Struggling construction industry promotes initiative for rebound
With labor and materials belts tightened to the last notch, and projects bid at near-cost just to keep crews busy, construction industry officials were meeting with congressional delegations in Washington, D.C., this week for what could be the fight of their lives — and with good reason.
So far during 2009, the annual value of all construction “put in place” is about $880 billion, down almost 50 percent from $1.7 trillion during 2006.
Stephen Sandherr, chief executive officer for the Associated General Contractors of America, said his members are not willing to go quietly into the night, beaten down by a recession that has cost his industry more than 1 million jobs and revenue declines of 40 percent or more since 2007.
During a teleconference last week, Sandherr, AGC Chief Economist Ken Simonson and a handful of company owners from throughout the country described an initiative aimed at getting congressional action for the paralyzed sector.
“Build Now for the Future: A Blueprint for Economic Growth,” included several initiatives designed to jump-start privately funded construction, which traditionally accounted for 70 percent of all projects — or more than $766 billion during 2008.
The plan incorporates 13 key points. Among those included for congressional approval are: extension of some expiring tax cuts from 2001 and 2003 that would support small business facility upgrades and real estate investment; extension of the $8,000 First Time Home Buyer Credit; removal of trade barriers that inflate construction costs on imported materials; and expanded financing for public-private partnership investment established by the Troubled Asset Recovery Program.
In addition, AGC members will lobby for increased investment in national infrastructure, doubling investment levels in federal highway, transit, aviation, freight and rail programs. They also support doubling the federal gas tax, from 18 cents per gallon to 36 cents per gallon, as well as increasing the number of toll roads.
“This would allow the federal government to keep pace with aging infrastructure and projected growth in both the amount of drivers and distance they travel while simultaneously adjusting to a more appropriate user fee,” Sandherr said.
The group also hopes to get workers back on the job by undertaking $4 billion worth of aging federal building upgrades and remodels; by convincing Congress to increase Clean Water Trust fund funding and by establishing a multiyear capital budget for public works infrastructure maintenance and management.
Other AGC’s targets were to eliminate Buy American requirements, which have slowed the pace of American Reinvestment and Recovery Act contract allocation, and to accelerate licensing of new nuclear power plants.
Colorado ‘doing pretty well’
One of those taking part in the teleconference was Colorado Contractor’s Association Executive Director Tony Milo.
CCA represents the heavy construction industry and is one of two Colorado chapters of AGC. The other is Colorado AGC, whose membership consists of builders and subcontractors.
While Milo admitted that some areas of the country have suffered construction job losses more than others, he said Colorado remains a fairly “stable” state. He also said that the Colorado Department of Transportation had “fast-tracked” stimulus money into ready projects, allowing more small businesses to get to work.
“We’re not seeing the level of economic devastation here that others have seen in places like Phoenix, Las Vegas or California,” he said. “So far, … CDOT has been able to get most of our stimulus dollars out there into the market.”
AGC members in other parts of the country have complained about the slow rate at which American Reinvestment and Recovery Act-funded projects have been put to bid — especially those to be contracted through the U.S. Army Corps of Engineers and energy-related projects under the auspices of the Environmental Protection Agency.
Again, Colorado has countered broader trends.
Closer to home, those lucky enough to win project bids have seen some benefit from ARRA spending.
Leonard Miller, senior estimator for Schmidt Construction, said the local company’s paving and road construction or maintenance jobs are “about half of what they were in 2005.”
“We’re doing the paving for Edward Kraemer (& Sons), the general contractor on the Woodman interchange — it’s about a $2 million project for us,” he said. “Of course, they (Pikes Peak Rural Transportation Authority) just substituted the stimulus money for what was already in the budget.
“It’s pretty bad — probably the worst I’ve seen since I moved here in 1983,” he said, adding that Schmidt Construction had to lay off permanent employees for the first time in its history last year.
Colorado has seen more than 28,000 jobs lost through August on a year-over-year basis, a 14 percent decrease. Colorado Springs, however, posted better results, with just an 8 percent drop in construction-related unemployment for the same period — the lowest rate in the state.
“That’s probably tied to all the military construction under way there,” Milo said.
The Denver metro area, in comparison, reported a 16 percent drop in employment — and Fort Collins-Loveland had a 10 percent decline.
Because most initial ARRA funding was earmarked for infrastructure, waterway and transportation work, most general contractors used to winning private sector contracts are, for now, left behind.