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Price Swings

MasTec

Materials prices have been on a roller coaster ride over the past year and that has left specialty contractors scratching their heads. “During the first six months of the year, steel went through the roof and concrete suppliers couldn’t guarantee out past three months,” says Schuster. He says prices have come down a bit and stabilized for the moment. But if the economic slowdown reaches beyond the U.S. to the rest of the world, he thinks materials prices may soften considerably. “It’s all supply and demand,” he notes.

High prices and availability problems have extended demand for recycled products to the aggregate market. “Recycled aggregate demand is being driven by the high cost of oil,” making concrete a more viable alternative to asphalt in some areas,” says Leonard Cherry, CEO of Cherry Demolition. He says demand for recycled aggregate is up 30% in Texas. Cherry Demolition has recently added new concrete recycling yards. “As the price of recycled steel and aggregate goes up, the price of demolition goes down,” he says.

Structural Group

Price spikes also have given rise to an increasing interest in cost-cutting alternatives. “People are always asking if they can get things cheaper from China,” says D’Amario. He says architects are responding by simply specifying things like Chinese glass and curtain wall without thinking of the potential problems. “Chinese firms are under pressure to push product, so there’s no real guarantee of quality control or timing of delivery. What happens if the delivery is late, or there are warranty problems?” He says owners and architects have the assurance there will be someone around to take responsibility for the work by using American firms and products.

High oil prices also have taken their toll. “Our project managers and engineers tend to travel from job to job each day, and that means a lot of mileage,” says Siemens’ Brunk. So the firm is phasing out the use of trucks as company cars and replacing them with fuel-efficient cars. “Our guys may love their [Chevy] F-10s, but they don’t need them.”

Safety First

The recent series of deadly crane collapses has put safety front and center for specialty contractors. The proposed federal Occupational Safety and Health Administration crane rules have generated mixed emotions in the industry. Latture of Barnhard says the new standard is definitely needed, but it may take a toll on some of the “mom-and-pop” crane and rigging firms trying to comply with the training and inspection requirements.

Beldon

Latture is more concerned about conflicting local crane requirements. “When you get accidents, localities tend to jump in with their own requirements, often without understanding the business,” he says. “In some cases, these local regs could end up more dangerous than no rule at all.”

For Bacon of Limbach, safety has been a priority. He says there’s a tendency on the jobsite for workers to feel pressured to be more productive. This leads to taking shortcuts. “Yes, we want productivity, but not at the expense of safety,” he says. Limbach this year started a new program called I-CARE, where personal responsibility for safety is emphasized. Bacon says he personally conducted a training webcast to emphasize that the firm’s commitment to safety comes from the top down.

Avoiding a Lost Generation

A downturn may ease some of the industry’s personnel shortages, but there may be a dark side of the issue. “If this is a deep recession and it comes time for firms to start laying off people, we stand a good chance of losing a generation of people in this industry,” says ASA’s Nelson. She points out that Generation-Xers have never been through a serious industry recession before and if they are let go, may end up going into other industries. “Then, when there’s a rebound, most of them won’t be coming back to the industry,” she says.

Nancy Soulliard /ENR

The projected downturn in the market may also have an impact beyond markets. “The active market of the past few years has masked some intrinsic problems like pay-if-paid clauses and risk shifting that will become more apparent in a tight market,” says Nelson. “We are seeing backlogs getting shorter, payments slowing, and final payments and retainage held longer.”

The financial problems on Wall Street and in Washington are worrisome, but many in the industry are optimistic. “People in the industry are really bullish on the economy long-term, and this is just a normal downturn in the construction cycle,” says Suder of KHS&S. “If you take a five-to-six-year view of this, it may be a healthy thing,” says Guzzi. “The economy will have to go back to the way we used to work, with less leverage, more money up front, and better due diligence.”