What's the Future of Pavement Maintenance?

It is important to know how government rules and regulations impact your bottom line and your ability to sustain and grow your company. At National Pavement Expo in Fort Lauderdale we spent an entire session looking at how some of these challenges might impact the asphalt industry future.

 

Labor Challenges

The challenges we are facing from a labor perspective come primarily from two areas: safety and health compliance and health care reform.

The Occupational Safety and Health Administration (OSHA) has been focusing more and more on whistle blower protection programs and inspections, and recent budget actions highlight this shift. The Obama administration’s FY14 budget increased funding for whistle blower protection by 37% over FY13. The construction industry makes up over half of the 40,000-plus inspections performed annually by OSHA, not to mention the thousands of state inspections So it’s important for every pavement maintenance contractor to develop and maintain a safety program to meet OSHA requirements.

On the health care side, there are several aspects of the Affordable Care Act (ACA) that are of importance to the pavement maintenance industry. Under ACA, companies of 50 or more full-time equivalent employees will be required to provide insurance to their employees. Additionally, insurance companies providing group coverage plans to small businesses with fewer than 50 employees must bring their insurance plans into compliance with the minimum “essential health benefits” requirements of the law. The demographics of the construction industry, particularly as it relates to age and gender, point toward higher health costs in the future as a result of these features of the law.

Not only is the construction industry a mostly male workforce, but 31% of employees are between the ages of 16-34. This is significant because the people most likely not to have insurance and most likely not to take it even if it is offered, are males between the ages of 18-34. So the financial penalties associated with the insurance mandate for companies of 50 or more pose a potentially great risk to the construction industry.

For those companies unaffected by the employer mandate that choose to provide insurance, a mostly male workforce means potentially higher costs in the short term as insurance companies bring their plans into compliance with the law. Before ACA insurance companies could charge higher premiums based on gender. This option goes away with ACA, meaning group plans covering primarily male employees, particularly young ones, could see higher monthly premiums.

 

Material Issues

On the material side, an important trend to monitor is the growth in refined coal tar sealant (RTS) bans and/or restrictions across the country. Minnesota (read how that law passed, page 51) and Washington have banned the use of RTS, eight more states have local bans, and 15 have some sort of local restriction placed on RTS. And, legislation to ban RTS has been proposed – but not passed - in the U.S. House of Representatives.

Growth in these bans and restrictions is important for sealcoating contractors throughout the country because they are not isolated to particular regions or along political Red state/Blue state lines. For the sealcoating contractor, this might mean setting aside some time throughout the year to monitor actions by state and local representatives, as well as any voter referendums that might pass and prohibit or limit the use of RTS in your area.

 

Buying Equipment

Lastly, contractors need to review how government actions might impact their equipment, particularly in regards to purchasing decisions in 2014 and beyond. By the end of 2015, all new equipment produced for the industry must meet EPA’s Tier 4 regulatory guidelines. Given the complexity of the equipment being produced, many contractors are looking at alternatives to purchasing new equipment in the short term. In Pinnacle CCID’s conversations with manufacturers and distributors, many expressed concern over sales going forward due to uneasiness on the part of contractors with Tier-4 compliant equipment.

For the asphalt contractor, this might mean opting to maintain what you have for longer than you are comfortable with, purchasing used equipment, or renting. In fact, in our seminar at the National Pavement Expo, many contractors in attendance expressed an increased interest in buying used equipment in the next few years due to Tier 4.

 

Colby Humphrey is senior director of the Center for Construction Innovation and Development (CCID), a “focused research source” designed to meet contractors’ needs for general industry and market research, market growth analysis, competitor benchmarking, trend identification and analysis, and survey development including customer satisfaction surveys, leadership assessments, and more. Contact Colby at colby@pinnacleccid.com; phone 913-904-4970.

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