Contractors Share Four Essentials to Survival in 2010

Last month, I sat in on an Associated General Contractors of America (AGC) teleconference announcing the results of the Nationwide Construction Employment and Business Forecast for 2010. You can check out the report at www.agc.org.

While details of the report were of great interest, of equal value were the responses from the five contractors who joined the Q&A session that followed the presentation. Here is a quick summary of the major points they brought up:

1. Additional stimulus is desperately needed - The construction industry declined $137 billion in 2009, and as of last month, construction unemployment was at 22.7%, a level similar to the rate during the Great Depression.

"[A second] stimulus bill is absolutely essential," says Jack Parker, president and CEO, Reed and Reed, a Woolwich, ME-based road and maritime contractor. "I think of it like giving a shot of ether to an engine that won't start. We had one shot and the engine sputtered, but it's not responding. We need another shot to start the engine, and it will sustain itself if we can build the economy back."

2. Contractors need to look beyond their business niche to see what else may be out there - Take renewable energy, for example. "We have a wind mill factory [operating] in Little Rock... and they're spending $100 million to build a second one in Jonesboro," says Don Weaver, senior VP, Weaver Bailey Contractors, a road construction firm in El Paso, AR. "Mitsubishi is going to start building their wind mill turbines in Fort Smith. So even though we don't have wind mill farms here, we are seeing a significant investment in that industry."

Military base realignment has also proven a boon to various regions. "Base construction seems to be good from Texas clear up to the Midwest," says Kristine Young, president, Miller the Driller, an underground construction firm based in Des Moines, IA. "And it's encompassing all disciplines - underground, roads and bridges."

San Antonio, TX, will realize $3 billion worth of construction from base realignment, notes Maryanne Guido, CEO, Guido Brothers Construction, a San Antonio building contractor. "With the ancillary businesses coming in to support [the base], we are hoping that in and of itself will help San Antonio, and Texas in general, stay below the effects this economy has had on the rest of the country," she states.

3. More project owners need to take advantage of design/build to speed projects to market - "A couple of obvious benefits we've discovered... to the public contracting process are, first, design/build helps to expedite the projects to market because of the way the process works," says Parker, "and second, it creates innovation among contractors, which is part of the long-term solution for success in our business."

4. Contractors need to embrace innovation - "We have to get more innovative," stresses Doug Davidson, president of Atlanta-based New South Construction. "We have to individually improve our services by giving owners more value. We may have to enter some markets we may not have been in before. And we have to protect the turf we're on as the new competition comes at us. [We have to] provide value - not a low bid that's below the cost of the work."

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