Labor, bidding, cold spots can’t cool off hot summer

Construction: Labor, bidding, cold spots can’t cool off hot summer

It was the second hottest June on record. In July, farm ponds dried up that had never done so before. By August, corn was ripening a month in advance, in places with enough rain. Hot, hot, hot.

That’s how it’s been in the construction industry, too. Following a very good year in 1998, 1999 is shaping up to be even better – a business climate where most companies reported they could have done even more work if the region-wide, all-sector labor crunch hadn’t limited their ability to complete bidded work.

But perhaps it would be better to say “hot, hazy and humid.” Things still aren’t as sunny as they could be away from Chittenden County, especially in the Brattleboro and Bennington areas and in the Northeast Kingdom. Small contractors and construction-related companies continue to appear with regularity in the US Bankruptcy Court in Rutland.

Reports of a slowing of the pace of activity are starting to come in perhaps a slowdown, perhaps just a breathing spell or an anticipation of slower times this winter, perhaps the brakes being put on by recent Federal Reserve Board interest rate increase. A dependence on federal highway money for road and bridge work may, in the long run, be another weakness.

And despite the country’s high consumer confidence, widespread stock market prosperity, and free-spending ways, the d ay-to-day life of construction companies is dominated by cutthroat competition.

Bidding is fast, furious, and frugal. Relationships between the various parties involved in jobs can be frustrating. Overall, the stifling stress of the business climate may have sent a significant number of people into other lines of work, contributing to the present shortfall in the number of highly qualified, experienced construction professionals.

OVERVIEWS

Employment in the “contract construction” sector has definitely been on an upswing, to go by Vermont Department of Employment and Training numbers. The April figures showed 1,500 more people employed than in 1998. By July, that had taken a drop to 800, but with more people employed on a seasonal basis. The companies providing estimates have combined employment totals in the 15,000-20,000 range, so the increase was significant.

Another sign is that several programs are targeting groups of potential construction workers, offering training and tie-ins with prospective employers, The Department of Employment and Training has added a program for highway construction to its regular apprentice programs for plumbing and electrical work, joining with the Vermont Agency of Transportation and Tradeswomen of Northern New England to do so. Youth Build in Burlington’s North End offers another avenue into construction work. (See separate article for more on construction training)

In Burlington, Larry Cain’s bid tracking service Works In Progress gives him insight into how the sector is going.

“It’s been another great year,” he said. Though he has not compiled statistics to show the extent, he sees Chittenden County as continuing its economic predominance. The labor shortage “absolutely” has been a factor this year, Cain said. He keeps hearing “We could grow our business substantially if we had more people.”

At the same time, “I’ve just started to see the cracks in all of this,” Cain said. “I’ve started to hear form people that some of the contractors and general contractors are starting to slow down a little bit. They actually have to start looking for work now.”

AND REMODELERS

After lagging for much of this decade, the residential sector is moving to take the lead, offering opportunities for both larger and smaller companies and a variety of subcontractor and building materials suppliers, But with the baby boomers aging, there appears to be a structural change taking place, away from new home construction toward renovations and additions.

Kevin Dorn used to be the executive director of the Homebuilders of Northern Vermont. Now it’s the Homebuilders and Remodelers of Northern Vermont, he said. Residential work may have been dominated in the past by new home construction, but now many of the group’s 360 members are working exclusively on updating and improving existing domiciles, and the change came in response to that.

But new construction is definitely thriving, at least in Chittenden County and nearby areas that contribute the bulk of the Northern Homebuilders members, Dorn said.

“It may have been hotter in the late 1980s,” he said, recalling an era of feverish speculative construction that helped bring on the recession of the early 1990s. “Business is good right now, though it seems to have settled down a bit from this spring.”

“I think this is going to end up a good year, compared to last year,” Dorn said. “But I don’t think it will be much better.”

In the Chittenden County homebuilding market, a new limiting factor is appearing, Dorn said: they are running out of permitted building lots. Those driving along Spear Street into Burlington will see some very impressive houses going up in planned developments, but that is the exception, he said. And though high-end properties are getting built, the price of an “affordable” home in the county is now in the $100-150,000 range.

“What builders are telling me is that there is a growing concern over the lack of available lots in Chittenden County,” Dorn said. Soils issues, wetlands, conservation easements and zoning regulations all create barriers, and up the price of good lots. “My research says you’re hard pressed to find anything under $50,000 for a lot,” he said -and the final cost of course goes up from there.

“There are two Vermonts, from an economic standpoint: Chittenden County and the rest of Vermont,” Dorn said. “You’ve got to look at what’s going in the rest of Vermont.” Conditions overall have been getting better during the past four years, “but lagging behind Chittenden County.” Checks with construction companies around the state tended to confirm that view of the economic landscape.

SITE VISITS

Pizzagalli Construction, headquartered in South Burlington, didn’t bother with putting a big display ad in the latest Yellow Pages. They don’t have to: at any one time, they are usually working in 12 to 14 states, according to Gary Warner, their vice president for administration. And they’re meeting the same labor shortage everywhere, Warner said. They’re coping with it.

“Mainly you’ve got to be more proactive in how you recruit employees and get your story out there,” he said. Pizzagalli’s story includes several strong specialties, Warner said. One is water and wastewater work, which has taken them from Maine to Florida. A recent Vermont example of their work has been Middlebury’s $17 million wastewater treatment plan.

Another strong suit is work for advanced technology industries, which began with local work for IBM and has since led to contracts from big names in high-tech like Motorola and Intel. The jobs include such tasks as creating “clean rooms” for operations so precise that even a speck of dust could ruin everything. For that, “we will go anywhere in the US,” Warner said. An office in Tempe, AZ, reflects the concentration of such industries in the Southwest.

The John A Russell Corporation in Rutland range as far as Florida, too, thanks to a relationship they have developed with Pepsico. Mark Russell, their director of business development, said they did a warehouse in Tampa for that company, and currently have one under way in Johnstown, PA.

Still, about 150 of their 175 total employees remain in Vermont, with temporary hires on job sites making up the rest of the crews, Russell said. Their recent jobs in the state include the Paramount Center restoration in Rutland and a 54,000-square-foot warehouse for the Agri-Mark/Cabot cheese plant in Middlebury.

“We have been doing okay this year,” Russell said. As for the labor crunch, he said “We have a good name, and people want to work for us.”

A different perspective came from a smaller company in Brattleboro. CIFCO started as Crystal Fuel and Ice, and they still do fuel, but they also work now in paving, excavating and other construction-related work.

Greg Whitman, their president, said he can gauge whether there is an active high-end market in the area by sales of one-piece fiberglass pools, which can cost $25,000 and up installed.

“This year I’ve done a lot of estimating, a lot of quotes,” he said, but there haven’t been any sales.

“I’m not sure why,” Whitman said. “My personal feeling is that the economy is not that strong, and hasn’t been for several years.” Nearby New Hampshire seems to be thriving, but, “Vermont hasn’t generally done that well,” he said.

Paving, on the other hand, is “fairly strong,” Whitman said. “Commercial work is, I think, down a little.” Residential is better, “but not a great backlog.” His company doesn’t get involved in highway projects because they have to buy asphalt from big companies that produce it, and their price for raw material is higher than the total bid prices that the biggies submit for major horizontal work.

“I think northern Vermont is a it” le healthier,” Whitman said, though he regrets some of the changes Burlington has undergone since he was a UVM undergraduate in the early 1960’s.

“Brattleboro is kind of a stagnant place right now. There just doesn’t seem to be that much going on here.”

A similar view came from Dennis Murray of Murray Brothers, Inc in Bennington, which works mainly in residential construction. If he were to travel an hour to the north, to the ManchesterStratton area that is the ‘Northshire” of Bennington County, he could get as much work as he wanted. He could charge $30-32 an hour for carpentry labor and get away with it. But not in recovering, but still hard-pressed Bennington.

“There are still several depressed areas in Vermont, especially the southern part,” Murray said. There are some “tremendously good” businesses in the Bennington area, and the downtown revitalization group has done good work, and they are finally going to get a muchneeded bypass – but it’s not like Manchester.

“If you pay your bills, you’re making a living,” Murray said. “If you get behind, you’ve had it. If one guy bums you (not paying money owed), you’re under.”

That said, Murray Brothers has been seeing better times in the past two or three years, Murray said.

“Things are pretty good, I guess. We’ve gotten a few larger jobs,” though it isn’t like the late 1980s when a company might have 10 houses going up at once rather than one. Murray has seen the same shift toward renovations that Dorn reported in northern Vermont. When it comes to additions and such, “there’s a tremendous amount of work out there,” he said.

The other part of Vermont that has traditionally seen harder times is the Northeast Kingdom. At EM Brown & Son, Inc in Barton, selling building supplies since shortly after World War II, owner David Hathaway said, “There doesn’t seem to be a lot of new home construction. But there does seem to be a tremendous amount of renovation, garages, additions, decks.

His company is getting its share of that surge, but Hathaway, who has worked in the business since 1972, wasn’t celebrating much.

“The Northeast Kingdom is kind of in a continual recession,” he said. “But there’s an upside to that,” Hathaway went on. “You can always plan.”

In an amazing year, there won’t be too much extra spending. In a recession, things will keep going along, because it was so much like a recession anyway. “It doesn’t seem to change much,” he said. “But business has been good,” Hathaway had to admit, “even in the Northeast Kingdom of Vermont.”

A very different perspective emerged at Goodro Lumber in Killington, not to be confused with Goodro Lumber in Middlebury, which is run by a branch of the same family, but is an entirely separate business.

Seth Shaw, part of the family running the Killington operation, said, “We had one of our busiest summers ever, in the past three years. Everybody seems to be building. A lot of people are putting on additions, renovating their homes” – in addition to, and possibly in part because of, major investments in the ski areas themselves.

Historically, Naylor & Breen Builders of Brandon got their start during the ski area’s housing boom in the late 1980s. Since then, they have slowly but surely grown into one of the state’s leading companies, adding competencies that range from historic preservation expertise to steel girder construction.

Peter Breen, a co-owner with Robert Naylor, said, “We’ve been tremendously busy,” and now are gearing up for the next phase. “We’re bidding on a lot of stuff, but we don’t have the work yet but we never do. That’s the way it works.

One recent project was a 40,000-square-foot addition to Hubbardton Forge of Castleton, which makes hand-tooled home fixtures. That involved creating a steel building, Breen said.

So did the new headquarters of the Addison County Community Action Group in Middlebury, which included a warehouse wing for the antipoverty agency’s project repairing old appliances. Their historic preservation experience was involved in extensively renovating Middlebury’s former Masonic Hall, now home to the Vermont Community Foundation and also the Vermont Folklife Center. Finding enough good workers has been a challenge, Breen said.

“It seems when we get desperate for help, we end up hiring people who soon leave. There was a reason they were available.” However, “we do have a pretty solid, loyal crew that have been with us a long time.”

Ralph Eames of Landmark Homes in Bethel, which does new construction, is seeing good times.

“It’s cyclical for sure,” he said. And like many other builders, he said finding enough workers has been “a big problem.” At Biebel Builders in Windsor, they said they were too busy putting together estimates to stop and talk.

Bread Loaf Corporation decided several years ago to get out of the estimating and bidding wars, and concentrate on developing close relationships with regular clients, offering services that ran from designing to steering projects through the permitting process to building them.

President Maynard “Mack” McLaughlin said, “It’s going fine. Certainly we’ve been busy.”

“Finding the right type of people has been difficult,” McLaughlin went on, “but it is for most people, all over.” On the positive side, the relative lack of rain has given their workers a chance to collect five-day paychecks week after week, and it’s been good for company productivity, he said.

Looking ahead, Bread Loaf already has enough work lined up to keep busy for six to 12 months, McLaughlin said.

CMO’S?

Bread Loaf isn’t the only place where the regular process of finding and finishing construction jobs has proved unsatisfactory. After 25 years in the business, Dennis Murray, who heads Murray Brothers, Inc in Bennington, is almost burned out from dealing with a new way of doing business, which seems almost like the much-criticized scrimping of health maintenance organizations.

To begin with, there is the hectic pace, which Murray believes is related to the increasing computerization of the industry. He himself uses AutoCAD to help with his bids, and it’s much faster. “I’ve never done so many estimates,” he said.

But that doesn’t translate into more work. If he makes 10 bids and gets one job, he’s happy to get the one. And the labor-saving aspect of bidrelated software isn’t as high for a caring contractor. “There’s nothing in there that tells you how to leave the home when the family comes in at the end of the day,” he said.

“It’s an intense business, but each year it seems to get tougher,” Murray said. “I’ve gone 8 (am) to 8 (pm) the last two weeks, and I’m nowhere near getting caught up.”

Being a small contractor means being at the mercy of big companies that run big projects by the books, and simply refuse to pay any more for subcontracting work than the figures suggest, Murray said.

He told of one colleague who put in a $2,500 bid, then was offered a job at $2,000 and took it based on the description of the contractor who telephoned and it was the same job.

“He didn’t know it was the same person,” Murray said. In some cases, he alleged, big companies have held back paying subcontractors that were living from check to check, and it caused them to go under. “They’re busting little contractors. I see it happening all the time.”

The top-down status system in the business is a drain as well, Murray said. “I’ve never seen an architect admit he made a mistake. The builder guy always gets blamed for it.”

Not long ago, Murray got involved with a million-plus-dollar house for which the owner had hired an architect and an engineer, The engineer designed a complete heating, ventilating and air conditioning system that was completely inappropriate for the post-and-beam house frame the architect designed. Murray’s “tin-knocker,” his duct installer, managed to alter the design so it could Work with the house – then the engineer came around with testing equipment saying the tests should match the calculations he made for his original system, then in the end the architect and engineer took the credit for making it all work.

“If I don’t work with another architect, I don’t care,” Murray said. “I’ve never met one who didn’t act like this.”

Topping it all off, there is the worker’s compensation system, with its bureaucracy and high insurance rates. There, in Murray’s view, is a good reason why there aren’t enough construction workers now that boom times have come.

“Do you sense a little burnout?” Murray said. “I’ve been burned for 25 years.”

CHANGE IN THE LANDSCAPE

Construction methods don’t change that much from year to year, but they are not exactly static. One Brandon-based construction company, the 40-employee McKernon Group, has developed an unusual approach to homebuilding that may gradually give it new kinds of environmentally friendly functionality.

Larry Rowe, one of the two sales managers for the company, said McKernon is very keen on environmentally friendly “green” processes and products. Trying to define what that means, Rowe said it includes energy-efficiency, either in producing materials or in their functioning; using recycled materials; or being able to recycle what is used at the end of its lifespan.

Rather than simply build structures according to those principles, the McKernon Group has become a distributor for several products that can be used by many contractors, Rowe said. All the lines they have taken on have found followings in other parts of the country, but for whatever reasons are new to the Northeast, he said.

These include:

The “Blue Max” system of wall construction, in which the forms for pouring concrete are interlocking, hollow, hard styrofoam and hard plastic blocks. Having a solid concrete wall ends air infiltration problems, creating such energy efficiency that tiny heating appliances can suffice. Not only do the walls go up quickly, the outer and inner sheathing can be nailed directly to the plastic sections of the blocks, speeding up that work as well.

Davis Frames post-and-beam construction. Unlike kit construction, this system starts with the future homedweller sketching out a concept, which can then be designed for timber framing. Stress-skin panels offer high insulation values.

* Champlain Stone, from a company in Fort Ann, NY, that has access to five quarries, and creates building materials in three granites, one quartzite, and one limestone. Fireplaces, walkways, stone walls, wall exteriors, accents, and landscaping are all possible uses.

* Thermo-Ply, a sheathing product made of recycled fibers, which can make other housewrap products unnecessary to block air infiltration because it can be pieced together and bent around walls. It has tremendous wind shear resistance, leading to Florida, a state where hurricanes frequently hit, specifying its use. It can replace oriented strand board, having the advantage that water does not migrate into it as can happen with OSB.

* Authentic Roof, a slate lookalike product made from recycled rubber and polymers. Cast in molds to have the same shape as slates, it is likewise a very durable product: the guarantee is for 50 years, and the actual life expectancy is more like 100 years. The individual pieces are marked and shaped in ways that make it easy to install for do-it-yourselfers, without any of the specialized tools or fear of walking on slates and breaking them that have made slate installation and repair a specialty of its own.

Rowe said Jack McKernon is convinced that green building will be more and more important with time.

“He’s looking ahead. He’s pushing into the future,” Rowe said. The philosophy is “keep up with what’s going on and be a leader.”

HORIZONTAL GOES VERTICAL Those with a general impression that a lot of highway work is taking place this summer are correct. The numbers from David Scott, director of project development at the Vermont Agency of Transportation, tell the story.

These are calendar year numbers, dollar amounts for contracts bid and awarded, Scott said. That is to say, they include both federal and state monies. The totals have been: for 1994, $52,481,249; for 1995, $44,305,206; for 1996, $62,677,219; for 1997, $59,186,081; for 1998, $51,926,384.

And for 1999, through August 20, $62,397,639. “And there’s more to go,” Scott observed – a whole quarter’s worth.

Increasing pressure in the Legislature to stop “raiding” transportation fees for the general fund may continue that positive outlook, which this year is based heavily on an influx of federal funds.

BANK ON IT

Low interest rates have to be credited with much of the boom, and banks’ willingness to lend is another factor. Hesitant after the real-estate-led recession that began the decade (and brought hawk-like federal oversight of bank lending practices), they are now full participants in keeping the good times rolling, the construction contacts agreed.

Steven Bourgeois, president of the FranklinLamoille Bank, in turn gave a great deal of credit to the businesses that are creating jobs that pay well enough for people to be banking some of their money.

Primarily, “We are seeing existing companies, which are very strong, expanding,” he said. He agreed with those who say remodeling and upgrading existing homes now constitutes the fastest-growing part of the construction industry.

Will higher interest rates choke off the construction surge? “I think not,” said McLaughlin, one of the most experienced hands contacted. The rise earlier this year had no such effect, he said.

Consumer confidence, higher spending, industrial expansion, greater savings, more lending, more construction, more job security, more consumer confidence -the American economy, at least at the close of the millennium, is the wonder of the world. One word might sum it up, in a way that the construction industry would find accurate enough: “building.”

Copyright Boutin-McQuiston, Inc. Sep 01, 1999

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