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CONSTRUCTION KNOWLEDGE BLOG

January 21, 2011

The Price of Meat has Just Gone Up and Your Old Phone has Just Gone Down
Filed under: Industry outlook — Tags: — nedpelger

Paraphrasing Frank Zappa from “Don’t You Jive Me with That Cosmic Debris“, I just saw a useful post about things that will cost less in 2011 and things that will cost more. These two posts should help you with your planning for the year.

The 12 Things that will Cost Less in 2011 illustrates some fascinating trends. For example, the Kindle book reader cost $259 in 2009, $130 in 2010 and should get to $99 in 2011. A 2 TerraByte (TB) hard drive went from $140 in 2009, to $90 in 2010 and should get to $50 in 2011. For $50, you could never have to worry about computer storage quantities again.

How about things going up? The 20 Things that will Cost More in 2011 also is worth the read. Car Insurance, Chocolate, Airfare, Cars, Food, Water, Gold, Ammunition and Movie Tickets are a few of the culprits. The fast food dollar menu items will soon be only a memory. And of course, postal rates and college tuition will continue their extended run above inflation rates.

What about construction pricing? Can it go down any further? I really doubt it. Lots of firms have been working below costs for the past two years. As these firm slide into bankruptcy, the cost of construction will rise. So the secret is…don’t go bankrupt before it gets better.

It’s like the Steve Martin joke about how to make a million dollars and not pay taxes. First, get a million dollars. Then, when the IRS agent knocks on your door and asks why you didn’t pay taxes, just say, “I forgot.”

CONSTRUCTION KNOWLEDGE BLOG

January 20, 2011

US Homebuilding: It Really is That Bad
Filed under: Industry outlook — Tags: — nedpelger

In a healthy economy, US residential contractors build 1.5M single family homes a year. The last two years have been the worst since 1959. In 2009, homebuilders broke ground on 554,000 homes and in 2010 they improved slightly to 587,600 homes. Not many industries face volumes dropping to about 1/3 of previous levels.

The unemployment level in construction dropped to about 21% in December, which is surprisingly low compared to the volume drop described above. Of course, the US construction business is more than single family housing. Apartment construction continues to go well as does the public work sectors.

Unfortunately, the construction market for 2011 and 2012 looks bleak. The spending and lending problem hasn’t gotten resolved. Consumers hesitate to spend due to uncertainty and banks to lend for the same reason. The tight state budgets  will also dampen public works for the foreseeable future. Of course, the poor job by banks and the courts to resolve foreclosed properties and get them back into the market further prolongs the pain.

On the bright side, no one really knows what the economy will do next. Remember the words of the old contractor that I have in listed in ConstructionKnowledge.net, “When things are really, really bad, don’t get too excited…’cause they’ll get good again. And when things are really, really good… don’t get too excited….’cause they’ll get bad again” .

CONSTRUCTION KNOWLEDGE BLOG

January 18, 2011

Are We That Bad at Innovation?
Filed under: Industry outlook — Tags: — nedpelger

I was reading a Nadine Post article in ENR. She’s my favorite construction writer and so often provides useful info in a compelling manner. She described some prefabrication of hospital construction components in Europe, then stated:

But that’s no surprise: When it comes to innovation, Europe leads and the U.S. follows. However, just because something has been done in Europe doesn’t mean it is easy to accomplish here.

The portion of that statement that I put in bold lettering above just annoyed me. I thought, “That’s not true. How can she make such a sweeping statement? I’m going to send her an email and show her why that’s wrong!” Then I tried to think of examples of construction innovation in the US. Drew a blank. How about examples in my own construction business? Drew mostly another blank.

I considered the change from the old energy hog T12 fluorescent light fixtures a few years ago to the efficient T8, now to the super-efficient T5. But that hardly counts as innovation. The green building approach doesn’t really pass muster as innovation either, being a mix of common sense good design or just trendy ideas. Besides, just specifying an updated product really doesn’t constitute construction innovation. Improvements in the way we actually build or deliver the project would be construction innovation.

With few exceptions, we mostly build things the same way we did 30 years ago when I started as a project engineer on sewage treatment plant projects. Or do we? Do you think we’ve progressed with construction innovation in the past few decades? Can I tell Nadine she’s wrong?

CONSTRUCTION KNOWLEDGE BLOG

January 17, 2011

Rule Change in US Congress will Drop Road and Bridge Spending
Filed under: Industry outlook — Tags: — nedpelger

The games have begun. On the first day of the 112th US Congress, the House of Representatives changed a procedural rule that will greatly affect highway projects. This opening move will likely be the first of many to cut federal spending.

Specifically, the 1998 Transportation Equity Act for the 21st Century had installed a firewall that forced legislators to keep highway funding at an indexed level. For the last 13 years, the amount to spend was set automatically and couldn’t be reduced. Then all the congressman just had to fight to get their own pieces of that ever increasing pie.

Now that firewall is gone by a procedural vote in the US House. At this point, everything is on the table.

I have mixed feelings. We certainly need to reduce US Government spending. We need to learn to live within our means. On the other hand, American transportation infrastructure needs maintenance and improvement.

The best solution likely will be found a plan that better measures use and benefits, then charges the users accordingly. We should be moving to some type of plan that charges for vehicle miles traveled. Technology certainly exists for this type of focused taxation, we just need the political smarts to move it forward.

CONSTRUCTION KNOWLEDGE BLOG

December 18, 2010

600 Construction Workers on the Jobsite, 350 are Women
Filed under: Industry outlook — Tags: — nedpelger

Of the many phrases that pass over my computer screen in a day, the “600 Construction Workers on the Jobsite, 350 are Women” immediately caught my attention. The only place I’ve ever seen more women than men on a jobsite has been some Habitat for Humanity projects. I doubted they would be doing one with 600 workers.

I clicked on the article and found the project they were building was a large shopping mall. That further intrigued me, I had assumed it was a big residential project. Since the skill level of the various trades certainly increases from residential to commercial, that meant a substantial training program must also be involved.

In fact, that’s the case in for the Greenspan Estate in Eastlands shopping mall in Nairobi, Kenya. Construction supervisor Paul Wafula says “We initially started off with few women, but over the past year, the performance of women has simply shocked us,” he says. “As a result, we have gradually taken in more women and have not regretted it.” They set up training programs for tile setting, painting, steel erection, concrete work and heavy equipment operation. Wafula also noted that women take instructions better than men and argue less on the jobsite, improving the overall atmosphere.

The concept of lots more women performing construction jobs likely will gain traction in many ways throughout the world. Construction jobs typically pay better than low skill employment. The physical strength advantage that previously kept much of the work all male has greatly diminished with new tools, equipment and processes. Though there are certainly still times when substantial physical strength is required for certain tasks. This fact, though, hardly disqualifies women from construction work any more than it does smaller, less strong men. When substantial physical strength is required, the strongest candidates are selected and they do that job.

The other element that makes me think this will be a trend is the micro-lending industry in the developing world. Most micro-loans go to women. The repayment of these loans by women has been far better than by men. There are simply going to be many more women with more interest in working outside the home and with opportunities for better wages.

Therefore, I think this is a trend worth watching.



CONSTRUCTION KNOWLEDGE BLOG

December 13, 2010

Don’t Eat the Purple Snow
Filed under: Industry outlook — Tags: — nedpelger

The Purple People Eating Minnesota Vikings had a surprise in their Mall of America Field at Hubert H. Humphrey Metrodome. The air supported structure has two layers of Tedlar coated fiberglass that require 250,000 cfm to stay inflated. With 17″ of snow on Saturday, the roof fabric tore, allowing a small leak and some deflation. As the deflation occurs, or course, the roof lowers, more snow moves into the low spot (and into the interior) and the hole gets bigger. This led to a full collapse of the roof. The short video below shows the collapse.

httpv://www.youtube.com/watch?v=o2K53bkzX2I

The roof had deflated 5 times previously due to snow loads causing tears.  The Vikings had been pushing for a new $700M stadium, but with Minnesota facing a $6.2B deficit, it’s unlikely the state will rush in to solve the problem. It will be interesting to watch the resolution of this issue. In this new economy, will stadium developers continue to count on huge public subsidies? Or will we be moving back to a more market brand of capitalism?

CONSTRUCTION KNOWLEDGE BLOG

December 9, 2010

There Go I…Maybe
Filed under: Industry outlook — Tags: — nedpelger

Jim Babcock was a Construction Superintendent for a Tampa Bay, FL construction company. Three years ago, the firm fell onto challenging times and Jim went a stretch of 10 weeks working but not receiving a paycheck. The Tampa Bay Online article notes that Jim left that company and spiraled into homelessness.  At 55 years old, he lived for a few months in the Salvation Army shelter. He was eventually hired as staff by the Salvation Army (Construction Supers tend to be competent folks) and is pictured below helping a current shelter resident.

“I’ve seen clients as young as 18 and as old as 80,” Babcock said. “It (homelessness) can be very shocking. A lot of people aren’t prepared for that eventuality – that money has run out, jobs are dried up. That would be a shock for most people.”

Indeed it would. As you contemplate this Thanksgiving, Hanukkah and Christmas season, take some time to remember the tenuous nature of our lives and our jobs. The knowledge that everything can (and most things eventually will) be taken away helps to hold onto to them lightly. A certain detachment lets us truly live in the present. Worry about the past or the future only wastes our time. Prepare…but live with joy.

CONSTRUCTION KNOWLEDGE BLOG

November 26, 2010

Tricky Times in Construction will Reward Those Who can Work Together
Filed under: Industry outlook — Tags: — nedpelger

I just read an excellent blog post titled Construction Industry: Light at the End of the Tunnel in which William Graves describes some reasonable optimism for the commercial construction market. It’s a short post and worth the read.

The most interesting aspect was the realization of how wounded many industry players are. Design professionals, GCs, trade contractors and most everyone else have suffered through several rough years. Some have taken projects below costs and now have to finish them, paying for the privilege of doing their job. These walking dead often fall over just as the recovery is beginning. They are often so far in the hole that some new work, even at a small profit, just won’t be enough.

So we all need to be vigilant about how we work and who we select as our team members. It’s a great time for collaborative projects, but only with strong teams.

If you work for a company, take some time to think about how their strengths and weaknesses coming into this new economy. Now is the perfect time to be making a change for a better position with a better company. As my wife often reminds me…Timing is Everything.

CONSTRUCTION KNOWLEDGE BLOG

November 18, 2010

Don’t Buy that New Yacht Just Yet
Filed under: Industry outlook — Tags: — nedpelger

ENR seems to have an article each week warning us to expect a longish and slowish recovery. The mantra seems to be, “Slow 2009, slow 2010, slow 2011, better 2012.”

Of course, the good and the bad news about all this forecasting is that no one really knows what will happen. If they did, they wouldn’t be writing about it, they’d be investing to make huge windfalls from their prognostication.

Savvy owners know that the best time to buy construction is the beginning of the recovery. The highly competitive pricing and great financing deals motivate owners to jump back into the building market. I think that time is now and expect 2011 to be a stronger year than most are predicting. But don’t buy that new yacht just yet.

CONSTRUCTION KNOWLEDGE BLOG

October 29, 2010

Winning the Project: Tips from Owners
Filed under: Industry outlook — Tags: — nedpelger

ENR has a helpful article this week titled Recession’s Realities: The New Normal and How to Win Work. Explaining that the future in construction is unlikely to look like the past, the article hits the normal negatives of low pricing, lagging funding and scarcity of projects. On the positive side, however, they discuss an increase in quality, more functional joint venture partnerships and much more interest in innovation from Owners.

As I’ve been saying for years, these tough times will good for the competent folks and miserable for the those just trying to hang on. The good news? You get to choose to which group you belong.

The ENR article listed the following insert that impressed me:

Winning the Project: Tips from Owners
• Visit the site of the project ahead of time, even if you have to travel.
• Put together a team in which the different cultures mesh. (This strategy is more important than compatible computer platforms.)
• Make certain that every team member you propose will be on the project—and stay.
• Don’t go around, behind or above your official point(s) of contact to get a foot in the door or insider information. Such a move only makes it harder for them to choose you.
• Establish a rapport. Owners say again and again that chemistry is a key factor in selecting a winner.
• Don’t over-Google the people on the owner’s team. They consider it creepy if you know too much about them.
• Treat the administrative staff and the rank- and-file people well. They have more influence than you think.

I recommend you consider these guidelines carefully, regardless of your position in the construction food chain. How could these guidelines be varied to help you better succeed at what you do?

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