theme song for 2011

While  “Free Fallin’” may be a little bit of an exaggeration, I was thinking about something more like Tom Petty’s, “Won’t Back Down”, where Petty confidently boasts, “In a World that keeps on pushin’ me around, but I’ll stand my ground, and I won’t back down”.  Petty suggests that even at the gates of hell, just don’t back down.

Don’t worry Tom – we won’t!

I looked all over for some positive construction industry forecasts for 2012 and well, I didn’t really find any.  But why?

Everybody says how the economy is improving which may or may not be true, but the unemployment rate in the US appears to be decreasing.  However, the construction employment is still tremendously stagnant.  I suppose this is because construction improvement woefully lags the rest of the economy – lucky for us.

While I couldn’t find any economic info that made me want to “Whistle Dixie” (maybe next year’s theme song?), I did find a great report for construction economic data put out by the Gilbane Company.  While not overly positive, this report gives a great snapshot of what is going on and what can be expected.  If you’re into all the graphs and tables and things like that, you’ll love this.

It’s kinda funny that you’d think a website called Constructonomics would put a bunch of tables and graphs and stuff up as well but instead it has a bunch of touchy feely mumbo jumbo making analogies to rock songs from 1989.  Go figure that one…

But before we  give our Carharts to Goodwill and pawn the Hilti gun (neither of which I have ever owned), just take a deep breath and try to relax in the midst of industry-wide unemployment and underemployment.  Ok?

Now, everyone just needs to realize that things will improve and while it may not be this year, it will definitely be next year.  How do I know this?  Well, I don’t, however, I did read something from the AIA saying that architectural billings will be up nicely this year, which means….Plus, I stayed at a Holiday Inn Express last night.

But seriously, it has to.  As companies hire more people they are going to need more office space to work and more hotels for travel.  As consumers make more money they’ll need more retail space for shopping and bowling alleys etc. for having fun.  It’s only a matter of time.

How much time?  I don’t know.  But until that time comes we’ll fight, claw, and scrape our way through what hopefully turns out to be the worst downturn of our careers.

And of course……We Won’t Back Down.

This isn’t the first time I’ve made a mention of Mr. Darnell on this blog.  Way back in February of 2010 I did a write up on the PPC shortly after reading it for the first time.  At the time, I was gung ho on emotional intelligence and transforming the construction industry into what I thought it should become.  However, 2010 brought challenges that made this difficult.

I didn’t fully realize how far I had strayed from my once unwavering ambition to infuse emotional competence into the construction world, until I re-read the PPC this weekend.  2010 brought challenges for me like none I had ever experienced.  I was for the first time, 100% responsible financially for the projects on which I was working.  Not only was I responsible, but the margins we were working under were slimmer than I had ever seen.  I was also doing hard bid, high risk work.

This stress produced more self interested thinking and my people skills tremendously declined.  I was snappy with clients, designers, and subcontractors.  I think I knee-jerked to the old school, “kick ass and take names” mentality.  Trust me, it’s easy to do when you’re doing a project with a liquidated damages clause of $1000 per day for a late finish.  One week late and I’m eating at the soup kitchen.

So I’ll cut myself a little slack because of the pressure I put on myself, but I won’t let myself off the hook entirely.  It just goes to show  how easily you can lose sight of this stuff.  I’ve studied this for years and when the pressure was on, I kind of lapsed into more entrenched ways of doing things.  You gotta be careful.

With all this said, the pressure of hard bid contracts certainly doesn’t help the movement of trying to get some more emotional competence in construction projects.  In bad economies, margins slim down and hard bidding increases.  But hopefully as things improve, we’ll get into more collaborative projects with a more even distribution of risk.  And hopefully, more emotional intelligence.

I didn’t know much, if anything, about fracking until about three months ago when I downloaded a podcast of This American Life that explored the issue and then specifically looked into two professors who had conflicting opinions about the benefits of fracking.  After listening to the podcast, I came to the brilliant acertion that the whole thing is totally fracked up. 

One of the professors from Penn State, in this NPR tale of good vs. evil, calculated the large amount of natural gas in the Marcellus Shale deep beneath the surface of Pennsylvania, Maryland, New York, and West Virginia and presented his admirable findings with pride to the administration of his University.       

The other professor from the University of Pittsburg did a calculation of the amount of toxic chemicals used in the hydraulic fracturing process that could be polluting ground water, streams, rivers, and eventually making its way into drinking water. 

One of these professors received wide acclaim and praise for his work, the other ended up out of a job.  

I starting trying to gather facts about fracking (I guess you could call them fracks).  The funny thing is that facts (fracks) are rather few and far between.  It doesn’t seem that anybody really knows if fracking is safe, dangerous, good, or bad.  However, this much we do know, fracking is big money.  It’s big money for drilling companies, but it’s also very lucrative for owner’s of land with gas underneath.  We also know that the fracking practice was exempted from the Safe Drinking Water Act despite knowing that the fluids used to fracture the rock contain many toxic chemicals including known carcinogens. 

Pennsylvania is sometimes described as Pittsburg and Philadelphia with Alabama in between.  In short, there are some depressed towns in central Pennsylvania and natural gas drilling has transformed these places.  The gas industry has brought money, luxuries, and to many of these people – hope.  But at what cost?  The word is very mum on that one. 

I’m honestly kind of torn about the issue.  I tend to knee jerk to the side of the environmentalists in situations like this, but I can also see the need for quality domestic energy and a decreased reliance on foreign oil. 

However, I do want to make sure we are dealing with the correct information before we rush to judgment.  For example, the drilling and gas companies cry from the mountaintops about how natural gas is so clean burning and a non-contributor to climate change.  This is not true.  While natural gas does burn cleaner and with less impact to climate change, the extraction process releases natural gas into the atmosphere which is a tremendous contributor to climate change, so the net effect is not much better than burning oil or coal.  Sorry, but gas companies didn’t quite hit the mark on that one. 

I guess I’m just an advocate of full disclosure of information and having smart people make good choices based on lots and lots of accurate information.  That’s all.  So when the EPA asked the drilling companies to disclose all the chemicals used in fracking fluids and they said, “No”, that kind of ticked me off. 

Hopefully we’re not fracked on this one.    

My Uncle, who has spent his whole life living within the city limits of Philadelphia, used to call the Philadelphia tap water “Schuylkill Punch”.  That nickname didn’t always give me warm and fuzzies about drinking the Philly tap water.  However, I think the drinking water in Philadelphia is actually less of an issue than the quality of the river waters after major rain events.  This is because Philadelphia, like most older cities on the east coast, has a combined sewer system where stormwater and wastewater are both carried to the wastewater treatment facility in the same pipes.  This is all well and good, until the stormwater is extremely high and exceeds the capacity of the system.   In order to avoid sinks and toilets from backing up into people’s houses, the city has several combined sewer overflow points along the Schuylkill and Delaware rivers and some other smaller creeks. 

Yes, raw sewage pours into these rivers during large storm events.  And not only raw sewage, this water also contains plenty of chemicals and oils that are picked up from paved impervious surfaces. 

According to Rivercast (www.phillyrivercast.org), conditions on the Schuylkill River are unsuitable for certain types of recreation over 30% of the time due to high bacteria levels.  It also creates conditions that are unsuitable for wildlife. 

I suppose Philadelphia could embark on a plan to uproot the entire stormwater system and effectively separate the storm and waste water, but the chances of that happening are right up there with hell freezing over.  A less daunting solution may be to implement systems in the buildings and infrastructure of the city to reduce the amount of stormwater runoff.  Some of these strategies include the use of pavement that allows water to drain through to the soil below instead of rushing off to the stormwater system.  Vegetated roofing also slows the runoff of stormwater.  Stormwater can also be diverted to more vegetated areas prior to being release into the system. 

These and other stormwater mitigation techiques can be further reviewed at http://www.phillywatersheds.org/what_were_doing/green_infrastructure/programs.

But until we get about half of the houses in Philadelphia growing something on their roof, you better be careful about taking a dip in the Schuylkill.

Now it seems like there’s a casino in every town in the country with Philadelphia being the largest major city to have one.  On the east coast you can gamble in Philly, Connecticut, Jersey, hell, you can even throw a bet down in the Poconos.  In fact, there are 35 states in the US that have hotel casinos.  How did this luxury of going to the casino turn into a vice that can be accessed in nearly every town you pass through?

Well, it’s very simple.  There is an enormous market for gaming and the profit margins are equally ludicrous.  I recently read that the new Sugarhouse Casino in Philadelphia projects a profit margin of 20%.  Just as a comparison, general contractors project a profit margin of about 5%.  However, the profits on casinos are taxed heavily, those that can’t be evaded of course.  I read that the tax rate on casinos in Pennsylvania is 54%.

So here’s the deal.  The politicians in Pennsylvania, specifically Ed Rendell who made a complete ass of himself in his interview on 60 Minutes on Sunday, were unhappy that people were spending all their gambling dollars in Atlantic City; creating a situation where people where losing all their money and going broke, but spending that money in New Jersey instead of Pennsylvania.

Rendell was pressed on 60 Minutes about how people in Philadelphia may be more likely to gamble if a $500 million casino is built right in their back-yard.  He gritted his teeth, raised his voice and replied, “You’re not getting it, those people would lose that money anyway. Don’t you understand?”

No, we don’t understand.  And the reason we don’t understand is because it isn’t true.  You’ve got to have a screw loose to think that people will gamble the same amount over the course of a year when there is a huge luxurious casino on their way home from work everyday vs. casinos 60 miles or more away.

And just for the record, it’s not like the proceeds from the Sugarhouse Casino are going directly to the government like the lottery or something.  There are several very rich people profiting immensely off the operation of this thing, making rich people more rich and poor people more poor.

But at least they’ll save the gas money to AC.

Over the past two years, I swear I’ve bid about thirty of these damn things.  You fill out a bid form that has you basically sign your life away and then go up against eight to twelve other bidders.  With that many bidders is it really worth getting the job?  The low bidder had to have missed something.  And when we are required to submit a bid bond and provide a 100% performance bond, the owner is pretty much assured that they will get their project at the price promised. 

I was recently the low bid on a $360,000 job where ten general contractors provided pricing with bid bonds.  The pricing ranged from $360k to $490k.  $490,000!  All I could think about on my way out of the room was if I screwed up or missed something.  How could someone think this job would cost $490,000 and I thought it would cost $360,000?

As it turns out, I didn’t get awarded the job because they took one of the deductive alternates, in which case I was no longer the low bid.  So I’ll never know if I actually could have performed the work at that price, and maybe that’s a good thing.  

But if there is no money in public bidding why are so many contractors bidding the work?  They must have figured out a way to keep their costs lower.  It’s either that, or they just want to keep money moving through their company and keep some of their employees working.  Either way, its really not the place to be when you’re actually trying to turn a profit. 

I’m trying like heck to get out of the public bidding world, but I just can’t seem to shake it.  Private owners have their buddies and their go-to contractors that may or may not be better. It’s just tough to muscle your way in.

The biggest problem, in my mind, is that building teams takes time.  Time is what construction projects don’t have.  Time is the arch rival of project success.  The excuse for why something isn’t done is always…..you guessed it, time.

I’ve seen owners put together some lame team building exercise where one or two people from the owner, architect, and contractor all go out for an afternoon and play four square or do that thing where one person falls backwards and the other people have to catch them.  Just for the record, if I was the contractor and I had to trust that the owner was going to catch me, I think I’d politely bow out of the team building exercise.

I just finished a project where an owner, owner’s representative, architect, and two prime contractors worked together for nearly a year on a project.  In my short career, I’ve noticed that a year is not a lot of time.  I’ve been involved in projects where a group of twenty people were thrown on a job and the group dynamics resemble that of a dinner party with the Capulets and Montagues.  However, I’ve noticed the team begin to improve at about the six month mark and when the team approached the year point, they start to move into a team building state called: performing.  This project I recently finished was no different.

You may have heard about the forming, storming, norming, performing stages of teambuilding.  This model of group development was first proposed by Bruce Tuckman in 1965 and was later adopted by the Boy Scouts of America.  I’ve actually seen this take place on construction projects, but the problem that I have also seen is that right when we start to hit that performing state, the project ends and everyone explodes to a new company or project.

I’d love to see owners, contractors, and architects stay together for the next job, just like you try to keep the offfensive line and defensive backfield in tact on your football team.  However, the bidding process and the obsession with low cost and hard bidding kind of puts a damper on this.

Maybe in the future we can form, storm, and norm on the first job, and then perform on the next one.

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The answer to the question is not easy, but there are options believe it or not.  I’ll try to sum up a few.

Look International

I’m not saying that the international construction market is much better than it is in this country, but there could be some opportunities with American companies that are having trouble getting their more rooted and stubborn older employees to drag their family overseas.  You can definitely make some money overseas, there are tax advantages, and a company will often pay your living expenses while you’re over there and probably let you come back to the states about four weeks a year.  I would just make sure  you have an exit plan if the company decides they want to send you to Antarctica for ten years to build their top secret alien communication headquarters.  I would just be clear that you want to get back to the States a few years down the road and maybe even get it written into your offer letter.

Build Highways

I know, I know, who the hell would want to build highways?  Well, certainly not me, but believe it or not, there are a lot of people that do it, and they make some good money.  And I don’t think it’s really as boring (no pun intended) as everybody thinks.  There are actually pretty innovative methods of financing highway projects with public and private entities partnering up and sharing revenues.  If you’re interested in politics there is certainly a heavy dose of it in construction of highways, bridges, and other transportation projects.  With all the stimulus money pouring into infrastructure, this would be a good way to get a paycheck during these “challenging” times.  But be careful of the pigeon hole, and being shipped to Alaska to build the first paved dogsled track.

Do It Your Damn Self

The worst part about this is that it takes two things that most people who are coming out of college don’t have: experience and money.  Maybe you can get a loan to start the company and pay your bills for the first year or so, but it’s going to be very tough to get awarded a contract without a track record or at least some references.  However, you may be able to partner with a more seasoned entrepreneur who may be able to get financing and also provide the much needed experience required by most clients in order to get a project.  Just be careful cutting a deal with a partner that you don’t know (or that you do know for that matter).  You probably want to at least pay a lawyer for a few hours to review the agreement and documentation that all parties involved will be signing.

Last but not least,

Chill Out

Just because you don’t have a job right after you graduate doesn’t mean the world is coming to an end or things won’t improve in the future.  You may want to take this opportunity to do some traveling or volunteering around the world for a couple of years and then come back to a much improved job market.  Believe it or not, there are some employers (albeit not many) that may look at that as a valuable growth experience that will benefit their organization in the long term.  But either way, it will certainly be personally beneficial and it’s only a matter of time before things are cruising along nicely again.