Legal Concerns

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With all the interest in reconstruction work in the deep South, there is another emerging concern in specialty contractor circles. "The damage is centered in states that have the fewest legal protections for subcontractors," says E. Colette Nelson, executive vice president of the American Subcontractors Association, Alexandria, Va. While things might work out well for subcontractors that have long-term relationships with regional general contractors, GC "strangers" coming down to work on reconstruction may bring tough contract conditions and practices not familiar to subs working in the region.
Click here to view electrical chart

The cost of insurance presents another worrisome unknown. "I’ve seen a report that the amount of insured losses from the hurricanes could amount to $34 billion," says Edward Dunlap, CEO of Centimark Corp. "Someone’s going to have to pay for that." Haddon of ColonialWebb shares this worry: "The big question is who will bear the bulk of the costs, the insurers or the federal government?"

(Photo by Tudor Hampton for ENR)

Many specialty contractors also worry that Katrina will exacerbate already strong shortages in trained personnel in other parts of the country. "There are a lot of ‘travelers’ in the skilled trades who may migrate to the Southeast in search of steady work and long hours," says Charles Richter, senior vice president of ACCO Engineered Systems. "We feared such an exodus of workers going down there for premium pay, even though the real work won’t start in affected areas for another six to twelve months, so we don’t know what the impact will be," says Charlie Bacon, CEO of Limbach Facilities Services. "Instead, we are seeing people in the trades displaced by Katrina coming into Florida looking for work."

Finding enough people is an issue many contractors find concerning. "One problem is young people see weather and the dirt as a turnoff," says John Doherty, president of Pyramid Masonry. "But young people have little idea of the money you can make in this industry."

Getting Home Safely

Taking care of employees is key to recruitment and retention, specialty firms agree. "We’ve been running our ‘Incident and Injury Free’ program for the past 18 months," says Bacon. In that time, the firm has reduced the number of workers’ comp claims by 68% and their cost by over $1 million in the first eight months of 2005 over last year. "It’s not about money or statistics," he argues. "There are other things that aren’t measurable, like employee morale and productivity, when they know that an employer wants them home safe at the end of each day."

(Photo by Tudor Hampton for ENR)

ColonialWebb is trying something different to meet the demands of an increasing workload. "We are embracing process improvement by using the Six Sigma process analysis tools," says Haddon. "It’s not enough to tell your people to work harder and longer. You’ve got to learn how to work smarter." ColonialWebb has used Six Sigma on the service side of the business but is now trying it on the construction side as well.

For many major specialty contractors, design-build has become the modus operandi for big jobs. "Large subcontractors are being required to take on more engineering duties. It’s no longer a trend on the rise. It’s pervasive," says Dean. This has given some of the larger subs a chance to shine. "Being brought in early on a design-build project allows us to take our experience and share it with the owner in a nonadversarial way," says Bacon. Click here to view mechanical chart

Mechanical contractors have been enjoying the hot market. "We have an abundance of work here on the West Coast," says Richter of ACCO. This has led to problems with some subs. "There is a tendency to grab everything available," he says. The market has caused labor shortages, with some contractors caught short by bidding too many jobs.

(Photo by Guy Lawrence for ENR)

Among concrete contractors, CECO Construction pushed itself strongly up the list, partly due to expansion of services. "We’re known for floor forming to total scope formwork. But clients are pushing us to do the total package, from total forming to pouring concrete," says Ron Schuster, CEO. Sunbelt states, from Florida to Arizona, have been booming, particularly with condo work. "It’s a really strong market," he says.

Last year started slowly for ground modification contractor Hayward Baker, but picked up as the year wore on, says President George Grisham. Enactment of the federal transportation funding bill has put a new spring in his step. "A lot of infrastructure work uses ground modi-fication, so that market will only get stronger for us," he says.

Hayward Baker is not sitting still, however. "We recently got into the St. Louis market and that is working out well," Grisham says. The next target is the Northeast. "We are actively pursuing an acquisition in that market," he says. While there is nothing firm at the moment, Grisham hopes there will be successful entry before the end of the year. "We are really interested in the New York City market," he says. "We think it will pick up where the Big Dig in Boston has left off."

Piling contractor Berkel & Co. Contractors predicts that soaring concrete prices will remain a major problem. "We have 55 piling projects ongoing at the moment," says CEO Michael L. Jones. "That comes out to something like four million pounds of concrete per day. That’s a significant cost when the price goes up." The firm is researching alternatives to reduce cement content in pilings.

Materials prices and availability are also troubling wall and ceiling contractors, as well. "I’m a little concerned about drywall prices," says Steven A. Nienke, president of Midwest Drywall. The firm is on allocation for drywall in most of their markets, which range throughout the Midwest and Southwest, from Omaha to Denver.

(Photo by Tudor Hampton for ENR of the McCormickPlace West Expansion)

Insurance issues are a major concern for KHS&S. "On the workers’ compensation side in California, the reductions in cost from Governor Schwarzenegger’s reform law have been minimal, and the insurance comp carriers are not happy," says David Suder, the firm’s West Coast president. He adds that sureties are tightening up on interiors contractors. "We are seeing more requirements for information," says Suder. "Four years ago, it was a straightforward process. Now they want a lot more assurances."

Neinke has his own beefs with insurance programs. "We are seeing more owner- and contractor-controlled insurance programs," he says. That takes control out of subcontractor’s hands and is dangerous and expensive, he says. "The [owner-controlled insurance plans] and [contractor-controlled insurance plans] often force you to bring injured workers back to work before they are ready," Neinke adds. "Then we are forced to put them on light duty or office duty, costing us money."

Framed

Increasing concern about mold contamination is having a serious impact on drywall and interiors contractors. "There is a lot of new demand for steel-framed housing and facilities over wood framing," says Suder. Most of this is prefabricated panelized work, making it about 25% faster than stick-built structures, he says.

(Photo by Michael Goodman for ENR at 7 World Trade Center, NYC)

Much of the push toward steel framing is coming from the insurance industry. "There is less concern from mold, termites, and fire issues," he says, noting that The Steel Framing Alliance, Washington, D.C., and Zurich Insurance have introduced an insurance program directed at steel-frame structures. KHS&S recently completed a 900,000-sq-ft steel-framed dormitory for California Polytechnic University, San Luis Obispo. "We could do ten times the amount of steel frame projects if we had the capacity," he says.

Roofers may be the only people to complain about good weather, so 2004 was a big year and 2005 promises to be even better. "The market has been good all year, and that is above and beyond the impact of the hurricanes on the Gulf Coast," says Santacrose of Tecta America. And there will be a lot of work coming from Katrina and Rita. "We have 80 people in the region and expect to have 200 within a month," he says. The firm has secured trailers to house employees displaced by the storms.

(Photo by Guy Lawrence for ENR)

But Santacrose warns that the Katrina cleanup will be fundamentally different from the hurricane damage in Florida last year. "Last year in Florida, there was a lot of damage. but the underlying infrastructure remained intact. Here, there will be a lot of moving parts, from planning to environmental concerns to fuels and materials shortages to housing and labor availability before anyone even thinks of getting a new roof."

For Centimark, this year’s largest roofing contractor, hurricane repair work was a big factor in its growth. "We did $35 million in Florida alone last year," says Dunlap. The hurricane-ravaged South was the firm’s biggest growth market, followed by the western U.S., then the East. He expects to do $5 million to $10 million in Katrina-related work.

Demolition contractors also found business booming. "Part of the boom is from disaster services from last year’s hurricanes in Florida," says Dave Whitley, senior vice president of Nuprecon. Some work can be traced to the residential building boom. "We are seeing property values so high in some areas that developers are gutting 20-year-old buildings for conversions or simply taking them down to make room for condos," he says. The Washington and Oregon markets are growing exponentially, while those in California and Hawaii are growing substantially.

Whitley is also seeing something new in the market: design-build demolition. "Companies are hiring us not simply to do demolition, but to first do site and construction scope evaluations. They then ask us to do demolition and recycling," he says. "Basically, it comes down to owners wanting ‘a one-call solution.’"

(Photo by Michael Goodmanfor ENR of Clen-Up in Mississippi after hurricane Katrina)

One particularly fast-growing demolition contractor is also the sector’s largest: Brandenburg Industrial Services. Geographic expansion is a driver. "We used to be centered around the Chicago market," says Bill Moore, vice president of marketing. "Now, we go anywhere. We have jobs ranging from South Carolina to Tucson."

But Brandenburg is seeing mixed results in the hurricane disaster area, even as competitors are busy with lots of work. "I was surprised that the industrial facilities suffered less damage than I expected," says Moore. He says the huge hur-ricane cleanup may not translate into dollars for the big firms. "Our name is on every bid list around, but a lot of that work is being earmarked for small businesses, and that leaves us out," says Moore.

 

...Berkel & Co. Contractors. "People love to live on the water but are now afraid of building stick houses. You’re going to see more big-box concrete condos on the Gulf and Atlantic after the recent storms."