AGC Specialty Contractors…A New Way to Learn About Negotiated Projects!
By Jim Ryan, AGCSD Executive Vice President

So…..you are a specialty contractor and you are driving past what appears to be a major, new construction project that is just underway.  Maybe it is one of the many office complexes that have been under construction in San Diego during the past few years?  You stop and read the project sign that has just been erected on the site…..the project’s general contractor is one that you have just not been able to work with on a regular basis.

Hmm….maybe this is an opportunity….it is obviously a negotiated project…..You get on your cell phone and call your contact in the general contractor’s office.  After a few pleasantries, you ask about the project…..oops, all of the specialty contractors have been selected. To make matters worse…your major competitor negotiated the project months ago and has been working with the general through pre-construction. 

You go back to the office and review the leads that were provided by your bidding information services…..nothing ….not a single report about this project! 

I have been involved in providing bidding information to the industry for over 20 years. Until now….here is how the system worked as far as reporting on negotiated projects.  The large national bidding information services usually assign a person to secure these project leads.  Often, a significant portion of their salary is based upon the number of leads they publish. These reporters do find out about a few legitimate negotiated projects…they publish the report and the general that is negotiating the project cringes….the owner and the architect they have been working with, now are getting numerous calls from the general contractor’s competition….the general is getting numerous calls from specialty contractors.  The bottom line for specialty contractors….as a rule, you are still too late to get invited “to the party.”

The other outcome of the system is that the services that do this type of reporting end up publishing reports about projects that are not real projects…..my guess is that more time is wasted by the industry chasing these than any of us can imagine….remember…the reporters get paid for each lead they publish.  One of the most interesting “tricks” in the business is to report the same project under two or three different names!!!

On Thursday May 17^th and Friday May 18^th, AGC’s online bidding information partner, iSqFt, will introduce a new system that brings some common sense to the distribution of information about negotiated projects.  This system gives those specialty contractors that choose to participate, the opportunity to know about projects earlier in the process when it may actually give them a chance to secure a part of the project.

iSqFt has signed up 30 of the major general contractors in the San Diego area to the iSqFt Construction Office: 

BSD Builders, Inc.
Barnhart, Inc.
Burger Construction
Cairo Construction
Cornerstone CMS, Inc.
Cox Construction
Diffenbaugh, Inc.
Good & Roberts,Inc,
Grant General Contractors
Harbison-Mahony-Higgens Builders
Hathaway Dinwiddie Construction
Hensel Phelps Construction
Jaynes Corporation
Marcotte & Hearne Builders
Melhourn Construction,Inc.
NK David Constructors
Pacific Building Group
Prowest Constructors
R.A. Burch Construction
Reeve-Knight Construction, Inc.
Reno Contracting
Riha Construction
Roel Construction Co, Inc.
San Diego Contracting
Simac Construction,Inc.
Swinterton Builders
The Augustine Co.
University Mechanical
Viola, Inc.
W.E. O’Neil Construction

The Construction Office has been around awhile, but now it is connected to the AGC/iSqFt Online Plan Room.

What does this mean?

Here is how it works:

Specialty Contractors that subscribe to the iSqFt System will now be able to log on to the iSqFt System and instead of being able to access just the projects that are listed in the AGC Plan Room, they will also be able to view a screen in which general contractors are able to invite them to participate in negotiated projects.  This system has been in place in Dallas, Houston, and a few other major metropolitan areas……what has happened?....it is easier now for general contractor employees to contact a number of specialty contractors as they begin to work on their negotiated projects.  They have in the system, a profile of each firm (provided by the specialty contractor), and an easy way to review the specialty firm’s credentials.  Then a simple “click” and they are able to send you information concerning the project. 

As the project moves forward, the general is able to send you drawings, etc., as they develop.

I suspect that in most general contractor offices, the selection of specialty contractors often comes down to who is or is not familiar to key employees of the project manager or the estimating staff….time constraints seem to eliminate really analyzing the market for other specialty contractors that are qualified for the project.

The new AGC iSqFt system makes it easier to contact key specialties…..but you must be in the system…..so….come to one of the free sessions on May 17^th  7:30 AM or 11:30 AM or May 18^th  at 11:30 AM……and learn how to expand your market!!!!!- See attached registration form.

 

First the Good News, Then the Bad  - A Congressional “Call to Action”
By Brad Barnum, Vice President Government Relations 

It was a full room of contractors at the April 24 meeting of AGC’s Navy Liaison Committee, when the leadership of the Naval Facilities Engineering Command, Southwest Division, presented what was thought a very impressive list of hundreds of millions of dollars of military construction over the next several years.  The list includes a $1.3 – 1.7 billion program to build 50 Bachelor Enlisted Quarters (BEQ), to eliminate a nationwide deficiency of 20,000 beds.  The $500 million “West Coast Slice” of the overall program consists of 17 BEQs at Camp Pendleton, 4 BEQs at 29 Palms, 2 BEQs at Yuma, and 1 BEQ at San Diego. 

Liaison Committee members were then informed of the acquisition strategy, which apparently is already moving forward…a single $500 million design build contract for Fiscal Years ‘08/’09 with re-solicitation for Fiscal Years ‘10/’11.  The benefits of such a strategy, said NAVFAC’s leadership, will “attract large contractors” and “prompt high performance and stimulate competitive, follow-on contract pricing”.  The downsides: “potential bonding capacity issue for other than the largest contractors”, “may limit follow-on competition, i.e.: perception that initial contractor will get follow-on”, and “reduces/eliminate Small Business prime contractor opportunity”.

What was most interesting about this announcement was the lack of concern from the contractors in attendance… but why would the response be any different?  They were happy to hear about the hundreds of millions of dollars of work on its way to Southern California, and were led to believe the BEQ acquisition strategy was a done deal. 

However, it wasn’t until after the meeting that I started getting calls/e-mails of concern about the “single contract” for the $500 million BEQ projects. Comments by some of our members included: inability for smaller local contractors to put up a $500 million bond; eliminates contractors, subcontractors, suppliers, distributors from participating; less commitment to local and small disadvantaged business; and less use of local area trade workers.  Sound familiar? These are some of the same concerns raised by NAVFAC!

Call to Action --- Last Friday, AGC sent out a Call to Action (click here) to our membership encouraging them to write our Congressional Representatives (Bilbray, Davis, Filner, Hunter, Issa).  The five of them need to contact NAVFAC, their colleagues on the Armed Services Committee, and Military Appropriations Committee, and tell them that this proposal is bad for the construction industry, will limit competition, will reduce small business participation, and will compromise NAVFAC's and the Marine Corps' risk management.  If you haven’t contacted the Representatives, please do so now!

In addition, AGC of America happens to be holding its Annual Federal Contractors Conference in Washington, DC beginning today.  San Diego AGC once again has a good size delegation going, and you can rest assured that they will raise these concerns at the AGC-NAVFAC meeting on Tuesday. 

It also should be noted that there will be an industry forum in Norfolk, Virginia on May 16 in order for NAVFAC to further describe the BEQ construction program. 

Is the single contract BEQ a done deal?  Not yet!

 

California Air Resources Board to Vote on Off-Road Diesel Equipment- May 25

On Friday, May 25, the California Air Resources Board (CARB) is scheduled  for a final vote on new rules to curb emissions from the 180,000-200,000 unregistered diesel machines…the earth movers, backhoes, tractors, scrapers, and other heavy equipment our industry uses to build highways, dams, housing developments, skyscrapers, and other projects, public and private.

CARB has been developing these rules for 7 years.  AGC San Diego, and nine other associations statewide, four labor unions, and five national trade associations have represented the industry in negotiations with CARB.  This umbrella organization is part of the California Industry Air Quality Coalition (CIAQC).  This week, the AGC-San Diego’s special task force assigned to these negotiations are: Scott Erreca, Erreca’s Inc; John Nelson, FCI Constructors; Steve Coker, TC Construction; Mike Carcioppolo, Hawthorne Equipment; Mike Furby, Marathon Construction; Mike Shaw, Perry and Shaw; John Daley, Jr., Daley Corporation and the AGC Board will meet to form AGC’s final strategy as the May 25^th CARB meeting approaches.  CARB meetings rotate around the state…the May 25^th meeting will be in San Diego. 

Summarized below are the critical issues we see in this debate.

CRITICAL ISSUES:

Put simply, the rules CARB has put forward are not viable or achievable.  There are five primary reasons for this – unattainable annual limits, inadequate clean engine supply, limited clean engine technology, prohibitive cost and the fact that construction is a low-margin business.

1. Unattainable Annual Limits

Given the available resources and technology, the annual emission limits in the draft proposal released by CARB cannot be achieved by the contractors in the State of California.  Even the most progressive firms, who have been re-powering and updating their fleets in anticipation of the regulation, cannot meet the annual goals set forward in the draft rule.

2. Inadequate Clean Engine Supply

There is an inadequate supply of engines or new equipment to meet the demand these regulations would place on the market.  These rules require the purchase of more than 165,000 new pieces of equipment by 2020.  Virtually all Tier 0 and Tier 1 engines will need to be replaced with Tier 2, 3, and 4 engines in 13 years.  The Board consumed valuable and necessary time when they waited seven years to develop these rules and now the market is not able to meet the equipment demands.  To put this into perspective, currently 10,000 new pieces of equipment are sold in California every year.  Under these regulations, that number would have to grow to 15,000 each year.

3.   LIMITED CLEAN ENGINE TECHNOLOGY

The addition of NOx reductions to the proposed rule will force companies to re-power more engines (a very costly alternative), and make PM reductions a low priority.  First, no retrofit device is available to achieve the NOX emission reduction requirements.  This means companies will be forced to re-power or replace equipment -  which significantly increases costs.  The NOx requirement also makes it impossible for contractors to qualify for the Carl Moyer funding that has propelled the significant voluntary emissions reductions already achieved by the construction industry.

4.   Prohibitive Costs

CARB has significantly underestimated the cost of these rules.  By assuming an unrealistic “natural” turnover for construction fleets and a lower number of machines covered under this rule, CARB’s economic analysis of its proposal does not accurately reflect the real burden of this proposal.  In effect, CARB has inaccurately assumed that the construction industry will spend billions on re-powering, replacing and retrofitting equipment in the next 13 years without any new regulation.  CARB estimates that the cost of the draft rule is only $3 billion.  CIAQC estimates the total real cost to the industry to be at least $13 billion. These costs are likely to be passed on to consumers, including the state as it contracts to build the roads, schools, housing and flood control systems voters authorized $43 billion in bonds to construct.

5.  Construction is a Low-Margin Business

Contractors do not have the financial resources to fund the program.  Construction is a fiercely competitive business and contracts can be won or lost by only a few thousand dollars. Most contractors hope to achieve a profit of 2.5 % to 7% and can, on average, do so in three out of five years.  After labor, materials, insurance, fuel and overhead, a very small portion of the $60 billion spent on construction every year in California is available for fleet upgrades.  To meet these requirements, many businesses will need to downsize, which means construction workers will be laid off, and capacity to build projects will decrease.

 

AGC’s Baseball Bash – June 19^th

The 2007 AGC’s Baseball Bash is scheduled for Tuesday, June 19^th at 5:00 PM and will be held again at “DICK’S LAST RESORT.”  The baseball bash/mixer will include beer, soda, wine, food & our huge raffle.  We have secured a block of tickets to the game, but space is limited, so reserve yours early! FYI – Half are already sold!  Tickets have to be pre-purchased even if you decide to attend the mixer only.  No walk-ins allowed! Due to the popularity of this even and the limited space, this event is open to AGC members and their guests only!

ARISE WACO SCAFFOLDING & EQUIPMENT and
AMERICAN TECHNOLOGIES, INC. / AMERICAN RESTORATION

ARE ONCE AGAIN OUR MAJOR SPONSORS! 

Please see the attached flyer with more information.  You can also contact Rae Krushensky with any questions at phone 858.731-8157, or e-mail: raek@agcsd.org

 

“AGC Education & Training….Building a Solid Foundation”

UPCOMING AGC CONSTRUCTION EDUCATION & SAFETY CLASSES

MAY

Construction Education Classes
Project Engineering – starts May 8
NAVFAC CQM – May 8 & 9
Construction Estimating Bootcamp – May 9
Microsoft Project 2000/2003- May 15 & 16^th (class size limited to 12 students)
Preventing Sexual Harassment- May 16
Business Succession Planning - May 23
Microsoft Excel Formulas and Functions– May 29^th
EM 385-1-1 - May 31, June 1

Safety Training Classes
CPR/First Aid- May 30
 

JUNE

Construction Education Classes
Course I - Design a LEED Certified Building – June 5, 12, 19, 26, July 3
Course II - LEED Commissioning- June 7, 14, 21, 28, and July 5th
Web CM - June 19
Intro to Prolog Manager – June 20 & June 21

Safety Training Classes
Scaffolding & Hazard Awareness- June 8
Trenching & Excavating- June 13
Crane Awareness – June 16
OSHA 10 Hour – June 18
CPR/First Aid- June 27   

Upcoming in July
Sure Trak – July 12

 

MAY
May 10- Specialty Contractors’ Council- 12 PM
May 11- Safety Committee- 7 AM
May 15- HR Resources Practices Committee- 11 AM
May 16- Foundation for Success Meeting -12 PM
May 18- Builders’ Exchange- 7 AM
May 22- Construction Education & Training at Construction Tech Academy – 11:30 AM
May 23- Government Relations Meeting – 10 AM
May 24- Affiliate Members Council- 12 PM

 

UPCOMING AGC EVENTS
May 31- June 3- Spring Conference in Napa
June 19 – Baseball Bash and Padres Game
July 20 – Day at the Races
August 6 – Affiliate Day Golf Tournament – Singing Hills
November 1 - Build San Diego Awards