Construction subcontractors are preparing for a sustained economic downturn, but they see some hope that President Barack Obama's economic stimulus will offer a lifeline to help them hang on.
Subcontractors at a national convention in Nashville this week say they would have welcomed more federal help but expect a significant boost to the lagging industry, which saw its national unemployment rate reach 18.2 percent in January.
Attendees at the American Subcontractors Association conference are schooling themselves in grim topics like "Surviving Tough Economic Times," ''What To Do When — or Before — a Project Stops" and "Being Prepared in Case of Client Bankruptcy."
"The residential side of things has all but dried up," said association president Bill Olmo, who foresees subcontractors vying aggressively over the next year for public works projects funded by the $787 billion stimulus plan: "That's really the only game in town right now."
Stephen Rohrbach, president of concrete construction company F.A. Rohrbach Inc. in Allentown, Pa., said he made $6.2 million in gross revenue in 2006 but slipped to $5.1 million last year. His company, which had about 40 to 50 employees, was forced to lay off about 30 people by the end of 2008.
"Last year we anticipated having our best year ever, but by June everything started to hit the brakes," he said. "Since that time, we've only picked up maybe a half million dollars worth of work."
Rohrbach says his company's work is largely government related — building curbs and sidewalks, water management structures — and that he's having to compete more with other subcontractors. Many are getting out of residential and commercial construction to bid on public works projects.
There are fewer construction projects to bid on, making the competition "incredibly intense," Rohrbach said.
"Pricing has fallen as much as 20 percent. We've had residential contractors come into our niche that don't have the experience on that type of work to maybe price it accordingly and are cutting some numbers."
This week the U.S. Commerce Department reported construction spending plunged more than twice as much as expected in January, a decline of 3.3 percent. It was the fourth straight monthly drop.
Residential construction, where the economy's troubles began more than two years ago, dropped 2.9 percent while nonresidential construction fell 4.3 percent, the biggest decline since January 1994. Analysts predicted further weakness in construction as developers find it harder to get financing.
Olmo says the subcontractors association, composed of nearly 5,000 subcontractors, estimates the $787 billion stimulus package will provide nearly $135 billion in construction work for the industry. Most of the money will go to federal, state and local public entities for work stalled due to budget shortfalls or start new, shovel-ready projects that will break ground within a few months.
Of the 3.5 million jobs Obama expects his economic recovery plan to save or create over the next two years, 400,000 will be in rebuilding the nation's infrastructure: roads, bridges, schools, levees, dams, and commuter buses and trains.
Olmo, whose group lobbied for the construction portion of the stimulus plan, said the stimulus package will make things better for the construction industry.
"I wish there was more, but I'm happy they've done something," he said.
Bob Lazenby hopes the stimulus plan will help boost the industry too. He worked full-time for a masonry subcontractor in Nashville for nearly 17 years, but since September he's only had sporadic work with the company — a couple of weeks on and then a couple of weeks off. His income last year dropped $10,000 from the previous year.
Lazenby says he's seen construction work lag in past economic downturns, but has never seen it take so long to hit bottom.
"The way I look at it, things have got to turn around eventually," he said.