their crews back to work."

Two out of three of the HMI's component indexes held unchanged in March, including the component gauging current sales conditions (holding at 17) and the component gauging traffic of prospective buyers (holding at 12). Meanwhile, the component gauging sales expectations in the next six months rose two points in March to 27, its highest level since May 2010.

Regionally, HMI results were mixed in March. While the Northeast posted a one-point decline to 20, the Midwest held flat at 12, the South gained two points to 20 and the West gained four points to 17. Read More.

Monday, 21 March 2011

Economists see improvements in commercial construction and home sales

The Charlotte region ended 2010 in a state of transition, stuck in an economic recovery that didn't feel like one, and in many ways, this year will deliver more of the same, economists say. The Charlotte Observer reports 2011 looks stronger than last year, and that more companies and consumers are taking note.

"While we've still got a lot of climbing left to do, there are more and more people who have begun that climb," said Rick Kaglic, an economist at the Federal Reserve in Charlotte. "It's a modest increase, but it's broad-based, and that's kind of the encouraging thing about it."

Local indicators from unemployment to home sales to commercial building permits point to a rebound early this year, after a stretch of setbacks in the second half of 2010. Home sales, for instance, rose 18 percent in January over the previous year, and foreclosures fell that month by nearly a third.

Kaglic and two other economists weighed in last week on the latest economic data from Mecklenburg County - and what it means for the year ahead. Last year was like a roller coaster, with the economy growing in fits and starts, due in part to government stimulus, Kaglic said. Looking forward, he expects the recovery to progress a little more evenly.

Employers have reported in recent business surveys more output and demand, and more firms are gaining the confidence to hire again, Kaglic said. That likely means a gradual improvement in the Charlotte area's unemployment rate in 2011, especially in the second half of the year, he said.

Wells Fargo economist Mark Vitner says there's some good news in the local economy, but also enough bad news to mean the recovery will remain painfully slow, Vitner said.

"It's not a fast enough pace so people without jobs can readily find a comparable job," he said. "... That makes it tougher for home sales and retail sales to bounce back all that rapidly." Vitner expects stronger job growth in 2011, particularly in finance, commercial real estate, leisure and retail. But he said it could take until the middle of the decade or longer to replace the more than 74,000 jobs the Charlotte region lost during the recession and to return to the sub-5 percent unemployment levels the area routinely experienced before the recession.

UNC Charlotte economist John Connaughton was more optimistic, saying the Charlotte-area economy has turned a corner. The number of unemployed workers has fallen, and jobs are slowly returning. Although lagging indicators such as falling residential building permits and still-troubling foreclosure rates continue to pose a problem, 2011 will bring more job opportunities and more confident consumers, he said.

That means people will be more likely to spend - and economists won't be called on as much to speculate on the region's outlook, a sure sign of improvement, Connaughton said. Connaughton expects the most job growth in the business and professional services, finance and health sectors, while jobs will remain scarce in manufacturing and construction. He said the NC unemployment rate is likely to fall to 9.5 percent by the end of the year, and while that's still well above prerecession levels, the drop will feel significant compared with years past.

Connaughton said it could take four years for the state to gain back the jobs it lost during the downturn. But for many local workers and businesses, the recovery will be well on its way before that. Read more.

Friday, 18 March 2011

Construction starts fall by 4 percent in February

At a seasonally adjusted annual rate of $404.9 billion, new construction starts in February fell 4% from the previous month, it was reported by McGraw-Hill Construction, a division of The McGraw-Hill Companies. Nonresidential building lost momentum for the second month in a row, and the public works sector retreated after its elevated pace in January.

Meanwhile, residential building in February was able to register modest growth. For the first two months of 2011, total construction on an unadjusted basis was $55.9 billion, down 9% from a year ago.

The February statistics lowered the Dodge Index to 86 (2000=100), compared to readings of 90 in January and 95 in December. For over a year, the Dodge Index has hovered between 80 and 96, with the average for all of 2010 coming in at 88.

“The pace of construction starts continues to fluctuate within a set range, as the gains for one month are taken back by weaker activity in subsequent months,” stated Robert A. Murray, vice president of economic affairs for McGraw-Hill Construction. “Compared to the declines witnessed from 2007 through 2009, the overall volume of activity has steadied in a broad sense, but this period of low-level stability is turning out to be extended. Given various countervailing factors in the environment, this fluctuation within a set range is likely to continue a while longer. On the plus side, job growth seems to be picking up, vacancy rates are beginning to recede, and interest rates remain low. At the same time, financing for construction projects from the banking sector has shown only modest improvement. And, the tough fiscal climate being faced by federal, state, and local governments has added further constraints to public construction programs.”
Read More.

Wednesday, 16 March 2011

Construction material prices escalate further in February

Financial pressures on contractors grew worse in February as prices for key construction materials rose sharply even as prices construction firms charge for completed projects remained stagnant, according to an analysis of producer price index figures released by the Associated General Contractors of America (AGC). Association officials said the price squeeze will make it harder for the construction industry to recover and urged federal officials to act on a series of recovery measures the group outlined.

“With construction spending hovering near a 10-year low, contractors are holding bids steady even while being hit with staggering price increases for key inputs,” said Ken Simonson, the association’s chief economist. “That combination threatens to add to an already appalling toll of laid-off workers and shuttered construction firms.”

Prices for materials used in construction leaped 1.1 percent in February and 6.1 percent during the past 12 months, while price indexes for finished buildings stayed nearly level during the same timeframe, the economist noted. He added that construction costs also outran the producer price index for finished goods, which rose 5.6 percent since February 2010.

Simonson said price increases were particularly intense for four essential construction inputs. Diesel fuel prices climbed 7.1 percent in February and 40 percent for the year; prices for copper and brass mill shapes increased 4.5 percent and 20 percent, respectively; steel mill product prices rose 4.7 percent and 13 percent, respectively; and prices for insulation materials rose 3.5 percent in February and 6.0 percent for the year.

Weak demand for both public and privately financed construction, which is driving up the number of contractors bidding on projects, is forcing contractors to hold the line on bid prices, Simonson noted. The producer price indexes for new office, industrial and warehouse construction rose less than one percent over 12 months and the index for new schools was up just 1.4 percent.

Association officials said the new data underscores the need for federal officials to act on a series of measures the group outlined in its new recovery plan, “Building a Stronger Future.” “Reviving demand for construction, particularly private sector construction activity, is essential to sustaining broader economic growth,” said Stephen E. Sandherr, the association’s chief executive officer.

View the latest producer price index tables for construction Here.

UNC Charlotte economist sees NC economy improving in 2011

North Carolina's economy will improve this year, though the recovery remains more anemic than anticipated, UNC Charlotte economist John Connaughton said in the Charlotte Observer.

He expects the state's economy to grow 2.7 percent this year compared to 2010, he said during his quarterly economic forecast. That's down from the 3.2 percent growth he predicted late last year. Still, it's better than the 1.3 percent expansion the N.C. economy likely experienced in 2010, Connaughton said.

"We have been able to struggle through 2010 without a double dip (into recession), but the sluggish economic growth during the past year really hasn't felt much like a recovery," he said.

Eight of the state's 11 economic sectors experienced growth last year, with agriculture, mining, services and retail posting the biggest gains, Connaughton said. But companies statewide added just 10,500 net jobs, an increase of 0.3 percent over 2009. That's not nearly enough to make up the more than 282,000 lost in the recession, he said.

This year, Connaughton expects output to increase in eight sectors and employment to grow in seven of the state's 10 nonagricultural sectors. NC companies will likely add 46,200 jobs in 2011 - in sectors such as wholesale trade, finance, insurance and real estate and retail - an increase of 1.2 percent over the December 2010 employment level.

But Connaughton predicts the unemployment rate to remain inflated, ending the year at 9.5 percent. Read More.

Monday, 14 March 2011

Contractors: Complete your contracts before starting work

Most contractors have heard on more than one occasion how important it is to execute a signed contract before starting work on a project. Failure to do so can result in a variety of contract claims and insurance coverage gaps. One unfortunate contractor learned that lesson the hard way, reports Contractors Risk Advisors.

In Zurich Am. Ins. Co. v. Illinois Nat'l Ins. Co., No. 105533/09, 2010 N.Y. Misc. LEXIS 6332 (N.Y. Sup. Ct. N.Y. Cty., Dec. 23, 2010), the Supreme Court of New York ruled that an excavation subcontractor who started work on a project before the contract was signed did not meet the definition of an "insured" under the wrap-up policy covering the project with respect to losses that occurred prior to enrollment. The OCIP policy defined "named insured" to include "[a]ll contractors and/or subcontractors and/or subconsultants for whom the owner or the owner's agents are responsible to arrange insurance to the extent of their respective rights and interests." However, it further defined "contractor" to include parties "who have executed a written agreement pertaining to said Contractors' performance of work at the Project Site, have been enrolled in the insurance program, and who perform operations at the Project site in connection with the Project."

The subcontractor (and its insurer, Zurich) argued that it was not unusual for construction firms to begin work while the paperwork is in process, and that its delay in getting the OCIP paperwork completed should not defeat the parties' intent that it would be covered by the wrap-up for its work on the project. The court rejected that argument, holding that the subcontractor's coverage under the wrap-up policy did not begin until the subcontract was signed and enrollment in the wrap-up was completed. There was, therefore, no coverage for pre-enrollment losses.

While this case was decided in New York, it serves as a reminder for contractors everywhere of the importance of getting the paperwork completed before bringing workers onto a project.

Whether your construction firm is working on a wrap up or not, it's important to always make sure the ink has dried on the contract prior to sending your employees and equipment to the job site. This lawsuit will be precedent setting, and in these trying economic times, it would be foolhardy to have an uninsured claim because of haste to get on a job site. Read More.

NC construction contracts down 22 percent to start 2011

The pace of new North Carolina construction contracts got off to a slow start in January, according to McGraw-Hill Construction, publisher of ENR Southeast. The company reported that the state registered approximately $908.5 million in new contracts during the month of January, down 22% from last January’s nearly $1.2-billion total.

All three of McGraw-Hill Construction’s project sectors showed double-digit declines for the month. The nonbuilding category, which includes infrastructure and civil contracts, fell 41% compared to the same period of a year ago, and recorded just $139.7 million in new volume.

Meanwhile, the residential sector tallied roughly $376.1 million in new January contracts, or 23% below the year-ago total of more than $486.9 million. Nonresidential contracts totaled approximately $392.7 million, or 10% behind last year’s pace. Read More.

Sunday, 13 March 2011

RSMeans detects a speedup on construction material prices; Charlotte building costs increase

According to RSMeans’ Construction Cost Index (CCI), which is based on an average of 30 major American cities, the expense of building in January 2011 increased 2.3% versus January 2010. The composite index gain was comprised of materials at +1.8% and labor at +2.9%.

Reed Construction Data Chief Economist Alex Carrick says, “recent evidence suggests the materials side of building costs is heating up”. The latest quarter-to-quarter gain in the overall index, October 2010 to January 2011, was +3.7% annualized. In Charlotte, materials prices speeded up considerably to +4.6% quarter to quarter annualized.

With respect to material inputs, some of the largest year-over-year cost changes came in concrete reinforcing (+10.9%), metal joists and decking (+5.5%) and tile and terrazzo (+6.4%).

Emphasis shifted in the latest quarter-to-quarter changes. Site and infrastructure preparation and demolition was +8.4% annualized; structural metal framing, +4.8%; metal joists and decking, +5.0%; glazing and curtain wall +3.9%; and fire protection, plumbing and HVAC +19.7%.

Higher prices for metals (e.g., copper at a record) are working their way downstream. Most important – due to oil’s usage in so many stages of the construction process – has been the jump in the world price of crude with the addition of a $10 to $15 USD per barrel risk premium.

For materials not as vulnerable to geopolitical conflict or separated from the emerging nations’ effect, change has been either more moderate or in the opposite direction. For example, quarter-to-quarter concrete forming prices in the latest period were -9.3% annualized; precast concrete, -9.7%; plaster and gypsum board, -14.7%; and ceilings and acoustic treatment, -4.9%.

In the U.S., the cities with the highest construction costs relative to the country as a whole are mainly the biggest centers, including most-expensive New York, followed by San Francisco, Oakland, Boston and Chicago. RSMeans ranked Charlotte as havng the lowest construction costs for the 51 cities studied -- 76.8% of the national average. Read More.

Thursday, 10 March 2011

NC construction employment declined 7.7 percent over past year

The Associated General Contractors of America (AGC) reported North Carolina, and South Carolina experiencing large overall declines in construction employment between January 2010 and January 2011. North Carolina lost 13,900 jobs (-7.7 percent) and South Carolina lost 4,700 jobs (-5.9 percent).

Thirty-six states lost construction jobs between January 2010 and 2011, even as more states added construction jobs than lost them between December and January, according to an AGC analysis of state employment data released by the Labor Department. Association officials cautioned that despite the increase in monthly employment, the construction industry is still facing severe economic headwinds.

“It is encouraging to see more states adding jobs instead of losing them between December and January,” said Ken Simonson, the association’s chief economist. “Yet despite those monthly gains, we’re still a long way from seeing the kind of construction employment figures states experienced in 2006 and 2007.”

Harsh winter weather affecting much of the country in January likely contributed to some of the annual and monthly state job losses, Simonson cautioned. Among the 20 states losing construction jobs between December and January, are North Carolina (-5,100 jobs, -3.0 percent) and South Carolina (-3,600 jobs, -4.6 percent)

Association officials said the new construction employment figures indicate that more needs to be done to help the construction industry recover. They noted that the association was planning to release a comprehensive set of recommendations on March 15th designed to boost private sector demand for construction, help the nation address the infrastructure deficit and cut needless regulations and red tape.

“Allowing this industry to continue to stagnate will have significant long-term impacts on the strength of the labor market and the quality of America’s private and public buildings and infrastructure,” said Stephen E. Sandherr, the association’s chief executive officer.

View construction employment figures by state Here.

Lawmakers seek public input on regulatory reform; first meeting scheduled for Friday in Wilmington

The Joint Committee on Regulatory Reform, chaired by Senators Harry Brown (R-Jones) and David Rouzer (R-Johnston) and Representatives Marilyn Avila (R-Wake) and Pat McElraft (R- Carteret), announced a statewide listening tour to receive feedback from the public on burdensome state regulations.

The committee is tasked with scrutinizing all state regulations on the private sector and targeting outdated rules and regulations that should be eliminated. It is comprised of nine Senators and nine Representatives, appointed by Senate President Pro-Tem Berger and Speaker Tillis, respectively.

Carolinas AGC NC Building Division Director Dave Simpson said "It's imperative that our state leaders hear from the construction industry on regulatory reform. Reducing red tape will allow contractors to focus on their companies and employees."

Simpson added, "It is also important for you to let it be known that providing construction funding is the way to stimulate North Carolina's economy and provide jobs. Every $1 billion invested in design and construction creates or sustains 28,500 jobs at a time when the unemployment rate in the state's design and construction industry is over 20 percent."

The first meeting of the joint committee is scheduled for Friday, March 11 in Wilmington. It will take place from 1:00 to 3:00 p.m. at the downtown campus of Cape Fear Community College in the McLeod Building, room S-002. This meeting will be open to the public and the media. Those interested in making a brief (1-2 minutes) statement to the committee are encouraged to arrive at 12:30 p.m. in order to sign up in advance. Additional meetings of the committee will be scheduled across the state in Charlotte (3/21), Greensboro (3/28), Greenville (4/4), Hendersonville (4/18) and Raleigh (4/21). Details TBA at the committee's website www.ncleg.net/regreform.

The committee's website will house a web-based submittal form as a tool for collecting public input, as well as an email address for those that cannot attend meetings but would still like to submit comments (or for those who do attend and want to submit additional comments or materials). The public email address is regreform@ncleg.net. Read More.

Winner of the Most Popular Construction Blog announced

Voting ended this week for the 2011 Most Popular Construction Blog. Michael Stone’s Markup and Profit blog was the winner followed by Melissa Brumback’s Construction Law in North Carolina blog.

The competition was sponsored by Mark Buckshon, Group Publisher of Construction Marketing Ideas, Design and Construction Report and North Carolina Construction News. Mark will announce the judges decision on the 2011 Best Construction Blog in the next on-line edition of Design and Construction Report with a detailed report on the finalists.

To view the list of the most popular construction blogs finalists, Click Here.

Wednesday, 9 March 2011

How 'green' is your construction firm?

Greensource Magazine reports the Boston-based Green Roundtable has produced a new “green” certification for design and construction firms. The program recognizes firms that have the institutional capacity to deliver consistent, high-quality sustainability services and projects.

Recently piloted in the Boston area and now available nationally, it includes 64 required credits and 15 optional credits that provide a roadmap for further improvement.

Tova Greenberg, director of business development at Green Rountable's Sustainable Performance Institute (GRT), says that the goal of the program is to provide top firms with a mechanism to differentiate themselves while helping other firms assess and address gaps in their sustainability capacity.

The certification process includes an initial assessment, internal and external surveys, and an audit that assesses specific projects and documentation of credit compliance. The entire process can take from three months to one year, giving firms time to fill in gaps. Successful firms are designated “Green Firm Certified.”

Following certification, firms participate in an annual “spot check” for two years, and in the third year the certification process is repeated. Firms that fulfill the criteria but need more time to collect sufficient data will earn “Provisional Certification,” which is reevaluated in six months.

Overall categories include: leadership, strategy, and policy; project delivery; infrastructure and support systems; partnering and collaboration; and outcomes and metrics. Optional credits provide guidance for future improvement; one example is creating company policy to adopt “formal partnering” to foster communication and address sustainability challenges. The first version of the standard is open for public comment on GRT’s website.

Greenberg has observed two main motivating factors for firms thus far: “to tout their accomplishments or increase the level of sustainability in the firm, or both.” While it does not conform to the full suite of ISO or ANSI criteria defining a true third-party certification—falling short mainly because GRT offers both auditing and consulting—it is an important first step to improving, verifying, and rewarding true firm capacity to deliver sustainability services. Read More.

Tuesday, 8 March 2011

NCMBC offers free military contracting workshops

With 2011 slated to set a second consecutive record in construction expenditures aboard Camp Lejeune, New River and Cherry Point, staff with the North Carolina Military Business Center will visit Fayetteville (3/10), Charlotte (4/4) and Cary (4/5) to help give local contractors an edge in securing the available work.

Training will focus on source selection, with administrators discussing the factors on which the government evaluates contractors and how to correctly compile an application for a work contract. Talks will also cover the post-award process: How to properly execute the work and better ensure being chosen for subsequent contracts.

NCMBC’s program manager for the military construction initiative and a teacher of the course, Sue Kranes, said she was uniquely able to assist potential government contractors as a former chief of acquisitions for Naval Facilities Mid-Atlantic.

“The contractors that we have been working with have won federal contracts under some of the guidance that we provide,” she said. “We try to help contractors with their proposals prior to submission, and we also do a lot of partnering joint venturing so we’re hooking up other firms, the right firms. We provide a lot of guidance and training form that perspective. Our success rate, I believe would be how many contractors have won contracts, and we’ve had quite a few.”

Center executive director Scott Dorney said the additional training reflects the increasing amount of work available at local bases. Camp Lejeune, New River, and Cherry Point received $810 million in federal military construction funding in the 2010 fiscal year, exceeding 2009’s funding by nearly a quarter. This year is expected to set another record, with $850 million worth of construction projects planned.

“We’ve got NC contractors who need to have the pre-award skills right now. Doing the work is only half the battle; you have to be able to win the work,” Dorney said. “Then, we want them to perform well on their post-award skills so that their first contract won’t be their last.”

Following the training, Dorney said the center provides a spectrum of services to assist local businesses throughout the process of securing and completing government work. While the training is free, pre-registration is required. To register for the event, click here.

Monday, 7 March 2011

Raleigh named healthiest housing market for 2011

According to Builder Magazine, Raleigh is the place to be if you are in construction this year. The magazine ranks metro areas based on a system called the “Builder Healthy Markets Index.” It factors in home prices, employment, household formation and income.

Tim Minton, the Home Builders Associations’ executive vice president in Raleigh-Wake County, explained how Raleigh is thriving in today’s market. He credited many of the positive accolades that the area has received with attracting business, as well as the area’s home builders’ ability to deal “with manageable inventory levels” and respond well to the “changing demand of the market.”

The magazine reports Raleigh builders sense that their market may be in for something big--building permits increased 85% last year to 8,600, with much of the strength on the multifamily side. But single-family permits increased as well as builders took stock of improving market conditions.

The market was hot enough that existing home prices rose 4% in 2010, though they are expected to fall 10% this year due to a spreading foreclosure problem. But excess inventory may be absorbed quickly, because households are still moving in large numbers to Raleigh, drawn by its temperate climate and good employment prospects. Raleigh continued to add jobs last year, especially in services, lowering its unemployment rate to 8.4%.

Other NC cities on the top 20 healthiest housing market list include: Durham-Chapel Hill (3) and Wilmington (16). Read More.

Sunday, 6 March 2011

Construction adds jobs in February

For the first time in six months, the nation’s construction industry added jobs in February. According to the March employment report by the U.S. Labor Department, 33,000 jobs were created. However, on a year-over-year basis, construction employment is down by 24,000 jobs, or 0.4 percent.

“Unfortunately, nonresidential building construction continued to shed jobs, losing 2,000 for the month. This segment of the construction industry remains stubbornly resistant to improvement due to a combination of high vacancy rates and cautious lending,” said Associated Builders and Contractors Chief Economist Anirban Basu.

The construction unemployment rate stands at 21.8 percent – more than twice the national average. However, unemployment is down from 22.5 percent in January and down from 27.1 percent the same time last year.

Hardest hit was the nonresidential building construction sector which lost 2,000 jobs in February, but is up by 3,500 jobs year-over-year as employment in that sector stands at 654,100 jobs.

Heavy and civil engineering construction gained 4,500 jobs in February and 26,600 jobs, or 3.3 percent, over the last twelve months. The specialty trade contractor sector added 16,700 jobs for the month and 11,500 jobs, or 0.6 percent, year-over-year. This represents the first year-over-year increase for the sector since June 2008. Residential building construction employment increased by 2,200 jobs in February, but is still down by 20,000 jobs, or 3.4 percent, from the same time last year.

Overall, the nation gained 192,000 jobs in February with 222,000 jobs added in the private sector and 30,000 jobs lost in the public sector. Year-over-year, the nation has added 1,269,000 jobs, or 1 percent. The national unemployment rate now stands at 8.9 percent.

“While nonresidential building construction employment is likely to improve going forward, particularly as the balance of the nation’s economy gathers momentum, there is little reason to believe conditions will improve markedly in 2011,” Basu said.

“Still, overall construction employment totals should pick up gradually over the course of the year. But it’s clear that cold weather and snow had served to interrupt the momentum that had been building over the past six months,” said Basu. Read More.

Thursday, 3 March 2011

Obama signs Highway-Transit Fund extension

In a move that will provide some stability for transportation construction, President Obama has signed legislation to extend federal highway and transit programs through Sept. 30, the last day of the 2011 fiscal year. Final congressional approval of the bill came on March 3, when the Senate passed it on a voice vote. The House had approved the measure one day earlier.

The bill is the seventh stopgap highway-transit authorization since Sept. 30, 2009, when the last multi-year statute, the 2005 SAFETEA-LU law, expired.

Construction and state transportation officials would have strongly preferred to see Congress approve a much longer bill, but the new extension provides more funding predictability than the previous six short stopgaps did.

John Horsley, the American Association of
State Highway and Transportation Officials'
executive director, said the new extension also gives the House and Senate a "window of certainty" to allow lawmakers to "focus on drafting the legislation to fund the program long term." He added, "Now we set about the hard work of getting a multiyear reauthorization in place later this year."

Senate Environment and Public Works Committee Chairwoman Barbara Boxer, D-California, said in a statement that the seven-month extension of Fiscal Year 2009 funding levels for highways and mass transit will save and create jobs in the construction industry and help get the economy back on track.

"With the construction season upon us, this extension is especially important because it will give states the certainty they need to award contracts and get projects underway," she said. "This will help ensure that jobs are saved and created across the country. I am continuing to work with my colleagues from both sides of the aisle on a new surface transportation bill for the 21st century. Our goal is to get this legislation enacted by the end of this year."

Read More.

Vote now for the 2011 Best Construction Blog

Voting concludes at 5:00 p.m. on Monday, March 7 for the 2011 Best Construction Blog competition. As polling reaches the home stretch, Michael Stone’s Markup and Profit blog is in the lead followed by Melissa Brumback’s Construction Law in North Carolina blog.

The competition is sponsored by Mark Buckshon, Group Publisher of Construction Marketing Ideas, Design and Construction Report and North Carolina Construction News. Mark will announce the overall best construction blog by March 15, and provide a detailed report on the competition and finalists.

To vote, click Here. Feel free to vote for as many blogs as you like. Read More.

Wednesday, 2 March 2011

Construction spending nears decade-long low

The Associated General Contractors of America noted drops in nearly all private nonresidential categories offset small public gains, in an analysis of new Census Bureau data. Construction spending slumped 0.7 percent from $798 billion in December to $792 billion in January, the second-lowest seasonally adjusted annual rate since July 2000. Association officials noted that nearly every private nonresidential category plunged, offsetting pickups in some residential and public nonresidential segments. They added that since January 2010, construction spending has declined by 5.9 percent.

“These discouraging figures show that millions of construction workers and their firms are still suffering from the economic downturn, despite a year and a half of growth in the overall economy,” said Ken Simonson, the association’s chief economist. “Other than an uptick in the construction of truck terminals and railroad facilities, private sector demand for construction remains extremely low.”

Simonson noted that private nonresidential construction sank 6.9 percent from December and 13.2 percent from January 2010 levels. He added that the figures for public construction were more positive, up 0.1 percent for the month and 2.9 percent for the year, largely thanks to ongoing federal spending for stimulus, military base realignment projects and hurricane prevention and recovery work. He warned, however, that much of this temporary work would dry up later this year. As a result, Simonson predicted that public construction spending was likely to decline in 2012, if not sooner.

Association officials urged leaders of the 112th Congress to act quickly so that federal programs to invest in transportation and water infrastructure do not lapse. Stephen E. Sandherr, the association’s chief executive officer, noted that federal highway, transit and airport funding could expire this month, throwing thousands of construction workers out of jobs. “The last thing taxpayers need is the extra cost of adding thousands to the unemployment rolls and the penalties associated with walking away from half-completed construction projects,” Sandherr said. Read More.