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CONSTRUCTION KNOWLEDGE BLOG

October 21, 2010

An Amazingly Dumb Idea
Filed under: Industry outlook — Tags: — nedpelger

Floridians will be voting soon to decide if any changes to local land use plans will need to be approved by a voter referendum. The ballot language states that Amendment 4 “establishes that before a local government may adopt a new comprehensive land use plan, or amend a comprehensive land use plan, the proposed plan or amendment shall be subject to vote of the electors of the local government by referendum.” Blogger Scott Judy of ENR reports that the the statewide annual average for amendments to land-use plans was nearly 8,000 between 2001 and 2005.

Can you imagine the effect the passage of this state constitutional amendment would have on construction? Say you’re an Owner considering all the risks of developing an apartment community, or an industrial park, or even a church. Since site conditions and project needs often vary so widely, it’s fairly common to need some sort of relief from the “One size fits all planning codes”. So before you get too far into the project, you’re told that a voter referendum will be needed to approve your project. To proceed, you’d likely have to spend tens or hundreds of thousands of dollars to complete the design so you could adequately answer all the questions, while knowing the the voters could just vote no.

What would you do? You’d go somewhere else…or do something else. The risk/reward would be so skewed that projects won’t even be proposed. How can people be this stupid?

The folks at Florida Hometown Democracy were kind enough to post a YouTube video to explain.

httpv://www.youtube.com/watch?v=ZWMXPWwrchU&feature=player_embedded#!

We are already a society that hasn’t built a new nuclear plant, chemical plant or quarry in years. Are we going to continue on that trajectory?

CONSTRUCTION KNOWLEDGE BLOG

October 20, 2010

Apartment Construction a Bright Spot in Industry Outlook
Filed under: Industry outlook — Tags: — nedpelger

We’ve had a few projects stall in recent months. Owners either decide to just wait and see or can’t get financing. Our multifamily apartment projects, though, continue to get approved and keep crews working.

I just came across a good blog post from Boyce Thomson about the strong apartment construction market outlook. All the speakers at this year’s Multifamily Executive Conference agreed on the the positive outlook for apartments for the forseeable future. As home ownership becomes less appealing from a long term investment standpoint and as labor mobility becomes more important in our economy, apartment living looks good.

The executives at the conference spoke of 2011 as a good year for rent growth and Net Operating Income. They also noted that the new apartments being built tend to be sustainable and high-tech.

As you look at where you fit in this crazy construction economy, remember to pay attention to trends like this. It’s much easier to swim with the current than against.

CONSTRUCTION KNOWLEDGE BLOG

October 9, 2010

The Hidden Cost of Public Design-Build Projects
Filed under: Industry outlook — Tags: — nedpelger

Yesterday, I posted about a public design-bid project with a budget so wrong that the project needed cancelled after it had begun. I closed the post proclaiming that the time for design-build on public projects has come. Today I read an ENR article about a $1.1 Billion Utah highway and bridge project that illustrated one of the problems with public design-build: sore losers and their ability to litigate.

The Utah DOT made a request for proposal for upgrading a 24 mile highway section near Provo.

The design-build finalists were each paid $1.5 Million to prepare their designs and proposals that were judged on budget, highest value, schedule, design and public inconvenience. The Provo River Constructors team (led by Fluor Corp) bested the Flatiron-Skanska-Zachry team by one point.

Apparently the Flatiron-Skanska-Zachry design was elegant and included additional bridges, lanes and pedestrian access. That added scope, however, worried the Utah DOT executive director John Njord:

“They had an elegant design that could only be partly implemented,” Njord says. “It would have to go through an environmental review process. We liked their ideas, but we didn’t know if it could really be achieved.”

Rather than allow the project to be delayed by litigation from the second place finisher, Njord agreed to a $13 Million settlement. While that’s only about 1% of project cost, the political implication of giving away $13 M remains to be seen.

I still believe our society needs to move in the design-build direction, even though some of the steps will be quite challenging.

CONSTRUCTION KNOWLEDGE BLOG

October 8, 2010

Trans-Hudson Tunnel: The Sorry State of Budgeting
Filed under: Industry outlook — Tags: — nedpelger

Gov Chris Christie of NJ announced today that he’s stopping work and canceling the proposed $8.7 Billion Trans-Hudson Tunnel project. The tunnel would have doubled commuter train capacity from NJ to Manhattan. The New Jersey Transit, the Port Authority and the Federal Transportation Authority all worked together to agree on the $8.7 Billion budget, as reported by ENR.

Rumors of likely cost overruns inspired Gov Christie to stop work on 9/10/10 on the early stages of the project. A 30 day period of cost evaluation began, even though several hundred million dollars of construction had already been awarded and started. Nearing the end of that 30 day period, the project seems likely to cost between $11 Billion and $14 Billion. Gov Christie made the difficult, but responsible, decision to cut the losses and cancel the project.

How can our industry be so poor at projecting project costs? Inflation can’t be the culprit this time. The bidding market couldn’t be more competitive. The usual suspects for missed budgets don’t seem to be in play. So how can the budget be almost half? Did they take-off the one wall and floor and forget to multiply by two?

As an industry, and as a society, we need to change our systems to obtain reasonably accurate cost projections. It’s time to scrap the design-bid approach to public projects. Any thoughts?

CONSTRUCTION KNOWLEDGE BLOG

September 13, 2010

A Great Business…and Parties Too
Filed under: Industry outlook — nedpelger

Last night, one of my customers, Phil Frey of B&F Partners, had a surprise 60th birthday party. Since Phil worked as a dentist on a Navajo Indian reservation in the 1980s, his wife Pati threw him a “Phil Missed the 1980s” party. My costume, like most of the men, consisted of turning up my collar on a polo shirt. TBW, on the other hand, went all out with an Olivia Newton-John work-out outfit and won the prize for best costume.

Lots of people I work with in the development, design and construction industry attended. We enjoyed talking shop in the 1980s environment (which doesn’t seem that long ago to me). What fascinated me was the enthusiasm and new directions I encountered.

One developer just launched a sitework contracting company by hiring some fantastic personnel available due to the challenging times. Beyond doing his own sitework efficiently, he can deliver some great values to customers, treating them like friends. So while many sitework companies are teetering on bankruptcy, new ones are opening with different strategies.

A mechanical, electrical and plumbing (MEP) firm I often utilize has branched into new markets and has been looking for a talented young Professional Engineer to help their designs improve even more. They’ve been looking for quite a while and haven’t found the person that fits. So for any MEP engineers out there, here’s a great opportunity.

Another developer recently bought property in Panama, knowing that lots of earth fill on the property would be utilized for another large project. He’s teamed with a local excavating company to provide expertise and investment to get the work done in Central America.

Generally, people in the development, design and construction industry aren’t a doom and gloom bunch. We’re innovators looking for opportunities. As I talked and listened last night, and from what I’ve been reading, now’s not the time to double down and bet your hand. Now’s the time to innovate. Evaluate what you do, what your market has done and where it might be heading. Try to position your firm, or yourself, to be where the fun projects are.

Speaking of fun, Pati arranged for an old style photo booth for the party. TBW and I had a go.

CONSTRUCTION KNOWLEDGE BLOG

September 7, 2010

Tough Mudder Needs a Construction Guy
Filed under: Industry outlook — Tags: — nedpelger

Tough Mudder boasts itself to be the TOUGHEST one day athletic event on the planet. For 7 to 12 miles they run you up hills, make you swim under obstacles in freezing creeks, carry heavy objects and run through fire. The philosophy behind Tough Mudder?

The Tough Mudder series is being launched because there is not an event in America that tests toughness, fitness, strength, stamina, and mental grit all in one place and all in one day. Sure, there are a few that will test these things – for thousands of dollars and a week of your life. But in one day in one location? We don’t think so. Other summer sun and fun mud runs? Forget it – unless you want to run alongside your 60-year-old grandmother. Tough Mudder is a truly exceptional event for truly exceptional people. Fair weather runners should stay at home.

The folks at Tough Mudder decided they need an engineer/construction person to help design, build and run the events. So if you love running, construction and managing projects (like I do) you may want to look into this job.

My triathlon buddy and I almost decided to do the Tough Mudder event in Allentown, PA this spring, but laid down until the feeling went away. Maybe next year…

CONSTRUCTION KNOWLEDGE BLOG

June 8, 2010

Tense Times
Filed under: Industry outlook — Tags: — nedpelger

As I talk with others working in construction, I hear a mixed bag of experiences. Many are working hard on smaller projects, running down more false starts for skittish owners and generally stressing through difficult times. On the other hand, 25% of construction workers stand in the unemployment line. It’s a time unlike any I’ve seen in 30 years.

World events seem even more discombobulated. North Korea sinks a South Korean submarine setting up the possibility of American and Chinese soldiers facing each other in the near term. Israel attacks an aid ship and further alienates themselves from the world of civil discourse. Of course, oil continues to spew from that hell hole in the Gulf that may be one of the most cataclysmic events of our lives.

With all this drama, I look to Dr Strangelove for insight. At this very moment, perhaps a checklist like the video below is being discussed:

httpv://www.youtube.com/watch?v=HgyjlqhiTV8

As I struggle to make sense of all these inputs, I’m reminded of some teaching I recently heard from John Ortberg. He noted that our society (meaning most of us) has become focused on “More”. We simply want more. Whatever we like, whatever we value, we want more of it.

He asks, Who is happier, the man with a billion dollars or the man with 12 children”? The answer is the man with 12 children, because he knows he doesn’t want any more. Hope you have a more relaxed day in these tense times, remember, we can’t control what happens, but we can control our response.

CONSTRUCTION KNOWLEDGE BLOG

April 16, 2010

Solar Energy Shines in the New Economy
Filed under: Industry outlook — Tags: — nedpelger

Solar energy installations continue to be one of the few bright spots in the construction industry outlook for America. Rhone Resch of the Solar Energy Industries Association states “Residential installations grew from 78 megawatts in 2008 to 156 megawatts in 2009.” A megawatt can power about 1000 homes (since the average home uses 10,000 kwhrs of electricity per year and there are roughly 10,000 hours per year). The commercial installations are even more exciting.

The list of photovoltaic power stations shows that Europe is far ahead of America in solar installations. The recent tax law changes in America, however, seem to be creating a boom of solar planning and installations soon to be built.

The states that have legislated a certain percentage of electricity be produced from renewable energy seem to be leading the boom. For example, California now requires 20% renewable energy electricity and increases that requirement to 33% by 2020. Pennsylvania, on the other hand, will require about 80 times more solar energy in the grid from 2009 to 2020. These are huge investments that will need to be made.

If you think this market may suit you, hop on the internet and start researching. Remember, where you are 5 years from now depends partly on the decisions you make today.

CONSTRUCTION KNOWLEDGE BLOG

April 3, 2010

Construction Industry Updates
Filed under: Industry outlook — nedpelger

I found a few tidbits in this week’s ENR that I thought you might enjoy.

You are probably sick of reading about the new health care law, regardless of which side you’re on. Did you know that the construction industry has a special status in the new law? For every company in America, except construction companies, 50 full time workers tips the firm into the requirement to provide health care to employees. The law currently states that construction companies must provide health care with 5 employees or $250,000 in payroll. The penalty is $750 per employee per year.

Supposedly, the Reconciliation package will eliminate this special treatment of the construction industry. As you’d expect, vocal proponents are politicking on either side of the issue. Construction business groups wonder about the hardest hit industry of the Great Recession taking another shot. Union leaders want the 5 employee rule to stand.

The unemployment rate in construction dropped from 27% to 25%, which I guess is good news. Though an industry with a 1 out of 4 people out of work really can’t celebrate. Firms I’m talking with are starting to see some work moving in mid-2010, though most don’t see much improvement till 2011. The forecast seems to vary widely depending on the types of buildings.

Most of my work seems to be designing and constructing apartment buildings, churches and solar farms. A decade or two ago, it was factories and office buildings. I’m not sure what that says about America, but I’m thinking it isn’t so good.

Something that is good, though, is the cover story in ENR about an innovative apartment building now being constructed in Manhattan. Designed by architect Frank Gehry (think the curvy metal of the Disney Theater in LA or the Guggenheim Museum in Spain), this 70 story building is on time and budget. Nadine Post writes yet another wonderful article outlining how the various players work together to design and build this complex project. She also makes the astute observation that the cooperative design-build team kept much of the project simple (to control cost) and only added the curves and complexity where it showed.

CONSTRUCTION KNOWLEDGE BLOG

March 18, 2010

Facebook Passes Google in Web Traffic
Filed under: Industry outlook — Tags: — nedpelger

Last week, Facebook surpassed Google to become the most visited website in the U.S. That means that more people logged on to see what their friends were doing on Facebook than executed searches on Google. Just to give a sense of their scale, last week Google and Facebook combined for 14% of all website visits.

So why should those of us in construction care about internet social media? Well, the construction world, along with the rest of the world, becomes more interconnected and complicated every year.

Being great at what you do is still the best insurance policy for success in hard times. Yet, that competence may not be enough. Some self-promotion and networking just may be required for you to keep working in these challenging times.

I don’t particularly like it, but that’s the way it is. So you would be wise to stay somewhat current with these social networking trends. Do you have a Facebook account? If not, I encourage you to sign up for one.

The process is simple. You can go to the “find friends” screen and let Facebook access your email. Then anyone who you have emailed who is on Facebook will come up as a possible friend. That attribute makes it easy to find people. Maybe one of those people will play a part in hooking you up with your next job.

Go to HubSpot if you want to better understand web traffic and analytics.

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