NEWSLETTER

 
Enter your email:

Construction Topics

GENERAL TECHNICAL KNOWLEDGE

SITE WORK

CONCRETE

MASONRY

METAL

CARPENTRY & WOOD

THERMAL & MOISTURE

DOORS & WINDOWS

FINISHES

SPECIALTIES

EQUIPMENT

FURNISHINGS

SPECIAL CONSTRUCTION

CONVEYING SYSTEMS

MECHANICAL

ELECTRICAL

PEOPLE SKILLS

JOBSITE MANAGEMENT

ADS

Become a FB fan


Construction Network


Trades Hub

CONSTRUCTION KNOWLEDGE BLOG

January 12, 2012

A Big Bet on High Tech Cluster in NYC
Filed under: Industry outlook — Tags: — nedpelger

Michael Bloomberg was a tech entrepreneur prior to being mayor of NYC. Last year Bloomberg solicited RFPs from universities to develop a high tech campus on city owned land with $100M of public money thrown into the mix. I love that kind of big thinking, it’s part of what made America great.

For example, when the Erie Canal connected the Great Lakes to the Hudson River, which was considered a huge boondoggle by many at the time, everything changed for NYC. Within 15 years, the NYC port became the largest in America by far. NYC hopes the high tech campus will be another Erie Canal moment.

Cornell University won the competition by teaming with Technion, an Israeli technology institute. They plan to build 2M sf at a cost of $2B (that’s right, $1,000/sf).  The 11 acre Roosevelt Island site is only one subway stop from mid-Town. When Bloomsburg announced the Cornell-Technion award, he said, “By adding a new state-of-the-art institution to our landscape, we will educate tomorrow’s entrepreneurs and create the jobs of the future”. They are projecting 20,000 construction jobs and 8,000 permanent jobs.

Cornell’s bid was further sweetened by a $350M donation from the Atlantic Philanthropies (the largest donation in Cornell’s history). It’s wonderful to see parties converge on a big idea and do what it takes to make it happen.

I see my customers taking similar steps (on a reduced scale) and making some big decisions to move forward on various projects. It’s a good sign for America’s future…and for mine.

CONSTRUCTION KNOWLEDGE BLOG

November 14, 2011

Building without Infrastructure: It’s a Crappy Endeavor
Filed under: Industry outlook — Tags: — nedpelger

When Americans sit down on the toilet and “Drop off the kids at the pool”, they rarely give thought to where that fecal matter goes. We have laws, regulations, municipalities, engineers and sanitary workers that take care of our dirty business. We rarely appreciate them.

I remember my first trip to Haiti and the surprise at seeing the swale along the side of the road operating as an open sewer trench. Seeing toddlers playing in the fluids made me more fully appreciate being an American than anything else I can recall.

So when BoingBoing did an article about the world’s largest building, the Burj Khalifa located in Dubai, hauling all their sanitary sewage away in tanker trucks, I was amazed.

These trucks not only have to pick up the sewage daily from the holding tanks, but the Dubai municipal sewage treatment plant has a truck cue that can last 24 hours to get the dump accomplished. Imagine the logistics of such a line. Do you need two drivers, one to inch the truck forward and the other to sleep?

Remember that big construction boom locations like Dubai often end like a game of musical chairs. While the music plays, everything moves along, but the end of the music brings an abrupt transition…where a chair you anticipated isn’t available. As you contemplate your projects and your career, don’t forget to factor the boom and bust nature of construction into your decisions.

CONSTRUCTION KNOWLEDGE BLOG

November 10, 2011

Housing: Get Ready for a Quick Bust to Boom Transition
Filed under: Industry outlook — Tags: — nedpelger

With everyone writing about all the excess inventory in the housing market and how the recovery may be years away, check the facts. The housing boom up till 2008 wasn’t as spectacular as seems to be remembered and the current bust goes way beyond what logic dictates. The Economist chart below shows it clearly. With 1.5M new houses built every year as the average, look how the 2007 peak isn’t as outrageous the 2010 valley.

On the other hand, with home prices 30% below their peak in 2008, the confidence of potential home buyers has been battered. The overall pessimism about the housing market, though, seems over-stated.

Remember, the housing market often revs up fast. With all the pent up demand (several years of adult kids staying with parents and not moving out, folks not upgrading that can afford to, etc) the construction starts, sales and then pricing may escalate quickly.

Another sign in favor of a quick bust to boom transition involves the value of renting vs owning in the last few years. The Economist chart below indicates that the value proposition to purchase has improved significantly in the past year. Rents have gone up and mortgage rates and house prices have dropped. So buying a house looks wise today.

The theory I’m spouting above jives with what I’m seeing in the field. The local housing contractors have all taken off on a tear of new construction. As long as Europe doesn’t implode, a big if I’m afraid, it looks like the housing market may surprise the media and make a big move. Don’t let it surprise you. Take some time to think strategically about how you can use this info to your advantage.

Here’s a simple challenge. If you’re unsure about taking any action, just jot down in writing what you would consider doing if you had the gumption. Look at it in a few weeks or months and learn something. We get better about making strategic decisions by making (or practice making) them and tracking the results.

CONSTRUCTION KNOWLEDGE BLOG

November 2, 2011

Gov’t in Construction: A Confederacy of Dunces
Filed under: Industry outlook — Tags: — nedpelger

Beacon Power Corp, which previously received a $43M US Dept of Energy loan guarantee, just filed for bankruptcy protection. Beacon developed a 20 MegaWatt flywheel storage facility in upstate New York to help manage electrical grid power fluctuations. LeChase Construction, Rochester NY, built the New York plant and hasn’t received final payment, making them the largest creditor. The photo below gives a sense of the facility.

Beacon Power had also received a $24M Smart Grid stimulus grant to build another 20 MegaWatt flywheel storage facility in Hazle Twp, PA. Since Beacon was still searching for financing for that facility, I assume it won’t be proceeding.

The US Government’s recent record on project funding has had some spectacular flame-outs. The most famous being Solyndra, which received a $535-million Dept. of Energy loan guarantee to make solar panels and filed for bankruptcy in September. As an added kicker to that story, the news today noted that the Solyndra former CEO was given about a half million dollar severance package.

Now I understand that many venture capital firms select losing projects, that the skill in picking a winner is far from a science. For that reason, though, the government shouldn’t be in the VC business. When the government tries to direct businesses with grants and loan guarantees, markets distortions occur. Solar panels all over Germany, which has so little sunshine, tend to be the result. Similarly, corn ethanol in the US, which raises food prices (putting many into poverty) and does nothing to improve the fuel balance.

On a more local note, I spoke last week to a buddy working as a bridge carpenter. He is helping construct a new bridge that boggles his mind in terms of complexity and uselessness. He sees the government simply spending cash for the sake of creating jobs. What a shame when so many bridges and other infrastructure projects really need to be completed.

I propose a merit based government funding process. To begin, the government stays out of VC type funding. A market already exists to fund entrepreneurs and the government can only pollute that process. The infrastructure funding, though, needs to be done by the government, but could be done in a non-political way.

The politicians would decide the amount to go into the pot for annual spending. An independent technical committee would evaluate projects in some double blind way and select those that deliver the most value. Then the politicians could vote only yes or no on the funding package.  Merit project funding could be one of the changes that helps America get back on the right track.

CONSTRUCTION KNOWLEDGE BLOG

September 21, 2011

Glassdoor.com Gives Employees an Advantage over Employers
Filed under: Industry outlook — Tags: — nedpelger

In the past, construction employers have had tremendous advantages compared to construction employees. That’s one of the reasons construction unions started and have continued. Since the skills needed for all levels of construction work are difficult to test and clarify, highly competent employees contemplating job changes struggle with how to convince potential employers of their sterling skill set.  So many excellent construction employees continue to work for the same firm, even when not treated well.

Now I’m a free market fan, believing that the world’s better off if we can all concentrate on doing what we do best. Yet I don’t like the bumpy playing field that gives construction employers too much power in the employment negotiation. So, when I found this Glassdoor.com website, I was intrigued. Launched in 2008, the site provides info on 120,000 companies worldwide. Employees and former employees can anonymously share their perceptions of the company, salary levels and even oddball interview questions.

For example, I looked up Kinsley Construction in York, PA and saw an interesting review. To make this site really work, though, more folks in construction need to join and submit reviews. It’s free and anonymous and only takes a few minutes. I challenge you to check it out, rate your current and past employers. Strike a blow for employee power in the construction world.

CONSTRUCTION KNOWLEDGE BLOG

September 6, 2011

Knowing Where the Money Is
Filed under: Industry outlook,People Skills — Tags: — nedpelger

When Willie Sutton was asked why he robbed banks, he replied, “Because that’s where the money is.” When thinking about construction work, learn to know where the money is.

Yesterday, an old friend stopped by and told me about his good job with a local CM firm. The owner of this large and multi-faceted construction outfit predicts 2012 will be the worst year we’ve ever endured. My friend plans to retire next year (I think he’ll be 62) and start a small consulting business helping banks and bonding companies close out projects of bankrupt contractors. My friend has some other job opportunities available and stated something I’ve always thought, “For good guys, there’s always work.”

He also mentioned that his firm had nailed a couple of large sewage treatment plant projects and had been looking for capable project superintendents to run those projects. They have been unsuccessful in finding any first class supers with appropriate experience. The firm had previously paid some headhunters huge commissions for supers that didn’t work out.

So here are a few great opportunities for the right folks. Here are a few pots of gold, but how do you find the rainbow to follow?

Of course, you can keep checking Monster.com for construction job postings, though that site isn’t particularly construction focused. You can also think deeply about whether you’d be willing to relocate for a great job…or for any job. If you’re willing to move, you have a whole world to study for opportunities.

An article in The Economist shows the amazing clout the emerging economies now have. For example in 1990 the emerging economies made up less than 20% of the world GDP. In 2010, the emerging economies account for almost 40%, compared to the developed economies. The graphic below shows many other fascinating trends.

Steel consumption and copper consumption are both already at 75% for emerging economies. Let’s assume lots of those materials go into manufacturing, but factories need to be built to get that done. So even though construction, like politics, tends toward the local, your experience and skill set may be in demand in the international community. Give it some thought.

If you excel in your job, effectively completing projects on time and with profits, meeting all the performance goals, you should still be in demand. If you’ve limped through your career, putting in the least amount of effort to get by, you’re probably already reaping what you’ve sown. So I’m talking to the life long learners, the high performers when I say: don’t get discouraged, start doing rainbow research to see where the construction gold pots reside. Then go get yourself one.

CONSTRUCTION KNOWLEDGE BLOG

August 30, 2011

US Housing Market Really is That Bad
Filed under: Industry outlook — Tags: — nedpelger

This graph in The Economist illustrates how bad the American housing market has become. The housing market historically hangs around 5% of the Gross Domestic Product (GDP), but the chart below shows our current doldrums.

I thought the take away line in The Economist article “The Economy’s Prospects: Waiting for the Earth to Open” was:

Whether recession is avoided will therefore depend heavily on luck and the wisdom of policymakers.

Are you feeling lucky?

You know what? For some odd reason, I think I am.

CONSTRUCTION KNOWLEDGE BLOG

August 29, 2011

The Changing Times
Filed under: Industry outlook — Tags: — nedpelger

The photo below by Chicago-based industrial photographer James Kay (click on it to really see the details) makes me think of two competing thoughts. On the one hand, there really is nothing new under the sun. This beautiful bell tower built in Cologne, Germany required all the wits the builders could muster. It’s complicated and precise, working good and looking good.

On the other hand, our newest challenges in design and construction push us to build more, better, faster and for less…as well as modeling it digitally to increase the long term investment. As we work for our current clients, we should be striving to provide value like the bell tower builders provided, but consistent with today’s environment.

Whether we do 3 D drawings, Building Information Modeling that ties into long-term operations, or just great as-builts, we need to be looking to the long term value we provide our Owners.

CONSTRUCTION KNOWLEDGE BLOG

August 9, 2011

Don’t Do Doom
Filed under: Industry outlook,People Skills — Tags: — nedpelger

The cover of this week’s Economist magazine asks if it’s time for America to take a double dip into recessionary waters.

The stock market looks like the first half of any Rocky movie. America’s politician’s go on vacation after acting like spoiled children and being reprimanded by S&P. Finally, and most importantly for those of us in the private construction world, banks seem to have forgotten the part of their business that includes lending money for real estate projects.

So what’s a poor boy to do? I look to G.K. Chesterton, a brilliant writer from a hundred years ago, for some perspective. He defines doom as, “The oldest of all the Demons, who has always blighted mankind with superstitions of the destiny and death of the races.” So don’t fall for the Doom. Just don’t do doom.

America isn’t over. Our time hasn’t passed. Yes, we live in a time of fast changes and systems will not be like they were. That’s good, though, we need the challenge. Fat and happy usually isn’t really happy. Focused and striving works so much better.

Consider a piece of construction related news that reinforces my assertion that America’s demise has been called too soon. Two high speed trains crashed in China, killing 40 and injuring 191. If you recall, I’ve blogged previously about China’s high speed rail push. The Communist Chinese leaders pushed the high speed train lines, without any market demand, as a pet project. Most workers can’t afford the fares, so the ridership has been disappointing. Now the safety record has also been besmirched.

Suddenly, China’s directed economy looks a lot less bullet-proof. Citizens are angry and the media (supposedly state controlled, but showing some gumption) also demands answers for the boondoggle. So don’t be too enamored of the “Bejing Model”. In the end, America’s topsy-turvy representative republic will prove a better system.

If some challenging times are coming your way, don’t despair. Life will give us all some struggles. Just do the things you know you should do and let go of the things that are beyond your control. Get up in the morning and plan a great day. Strive to live every moment of it and you’ll be fine.

Finally, remember my favorite G.K. Chesterton definition: “Death: a distinctly exciting moment.”

CONSTRUCTION KNOWLEDGE BLOG

July 27, 2011

Expect Construction Bankruptcies to Peak this Fall
Filed under: Industry outlook — Tags: — nedpelger

I had dinner last night with a wicked smart friend who advises lots of construction companies. I mentioned my surprise that more firms haven’t gone bankrupt in this recession. His response seems worth sharing:

  1. A few years ago, many privately held firms had the principals no longer guaranteeing their loans with their personal assets. The banks have gotten more aggressive and now most principals have their homes and personal savings on the line. So banks know that company owners have all their skin in the game.
  2. Banks have a limited number of “work-out specialists” and started with the worst problems first. Lots of construction companies were down on the list, in default of loan provisions but blaming the economy.  Banks are working through their lists of problem loans and getting to more construction companies. The excuse of a bad economy holds less weight as each year passes.
  3. Many construction firms had a dismal 2009, but thought 2010 would be much better. It often wasn’t. Then the hopes were thrown to 2011, which has been better for some but certainly not a big recovery year. Many banks will look at the upcoming down winter cycle and a 2012 that may not be much different than 2011, they will often conclude that the firm should close in the Fall of 2011.
  4. Site work companies and other firms with substantial construction equipment assets may follow a different logic. Since the asset value remains so low for the construction equipment, the banks may encourage those firms to continue operating if they can avoid going much further in debt. It’s likely that the construction equipment will be worth considerably more a few years in the future.

So, if you are subcontracting work, be especially vigilant this fall. Construction firms that close are like people drowning. They will grab anyone nearby and try to push themselves to the surface. Don’t expect integrity, even if you experienced it with the same folks previously. Think desperate times and unethical measures.

If you’re thinking of starting your own construction related business, pay particular attention to what’s happening with competing firms in your local area. The death of one firm becomes an opportunity for another. It’s just basic ecology.

Finally, remember to be thankful that we live in exciting times. In a boom economy, anyone can make money. Now you get a real chance to prove yourself. How’s that for half-full thinking? Maybe half-fool thinking? You decide.

Give me some comments here.

« Newer Posts — Older Posts »