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July 26, 2012

Another Good Recovery Sign
Filed under: Industry outlook,Sitework — Tags: — nedpelger

The Volkswagon Plant in Chattanooga, TN could be seeing a big expansion soon. The Chattanooga Times/Free Press reported that the local Industrial Development Board just voted to begin the earthwork for the potential future plant. The aerial photo below shows the site:

Even though VW corporate hasn’t yet agreed to expand the plant, the Industrial Board will spend several million dollars on earthwork to prepare the site for the proposed expansion.

Since the State of TN previously agreed to spend $16M on the project, the money is available. By grading now, the soil will be able to settle prior to the start of the hoped for expansion.

The VW plant now makes about 150,000 Passats annually and some $7M of internal plant renovations now ongoing will increase that to 170,000/year. The proposed expansion could take that to 500,000 vehicles/year.

I rented a Passat on my recent travels and was impressed with the design and the mileage. It’s a bit disconcerting to have the engine shut off at every stop, only to restart as soon as my foot went off the brake. The mileage was phenomenal, though.

So it’s good to see a well built car with great potential for increased American production. Don’t just hear all the bad news…there’s lots going right in this USA economy.


July 3, 2012

Finally, A Bill the Unions and Tea Party can Agree On
Filed under: Industry outlook — Tags: — nedpelger

ENR noted that Pennsylvania just passed a bill that requires contractors on all public projects prove their workers are in the country legally. Senate Bill 637, by Sen. Kim Ward, R-Westmoreland, passed Senate by a vote of 42 to 7. Most of the no votes were Philadelphia Democrats, citing discrimination. The article states:

Ms. Ward denied there is any discrimination involved. “It makes sense that construction projects funded by public tax dollars employ workers who are taxpayers and that legal construction workers who need jobs can get them,” she said.

There is also a public safety side to the issue, she added. Making sure workers are who they say they are, and are in the country legally, helps ensure that workers are qualified to do complicated, sometimes dangerous construction work and that they aren’t foreign terrorists who could make buildings unsafe, she said.

The first part of Sen Ward’s rationale above is logical and you may agree or disagree based on your politics. The public safety issue, though, seems ludicrous. Workers are more qualified because they are Americans or have a visa? The idea of foreign terrorists as construction workers seems especially unlikely.

Blowing things up or making them fail is fairly easy. Building things, on the other hand, takes huge amounts of skill and effort. Then to build them slightly wrong, so the items will pass inspection, work through all the testing but fail at some special time would take amazing amounts of skill and effort. Frankly, it’s a silly argument.


June 19, 2012

Idiots on Parade: A Primer on Wasting Federal Construction Grants
Filed under: Industry outlook — Tags: — nedpelger

After the Katrina hurricane, the federal government gave $234M US to a southern Mississippi county utility authority. According to an AP article, the Authority wasted that money in a shocking manner.

Three wastewater treatment plants nearing completion will begin operations at 11%, 6% and 1% of design capacity. Of course, the operations costs for these plants will be substantial and borne by the county taxpayers. How do these boondoggles keep happening?

The federal officials certainly deserve a large portion of blame. The AP article ended with this info:

Robbie Wilbur, a spokesman for the Department of Environmental Quality, said the site was picked “because there were fewer endangered species issues, less wetlands impacts, better access, and lower construction costs.”

Wilbur said the decision was made by local officials, but members of the utility authority dispute that.

“DEQ rejected all of those alternatives … I want it on the record that we strenuously looked at these alternatives and asked for them and those things were rejected,” Ladner, the Harrison County supervisor, said during a November 2009 board meeting. “They were determined that we put it there and if we don’t … we lose all funding.”

But the local engineering firms that did the population projects and feasibility studies also share the blame. Generally, authorities hire engineering firms to do the feasibility studies that will then go on to design the plants (which is the main fee generator for many consulting engineering firms). So it’s like asking the barber if you need a haircut.

Finally, the local Authority Board members have to make better decisions. The allure of free money so often colors the thinking of rational people. Bad decisions get made, then the terrible consequences spin out for the next 50 years.

America needs a better model for spending public money. Or do you think this boondoggle is the exception to an otherwise efficient system?


June 4, 2012

CA High Speed Rail: Looking Worser and Worser
Filed under: Industry outlook — Tags: — nedpelger

The $68B US high speed rail system proposed in California seems to be a stimulus project. Yet stimulus projects (funded by the government to prime the economic pump and get some money flowing through construction) should be spent on projects that substantially improve the country. The interstate highway system built in the 1950s achieved that goal.

High speed internet access for everyone or smart electrical grid applications seem to be great stimulus projects for today. The CA high speed rail project, though, just doesn’t pass the smell test. The huge cost to only slightly improve the commute from San Francisco to Los Angeles from the current plane, train and automobile options would never get done with private money.

In fact, one of the biggest project criticisms came from Huffington Post regarding the low projected operating costs. They write:

If the bullet train project is to pencil out, it must operate far more economically than any high-speed rail system in the world, according to the experts, who include former World Bank executive William Grindley.

Unless these extraordinary economies actually are achieved, the train will require alarmingly high annual operating subsidies “forever,” as the experts wrote in a report last month. The annual operating deficit could top $2 billion.

On another project front, ENR reports that farm groups filed a major environmental lawsuit seeking a preliminary injunction to block the start of construction. Making that a double whammy, the Orange County Transportation Authority want to spend much less money and simply improve the current train service. They question all the project parameters, but particularly the demand:

“We are building something new and haven’t proven there is a pent-up demand for train travel…. I find this process almost surreal,” Orange County Supervisor and transportation authority Director John Moorlach said at a recent board meeting.

So if I were a betting man, I’d be wagering that this project will be a non-starter.


May 18, 2012

Chicago Infrastructure Trust: You Heard It Here First
Filed under: Industry outlook — Tags: — nedpelger

Remember that scene in The Graduate when Dustin Hoffman, as a recent college graduate, gets some sage advice? Take 22 seconds to watch it:


Well I’m going to give you the word for our times. Actually,  let me give you the phrase: Chicago Infrastructure Trust. Imagine Rahm Emanuel whispering it to you at a party.

As most folks in America know, we haven’t been spending enough to repair our infrastructure. Inefficient transportation systems and buildings cost our society $130 billion in 2010, mostly because of higher running costs and travel delays, according to The Economist. The American Society of Civil Engineers calculates (which is something they’re good at) that this under-investment will cost each American family over $10,000 US between 2010 and 2020.

We all also understand that no political will exists to get this money raised through traditional public sources: raising taxes, selling municipal bonds, etc. So, the Chicago Infrastructure Trust (CIT) shows a new way. It’s not an infrastructure bank so much as a project facilitator, matching public infrastructure needs and private investor wants.

The Economist article says it well:

The CIT allows Mr Emanuel to tap the private sector for money, rather than just raising taxes and borrowing. The private sector will invest money in projects and get it back in the shape of tolls, user fees, premium pricing or even tax breaks.

The first project is an investment of $225m to make city buildings more energy-efficient. This is expected to reduce annual energy costs by $20m, and the savings will then be used to pay back the investors. The CIT will provide some capital, bond financing and grants. It will also offer tax-exempt debt to entice investors. Returns on investment could vary from 3% on tax-exempt bonds to 8% for equity partners.

The beauty of the CIT system, to me, is the private investor direction and oversight. Goofy projects that don’t make sense (which so often proceed in the public process), simply won’t find traction among private investors. Also, the private investors will tend to demand better selection, design and construction management. The private investors (think smart financing executives) will push for efficient pricing of public resources like parking and busy roads, allowing the free market to improve our public works.

Certainly many details need to be resolved and safeties need to be in place, but the CIT will be the future model for public investment. If you agree, you may want to think about how you could productively align yourself with the trend. Knowing an important trend early can be a huge advantage.

Now, if you have a few more minutes, why not treat yourself to the amazing conclusion of The Graduate? You know you want to.



May 14, 2012

A Game of Chicken on the High Speed Rail
Filed under: Industry outlook — Tags: — nedpelger

ENR reports that Transportation Secretary Ray LaHood, acting on behalf of the Obama Administration, has given an ultimatum to California: either vote in June to provide the matching state funding for the high speed rail from Bakersfield to Fresno or lose the $3.3B US federal grant. I struggle when I think of 3,300 million dollars. That’s a lot of scratch…to continue the chicken analogy.

The CA Legislature had planned to vote to authorize the funding, but moved toward more hearings in the summer and delay the decision till August.

“We need the Legislature to make the strongest commitment possible,” LaHood said in an interview. “The way to do that is to include the money for high-speed rail in the budget that is passed in June. August is too late for us.”

Of course the CA legislators respond that they want to follow their plan and not be pushed around. So it will be interesting to see who jumps aside in this game of chicken.

As I understand it, the first high speed rail section from Bakersfield to Fresno will cost about $6B, but the entire project cost from LA to San Francisco will run $68B.

While the construction industry certainly could use some stimulus, it’s amazing to me to see projects like this under consideration. Adding flights seems so much more efficient.

When President Eisenhower dreamed and financed the interstate highway system, that government investment made USA more efficient to do business than anywhere in the world. Why are we now jerking around with high speed rail to make for comfortable commuting (which already has several viable alternatives) and not high speed internet access for the entire country? Or a more bulletproof electrical grid?  Who is driving the dream?


May 9, 2012

Bird Brain
Filed under: Industry outlook — Tags: — nedpelger

I read an article in ENR that opened with:

As California Department of Transportation Construction Manager Douglas Coe tells it, the key to success on a very complicated seismic retrofit of the Antioch Toll Bridge is the mastering of the three B’s – birds, bearings and bracing.

Now I understand that a seismic retrofit for a bridge would involve some work on the bridge bearings and the bracing structure, but why did birds top the challenge list?

Turns out that Caltrans knew that Barn Owls, House Finches, Cliff Swallows, Barn Swallows and Northern Mockingbirds all build nests on the bridge between February and September. If a nest is built and eggs laid, then all work has to stop for the 6 to 12 weeks till the eggs hatch and birdies fly away.

So a $35M US project halts, costing tens or hundreds of thousands of dollars for a barn swallow egg? I’m wondering who has the bird brain in this scenario. How have we gotten to the place where this behavior makes sense?

I’m in the process of awarding a large site package and talking to several older estimators (my age) about the project details. We easily track onto how things were in construction and how they are now. The increase in silly rules and paperwork dominates those conversations. Can our society ever move away from special interest initiatives and back toward common sense?


May 7, 2012

Construction Unemployment Rate Falls, But 2,000 Jobs Lost
Filed under: Industry outlook — Tags: — nedpelger

So how can the Construction unemployment rate for April 2012 fall to 14.5% (from 17.2% in March) but the industry lose 2,000 jobs? As ENR reported, the laid off construction workers find jobs outside the construction industry. In fact, though the unemployment rate has steadily dropped, the construction industry employs less workers than in April 2010.

According to the Bureau of Labor Statistics’ latest monthly report, though, the architectural and engineering services have added 7,400 jobs in the last month. That’s normally a harbinger of good news for construction.

As I’ve been writing for over a year, if Europe doesn’t melt down, we should be on our way to a reasonable recovery in construction. We certainly see it here.


March 12, 2012

Construction Employment Improves for 17th Month in a Row
Filed under: Industry outlook — Tags: — nedpelger

The US Bureau of Labor Statistics reported that Feb 2012 construction unemployment rate was 17.1%, an improvement from the 17.8% Jan 2012 rate. It’s a substantial improvement from the Feb 2011 rate of 21.8%. In fact, the report shows notable gains in construction employment in the last year across all categories. The seasonably adjusted rates are shown below (in thousands).

Type                                   Feb 2011     Feb 2012

1. Constr of bldgs              1,141.11      1,236.3
1.1 Resid  bldgs                      528.0          573.1
1.2Nonresid  bldgs               613.1           663.2
2. Heavy and civil                 714.7         836.5
3. Specialty trades              3,192.8     3,480.8
3.1 Resid spec trades         1,328.3     1,457.6
3.2 Nonresid spec trades 1,864.5     2,023.2
Total Construction       5,049              5,554

The employment rate grew for the 17th consecutive month, which is welcome news. From the chart above, you can see that a half million construction jobs were added in the last year. An ENR article puts that news in perspective, though, noting that 2.2M construction jobs have been lost since the 2006 peak.

I don’t know what you’re seeing, but 2012 projects are coming in fast and furious for me. Seems like owners want to build while prices are still low, but demand is rising. Lots of owners seem to think the end of the Great Recession is now.


February 21, 2012

Working for the Russians in Afghanistan
Filed under: Industry outlook — Tags: — nedpelger

Looking for construction work? Has the economy not quite rebounded in your locale? Well here’s an opportunity for the not-so-faint-of-heart. The Russian Ambassador to Afghanistan announced yesterday that Russia wants to help with the reconstruction of Afghanistan by restarting over 150 construction projects started during the last Soviet invasion. The Ambassador stated that the highway and factory projects should help strengthen the weak Afghanistan economy.

What could be better than working for the Russians in Afghanistan? You may even get to be part of building the first railroad in Afghanistan. Think Coolies, 1880s, in the American West .

You should buy your plane ticket today. Just showing up and checking out the situation would probably work best. Let me know how that works out for you.

If you need a bit more encouragement, maybe the clip below will help.


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