Construction Equipment Owner

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.

Like many cities that experience multiple freeze-thaw cycles, Chicago has a pothole problem and it has a pothole problem every year. And each year newscasts feature film of potholed streets and car-eating potholes, and each year the city attracts attention (meaning politicians get lambasted) for not repairing potholes quickly enough. No news there.

But this year there’s been some news: First there was Kentucky Fried Chicken’s offer to repair $5,000 worth of potholes on Chicago streets provided KFC could stencil an ad on top of each pothole when they’re done. KFC did the work in its hometown of Louisville, KY, and made the offer to five cities total. Chicago said “thanks but no thanks.”

More recently some city residents took the matter into their own hands — and repaired the potholes on their streets using eight bags of a pre-mixed cold product they bought for $100 and a 250-lb. push roller borrowed from a neighbor to fill 15 holes. Not very economical considering the city spends $100 per ton on a high-performance cold patch, but also not very safe to have residents working in the street.

The city reports its crews fill between 3,000 and 5,000 potholes a day and have filled 300,000 potholes since the beginning of December and urges residents to be patient…but they are “considering” corporate sponsorship of its repair operations.

I found out a few days ago that Harold Neal, president of Neal Manufacturing Co., died at the too-early age of 63. It took me a few days to write about it as Harold and I go back to 1990 when I started in this industry — and he wouldn’t take my calls.

Harold was a tough guy, a tough competitor (you can ask those he competed with), with a little of a prove-yourself-to-me attitude. But after meeting him a few times, talking with him at NPE and particularly at the first NPE West show in Long Beach, CA, in 1991, I must have shown him something because that spring I was able to reach him on the phone — and he gave me his direct line. Ever since then he spent a good deal of time teaching me about this business, from the technical differences between gear pumps and his piston pump to how a contractor should run a sealcoating business. He was one of those who helped me make my way in this industry, and I won’t soon forget it.

But that’s what he did for me. What he did for the industry was even more important, starting with equipment developments aimed at making sealcoating operations more efficient and more profitable, which helped businesses grow and expand. He also was known to offer credit to start-up contractors who really couldn’t justify the loan, but many of those folks are still in business and have Harold to thank for getting them started.

He also laid the groundwork for what is today National Pavement Expo. Neal Manufacturing used to host “customer appreciation” events in Atlanta that offered sessions on various pavement maintenance topics and and exhibit floor full of Neal equipment. Many, many contractors left those events with a new piece of equipment on order, and that recognition by Bob Woltering lead to the first NPE in Nashville…which lead to where we are today.

There are many people out there who contributed early on to the development of the pavement maintenance industry, and there are many who contribute to the industry’s progress today; Harold Neal was one of the first, one of the most influential, and one who won’t be forgotten.

Normally I’m not one to crow about anything technology related (usually because I don’t take the time to figure it out) but a revamped website that went “live” just yesterday really deserves some attention.

It’s called Equipment Connection and it’s such a high-caliber upgrade over what our ForConstructionPros.com website offered as it’s product research tool before that it’s almost inaccurate to term this new site an upgrade. It’s going to do for online research what the Ipod did for music selection and the Tivo did for recording television programs; its ease of use is that much better.

Even though it starts with equipment, it doesn’t end with equipment (and materials, tools, services, videos, manufacturer information and more). It’s the way Equipment Connection integrates so much of the industry that makes this something worth using. In this day and age we know that “content is king,” and that’s where this site starts. But you can have access to all the content in the world but if you can’t navigate it what good is it? It’s the fluidity of the site that I think makes it so valuable.

Say you’re interested in asphalt pavers. You go to the site and you have two options: Type “asphalt paver” in the search box, a menu drops down, and you can click on the category you want; Or, just use the handy category list on the left to take you to the asphalt paver section. Once in the section you can view products by company, you can view pavers by product from most recent back, or you can just get a listing of all companies that manufacture asphalt pavers. And you can even view pavers in an A-Z list by product name. And it’s all right there in front of you. You don’t have to back out or click to the “home” page to do anything; it’s all done right from whatever page you’re on.

Ease of use, fluidity, comprehensive information. You never know, I might even use this thing.

It’s only one project but a paving job on hold for lack of funds was recently put out for bid in Oak Park, IL. A stretch of East Avenue, a heavily trafficked suburban road, was slated for an overlay since 2007. Lack of funds, however, put the project on hold. But because of more than $600,000 in federal stimulus funding the job is slated to begin in spring 2010.

Hopefully that’s the first of many new paving projects. When you hear of any start-ups — especially delayed projects that have been given the go-ahead — in your market drop us a note. It will be great to track some good news for a change

Last year I heard constant stories from contractors who ended up doing often extensive pavement maintenance work for property managers who couldn’t afford the asphalt overlay they had planned. Maybe this year is looking like that too — or at least it is starting out that way in Lynchburg, VA, where Advisory Board member Steve Young, Young Sealcoating Inc., bases his business. Here’s what Steve told me recently:

“On the commercial end of things, we are getting a lot of bid opportunities for jobs that should be paved. Because asphalt has climbed in cost so rapidly while the economy has declined so rapidly, many property managers are taking a more serious look at asphalt maintenance. Some have gone to the extent of just having lots sealed instead of having them paved - even though they really should be re paved.

“This has lead to two factors: One, we are bidding work that is not as clean, and we are able to get more per square foot as the property owner approaches the contract with relief that it is only going to cost maybe $20,000 to seal instead of the projected $90,000 to pave. The caution however is to make sure that you communicate very clearly with written ‘provisions’ in the contract so that the P.M. understands that sealing it is not a substitute for paving it.

“I am finding that property managers are more eager and willing to respond to the age-old marketing question: “Can we meet to discuss options for reducing your paving costs?” More paving companies will likely need to shift toward providing services for the current market such as tapping into subs that sealcoat and crack repair or learning to sealcoat themselves. There is still plenty of work in this industry, we just need to be flexible enough to see the demand and modify our services to meet the current demand. In the long run, companies will have learned to expand and improve on their overall services…food for thought.”

Food for thought for sure, but it sure would be great if paving contractors could see some of the work postponed last year getting let to go this year.

Let us know what’s happening in your market as the season starts up.

Looking for some insight into how various states are adjusting to the budget crunch? Check out a nice overview by Daniel C. Brown in the Spring 2009 issue of Asphalt published by the Asphalt Institute.

“For the near term,” Dan writes, “it looks like lowered budgets, reduced new construction, and an increased emphasis on pavement preservation are the orders of the day.”

It’s the “increased emphasis on pavement preservation” that caught my eye. While many miles of state roads are undoubtedly past the point of no return, where preservation dollars spent would be preservation dollars wasted, an emphasis on preserving the existing pavement will enable states to improve road quality while extending pavement life and reducing life-cycle pavement costs.

Maybe this means that pavement preservation will (or has) finally become the legitimate “construction” alternative it always should have been.

National Pavement Expo’s conference program always offers sessions that we know contractors need to attend, but invariably these types of sessions (legal, contracts, safety, regulation) are among the sessions that draw the fewest contractors each year. I guess that’s okay, and we’ll keep offering the sessions our research shows contractors need to have access to, but I have to admit…I just don’t get it.

A perfect example is this year’s “Embezzlement & Fraud: How You Can Protect Yourself” presented by Pam Newman, RPPC Inc. Last year we offered it for the first time and it drew only 18 people; this year that number dropped to 7. We’ll offer the session again, though not in 2010, but I don’t understand why contractors aren’t interested in learning how to protect themselves from one of the most common and most damaging problems small businesses encounter. If you think it’s rare you need to have a few more conversations with other small business owners. In fact most contractors know someone who has encountered this type of problem (most people in the session the last couple of years had already experienced it). Why wouldn’t a contractor spend $65 and 90 minutes to learn some basic, low cost (or cost-free) steps they can take to protect their company?

Any contractor who has run into embezzlement or fraud can tell you an ounce of prevention is worth a pound of cure… and sessions like this one should be Standing Room Only.

Living just outside of Chicago I can attest to a recently published truck driver survey that I-55 and I-90 are two of the worst roads in the country (and they don’t get much better once you drive on them outside the Chicago metro area). Not a good thing, as the reason the roads are so bad is we’ve neglected them for so long. As a recent overview of road construction in Parade magazine, How We Can Save Our Roads, points out, those years of neglect might just be the needed push the country needs to get the economy working again.

John Horsley, executive director of the American Association of State Highway Transportation Officials (AASHTO) points out that as a country “we just haven’t been keeping up with the maintenance and preservation.”

But, Horsley says, we’re ready to start. He says 3000 road projects could be up and running within a few weeks if the dollars become available, and that will put one million people to work over the next year.

So let’s get going. As those 3000 (hopefully more) projects get underway contractors who prefer high-volume paving and roadway repair will shift themselves back into that market, leaving behind the commercial and industrial paving and pavement maintenance market they had been working in just to maintain their cash flow.