Construction Equipment Owner

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.

Baseball’s All-Star Break traditionally marks the unofficial (and mathematically inaccurate) half-way point of the season and it’s a time when teams reassess how their first half went, what their second half looks like, and what their prospects are for making the post-season. If you’re a Chicago baseball fan it’s been a frustrating few months with both the White Sox and the Cubs hovering around the .500 mark and demonstrating that they’re not quite “there” yet, though they’re not quite out of it either. There are worse places to be at this point.

I suspect most contractors feel just like Cubs and Sox fans: There are worse places they could be halfway through the season. Paving contractors, unfortunately, probably feel a little like Baltimore Orioles fans who are watching their team not quite be able to get near that .500 benchmark.

At least that’s what we’re hearing from contractors in the front lines and the manufacturers and material suppliers who support them. Pavement maintenance work continues to be steady if not plentiful, with many contractors scheduled four to six weeks out (in a normal year they’d be six to eight weeks out). Competition is tough, which is having an impact on margins, but the pavement maintenance work does seem to be out there still. And, contractors tell us that, for whatever reason, they have an unusually large number of jobs they’ve bid — but those jobs that haven’t yet been awarded. So there’s an undercurrent of optimism that there will be more work to come, with the prospect of a busy pavement maintenance fall season.

With paving contractors, on the other hand, there is no such undercurrent. New construction is still struggling so builders don’t need new driveways and new parking lots. Commercial overlay work has also declined as many properties are paying close attention to their pennies as vacancy rates increase while debt loads remain the same. And the federal stimulus package, while generating sporadic work throughout the country, has so far not had the intended impact of putting fleets of iron and crews of workers back in the field en mass. Plus, the work that is getting done is getting done at significantly smaller margins than paving contractors want and need.

So if your business is a “Cubs” or “Sox” business and you’re doing okay though not as well as you’d hoped, remember we’re only halfway through the season; a successful year is still within reach and flirting with .500 is something to build on. If your business is operating like the Orioles (or the Pittsburgh Pirates or the San Diego Padres) a “strong” season might be out of the question but a strong finish to lay the groundwork for 2010 isn’t.

Do I sound like a Cubs fan or what?

Not many contractors hire pavement consultants (we hire them to speak at National Pavement Expo), but property managers and owners hire consultants such as Benchmark Inc., Chec Management Systems Inc., and Murphy Pavement Technology to develop bid specs, oversee, and double check the work contractors do. An article in the May newsletter of Benchmark Inc., which consults on roofing and pavement for commercial property owners, shows what can happen when a consultant isn’t used and why consultants can be worth well more than their fee.

According to the article, Construction Observation — A Valuable Service by Russell V. Timmerman, Benchmark Inc. was hired to design rehabilitation of a section of parking lot and private road pavement for a commercial property. Benchmark provided all the pre-job work but the client decided not to hire Benchmark to conduct site visits during the project. The client did, however, hire Benchmark to perform a final walk-through with the client and the contractor. Among the problems Benchmark discovered after the job was completed was that the contractor shorted the customer more than 365 tons of binder material and 149 tons of surface material — roughly $71,000 in hot mix asphalt not being placed amounting to 25% of the overall cost of construction.

Obviously the contractor in this case was the problem, but Benchmark discovered it and helped the property owner negotiate an extended warranty for the pavement as well as make sure the contractor did not receive payment for materials not placed.

Contractors increasingly report working with pavement consultants on more and more projects, but the relationship doesn’t have to be adversarial. The consultant is there to handle the technical aspects of the work that most property managers don’t understand — and don’t have the time or the inclination to learn. As long as the contractor does what he (or she) is expected to do, the consultant and contractor can form a team that provides the best job for the customer.

National Pavement Expo does work to bring in the best of the best pavement maintenance speakers each year, and we know we get the right folks because they work year ’round for us. It’s the rare speaker who doesn’t field phone calls throughout the year from contractors who attended an NPE session, and our speakers step up and help these folks out every time.

Mick Vinckier, one of NPE’s premier speakers on pavement marking, has always happily fielded these types of calls, but a couple weeks back he went above and beyond his normal effort. While visiting Yellowstone National Park he happened to drive by the Jackson Hole Airport, located right at the base of the Teton Mountains, where he noticed some striping going on. So he pulled over to take a look. Turns out the director of operations was out there pushing a striper trying to restripe, partly on a curve, with the gun on the front end of the machine.

So Mick ambled over and before you know it he was giving the operator a “shortened” version of his striping sessions. Before too long the director of operations called over two other employees and Mick took the three of them through the paces of how to properly and more efficiently restripe the airport, including showing them how and why to move the gun to the rear of the machine. Nearly two hours later Mick went back to vacation - but not without inviting these folks to National Pavement Expo and not without giving them a copy of Pavement Maintenance & Reconstruction and urging them to subscribe.

Thanks, Mick!

Oh, by the way, the reason the airport director of operations was striping himself is because the only striping contactor he could find to do the work was in Cheyenne and he had priced himself out of the job.

So, more than a solid month into the season and what’s the industry look like? Here are some anecdotal insights:

* There’s a lot of potential sealcoating work in the bid pipeline. Contractor after contractor I talk with says they tried to jump start their season by offering aggressive bids early on. Most of those bids have not been awarded, so that work is sitting out there waiting…and contractors are waiting hopefully on it.

* Weather is playing a big role. Many Midwestern contractors, for example, stopped and started several times trying to get their season going but consistent rain forced late starts to the season. The obvious result is a backlog of work built up, which many contractors are just now starting to eat into.

* A southeastern contractor says his crews are paying much closer attention to the weather — not only each night and morning but at the end of each sealcoating job. If the weather looks threatening his crews shift to repair work.

* A Midwestern paving contractor expects paving sales to be down 5% from budgeted numbers, due primarily to large commercial properties holding off on overlays and new parking lots. The plus side is that many of those properties are still seeking pavement repair and maintenance, but the volume isn’t there from them.

* A western contractor sees just the opposite: Sealcoating work in his market is down but paving is going great guns, primarily, he guesses, because hot mix costs aren’t as high as last year and the customers are trying to take advantage of that.

* Most contractors I talk with are scheduled about eight weeks out — consistent with a typical year.

* Margins, not surprisingly, are tight. But contractors are not lamenting that fact - instead reacting as if the tight margins are current “fact of life” they have to get through until the economy picks up.

On the whole, contractors seem accepting of the current market and seem to be using the tight economy as an opportunity to re-evaluate how they are running their business, handling their jobs, and managing their crews. Many are also exploring adding additional services. That’s just some of what I’m hearing. What’s going on in your market?

Contractors offering milling services can support their work with a report prepared for the Washington Dept. of Transportation that supports the use of pavement milling — even without a tack coat — as a pavement preservation technique.

Reported in the Winter edition of Centerline published by the Asphalt Pavement Association of Oregon, milled pavement surfaces had a better bond than non-milled surfaces. The study also found that when milled pavement was overlayed without a tack coat the lack of tack did not adversely affect the bond between the layers.

However, the same was not found for non-milled pavement. Pavement that was not milled prior to an overlay and that did not receive a tack coat exhibited decreased bond strength — actually no bond at all.

The impact is this: Milling, with or without a tack coat, is an effective way to place a pavement overlay. If you’re not milling the surface then a tack coat is essential.

Anyone who lives in, near, or drives through Chicago will soon get an eyeful (and probably have plenty of time sitting in construction traffic from which to watch) how some of the federal stimulus money is getting spent.

Typically Chicago resurfaces about 35 miles of streets a year, though Chicago DOT says only a few miles were repaved in 2007 and 2008 because state funding basically dried up. But through 2010, largely because of stimulus dollars, Chicago will reconstruct from the subbase up four sections of major roads and resurface another 100 or so miles of some of the worst streets in the city. And drivers in Oak Park, IL, will finally notice construction on a section of roadway that has begged for repair for years.

Whether or not you support the stimulus, this work is a good thing. New and repaired roads are important for communities, they’re good for drivers and driver safety, they’re good for the paving industry — and ultimately good for the pavement maintenance industry.

There’s no question the infrastructure of the country has to be rehabilitated, and that means roads have to be repaired before they are too far gone. You know, “proper maintenance in a timely manner.” If the stimulus gets that done it will have a lasting impact on the infrastructure while hopefully providing a long-lasting boost to paving and pavement maintenance contractors.

What kind of work, stimulus-generated or not, is going on in your area? How does that affect the work available to your company? Are you getting more requests for bids? Are you encountering fewer competitors? Are big pavers moving away from parking lot work?

Let us know.

The title of a great song by Adele, a young big-voiced, Grammy winning soul singer from Great Britain, “Chasing Pavements” is also what contractors are often doing this time of year as they try to get the pipeline full for the rest of the season.

And if pre- and early-season conversations with contractors and materials suppliers are accurate, the industry is doing a pretty good job and those pipelines should be full pretty quickly.

That’s because contractors - to a person — say they have many, many bids out, just waiting for contracts to be awarded. Margins, unfortunately, have been tightened in some cases, especially for early season bids. But a number of contractors (sealcoaters and stripers) have gone back to near normal margins as the bidding seems to be plentiful and they figure they’ll get their share of the business.

Materials suppliers are at least cautiously optimistic. The ones I’ve talked with say the season started slowly but they are encouraged by the number of bids their prospects say they’re waiting to hear on. And just this last week we talked with a sealer supplier who not only had existing customers placing and increasing orders, he had new customers buying material.

All pretty good news, indicating property managers are planning on getting work done, and all the chasing pavements effort likely will pay off.

I had a chance to talk with a couple of pavement consultants the other day, and they both report the world has changed from their perspective.

Both consultants work extensively for commercial clients, many of whom have locations spread across the country. The consultants evaluate parking lots, develop bid specs, and in some cases screen contractors and oversee work.

One national property management company has put a halt on all pavement maintenance work for the time being. The consultant explained it’s not that the firm doesn’t believe in pavement maintenance — just that they’re tightening their belt as much as possible. That’s a big chunk of work lost at least for the time being. Luckily for this particular consultant his company also works in the public sector and has already been awarded some projects as a result of the federal stimulus package, so 2009 is shaping up to be a good year.

The other consultant has seen a major shift in the way one of the corporations he works for is handling its properties. The consultant works for a major corporation that managed virtually all its properties centrally. In 2008, however, many of the properties were franchised, and much of the decision-making became fragmented at the local level. Probably good for local contractors, not so good for this consultant.

But he does still work for the parent company, and he has a number of other national accounts who not only are not cutting back on pavement maintenance but are actually ramping up some work. So 2009 is looking fine, though different, for him.

Did the other shoe just drop?

Analysts have been warning for months that the housing slump created by tight lending practices (on the heels of ridiculous lending practices) would eventually spill over into the commercial property sector. Well, that happened big time yesterday when General Growth Properties filed Chapter 11 to reorganize its operation — and it will probably have to sell some properties.

One of the largest mall owners in the country, General Growth owns more than 200 shopping centers in 44 states, including many high-profile locations such as Chicago’s Water Tower Place and the Grand Canal Shoppes at The Venetian in Las Vegas (neither of which require much pavement maintenance).

But many of their other holdings do include parking lots. And while this Chapter 11 filing doesn’t necessarily mean pavement maintenance work for General Growth will disappear, it does mean more attention will be paid to monies spent.

For pavement maintenance contractors this filing should be a caution: Make sure you know who you are doing the work for and who will be paying the bill. Hopefully General Growth will be the last property owner to be in this financial bind, but I wouldn’t bet on it.