Counting Our Blessings
On May 1, I had the honor of being inducted as president of the Construction Writers Association (CWA) at their 40th Annual Meeting in Washington, D.C. Participating in that meeting was an all-star cast of guest speakers connected in some manner to the construction industry. A more upbeat group would be hard to find outside of a postgame championship locker room.
"Where are the imbalances that will derail this expansion?" was the rhetorical question put by F. W. Dodge chief economist Robert Murray. "They are hard to find at the moment," he answered himself. Murray told CWA that the nation continues on a path of "strong GDP [Gross Domestic Product] growth without inflation. The question for 1998 is, will there be an impact from Asia? Nobody knows, but there's no smoking gun yet for inflationary pressures that would cause the Fed to tighten up."
According to Murray, all of the key F. W. Dodge indicators-contract awards, construction put in place, building materials shipments and construction equipment purchases-show stable, upward trend lines. Take heart in that word "stable." Construction has known periods of explosive growth before, but they almost always led to a subsequent crash landing. Our current good times are documented by trend lines less steep but of longer duration than characterized the boom and bust cycles of yesteryear. Nothing is too badly overbuilt.
Americans get religionMurray noted that religious buildings are, percentage-wise, one of the fastest growing construction markets, up 28 percent in 1997. He wasn't exactly sure why but speculated that it may be due in large measure to an aging population becoming more introspective.
Schools are another hot market. School building is benefiting from what he called "the baby boom echo." Unlike the baby boom in the 1960s, when schools were suddenly overwhelmed with burgeoning enrollments and forced to resort to temporary classrooms, today's "long, slow rising wave" enables school districts to plan ahead for new construction.
Americans get toughRobert Peck, head of Public Building Services for the General Services Administration (GSA), reported that the law and order mood of the country has sparked a boom in courthouse construction. About 160 courthouse projects are underway or under design. (Courthouses fall under GSA authority, while the Justice Dept. oversees federal prisons.)
Peck also told of GSA's five-year-old "Design Excellence Program," which aims to upgrade the quality of federal construction. "After World War II, we put up a lot of crap," he admitted. "We're not doing that anymore."
Peck added that federal building construction has entailed an additional 5 to 10 percent premium in added security costs since the bombing of Oklahoma City's Murtaugh Building.
Construction's economic impact.Ask people what drives their local economy, and the answer that rolls off their tongues are words like manufacturing, finance, transportation, agriculture, high technology or some combination thereof. Nobody ever mentions construction as an economic force, but intuition tells us it must be.
Acting on this premise, the Washington Building Congress commissioned a study examining the impact of construction on the local economy of our nation's capital. Heading it up was Dr. Stephen S. Fuller, professor of Public Policy at George Mason University, who found that the industry generated an economic impact totaling $26.7 billion in 1997, accounting for 14.8 percent of the Washington area's Gross Regional Product (GRP). That is the third highest sector next to federal government (34.6 percent) and technology (17.7 percent).
Design/build momentumRear Admiral David Nash, chief of civil engineers for the Naval Engineering Command, addressed two major trends in his bailiwick. One was increased reliance on design/build. "I believe design/build lowers the project cost when you include the cost to manage and litigate," Nash said.
"The biggest problem we've had with design/build is it's been hard for our engineers to accept." But, he added, it is part of an overall movement toward what he called "best value procurement" as opposed to low bid. Nash noted that design/build is better suited to fast-track projects. "We had one building that was 60 percent complete before we finished the design," he said to a murmuring CWA audience.
The other major trend with naval construction, Nash said, was of "sustainable design," which embraces environmental concerns and lifecycle costs. "Sustainable design concerns not only the building, but also how you build it," Nash said. "Cheaper, faster, better, easier-that is our goal for naval construction projects," Nash concluded.
Adam Smith spins in his grave"We see no end to the rosy horizon," said Paul Choquette Jr., president of construction giant Gilbane Building Co. He added, though, "What Adam Smith said about supply and demand doesn't seem to be working. Despite the great amount of work, our fees continue to be unbelievably competitive, yet the owners continue to want more from us. So there is constant pressure on profit margins and overhead. Maybe it's because things are so good, many new contractors are entering the business and driving down prices," Choquette said.
He, too, spoke of the growing trend of design/build. Whereas that method of project delivery accounted for 7 percent of Gilbane's business in 1987, design/build amounts to 27 percent today. "It permits super fast-track projects and lends itself to standardization," he said of its upside. On the other hand, he acknowledged that design/build "does lack checks and balances. You don't have that healthy tension between the designer and owner, and it may not provide the best vehicle for value engineering."
Roses are bled, violets are tooThe headliner at CWA's 40th Annual Meeting was Transportation Secretary Rodney Slater. It was quite a coup for our group to attract a Cabinet head, but if truth be told, his canned political blather left some of us counting the minutes to a bathroom break. Slater spoke as Congress was debating delayed passage of the massive $217-billion pork-laden highway transportation bill. His presentation can be summed up as "Clinton administration good; Congress bad." The other notable component of his speech was an extended poem glorifying the Dept. of Transportation. I'm not kidding.
To be fair, I should point out that Secretary Slater is youthful, winsome and, if one pays no heed to content, a decent public speaker. He's a fresh face in Washington who has mastered the politician's essential art of appearing likable. Mark my words, you will hear people talk about this man as vice presidential timber in the years to come. Then the entire country will know what it's like to endure bad poetry.
End of rant. Rest assured that all of the construction industry speakers were genuine people who had interesting things to say. And their bottom-line message was: A good time is being had by us all.