[VIDEO] How Today’s Construction Labor Situation is Driving Up Bid Prices

Some construction contractors are forced to over estimate pricing projects by 10% to 15% due to future uncertainty over the growing skilled labor shortage; plus more industry news on the June 23, 2016, edition of Construction News Tracker

Construction News Tracker is brought to you by Caterpillar and produced by ForConstructionPros.com.

Communities nationwide are faced with a mounting dilemma. They have the funds to build but not the workers to build a multitude of construction projects.

Chicago is a case in point. Contractors and developers are trying to line up skilled manpower months ahead of schedule, using overtime and other incentives to meet their goals.

Cushman and Wakefield claims the Chicago labor force is at 74% of the pre-recession level with less than 22,000 working.

Obviously construction projects took a nose dive during the recession and not yet fully recovered.

Mortenson Construction reports that some subcontractors were forced to downsize, are reluctant to expand now, and causing tension and anxiety among the industry forced to over estimate pricing projects by 10% to 15% due to future uncertainty. Builder association and labor leaders say there's no immediate resolution to the problem.

Saving money is a key factor for contractors trying to trim costs and keep their businesses healthy. The Construction Financial Management Association has developed suggestions on how to manage projects efficiently:

  • Tool management and inventory control
  • Setting petty cash policies for employees
  • Seeking out best prices on materials and equipment
  • And in this tech world we now operating in, making certain electronic tools are properly handled

Focusing on the small stuff, says the CFMA, is really key because the world is getting smaller, stronger, faster, and construction is not immune to that so cost savings for contractors is a means to really ensure survival.

What is seen as a major construction divorce, the Washington State Convention Center will pay Skanska-Hunt $8 million to just walk away. The project management company, Pine Street Group, alleged Skanska-Hunt was "not the right fit" for the $1.4 billion convention center expansion. Both sides sparred for weeks as the contractor said it never had a complaint and the firing came as a surprise.

What a superior court determined for the separation was that the management firm had no faith in Skanska-Hunt's ability to reduce project costs enough to reach a targeted savings amount. The outcome is that the Washington State Convention Center has selected the next lowest bidder — a joint venture of Clark Construction and Lease Crutcher Lewis — to take over the remainder of the work.

Calling it a project whose time has long since come, transportation authorities in North Carolina and Virginia have joined forces to create a $1 billion interstate to link Norfolk, VA, and the North Carolina research triangle. The 213-mile roadway could take upwards of 10 years to build and would be designated Interstate 87. Congress and the federal government have given their stamp of approval. Now the two states must develop funding for the massive highway.

Consider the mess that's developed in Illinois in recent months as the Governor's office and the General Assembly square off over...well, everything, including transportation funds. $1.8 billion in federal money is at stake because of the political stalemate, and without their authorization it's estimated that 80% of the federal dollars will remain unspent. Illinois DOT officials now have until July 1st to decide on suspending projects already on the books.

Now, tie this dilemma with an IDOT budget request for $11.2 billion for infrastructure repairs over the next six years. The funds would be used to repair 501 bridges and more than 2,500 miles of roadway. The budget request is $2.8 billion more than previously requested, and they have yet to receive a dime of that money.

The state of California set its gas tax rate at 17 cents per gallon in 2010 on a sliding scale based on fuel prices, and we all know what happened to that market. As a result, the Golden State gass tax is presently at 12 cents per gallon and headed to a dime a gallon July 1st. The net result is CALDOT is slashing its road budget by $754 million for next year, with an additional $755 million in potential cuts for later years. Now, some are calling for officials to settle on a stable, consistent gas tax level.

Fourteen years in planning, six of construction, is the World Trade Center Transportation Hub in New York City. Knowns as Oculus, designed by Santiago Calatrava, the complex time lapse video contains over one million images taken over the five year construction period, and as explained, has achieved Gold LEED certification. Oculus connects all three of the World Trade Center buildings at a cost of $4 billion, and that is $2 billion over budget.

And we leave you on this note, philosophy is a study that lets us be unhappy more intelligently.

This is Construction News Tracker looking over the industry that makes the world a better place. Presented by Caterpillar and produced by ForConstructionPros.com.

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