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CONSTRUCTION KNOWLEDGE BLOG

March 6, 2013

Natural Gas Vehicles a Rising Trend
Filed under: Innovation in Construction — Tags: — nedpelger

I like to share trends with you when I spot them. Natural gas vehicles (NGVs) look like a winner in the upcoming years. Ford announced that they tripled their sales of NGVs from 2010 to 2012. Natural gas is becoming the fuel of choice for truck fleets, buses and taxis.

Due to a lack of re-fueling stations, and the relatively long time needed to re-fuel, consumer NGVs don’t look to be over-taking the market any time soon. Bifuel (gasoline and natural gas) vehicles could become popular, but hybrid technologies rarely end up being major game changers.

For commercial fleets that come back to a yard each night, though, the NGVs outlook looks strong. The functional fuel cost of natural gas is about half of that for gasoline or diesel. The pollution and greenhouse gas issues are better for NGVs. With the wide spread fracking technology improving dramatically, the long term cost outlook for natural gas should be much lower (and more stable) than in the past.

Bankrate.com notes in an article about the pros and cons of NGVs that:

Today, 40 percent of new garbage trucks and 25 percent of new buses in the U.S. can run on natural gas, Kolodziej says. “In the city of Los Angeles, all the buses are now running on natural gas,” he says.

For consumer vehicles, my bet remains on electric cars. They are zero emissions at that hard to get efficient individual car level. Then the natural gas can be efficiently burned at the power plant (replacing more problematic coal generation). That’s where I think the car trend will go.

But if you run a construction fleet, look hard at NGVs. The return on investment will push you toward an immediate decision.

CONSTRUCTION KNOWLEDGE BLOG

March 4, 2013

Poor Project Management on GA Nuke Plant
Filed under: Industry outlook — Tags: — nedpelger

Once again, the construction industry fails to estimate costs on large projects. Plant Vogtle a nuclear power plant in eastern Georgia must increase budget by $737M US to become a $6,850M project.  The legislators that must approve the cost increase want to penalize Georgia Power for missing the mark.

“The price tag keeps going up. The timeframe they are going to build it has been extended year after year after year,” said state Rep. Mike Fasano, a Republican and nuclear power supporter.

Construction schedule for the project is shown here, but the costs keep increasing. The photo below shows the complexity and scale of the work.

Coupled with the low cost of natural gas, the project looks like a poor investment for the stake-holders.

Why has the construction industry continued to fail at effectively managing large projects? We continue to punish conservative projections, on the one hand. Managers and executive often won’t deal with bad news and demand better costs without making technical changes.

On the other hand, the design management seems likely to be failing. I don’t know enough about nuclear project design to be sure, but I’d bet that either the rules are changing or the someone isn’t properly managing the design process. Either way, a great opportunity exists for folks in construction to improve on the current state.

Think about how you manage the challenges and changes in your business. Do you keep focused on controlling the most important elements? That’s a secret to success in these volatile times. In a nutshell:

  1. Fiercely control the design (pay attention and conflict now, not later)
  2. Budget conservatively (things rarely go much better than expected)
  3. Develop a monthly cost review system that actually works

CONSTRUCTION KNOWLEDGE BLOG

March 1, 2013

Friday Musings
Filed under: Industry outlook — Tags: — nedpelger

I continue to be optimistic about the trend in construction work in America. I believe in the sustainability of growth because I hear good stories all around me. Hopefully, the politicians will get some minimal agreements done that succeeds in not destroying the recovery.

Yesterday I got a call from someone who wants two 90,000 sf buildings built quickly. That’s a nice call to receive, but the logic behind the call tells the rest of the story. The project was previously approved, permitted and several similar buildings constructed. The 2008 financial collapse drove the project into default. As it’s ready to resurrect, another large contractor had the project but called the owner and stated they are just too busy to take on another project.

When was the last time you heard about contractors being too busy to take on new work? Generally, it’s been a while. Many of us have stayed fairly busy, but not swamped.

I have a couple of projects moving forward that were approved and permitted a few years ago. These projects don’t have to wait the normal six to nine months till construction starts…they go right to the front of the line. That’s another way this construction recovery can ramp up quicker than the experts predict.

On the other side, I spoke with a trade contractor friend yesterday who hasn’t made any money in a few years. He’s just barely hanging on. My last projects with his firm, though, weren’t too satisfying. His guys bitch and don’t work hard. He has a tendency to annoy my customers. So, while I like this guy, his business prospect don’t look so good even in the recovery.

It’s important to remember that we have no work by right. Every project, every opportunity that comes before us, should be treated with respect. I love to have fun with everyone I work with (including poking at my customers), but I don’t forget that they can easily choose someone else. I strive to keep over-delivering in every meaningful measure.

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