Inside the Infrastructure Industry: West Virginia Construction Trades
November 22, 2013|
By Jennifer Jett
Everyday life is dependent on reliable infrastructure: water and sewer systems, roads and bridges and even schools, hospitals and airports. For the design, construction and maintenance of these elements that provide a higher quality of living, we look to the construction trades industry, comprised of construction, architecture and engineering.
For West Virginia Executive’s construction trades issue, we have asked the leaders of the state’s construction trades organizations—Mike Clowser, executive director of the Contractors Association of West Virginia; Gary Facemyer, president of the American Council of Engineering Companies of West Virginia; Dave Ferguson, vice president and president elect of the American Institute of Architects West Virginia Chapter and Wendy McCuskey, president of Associated Builders and Contractors West Virginia Chapter—to provide an inside look at the construction trades industry, including the challenges, changes in technology and direction these industries are headed
While construction, architecture and engineering companies have their own specializations, they also face some of the same issues. All have identified shale gas drilling as a growth area for their industry and an aging work force as a challenge. There is also a general consensus that the state and nation’s antiquated infrastructure must be addressed, and that when lawmakers realize this, federal spending will be appropriated for these projects, creating jobs and giving the economy a boost.
Mike Clowser, Executive Director
Contractors Association of West Virginia
WVE: Tell us about the impact the construction industry has on West Virginia.
MC: Contractors in West Virginia build West Virginia’s roads, bridges, water and sewer systems, schools, airports and hospitals—the infrastructure that, combined, provides the physical fabric of our state. As Hoppy Kercheval of MetroNews has said, “All this stuff does not magically appear because politicians cut a ribbon. Somebody has to figure it all out, and contractors are the people who do that.” Today, many of the contractors in business are the generation who built our interstate system, our secondary and higher education facilities and our other public works projects. A number of our members are third, and now fourth, generation contractors, and it will be their responsibility to make sure our infrastructure is there for the future. Our industry provides thousands of jobs for West Virginians building the projects. We provide thousands more in the industries that service our industry, plus the ripple effect as construction workers buy cars, take vacations, shop at retail and grocery stores and visit doctors and dentists.
WVE: How has the downturn in the construction industry in recent years had an effect on West Virginia’s economy?
MC: In July 2013, construction employment was 34,500, down 3.4 percent from 35,700 in July 2012. More disturbing is that this year’s figure is a 14 percent decline from the state’s peak in December 2006 when 40,300 West Virginians were employed in the construction industry. In addition to construction jobs, hundreds of jobs are lost with construction equipment, materials and service suppliers such as accountants, law firms and bonding and insurance agencies. Hundreds of jobs are also lost in the broader economy, since those unemployed construction workers will be unable to afford things like new cars or taking their families to dinner and movies and other routine or luxury purchases.
WVE: Tell us about the trends you have noticed in the construction industry.
MC: I have noticed two things in particular. First, while many expect slow or sub-par growth in the construction industry, there is a growing consensus that reviving demand for construction, particularly private sector construction activity, is essential to sustaining broader economic growth. This is because, among other things, construction builds a more globally competitive economy, and there is a growing realization that investing in efficient water and sewer treatment facilities, good schools and a modern and safe transportation system improves our quality of life. Congress, as well as West Virginia lawmakers, will realize it will cost more to repair the nation and the state’s infrastructure rather than just maintain it. This will lead to future funding of roads, bridges, schools, water and sewer systems and airports, which will boost the economy and immediately improve employment levels.
Secondly, given the challenging economic times, contractors are reviewing their business models and reconsidering their company’s organization and focus. Contractors will want to restructure, which may include actions such as consolidating operations, reducing overhead, replacing executives and applying traditional company strengths on emerging markets or acquiring firms that complement existing construction capabilities. The reduction in the market will drive companies to innovate and create new business opportunities and partnerships that provide work they never would have realized otherwise. There will be more mergers and acquisitions—and the creation of joint ventures to perform projects—that probably would not have occurred had the market remained stable. Great companies will get even better.
WVE: What types of challenges is the construction industry experiencing?
MC: The May/June 2013 issue of West Virginia Construction News magazine reported that members of the Contractors Association of West Virginia (CAWV) are beginning to have trouble finding qualified craft workers to fill key spots amid concerns that labor shortages will only get worse. A large number of construction workers are reaching retirement age and, with the recent downturn in the economy, fewer people are entering the industry. For contractors in the northern part of West Virginia, they are seeing a shortage of skilled workers due to the expansion of Marcellus Shale gas projects. A recent nationwide survey by the Associated General Contractors of America shows that 74 percent of the contractors surveyed report they are having trouble finding qualified craft workers. The most frequently reported difficulties are in filling on-site construction jobs such as carpenters, equipment operators and laborers, and we are hearing the same thing in West Virginia.
WVE: What do you anticipate for the future of the industry, or in which direction do you see the industry moving?
MC: Quite a few of the new construction jobs are in the Marcellus Shale industry and related power and energy industries. West Virginia contractors are seeing a good market in the oil and gas industry that was not there a few years ago. However, public construction continues to decline as local and state governments struggle to balance budgets. Federal investment policies are causing considerable uncertainty for construction firms.
Water and wastewater construction has been steady, but the Obama administration continues to cut funding for the Clean Water State Revolving Fund Program and the Drinking Water State Revolving Fund Program, the federal funding mechanisms for local water and sewer facilities. Unless Congress takes action, these programs will not grow in the foreseeable future.
The year 2014 will be a mixed bag for West Virginia’s construction industry. There will not be any immediate improvement in road and bridge construction unless action is taken on recommendations by the Governor’s Blue Ribbon Commission on Highways. There will be a small improvement in public building construction at various points during the year, starting with higher education and community college facilities, followed by state parks and county school facilities. Some CAWV members are beginning to get calls from private developers, a segment that has been flat for the past few years.
Gary Facemyer, President
American Council of Engineering Companies of West Virginia
WVE: What do you see as the strengths or benefits of engineering companies doing business in West Virginia?
GF: One benefit is that the market in West Virginia is relatively small, which allows firms to build professional relationships with public and private clients in the regions in which the work is needed. A second benefit is that West Virginia law requires state and local governments to use a qualifications-based selection process to select engineers and architects. During the past 40 years, the federal government and most state and local governments have transitioned to the use of qualifications-based selection, which has proven to be more efficient and less costly when considering total lifecycle costs than the use of a selection system using price as a criterion. Private industry in West Virginia largely uses the qualifications-based selection process as well.
WVE: Tell us about the types of trends you are noticing within the state’s engineering industry.
GF: Consulting engineering companies are losing engineers and designers to the shale gas industry at 30 to 100 percent of their current salary. While this may be good for the industry in the long run, it is causing consulting firms to scramble for resources in the short term.
Also, design-build (DB) and public-private partnerships (P3) are changing the traditional method of project delivery for engineers. In DB and P3 projects, engineers work in a collaborative team to design a project. Recent legislation and current trends indicate these delivery methods will become more widely used.
WVE: What types of challenges do you see the industry facing?
GF: Recruiting and retaining engineers and designers with five to 15 years of experience is a challenge, as well as the lack of qualified engineers to manage projects and designers to lead design teams. Other than the shale gas industry, wages for entry level engineers remain relatively low. There is also a shortage of mid-level and senior engineers.
The greatest threat to the engineering industry, though, may come from the federal government’s spending priorities. The nation’s infrastructure needs to be a focus of elected officials, and Congress needs to provide long-term stability for infrastructure funding.
WVE: How is changing technology affecting the engineering industry?
GF: Information technology will continue to drive innovation in our industry. Design software, modeling software and the use of geographic information system software in all aspects of life, not just engineering and management, will become the norm. While these are not new trends, they continue to grow and change the market even after 20 years of development. Engineers and technicians who embrace this technology will be the future of engineering.
WVE: Are there any new laws or regulations that are having an impact on the engineering industry? If so, what are they and what is their impact?
GF: Drinking water regulations continue to make it more and more difficult for small water systems to meet standards. Stormwater management and nutrient removal regulations are creating new opportunities but at the same time are taking away needed resources in basic drinking water and wastewater infrastructure. Regionalization approaches and good asset management are essential to reducing the overall cost of infrastructure.
The energy sector continues to be under the direct influence of existing and proposed state and federal government regulation, especially the coal and gas industries. The constant flux of energy regulation creates great uncertainty in energy investment, in turn creating the ups and downs of the construction and engineering industries. A consistent and predictable regulatory policy will have the greatest impact on the health of the consulting engineering profession.
WVE: What do you anticipate for the future of the state’s engineering industry?
GF: Sustainable design will be the future of the industry. Consulting firms will strive to ensure that projects are delivered with minimal impact on the environment and the community where the project is located. Sustainability is achieved through proper planning, design and construction of projects that create and maximize environmental and social impacts.
Dave Ferguson, Vice President and President Elect
American Institute of Architects West Virginia Chapter
WVE: How has the business climate in West Virginia affected the architecture industry?
DF: There always seems to be a good amount of public work in West Virginia. The amount of private work has not been consistent from year to year, but because West Virginia is a smaller state by comparison, it’s easier to build client relationships. It’s those relationships that keep some firms going during slower times.
In addition to a relationships-based business climate, our state also uses the qualifications-based selection process for the selection of the design firm. This process has proven over time to be the most effective tool in selecting design firms. It’s been so effective that private industry has taken it upon itself to also use this process. This way, firms can showcase their talents and qualifications and be selected accordingly.
WVE: Tell us about the ups and downs of the architecture industry over the last few years, both in West Virginia and nationally.
DF: The industry overall seems to have its highs and lows, depending on the part of the country in which you live and work. West Virginia, over the years, has seemed to keep a steady pace. At different times, selected sections of the country experience growth, and some design firms flourish while that growth is sustained. Over the past five years in West Virginia, a portion of the public works side of construction—the Army National Guard and the West Virginia School Building Authority—has spent more than $597 million on new and renovated construction projects. This has been a large portion of the steady growth in the design and construction industry.
WVE: What trends are you noticing in architecture and construction?
DF: Over the past several years, building information modeling (BIM) and sustainable design, or LEED (Leadership in Energy and Environmental Design), have gained ground both locally and nationally.
A BIM model is a digital representation of the physical and functional characteristics of a facility. These design projects haven’t really been developed here like the LEED or sustainable design projects have. In fact, most owners have embraced the sustainable design principals, even if they choose not to pursue LEED certification.
Clients seem to be more tuned in to energy-efficient buildings because of the capability to control their operating costs. LEED is intended to help building owners find and implement ways to be more environmentally responsible and efficient. Newer LEED standards and recent building codes have evolved from inception to accurately represent and incorporate emerging sustainable building technologies. The construction of a LEED project is just as involved as the design. Contractors must have working knowledge of the LEED process and be involved throughout the construction phase, and they will also have a key role in the final outcome of the project as it regards the LEED certification.
WVE: What types of challenges are you experiencing?
DF: One of our biggest challenges is trying to keep up with ever-changing design and building codes and technology systems while trying to compete with out-of-state firms that are looking for work in West Virginia.
Design and construction markets change at a different rate in some of the neighboring states. Typically an indication of this is the rate at which architects, engineers and contractors from surrounding states cross the state line looking for work. Usually, some of the larger design firms and contractors will cross the state line for a really large project, but as times get tougher, some firms will be more aggressive for the smaller work that is the mainstay for some of the West Virginia firms.
WVE: What do you anticipate for the future of the industry?
DF: We anticipate the public sector to maintain a steady amount of work. The government projects seem to have slowed down in the state, but hopefully there will be an increase in private and institutional work to help make up the difference.
Wendy McCuskey, President
Associated Builders and Contractors West Virginia Chapter
WVE: What effect has the business climate in West Virginia had on the construction industry?
WM: Without a growing business economy in West Virginia, construction suffers tremendously. Any reductions in private sector spending will negatively affect the industry. It is impossible to sustain an entire industry on federal and state projects. If new businesses aren’t coming to our state and current businesses aren’t growing and expanding, there are no private construction jobs. With increases in regulation, government spending and general uncertainty, private sector spending decreases.
WVE: Tell us about the ups and downs of the construction industry over the last few years both in West Virginia and nationally.
WM: West Virginia’s economy was hit hard in 2009, as was the national economy, and West Virginia has been a little slower to recover. One of the largest gains in construction spending nationally has been manufacturing, but with West Virginia’s manufacturing on the decline, this increase hasn’t been the same in our state. Luckily, we have seen a boom with the oil and gas industry. This recent boom has had a very positive influence on helping the construction industry recover in West Virginia.
WVE: What is driving the growth we are now seeing in West Virginia?
WM: The oil and gas boom in West Virginia has driven the most growth within certain types of contractors, but the boom has also begun to impact demand for commercial space, offices, hotels and transportation infrastructure.
Influxes in institutional spending at the university and hospital levels have also positively impacted the local construction industry. Private sector investment increases and some population growth in the Eastern Panhandle and North Central West Virginia have helped with commercial development and residential construction.
WVE: Tell us about the trends you are noticing in the construction industry.
WM: New technology, the design-build movement and energy efficiency requirements, as well as the challenge of an aging work force in West Virginia, are all impacting the industry.
Technology trends are allowing project managers and job site employees to have immediate access to information, which helps increase productivity on the job site.
Within the design-build movement, a design-build project creates 3-D models for clients to not only visualize their project but actually see it in 3-D. Inclusion of specialty contractors in the design phase of a project has been a new trend in design-build that has caught on.
Energy efficiency requirements and green building are not brand new to the industry, but complying with the increased environmental regulations is becoming a full-time job for construction companies. Many companies simply do not have the manpower to keep up with new regulations, and they are regulating a lot of companies out of business.
WVE: What types of challenges is the construction industry experiencing?
WM: The number one challenge in West Virginia is an aging work force that is getting ready to retire, which poses the question, “Who will replace them?” This should be an easy answer. There should be students enrolled in technical and vocational schools ready to start at a construction company as soon as there is an opening. We have a growing problem that starts with students who do not want to enter the industry. Whether there is a stigma with the industry, school counselors not being realistic with students or a lack of educational facilities, something is driving this major issue. Most likely, it is all three.
The second part of the work force challenge is the same one that is plaguing our entire state: drugs. There is no easy solution to this problem, but this is a major challenge within the industry. Hiring workers who can pass a drug test is becoming more challenging each day. If one teammate on a job site is abusing drugs, it puts everyone at risk for major injury or worse. Drug testing current employees has become the normal practice for all companies, but it takes productive time away from the work day and increases the cost of doing business.
WVE: How is changing technology affecting the construction industry?
WM: Technology is always improving, and keeping up with it is a tremendous task. Construction companies need to be proactively thinking about new technology in the industry to position themselves ahead of the competition. One of the major trends with technology is GPS fleet tracking and monitoring. By installing and implementing a GPS tracking and monitoring system, companies have seen increases in fleet productivity, decreases in fuel costs and faster recovery of stolen vehicles and equipment.
Another advancement is the ability to deliver information to a job site. In the past, much of the drain in construction productivity has been caused by information problems. With the work force in the field having smartphones, tablets and laptops, though, information is immediately shared, and there is no more waiting around for an answer or a decision. We can use mobile apps to calculate supply costs, create documents or log into job site cameras for added security.
WVE: What do you anticipate for the future of the industry?
WM: As the industry rebounds, the future of construction is going to start depending more on alternative sources of financing. Last year in the legislature, a bill passed enabling public-private partnerships for highway funding. There has been some controversy over this bill, but the overall theme for alternative funding sources is growing and will be a reality for our state.
With competition increasing, construction companies will need to market themselves in a different way. They will turn to social media, increase usage of 3-D modeling and be able to react quickly to a more demanding consumer. Technology will play a big role in the future of the industry, with safety and efficiency topping the reasons to adapt and embrace these advances.