More Construction Firms Plan To Hire, Instead of Cut, Workers In 2011

More construction firms are planning to hire workers this year than are planning to make layoffs, according to the results of an industry-wide survey released by the Associated General Contractors of America and Navigant. The survey, conducted as part of the Construction Industry Hiring and Business Outlook, shows the industry may finally be emerging from a severe downturn that has left millions of skilled workers unemployed.

?This won?t be an easy year for most firms, but it will be better than last year,? said Stephen E. Sandherr, the association?s chief executive officer. ?If current trends continue, this industry will be in a much better position 12 months from now than it is today.?

Sandherr noted that while 55 percent of firms laid off staff and only 20 percent of firms added employees in 2010, the outlook is more positive for 2011. He said that 27 percent of construction firms report they plan to add staff in 2011 while only 20 percent report plan layoffs. Even more positive, expanding firms plan to hire an average of 23 employees, while contracting firms plan to lay off an average of 16 employees.

Among the 26 states with large enough survey sample sizes, 45 percent of firms in Iowa plan to hire, more than in any other state. Those firms plan to hire an average of 5 employees each, 21 percent of their workforce. Only five percent of Iowa firms plan layoffs. Meanwhile, 48 percent of firms in Idaho plan layoffs for this year, the highest percentage of any state. Those firms plan to lay off an average of 12 employees each, 11 percent of their workforce. Only 14 percent of Idaho firms plan to hire.

Despite the improving employment outlook, more contractors expect the construction market to shrink in 2011 than expect it to grow. Contractors are most pessimistic about the private office market, where 56 percent expect activity to decline, followed by the retail, warehouse and lodging market, where 52 percent expect less activity. Contractors are most optimistic about the hospital and higher education market, where 32 percent expect growth and the power market, where 29 percent expect growth. However, even for those markets, 36 percent of contractors expect the hospital and higher education market to shrink and 32 percent expect the power market to contract.

Contractors? low expectations may be driven by the fact most firms expect stimulus-funded construction activity will decline this year. Clear majorities of firms (ranging from 56 percent to 66 percent) expect stimulus spending in every market segment to decline in 2011. Meanwhile, only 30 percent of firms report they plan to perform stimulus-funded work this year, down from the 45 percent that reported performing stimulus-funded work in2009 or 2010.

?The stimulus propped up many construction jobs during the past two years,? said Ken Simonson, the association?s chief economist, noting that firms reported one-in-five employees were involved in stimulus-funded projects during the past 12 months. ?The stimulus is already becoming a thing of the past in most contractors? minds.?

The dour market outlook appears to be affecting demand for new construction equipment. Only 28 percent of firms report plans to purchase new construction equipment in 2011, down from the 34 percent that reported purchasing equipment last year. Investment levels among the firms planning to buy equipment appear to be heading up, however. Firms report plans to spend nearly $900,000 on average for new equipment, up from average totaling of $671,000 last year.

Bid levels will remain very competitive this year. According to the survey results, 29 percent of firms report they plan to lower bid levels in 2011. That follows a year when 74 percent of firms reported lowering bid levels, including seven percent who reported lowering bid levels to the point they lost money performing the work. Adding pressure to firms? bottom lines, 71 percent of firms report their health care costs are expected to increase in the wake of the new legislation enacted last year.

?In the face of tough market conditions, many firms are focusing on operating efficiencies and expense reduction, positioning themselves well to take advantage of a resurgent construction market,? said Michael Feigin, Navigant?s managing director for construction. ?Construction firms are doing this, in part, by adopting new technologies and new techniques like BIM and Lean Construction.?

Growing numbers of firms plan to embrace new construction modeling technology known as Building Information Modeling (BIM) this year, Feigin noted. While only eight percent of firms currently use the technology, 55 percent expect that number to increase in 2011. Demand for green construction also continues to grow, with 15 percent of firms reporting working on Leadership in Energy and Environmental Design (LEED) registered projects in 2010 and 53 percent expecting that number to grow this year.

Growing numbers of firms plan to work on public private partnerships (PPP), perhaps driven by tight public sector budgets. Firms report working on an average of 5.2 PPPs in 2010, and an overwhelming 70 percent of firms expect that number to increase this year. In contrast, use of Integrated Project Delivery (IPD) contracts that include incentives for collaboration among parties involved in a project, does not appear very widespread. Firms reported working on an average of only 0.26 projects with IPDs last year, and 92 percent of firms expect that number to decrease this year.

Nearly half, 46 percent, of firms reported implementing Lean Construction Concepts, a way of minimizing waste of materials, time and effort. Feigin suggested many firms have embraced lean construction concepts to cope with decreasing revenue and ever tighter margins.

The outlook, which the association co-sponsored with expert services firm Navigant, was based on survey results from nearly 1,300 construction firms from 49 states, the District of Columbia and Puerto Rico. Contractors from every segment of the industry answered over 30 questions about their hiring, equipment purchasing and business plans. Economists and specialists from the association and the firm analyzed those comments to craft the outlook.

SOURCE: Associated General Contractors of America

Evansville Agrees to Upgrade Sewers

The city of Evansville, Ind., has agreed to make extensive improvements to its sewer systems that will significantly reduce the city?s longstanding sewage overflows into the Ohio River in a comprehensive Clean Water Act settlement with federal and state governments, the Justice Department, the U.S. Environmental Protection Agency (EPA), and the state of Indiana announced recently. The agreement would resolve allegations made in a lawsuit filed by the United States and Indiana in September 2009 against Evansville for alleged violations of its Clean Water Act discharge permits.

Evansville?s sewer system has a history of maintenance and system capacity problems that result in it being overwhelmed by rainfall, causing it to discharge untreated sewage combined with storm water into the Ohio River. Under this settlement, the city will improve operation and maintenance, as well as develop and implement a comprehensive plan to increase capacity of its sewer system to minimize, and in many cases, eliminate those overflows. Costs may exceed $500 million. The plan must be fully implemented by calendar year 2032 or 2037, depending on Evansville?s financial health. Additional measures to improve the capacity, management, operation, and maintenance of its separate sanitary sewer system to eliminate overflows of untreated sewage will begin immediately.

In addition, the city will take immediate steps to upgrade the treatment capacity of its two wastewater treatment plants. In total, the measures undertaken by the city of Evansville and required by the settlement will help eliminate more than 4 million pounds of pollutants and hundreds of millions of gallons of untreated overflows discharged into the Ohio River and Pigeon Creek every year.

?By reducing the volume of sewage and polluted runoff entering the Ohio River, this settlement will improve water quality and protect the health of people that use the river,? said EPA Regional Administrator Susan Hedman. ?The comprehensive plan will improve the performance and sustainability of Evansville?s sewer system and significantly reduce basement backups and overflows.?

?Evansville?s inadequate and aging sanitation infrastructure allows potentially harmful sewage and storm water overflows into the Ohio River,? said Ignacia S. Moreno, Assistant Attorney General for the Environment and Natural Resources Division of the Department of Justice. ?As a result of this settlement, Evansville will implement significant measures to achieve the requirements of the Clean Water Act. Like other settlements we have reached in municipalities across the country with outdated sewer systems, this settlement will protect public health and improve the water quality for the local community.?

In addition to improving its sewer system, Evansville has agreed to pay the U.S. a civil penalty of $420,000 and the state of Indiana a civil penalty of $70,000. Evansville will also implement an environmental project that will connect homes with failing septic systems to the city?s sewer system at a cost of more than $4 million. Failing septic systems often contribute significant pollutants that can impair local water quality.

Evansville is located in Vanderburgh County on the north bank of the Ohio River in southwestern Indiana. Evansville?s sewer system serves a population of approximately 163,000. Thirty-nine percent of Evansville?s total sewered area is served by combined sewers while 61 percent is served by separate sanitary sewers. The combined sewers are located in the older, downtown portion of Evansville and lack sufficient capacity to transport all of the combined sewage that it receives to Evansville?s two wastewater treatment plants during rainfall. As a result, Evansville commonly discharges the combination of sewage and storm water through one or more of its 22 combined sewer overflow outfalls on the Ohio River and Pigeon Creek.

In the past, the United States has reached similar agreements with numerous municipal entities across the country including Jeffersonville, Ind.; Fort Wayne, Ind.; Indianapolis; Nashville, Tenn.; Mobile, Ala.; Jefferson County (Birmingham), Ala.; Atlanta; Knoxville, Tenn.; Miami; New Orleans; Toledo, Ohio; Hamilton County (Cincinnati), Ohio; Baltimore; Los Angeles; Louisville, Ky.; and northern Kentucky?s No. 1 Sanitation District.
Once the consent decree is lodged in the U.S. District Court for the Southern District of Indiana, it will be subject to a 30-day public comment period and approval by the federal court. A copy of the consent decree will be available on the Justice Department website at http://www.usdoj.gov/enrd/Consent_Decrees.html

SOURCE: U.S. EPA

Infrastructure Bank Bill Introduced in House

Legislation that would create a national infrastructure bank was introduced recently in the House by Rep. Rosa DeLauro (D-Conn.), and Senate legislation is expected to be dropped over the next several weeks. The National Infrastructure Development Bank Act of 2011 (H.R. 402), which was introduced by Rep. DeLauro introduced in the 111th Congress, would establish a bank responsible for leveraging private sector funds to invest in transportation, water and wastewater, energy, and telecommunications infrastructure projects. The bank would have the authority to issue federal bonds and provide funding for projects from the proceeds, namely by making loans and offering loan guarantees. The bank would be capitalized with authorized appropriations of $5 billion a year over the next five years. The Treasury Department would be authorized to call up an additional $225 billion if needed to meet bank obligations. The bank could potentially issue up to $625 billion in bonds.

?With today?s budget constraints, innovative financing solutions are needed to invest in critical infrastructure projects, a key component to a national growth strategy that creates good middle class jobs at a time of unacceptably high unemployment and spurs economic growth to allow us to compete with other economic power centers around the globe,? ? DeLauro said in a statement.

SOURCE: National Utility Contractors Association

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