Earlier this year, Concrete Construction had a conversation with four concrete contractors from across the United States to gauge the state of the industry today and where it appears to be going over the next year or so. Here's what they had to say.
Concrete Construction (CC): How are things out there right now?
Mike Schneider: We have a strong backlog for this year but we are seeing a slowdown in the commercial arena and the condo market and that's pretty much in all parts of the country. We're optimistic for this year just not too sure for 2009. The energy market is strong—also health care and education. In the energy market, training and safety are very important and you need recordable incident rates that are under the industry average. The entry requirements are higher and that's where we can differentiate ourselves.
Diane Williams: We're in an area that had lots of new housing over the past few years, so now the commercial side is trying to catch up. But that's starting to slow. I haven't seen it like this before—people are just waiting to see what happens both on the residential and commercial sides.
Greg Smith: We are doing commercial work and apartments—commercial in Seattle is strong, office vacancy rates are low. In 2008, we expect another 30% to 40% growth following over 100% in 2007. But we've been waiting for the shoe to drop. Especially with the escalators on rebar—that is probably going to stop some projects. The mills used to give us two or three months' notice, now it's overnight.
Clay Fischer: With the demise of the residential market, we are seeing a lot of residential guys jumping into what commercial work there is. Not just small stuff either—some of these guys are pretty brave. Part of the problem is that a lot of them don't understand how to price commercial work. We're seeing crazy numbers from companies that we never heard of before. We've shifted toward public work, but the problem is you need to have a lot of staying power because they don't have the quickest turnaround on paying.
Schneider: We do a fair amount of public work and there is bureaucracy—the manpower utilization reports and minority requirements. One thing about it, though, is that you know you're going to get paid, although most have retention you have to worry about.
Williams: One advantage of being a concrete contractor is that you're in first and don't have to worry about the developer running out of money. Retention can be a problem, but we are picky about who we work for, because we want to make sure we get paid. Even the big companies are stretching out how long it takes to pay because they want to use the money.
CC: What do you do to protect your margins?
Smith: We've hired an engineer because on the majority of projects we are handed drawings that are less than buildable, so we are providing design/build services. We'll price out the structure as they've designed it but we've then been able to show substantial savings with our redesign because we have a more efficient structure.
Fischer: We've also done a lot of that type of thing—rearranging or redesigning portions of the structure to make it more efficient and passing some of that savings along to the owner, although it also allows us to keep our margins up.
Smith: All we do is the concrete work, but you might say we are a mini-general contractor because we often end up coordinating the whole job.
Fischer: We're in the same boat but we look at it as an opportunity. Some of the smaller GCs and developers don't have any idea what's going on, so we end up coordinating and scheduling, at least the shell of the building.
Schneider: We often drive the project. If you get the concrete frame up, you get rid of a lot of the variables, especially from a weather standpoint. We spend a lot of time upfront trying to find mistakes in the drawings. We don't get paid for it but we are able to minimize problems by bringing them up ahead of time before having a crew standing there waiting on answers.
CC: Is there any up side to a slowdown?
Fischer: It's given us a chance to clean up a lot of stuff—evaluating our people and updating our processes.
Schneider: We have a much better workforce than six months ago—more talent. As some of the other companies have had to let people go, we've been able to pick up those people.
CC: Is there still a shortage of qualified workers? What about immigration reform?
Stewart Klennart: We've taken a different approach and have gotten Native Americans into our workforce. It's a great workforce if you can get it going. The tribes are supporting it and the Native American median population is 26 years old so that's a good group to get.
Smith: As an industry, we've done a miserable job of getting people out of high school who want to come into the trades. These are good-paying jobs and they are family wage jobs with family benefits.
Williams: I am president of a local nonprofit called Building Horizons and we have classes in the high schools where we teach the kids construction. After a couple of months, we take them out on a jobsite and build two houses that are sold to lowincome families. There's a real need, from hands-on workers to project managers.
CC: Has competition gotten tighter?
Fischer: Yes. We need to be a little quicker, a little smarter, and come up with the next good idea. I think we're going to come out of this a lot stronger, ready to take on the next wave.
Schneider: Every time you go through one of these shake outs, it's a little Darwinian. There are a lot of people who are, or were, in the business that aren't going to make it. The guys that deserve to be in the business will make it.
Williams: Throughout the years, I have seen many upturns and downturns in the marketplace. My company, along with other strong companies, concentrates on training, quality work, and good business practices to face the challenges and become stronger through the down periods.
CC: Are you still buying equipment?
Williams: I still replace equipment when I need it because downtime is very costly and you need equipment to get the job done so you have to replace it. If I need it, I will buy it.
CC: What about sustainable construction? Are you seeing that on projects?
Schneider: The reality we've seen is that unless you're involved early in the project, by the time we get the drawings it's out of our hands. The only issue for the workers is to make sure the garbage onsite is getting recycled.
Smith: The City of Seattle passed an ordinance that 80% of construction debris has to be recycled and they actively are enforcing that. Getting things in the right dumpster is critical.
Fischer: We use temporary casting beds onsite so we wound up buying a big crusher and crush that concrete right onsite for road base or sell it for fill.
William D. Palmer Jr. is president of Complete Construction Consultants, Lyons, Colo