Construction Equipment Owner

Last week I passed along some numbers from manufacturers and material producers I’ve been talking with — this week it’s the contractors’ turn.

Not surprisingly most contractors I talk with report business in decline and tough competition — both of which lead to tighter margins. That’s pretty much what we’ve been hearing all year. Here are a few comments:

* “Our business is down 7%,” says one southern sweeping contractor. “The good news is the decline is all cutbacks in service, not cutbacks in price. I can get the service back I can’t get the price back.”

* “We are actually down about 9%,” says an East Coast sweeper, adding that there still has been a nice upside to his business this year. “Our maintenance division has been doing very well. I have had only one red month this year (and I know exactly why it happened) so overall it’s steady as she goes. What I have been telling other folks is ‘We are working twice as hard to break even.’”

* On the other side of the country a western pavement maintenance contractor reports that sales for the first quarter were down over 2008 but that April sales jumped and May sales jumped even more. June sales for this contractor dropped from 2008 but July sales in 2009 skyrocketed. So it’s been an interesting year made even more interesting by where the sales came from. This contractor notes that in 2008 sealcoating, cracksealing, and pavement marking lead they way accounting for almost 55% of sales. This year, however, HMA overlays dominate the work, and a recently added service, sweeping (primarily for construction sites) also plays a role, accounting for almost 9% of 2009 sales.

“This year the 2-in. overlay, 1 1/2-in. overlay, remove & replace, rotomilling and about 90% of the patching has been subcontracted out. Last year they were subbed as well, however we did 90% of the patching our self and only subbed out around 10%. We have had excellent luck with subcontracting this year, its honestly amazing,” the contractor told me. “Our sweeping is a new service that’s only a year old (accounting for less than 3% of 2008 sales). It has helped cover some of the other lower numbers and has been a consistent source of revenue. Almost all the sweeping (90%) is contracted following a large road slurry company around and only 10% or less is doing one weekly account or our own work.”

Respond to this blog and let me and other Roundabout readers know how your business is doing and what you think the rest of your season likes like. I’m hoping for dry weather and a long, long time before winter sets in.

This is precisely what one Skyline Construction Inc. of San Fransisco is doing. Ok, there are a couple of limitations to this, but basically it boils down to the following: Select employees of the company chose their own salary from a selected range. Then here is where it gets interesting. Those who chose a lower salary had an opportunity to receive a larger bonus at the end of the year if the company turned a profit.

Of the 15 employees who were offered to set their own salary, 12 decided to go on the lower end and roll the dice on earning a larger bonus at the end of the year - bonus amount was not disclosed, but the employees who chose the lower up-front wages reported being happy with their decisions.

The result? Skyline’s revenue grew from $42 million in 2004 to $76 million last year.

One belief for why this is so far has been a successful venture is that when employees are more directly in charge of their compensation they will be additionally motivated and more likely to produce profitable results because as the business succeeds so does their monetary return.

August seems to be a month where I’m talking to an awful lot of contractors and manufacturers, and without giving away any company names or locations, here’s some of what I’ve been hearing from manufacturers:

* One sealer producer says sales are down about 5% from 2008. A small percentage of that can be attributed to the economy but almost all of the decline is more likely the result of poor weather which has put customers way behind in getting their work done. So here’s hoping for an extra long season with a nice long Indian Summer.

* Another material producer says sales through June were up 30% — maybe you want to read that again to make sure you got it right. That’s a huge number in any economy but especially in this one. Some of that is attributed to the federal government’s stimulus package which has opened the door to short-term maintenance projects that can get started and completed so public agencies don’t have to commit long-term dollars to them.

* Not surprisingly, equipment sales are lagging, and that’s particularly true of the larger, more expensive units. Manufacturers are seeing some sales in less-expensive equipment but big pieces are a harder sell…plus, contractor are encountering issues obtaining credit despite the fact they might have a very solid credit history. This seems to be in line with what most manufacturers were anticipating for 2009.

If you’re a manufacturer feel free to let us know how your season is going — you can do it without letting us know who you are.

Next week I’ll report on what contractors are saying.

The up again, down again stimulus news hit a pretty high note today in a newsfeed item that came across the wire - Stimulus Work on the Cusp of Revving up the Economy: “ProPublica asked members of its reporting network to find out if states had advertised the projects, awarded contracts or actually started construction work. While about 30 percent of the projects in the sample had broken ground by mid-summer, at least 66 percent had a contract and 76 percent had been put out to bid - suggesting an impending gusher of stimulus work in late summer and early fall.”

In addition to news items, ProPublica has a pretty good site that breaks down stimulus funding in a variety of ways: http://www.propublica.org/ion/stimulus/item/our-stimulus-spot-check-summer-wave-of-projects-nears-crest-817

Another Stimulus Work Search Tool from JW Surety Bond Consultants

Usually when magazines and newspapers write articles about the “sounds of summer” they mention “I Get Around” by The Beach Boys, “Groovin’” by the Rascals, “Surf City” by Jan & Dean, or even “4th of July, Asbury Park” by Bruce Springsteen. That’s all fine “summer” music but this morning on a trek to Chicago’s northern suburbs I got a chance to listen to some different, and possibly “better,” summer music. Temperatures this morning were (finally) in the eighties, the sun was high in a bright blue sky… and I sat in six traffic backups of varying lengths that transformed a 90-minute roundtrip into a 150-minute roundtrip. Yes, summer is wonderful! Seriously! And the sounds of summer are music to my ears — even if I have to sit in traffic to listen.

I jumped on I-294 (which allows drivers to circumvent downtown Chicago) just at the end of the rush hour and had plenty of time to watch crews hard at work on the I-294 reconstruction project. While passing hundreds of orange-and-white barrels and hundreds more bright orange cones of varying sizes I counted 17 arrow boards and at least 7 message boards — and I might have missed a few. Work zone speed limit signs and signs designating lane shifts and new traffic patterns were plentiful, and I had plenty of time to watch the Big Boys and their crews hard at work — no paving work yet but an awful lot of big equipment out there making preparations.

Once I got off 294 the traffic continued in a snarl — but all to a good cause! A Wirtgen W2000 cold planer had already done its job on eastbound lanes of Dempster Avenue and was beginning its work milling what looked to be about 3 inches of pavement off the westbound lanes. And not too far behind it was an Elgin Eagle sweeping up leftover millings. And a few miles down more milling had been completed and temporary lane markings had already been sprayed onto the surface. It all sounded good to me.

And then, possibly the best news of the trip, was my destination featured a recently sealcoated and newly striped parking lot, a good-sized one too. I took a tour of the lot to check out job quality … only to realize it must have been done by a Pavement reader as the pavement appeared to have been recently cracksealed, new stripes were straight, ends of stripes were sharp and lined up, and all the places I checked there was no spillage or overspray of sealer on brick or concrete. The work there was complete so there were no summer sounds of sealcoating systems or striping equipment, but the evidence was obvious: They’d been there working.

So next time you’re in a conversation about “songs of the summer” let other folks bring up Alice Cooper (”School’s Out”) or Steppenwolf (”Born to Be Wild”), but make sure to mention the real music made by construction equipment working in every city, making every jobsite its own outdoor music festival. (But don’t forget about “Summer in the City” by the Lovin’ Spoonful, the first rock band to include the sound of a jackhammer in a pop song.)

Despite the fact that I need to get some more updated material for my blog headlines it does appropriately illustrate what we’ve been hearing from our audience of construction professionals. They want to know where they can track stimulus spending. By far, the best site I’ve found is Recovery.org. This is not to be confused with the Government site Recovery.gov.

We’ve worked together with the folks at Onvia (the company powering Recovery.org) before on this website and call tell you they have a large amount of resources dedicated to tracking ARRA and other projects. Mike Pickett, President and CEO of Onvia, recently posted an article on HuffingtonPost.com regarding “What We Do Know About the Recovery.”

I would encourage our audience to read this analysis and then check out Recovery.org as this is probably the best site on the web to see where and on what the stimulus dollars are being spent.

Working in the construction industry, I see projects of all sizes — from backyard patios to multi-story buildings. Recently I’ve been keeping an eye on a particular project that is just huge, and the imagery is out of this world (the image here is from The Hoover Dam Bypass Project Web site). It’s the Hoover Dam bypass bridge, formally known as the Mike O’Callaghan-Pat Tillman Memorial Bridge. The bridge will shuffle traffic over the Arizona-Nevada border, 890 feet above the Colorado River. When complete, it will be the largest concrete arch in North America. If you’re a concrete nut, the project is worth checking out.

The Las Vegas Sun covers the bridge construction closely, with great imagery. And with another concrete marvel  — the Hoover Dam – less than a half-mile upstream, the area is a true concrete mecca.

Well, they say all good things must come to an end, and this good thing just has. Loretta Miles retired last month from Cygnus Business Media and I’m sure going to miss working with her. Loretta and I go way back, to 1990 when the magazine and National Pavement Expo were acquired from Bob Woltering by The Aberdeen Group. We worked together in this industry since then — Loretta as primary salesperson for Pavement Maintenance & Reconstruction and NPE before becoming manager and primary salesperson on NPE and NPE West, and me as editor and conference coordinator for the shows.

Technically I worked “for” Loretta, but we were really the most successful team I’ve ever been involved in. Ours was one of those working relationships that was a great one. We each had a goal of developing the magazine and the trade shows for our company — first Aberdeen and now Cygnus — because just like contractors and manufacturers we’re in the money-making business. But what made us work so effectively is we both figured the best way to do that was to try to help the paving & pavement maintenance industry develop and grow. We believed that as individual businesses improve and become more profitable, the better and stronger the industry itself becomes and the more the industry can grow — and the more successful we can be for our company. It’s a real “rising tide lifts all boats” kind of philosophy and as I point out it my August Editorial in Pavement our efforts have resulted in “a trade magazine and two trade shows recognized for their unbiased and straightforward efforts to reflect, develop, and grow the paving and pavement maintenance industry.” Loretta can certainly can be proud of that and I’m sure we can continue the path she helped mark out during her almost 20 years in the industry.

I’ll still be talking with Loretta regularly, letting her know what’s going on in the industry, and she’ll be telling me about her long and straight tee shots and the putts she holed from just off the edge of the green, reminding me I could finish a round of golf a little quicker if I didn’t zig-zag down the fairway. I know she’d enjoy keeping up with her friends in the industry so if you want to drop her a note you can reach her at Loretta.Miles@live.com.