$52B CHIPS Act a boon for construction, but challenges remain

By Sebastian Obando | Originally posted on constructiondive.com

The White House announced Wednesday President Joe Biden will sign the $52 billion CHIPS Act, which subsidizes the semiconductor industry and provides a 25% tax credit for companies that build facilities in the U.S., on August 9.

Platitudes from construction pros started piling in as soon as Congress passed the bill last week.

Richard Branch, chief economist for Dodge Data & Analytics, said the CHIPS Act will “keep the construction sector on sure footing as the economy slows over the next year.” He added Dodge is currently tracking nearly $33 billion in semiconductor fabrication plants still in the planning stages.

James Christianson, vice president of government relations at the Associated General Contractors of America, said the act will “spur broader economic development and new, long-term construction jobs,” in a letter praising the passage of the CHIPS Act.

Despite those accolades, challenges remain.

Labor shortage

For example, there are a limited number of specialty contractors with the skill and experience in the semiconductor space, said Jeffrey Gilmore, chair of Akerman’s construction practice, a law firm based in Miami.

“The current demand and shortage of skilled labor will present a substantial challenge for the teams selected to perform such projects,” said Gilmore. “Ultimately, successful project delivery will demand a nimble team prepared to perform very specialized design and construction services suited to the clean building environment necessary for a precision industrial chip facility.”

The pace and complexity of such projects will present additional challenges. These jobs typically require progressive design-build and engineering, procurement and construction approaches, Gilmore said, as well as heightened security.

“Access to a workforce with security clearances will likely provide a further complication that may limit the pool of qualified candidates,” said Gilmore. “Access to federal funds will also likely entail a unique set of compliance issues to address relevant requirements that will be mandated as a condition of the funding.”

Davis-Bacon questions

Peter Comstock, senior director of legislative affairs at Associated Builders and Contractors, also raised concerns about how Davis-Bacon regulations, which set prevailing wages on federal projects, will be included on private construction jobs.

ABC hits out at US Inflation Act

By Liam McLoughlin | Originally posted on aggbusiness.com

The ABC has sent a letter to Congress highlighting its concerns about the bill

The measures planned in the legislation include raising US$739bn and authorising US$370bn in spending on energy and climate change, and US$300bn in deficit reduction.

Kristen Swearingen, the ABC’s vice president of legislative & political affairs, said: “While the Democrats’ reconciliation proposal has undergone changes over the recent days, the package unfortunately would still impose anti-growth tax policies that fail to address the rate of inflation, supply chain snarls and workforce shortages disrupting the economy and construction industry.”

“Most critically, this bill penalises employers that believe in fair and open competition and pay wages based on experience, quality and market rates, and also limits opportunities for the millions of construction workers who choose not to join a union,” said Swearingen.

The bill provides US$250bn in incentives for clean energy projects, but Swearingen said 83% of the value of these credits lies in projects ABC members will be largely prevented or discouraged from participating in due to these labour restrictions.

The ABC has sent a letter to Congress highlighting concerns in the bill, urging lawmakers to “reject the harmful policies included in the budget reconciliation package and work together to address the ongoing needs of our economy and hardworking Americans.”

The ABC is a national construction industry trade association established in 1950 that represents more than 21,000 members.

More Than a Century of Safety: The Legacy of Edward W. Bullard

By Carrie Williams | Originally posted on constructionexec.com 

Promoting both awareness and action in support of occupational safety and healthy workplace culture, World Day for Safety and Health at Work was established by the International Labour Organization (ILO) in 2003. Observed each year on April 28, there is perhaps no better day to reflect on the importance of those whose work has made us safer.

The National Inventors Hall of Fame® (NIHF), honors some of the world’s greatest inventors, many of whom have contributed significantly to the health and safety of workers. Among these inventors is Inductee Edward W. Bullard, creator of one of the most essential pieces of protective equipment for any construction site: the hard hat.

A SOLDIER BRINGS SAFETY HOME

Edward W. Bullard was born in 1893 in Las Vegas. A graduate of Lowell High School in San Francisco and the University of California, Berkeley, he served in the cavalry of the U.S. Army and was stationed in France during World War I. Bullard served for nine months and achieved the rank of lieutenant.

When he returned home, he joined E.D. Bullard Co. in San Francisco, which had been founded in 1898 by his father, Edward Dickinson Bullard, to sell carbide lamps and mining equipment.

Bullard soon noticed a common hardship for miners: they had no head protection from life-threatening falling debris. Thinking back to the “doughboy” helmets he and fellow soldiers had worn in France, he was inspired to develop a safety helmet for miners and others engaged in dangerous work.

In 1918, Bullard began turning his idea into a reality.

To create this new helmet, Bullard used overlapping layers of sturdy canvas, which were steamed for temporary pliability before being secured together with glue. He then covered the inside and outside shell with water-resistant shellac for added strength and durability. Finally, he added leather to the front and rear brims.

Bullard had created the world’s first commercially available industrial protective head gear. He called it the Hard Boiled Hat®, referring to the steam used in its manufacturing process. It was patented and entered production in 1919.

AN INVENTION BECOMES AN INDUSTRY STANDARD

The Hard Boiled Hat’s recognition among work zones soared during the major construction projects of the 1930s.

The construction of San Francisco’s Golden Gate Bridge was a defining industrial project of the Great Depression era, and those who built it faced significant risk. Golden Gate Bridge engineer Joseph B. Strauss, who had committed to implementing new safety standards, contacted Bullard Co. to request that the company adapt its protective helmets for bridge workers. Bullard modified his original mining helmet to create a durable industrial hard hat that would mitigate the danger of falling rivets on the bridge.

The Golden Gate Bridge project was designated as America’s first “Hard Hat Area” in 1933.

Also in 1933, Bullard Co. offered its first aluminum hard hat, as well as its first fire helmet, which was based on the Hard Boiled Hat design.

The significance of the hard hat has been reinforced over the decades. In the 1940s, Bullard Co. introduced the well-known three-rib hard hat design and the first fiberglass fire helmet. In the 1950s, the company created the first thermoplastic hard hat and opened a molding department to manufacture plastic helmets.

Since the early 1970s, when the Occupational Safety and Health Administration (OSHA) began requiring workers to wear hard hats on job sites, the number of worker deaths has significantly decreased, underscoring the immense importance of Bullard’s invention.

A LIFESAVING LEGACY CONTINUES

Of course, hard hat safety advances have not been confined to the previous century. In the past two decades, Bullard Co. has created TrakLite®, the first integrated lighting system for fire helmets, the lightest blast helmet on the market, and the AboveView Hard Hat, which features a transparent visor.

In 2019, Bullard Co. celebrated “100 years of head protection,” commemorating the invention of the hard hat.

Approximately 6 million hard hats are now sold annually. Bullard Co., which is in its fifth generation of family ownership, continues to produce hard hats and other essential protective gear for workers.

Both a symbolic and physical representation of workplace safety standards, the hard hat is an invaluable piece of protective equipment at worksites worldwide—and it all started with a veteran’s commitment to making workers safer.

MEET MORE INSPIRING INVENTORS

For more stories of Hall of Famers whose innovations have set standards and shaped industries, we invite you to visit the NIHF blog.

ABC 2022 Safety Performance Report: Top-Performing STEP Members Are Six Times Safer Than Industry Average

By ABC | Originally posted on constructionexec.com 

Associated Builders and Contractors has unveiled its 2022 Safety Performance Report, an annual, comprehensive study of the impact of the STEP Safety Management System and guide to safety best practices on construction jobsites. STEP is a proven system, more than 30 years old, that enables top-performing members to achieve incident rates 645% safer than the U.S. Bureau of Labor Statistics construction industry average. The annual study is published to coincide with Construction Safety Week, May 2-6.

“World-class safety and total human health are integral parts of the culture of ABC STEP members companies—and it shows,” says Greg Sizemore, ABC vice president of health, safety, environment and workforce development. “STEP is a crucial ‘step’ any company can take to be safer. STEP Diamond members are more than six times safer than the industry average, achieving an 84% reduction in Total Recordable Incident Rates. ABC annually researches what truly makes a contractor safer than others—and this report quantifies those best practices and results. Our people are our greatest asset and ABC will continue to advance world-class safety for our people, through valuable resources like the Safety Performance Report.”

ABC’s research on more than a billion hours of work completed by participants in the construction, heavy construction, civil engineering and specialty trades in 2021 identified the following proactive injury and hazard elimination best practices:

  • New hire safety orientation: Companies that conduct an in-depth indoctrination of new employees into their safety culture, systems and processes based on a documented orientation process experience reduce TRIR by 70% and their Days Away Restricted or Transferred rate by 72% compared to companies that limit their orientations to basic safety and health compliance topics.
  • Substance abuse prevention programs: Robust substance abuse prevention programs/policies with provisions for drug and alcohol testing where permitted lead to a 70% reduction in TRIR and a 73% reduction in DART rates.
  • Toolbox talks: Companies that conduct daily toolbox talks reduce TRIR by 76% and DART rates by 79% compared to companies that hold them monthly.
  • Top management engagement: Employer involvement in safety programs at the highest level of company management produces a 71% reduction in TRIR and DART rates.

ABC has studied how to improve construction jobsite safety through STEP since 1989. Participating ABC member firms measure their safety processes and policies on key components and the criteria for best practices through a detailed questionnaire with the goal of implementing or enhancing safety programs that reduce jobsite incident rates.

The 2022 ABC Safety Performance Report is based on submissions of unique company data gathered from members that deployed STEP in 2021. ABC collects each company’s trailing indicator data as reported on its annual Occupational Safety and Health Administration Form 300A (“Summary of Work-Related Injuries and Illnesses”) and its self-assessment of leading indicator practices from its STEP application. Each data point collected is sorted using statistically valid methodology developed by the U.S. Bureau of Labor Statistics for its annual Occupational Injuries and Illnesses Survey and then combined to produce analyses of STEP member performance against BLS industry average incident rates. The report demonstrates that applying world-class processes dramatically improves safety performance among participants regardless of company size or type of work.

The ABC 2022 Safety Performance Report is brought to you by ABC Tech Alliance member KPA, which provides safety management software, training and consulting to the construction industry. 

Four Tips for Drafting Contractual Safety Provisions

By Jeanne M. Harrison and Stephen M. Reams | Originally posted on constructionexec.com 

Construction accidents can delay a project and increase costs. More importantly, they can lead to serious significant injury or even death. Hence, it is imperative that owners and contractors make safety their top priority. To do this, they must create a culture of safety and continuously monitor and manage potential safety concerns on construction jobsites with the goal of zero accidents.

To foster a culture of safety, owners and contractors should address these concerns on the front end of the project through carefully written contract language. The construction contract establishes the rights, obligations and expectations regarding virtually every consideration of the parties on a project. If safety is to be job one, then the language should also address the contractor’s safety policies, procedures, preparedness and performance. Below are best practices for the inclusion of safety-related language into contracts.

1. ENSURE COMPLIANCE WITH THE EXISTING FEDERAL, STATE AND LOCAL REGULATIONS THAT APPLY TO ALL PROJECTS

At a minimum, written contracts should require all contractors, subcontractors and others performing work on the project site follow all applicable federal, state and local requirements. The contract does not need to specifically detail every law or regulation that the parties must follow. The burden is on the parties to know the applicable federal, state or local requirements and ensure their compliance. The contract may specifically reference or quote those regulations the contracting party wants to highlight. Following any highlighted provisions, the contract should also include language requiring compliance with all laws and regulations related to safety or otherwise governing the project. The contract may also set forth procedures for auditing compliance and the reporting of violations, especially any violation leading to an accident.

2. REQUIRE EVIDENCE OF A WRITTEN SAFETY PLAN

A number of OSHA regulations require contractors to maintain a written safety plan. Even where the governing authorities do not require a written safety plan, it is still good practice to require all lower-tier employers to maintain an updated written safety plan. The existence of such plans, establish a safety culture and help employees remember safety best practices and specific trainings as they work. Additionally, a written safety plan may help reduce costs related to workers’ compensation premiums. If the project has unique concerns, such as working around hazardous materials, dangerous surface conditions or infectious disease risks, the property owner should have a professionally developed video training on hand with required viewing before workers access the site.

3. REQUIRE EVIDENCE OF WORKERS’ COMPENSATION INSURANCE

Workers’ compensation insurance serves two purposes:

  1. it ensures that injured workers get medical care and compensation for workplace injuries; and
  2. it protects a businesses’ bottom line following the occurrence of a workplace injury or illness.

While Workers’ compensation insurance requirements differ by state, it is important to understand that most states do require it. A few states, including North Dakota, Ohio, Washington and Wyoming require that businesses obtain workers’ compensation insurance through state-funded operations. It is the responsibility of the contracting parties to ensure their compliance with the pertinent state laws. Additionally, The contract may mandate specific safety ratings (such as CPAR or workers’ compensation) and require that lower-tier parties be vetted on their safety ratings.

4. IDENTIFY AREAS THAT ARE SUBJECT TO CONTRACTOR’S CONTROL

It is common for multiple contractors/employers to perform different scopes of work at the same time on the project site. These contractors work in close quarters, and it is possible for one contractor’s work to create potential safety hazards for other trades. For this reason, it is important for contractors to understand and clearly communicate the specific areas of the project site that are subject to their control and oversight.

A safe workplace will protect employees from injury and lower a company’s expenditures. It will also increase productivity and quality of performance. In other words, safety is good for business and must be taken seriously from the very beginning—at the contracting stage. Identify the safety risks and manage them by contractually assigning the duties of responsibilities, documentation and compliance.

Promote a Culture of Safety With a Connected Workforce

By Rachel E. O’Connell | Originally posted on constructionexec.com 

Construction Safety Week 2022 runs from May 2-6. With that in mind, Construction Executive has conducted an exclusive interview with Gary Clevenger, vice president-risk control at CNA to discuss how to build a well-trained, connected workforce in order to promote a culture of safety and reduce the risk of injury.

Construction Executive: How is a connected workforce safer than an unconnected one?

Gary Clevenger: Connected workforces allow communication to flow up and downstream. Technology helps communication and messaging to be delivered to the workforce, as well as offers a space for critical messages and feedback loops for management. Companies that embrace connectivity can deliver and receive consistent messaging, feedback in real time and make corrective actions that enhance safety and productivity.

CE: How do training and connectivity promote safety?

GC: Digital collaboration and innovative use of technology can deliver consistent, consumable information to the workforce. Digital training platforms allow management to deliver clear messages on safety and hazard mitigation. Examples include: in line translation that delivers content to the worker in a preferred language, and increasing comprehension and understanding demonstrates the importance placed on the safety and well-being for all workers.

CE: What kind of training should contractors implement to improve safety?

GC: The construction industry continues to face shortages of skilled labor. Workers new to the industry should be provided with new employee orientations that prepares this new workforce for the hazards found in construction. Onboarding, prequalification and project- or task-specific training are components of an effective EHS strategy. Communicating safety expectations and addressing critical hazards by through technology platforms can effectively provide new employee orientations that track performance and comprehension—all valuable insight for employers.

CE: How does technology influence training and vice versa?

GC: The avenue for communication that fosters additional engagement with the workforce. Digital learning serves as tool for conveying awareness, hazard recognition and transfer of knowledge across a large population of the workforce in an efficient and consumable fashion. It has been found that because social media has changed the way society consumes content, digital training and awareness are effective ways to connect with employees.

CE: What is a “culture of safety”?

GC: The culture of safety allows everyone to be part of the conversation and solution. Safety is built into conversations, programs, work process and decisions with equal weight. It becomes a core value for a company, not just in words but also actions that demonstrate the commitment to worker safety and health.

CE: What can the industry do to ensure a culture of safety?

GC: A culture of safety is a core value that empowers workers to put their safety and health first over other competing priorities. Allowing workers to make safer choices and not be penalized when they make a decision that impacts safety and health is a strong first step.

CE: What technology solutions best encourage safety and reduce injury?

GC: Technology can be a factor and improve workplace safety when deployed thoughtfully with clear expectations and training. Wearables, proximity sensors, virtual training, autonomous equipment, telematics, biomechanics and AI can all play a role in improving worker safety and reduce exposures to injury. However, without a thoughtful and planned approach to innovative technology, there is a danger of over reliance and missed expectations. New technology does not eliminate the need for training, hazard identification and mitigation. A strategic approach should be part of the evaluation and implementation of innovations.

CE: What is the No. 1 way a leader can promote safety within their teams?

GC: To promote safety within their teams, leaders should deliver on safety promises and empower workers to put their safety as a priority. This can promote the value and commitment it takes to succeed.

CE: How do a culture of safety and low risk of injury impact the industry/the perception of the industry?

GC: Skilled trades women and men are the construction industries most valuable asset. With the tight labor market, workers have a choice. Safety and personal risk are a key component when choosing a career. A positive safety culture can change the perception and speak to the values of a company that many employees look for. A career that values the workforce and promotes safe work practices is often valued by its employees.

ABC Honors Careers in Construction Award Winners

Originally posted on consupt.com 

Associated Builders and Contractors announced the winners of the 2022 National Craft Championships and the ABC Construction Management Competition. The winners were honored on the last day of ABC Convention 2022 in San Antonio, Texas.

ABC Names the 2022 National Craft Champions
ABC Honors 2022 Construction Management Competition Winners

The 2022 NCC featured more than 175 of the nation’s best carpenters, electricians, pipefitters, plumbers, welders and other construction craft professionals vying for top honors in 15 competitions with skills on display across 12 crafts.

Showcasing the industry’s premier skilled trades profession, NCC recognizes the men and women who are building America and highlights the career opportunities that construction can provide, whether to a graduating high school student seeking an alternative to college, a veteran exploring their next chapter after completing military service or an individual rejoining the workforce or seeking a career change.

The Construction Management Competition is ABC’s hallmark competition promoting careers in construction management. The CMC features teams of four college and university students testing their project management, estimating, safety, quality control and presentation skills.

Missing Links | Untangling the Supply Chain

Originally posted on constructionexec.com | By Sam Barnes

All things being equal, the supply-chain problems that seem to be touching every sector, industry and sphere of life in the United States could ease up later this year. If the economy works the way it usually does, the production of goods and materials will ramp up in response to higher prices and alleviate the current logjam.

Unfortunately, two years into an ever-mutating pandemic, all things aren’t equal.

Which is why economist Anirban Basu predicts that supply-chain disruptions—not to mention inflation—will continue through much of 2022. “We’re still seeing shutdowns in various parts of the world because of the spread of COVID-19, most importantly in China,” says Basu, chair and CEO of Sage Policy Group and chief economist for Associated Builders and Contractors. “The country is home to a quarter of global manufacturing, so Chinese manufacturing activity has a disproportionate impact on production.”

Even if the omicron variant diminishes quickly and manufacturing regains steam by mid-2022, as expected, the backlog of orders is so great that contractors will still have to wait for materials. “Because of that,” Basu says, “contractors will confront elevated input prices over the near term.”

While it’s no longer news that construction companies can’t count on materials to be available when or at the cost they’re needed, it might be surprising to realize that the pandemic didn’t cause this entire situation. Shutdowns in upstream manufacturing facilities were followed by a range of transportation issues, including shipping delays at multiple West Coast ports, rail bottlenecks, workforce deficiencies and an alarming lack of trucks.

All of that combined to create a logistical perfect storm across the supply chain. And the problem hasn’t peaked yet. “The amount of goods the ports are handling now is far above pre-pandemic levels,” Basu says. “And while they’re taking steps to deal with this, they just can’t keep up with this massive movement of goods between economies.”

That’s the bad news. The good news: Contractors are figuring out a variety of fixes, workarounds and other solutions for untangling the supply chain.

PRICE VARIABILITY AND UNPREDICTABILITY

For years, the owner-designer-contractor conversation around materials was primarily about cost and vendor alignment. Now, there’s another, more urgent variable: lead time—which, for most projects, is much longer and more unpredictable than ever. Expedited shipping costs and inflation are now huge factors during every project analysis, with some owners, particularly in the industrial market, doling out millions of dollars for expedited shipping.

Brandon Mabile, business development manager for Performance Contractors in Baton Rouge, says industrial owners are more sensitive to supply-chain issues and must closely analyze return on investment for every dollar spent. In recent months, the “cost economics” due to inflation and lead-time issues have flipped, resulting in many projects being postponed or canceled. Still, Mabile expects Performance’s work volume to increase in 2022. “Last year, we really felt the impact of projects being pushed or canceled due to the supply chain, inflation or political reasons,” Mabile says. “We’re now seeing a little bit of a rebound.”

For their part, contractors are getting involved earlier in a project’s lifecycle and collaborating with owners and other team members to work through logistical hurdles and minimize risk. Some of the more radical solutions have been in procurement, with the entirety of a project’s materials and equipment more frequently being ordered long before groundbreaking. The offsite modularization of project components has become another popular way to minimize risk, a trend that began long before the pandemic.

Mabile says Performance, which primarily works capital projects in the industrial market, has been challenged more by price instability than shipping delays in recent months. “We’re able to get the materials that we need, for the most part, by shopping around,” he says, “but price variability and unpredictably is a big problem when bidding. For some of the more exotic materials, prices are being quoted for hours or days instead of weeks or months.”

To accommodate this new reality, Performance has become more upfront with clients about the challenges it’s facing. “We make sure they understand where cost growth may or may not occur, and we look at such things as risk sharing when there’s a certain potential of price growth,” Mabile says. “Other times, we’ll get a price; then when it’s time to start the project, we’ll get two or three bids and provide the owner with a cost-plus rate.” He adds: “Obviously, we can’t take a project and lose our tails because the cost of materials goes through the roof.”

Mabile also sees a trend toward “lump-sum” contracts in the industrial space. Plus, owners are buying more of their construction materials before even hiring a contractor—which requires that designs be completed well in advance of a project breaking ground. “In those cases,” Mabile says, “they might buy 80% of the materials and leave us to buy the last 20%.”

TRIPLE-QUOTING JOBS

Brendan McAndrews, chief operating officer of McAndrews Windows and Glass in Cincinnati, says his glass and glazing company has experienced “a multitude” of supply-chain issues over the last year. Inflation is a major concern, particularly when it comes to aluminum, which has increased some 30% to 40% in cost over the last year. Aluminum extruders are also running behind schedule.

The company’s biggest recent challenge has been getting a critical PPG paint additive that enables paint to bind to aluminum (as one of its services, McAndrews manufactures aluminum systems to support the glass). About 20% of McAndrews’ projects are currently being affected by the issue. In each case, the owner is given the option of switching from paint to an anodized finish or a different paint supplier to avoid a delay. “It has become a significant factor in the last month or two,” McAndrews says, “and taken our lead times from 10 weeks to 20-plus weeks.”

As a result, McAndrews is “triple-quoting jobs in many instances, just to get them off the ground,” he says. The company is also stocking up on standard colors and systems to sidestep potential delays. Still, there’s only so much they can do. “We stock enough so that we can turn around some of the small jobs pretty quickly without the impact on cost or lead time,” McAndrews says, “but we’re not going to have enough for a typical big job.”

Similar to Performance, McAndrews is transparent about supply-chain issues with owners, meeting with them early in a project to discuss flexibility in terms of timeline, specifications and vendors. The lead times on materials often come as a shock. “We send them submittals, tell them the timelines and they freak out,” McAndrews says. “Then we’ll give them other options. They can go with an anodized finish, or there are other brands that might not be having similar issues but don’t have the same color range as PPG.”

The planning process takes significantly longer, as a lot of additional back and forth is needed between architects and owners regarding changes in specifications, cost impacts and other factors. “There’s just more conversation than there used to be,” McAndrews says. “It’s typically a difficult conversation, where they’ll need to change the specs or wait until we have product.”

THE RIGHT DIRECTION

Brett McMahon, chair and CEO of Miller & Long Co. Inc. in Bethesda, Maryland, says his concrete construction firm was less affected than others at the onset of the supply-chain disruption, but that’s changing. Miller’s problems began with some rather obscure products, such as the cans for spray paint and nails, “but increasingly the shipments of cement and other items are getting hard to schedule,” McMahon says. “Just finding someone to drive the delivery truck is an issue.”

It’s a job-wide problem. “A material delay for one contractor can have a ripple effect that impacts the entire schedule,” McMahon says. “Decisions that don’t have anything to do with us still impact us and everyone else on the job.” Fortunately, designers and owners have become more flexible and more willing to accept materials substitutes. “It was an uphill battle in the beginning,” McMahon says, “but that’s been getting better.”

To Michael Coakley, co-president of drywall contractor C.J. Coakley Co. Inc. in Fairfax, Virginia, it’s clear that materials distributors are absorbing the brunt of the problem, “because they’re the ones having to do the gymnastics on this.” He adds: “The manufacturers keep changing their lead times and prices, and they have to be the ones to deal with it. They’re all struggling mightily right now to deal with that.”

Steel is a particular concern. C.J. Coakley typically buys coil steel from wholesalers to make studs, but in 2021 the material was nowhere to be found. And while the supply has rebounded somewhat, price quotes have been reduced from 120 to 30 days. “Steel is in such short supply that the prices have climbed astronomically,” Coakley says. “Steel is in everything. It’s in concrete, conduit, mechanical equipment—everything. So, they’re getting hit on all ends of the spectrum for this stuff.”

Auto manufacturers have exacerbated the problem. As they ramped up production at the end of 2020, they placed massive orders for steel. “Their answer to the supply-chain problem was to order more than they needed,” Coakley says. “Everyone has this massive demand for something that’s just not available, and it drove up the price.” He adds: “The worst thing is the uncertainty on pricing. In the past, we might have been plus or minus 10%, but not 400%.”

Looking ahead, however, Coakley is already seeing a change in the right direction. “I can actually get supply now,” he says. “It’s three or four months out, but we can get it. That means there’s more product in the marketplace.”

Other materials that Coakley needs are also being affected, if not to the same extent, including drywall and studs, which have six- to eight-week turnarounds, “so we’re projecting out a lot further than we would normally.” That’s become par for the course in the current environment, where earlier and more comprehensive planning is critical. “If you’re planning out in front,” Coakley says, “you should be able to get the material you need.”

HIGH PRICES = HIGH PRICES

Despite the uncertainty, Basu is confident that basic economic principles eventually will hold true. “The cure for high prices is high prices,” he says. “That means as the year progresses, there will be some alleviation of commodity prices such as steel, copper and aluminum, because producers have an incentive to produce more in a high-price environment.” Basu also expects to see an uptick in equipment purchases “precisely because producers can’t find enough workers. They’re looking to boost productivity, and that leads to the purchase of more equipment.”

Of course, the pandemic still has the potential to spoil everything; certainly, all bets are off if another variant emerges later in the year. Additionally, surging energy prices are making production less profitable. “It’s taking more money to transport your materials,” Basu says. “It might have wiped out whatever profit margin you might have had.” As a result, even though some owners might be planning to increase production, they nonetheless could choose to wait “because they’re getting squeezed by whomever is delivering your product.”

But, still, Basu offers more good news. In 2021, the world set a record for cargo-ship orders, and supply-chain issues have created a desire to expand manufacturing capacity. “As that happens,” Basu says, “we hope to see some of these supply-chain issues abate and prices fall.”

Nonresidential Construction Adds 11,300 Jobs in March

Originally posted on contractormag.com 

The construction industry added 19,000 jobs on net in March, according to an Associated Builders and Contractors analysis of data released today by the U.S. Bureau of Labor Statistics. After 23 months of recovery, construction employment has at last exceeded pre-pandemic levels. On a year-over-year basis, industry employment has expanded by 220,000 jobs, an increase of 3.0%.

Nonresidential construction employment expanded by 11,300 positions on net, with all three subsectors generating growth. Heavy and civil engineering added 5,000 net new jobs. Nonresidential specialty trade contractors added 3,700 positions. Nonresidential building added 2,600 jobs.

The construction unemployment rate fell to 6.0% in March. Unemployment across all industries declined from 3.8% in February to 3.6% last month.

Continued Growth

“Contractors continue to signal that they are searching far and wide for additional workers,” said ABC Chief Economist Anirban Basu. “With more workers reentering the labor market, job openings continue to translate into employment growth. Given elevated backlog and the expectation that demand for services will remain high, according to ABC’s Construction Backlog Indicator, construction employment is poised to grow further this year.

“Interestingly, the unemployment rate for construction workers is well above the economywide rate,” said Basu. “This is at odds with the notion of a severe worker shortage facing construction. The issue relates to skill sets. While many refer to the current circumstances as a labor or worker shortage, it is perhaps more properly characterized as a skills shortage.

“With infrastructure spending set to rise and construction workers retiring at a rapid rate, skills shortages are likely to worsen going forward,” said Basu. “That translates into rapid wage growth. Given high and rising materials prices, project owners will continue to see elevated bids for construction service delivery, although how this will affect project postponements and cancellations remains unclear.”

Visit abc.org/economics for the Construction Backlog Indicator and Construction Confidence Index, plus analysis of spending, employment, GDP and the Producer Price Index.

More inflation, recession ahead: construction economist

Originally posted on constructiondive.com | by By Joe Bousquin

Dive Brief:

  • Commodity prices will come down before the end of 2022 but supply chain issues will persist for years and a recession is on the horizon in 2023, a leading construction economist predicted.
  • In a James Bond-themed presentation titled “No Time to Buy,” Associated Builders and Contractors Chief Economist Anirban Basu emphasized the historic price inflation dogging contractors, with input prices for construction rising 24.4% year over year through February.
  • Planned interest rate hikes will likely temper those increases by year’s end, he said, but will also lead to a short-lived economic contraction. “The Federal Reserve has engaged in eight interest rate tightening cycles since the early 1980s,” Basu said. “Six have ended in recession.”

Dive Insight:

Basu’s current economic outlook portends a tougher bid environment for contractors going forward as they try to add new jobs to their pipelines in the face of even higher price escalations. In 2021, Basu challenged the Fed’s outlook that rising inflation was a transitory event, a view that proved prescient.

But while Basu’s presentation focused on the longer-term impacts of inflation, the supply chain, labor shortages and the war in Ukraine, it also outlined continued expansion for the immediate future.

“This will be a year of growth, but 2023 could be very different,” Basu said during a webcast with ABC members March 30. He pointed to the prospect of “stagflation” on the horizon, the combination of a tepid economy amid unusually high price increases.

He predicted that when first-quarter GDP numbers come out this month, they’ll show just 1% growth, but that inflation will continue to rise. “As long as you have supply chain issues, you still have price escalations,” Basu said. “And I think 2023 could get that kind of stagflation.”

Supply chain issues, which have hit construction harder than the broader economy and have pushed prices for critical materials such as steel mill products up by 74.4% in the last twelve months, will persist, according to Basu.

No magic wand

Due to much of the world still dealing with COVID-19, and many countries not having as plentiful access to vaccines as the U.S. to inoculate workers, he said there would still be a lag in the global production of materials.

“Even if COVID went away tomorrow and the Russia-Ukraine war ended, these supply chain troubles last into 2023 and in some cases 2024,” he said. “It takes a long time to build capacity.”

Despite these challenges, contractor optimism has largely stayed positive. But cracks are beginning to show in that outlook, as contractors’ expectations for profit margin growth have begun to flatten, according to ABC’s Construction Confidence Index.

The lack of supplies will continue to drive inflation to an even greater degree than current government projections, in Basu’s view. While the Fed is forecasting 4.3% inflation in 2022, Basu pegged his outlook closer to 5%.

“Along with rising wages amidst the Great Resignation, this unbalanced economy translates into higher-than-average inflation in 2022,” Basu said.

Given that outlook, he advised transportation officials to back weight their spending of dollars from the $1.2 trillion bipartisan infrastructure act until 2024 or 2025, when they will buy more for taxpayers.

“If you try to rush this, you’re going to be delivering or receiving construction services at a time when prices are really high and capacity is really constrained,” Basu said. “If I was a director of transportation in a certain state, I would spread out the construction work” over two to four years, he said.

By contrast, one bright spot has been the apartment sector. While most commercial contractors focus on nonresidential projects, there is crossover for some on multifamily developments.

“Apartment permitting is skyrocketing,” Basu said. “Some of you are involved in that multifamily market, and so that should be one of the stronger markets for you going forward.”

In spite of that momentum, Basu pointed to evidence that inflated pricing and persistent labor shortages are already causing owners to hit the brakes on proposed nonresidential projects.

He cited recent growth in the Architectural Billings Index, which tracks early stage design work and is hence used as a leading indicator for construction down the road. But that data hasn’t aligned with actual nonresidential fixed investment in structures as tracked by the U.S. Bureau of Economic Analysis, which has mostly fallen during the pandemic.

The reason why, Basu postulated, is that investors who have mandates to put capital to work have pressured developers to at least start outlining projects. But once they get to the bid phase, inflationary cost overruns have forced them back to the sidelines.

“I would think that there would be even more construction taking place based on design work that’s transpiring,” Basu reasons. But project owners looking at their pro forma — or the projected return on their projects — are seeing a disconnect with actual bids. The thinking at that point from developers is, “‘My pro forma is therefore busted, and I can’t move forward with this project,'” Basu said.

Good news

The silver lining of the outlook came from commodity futures. Basu said projected economic weakness in China, paired with decreased commodities futures pricing due to anticipated interest rate hikes, likely mean some relief is in sight.

“For many of these other commodities, like steel, I think these prices are going to fall significantly later this year,” Basu said.

In other words for construction, right now is no time to buy. At least not yet.