Stimulation? We sure hope so.

It's not a mystery to most that the US federal government is in the midst of a massive effort to stimulate the suffering American economy. Funding in the range of $800 billion will be phases into the pockets of companies and taxpayers to create jobs and make improvements to our infrastructure. But what may not be fully understood is how this money is apportioned and to whose pockets these dollars will soon be lining.

When I first got downwind (or down screen) of this package I honestly thought that all $800 billion was going to be pumped into the construction industry. I think my biased and slightly self interested mind took the information being fed to me and spun it to my therapeutic advantage. It was nice while it lasted.

The reality is that the division of funds is very complicated and resembles a linear algebra problem that would have required some serious cheating if it was given to me in college (I squeaked by without cheating, thank you). But the majority of this funding will be in the form of tax relief to (I think) public organizations. At least this is what I gather from the Recovery website put out by the government. I ran across a link to another stimulus website, and after reading it, I had to sit down to take several deep breaths while my migraine subsided.

So after I popped five Advil and removed the I.V. from my arm, I think I've brilliantly ascertained that about $136 billion will be pumped like portland cement into a construction industry that has an unemployment rate over 18%. And while this certainly isn't chump change, it is only 17% of the package and I'm skeptical about how much it will help a $1 trillion industry.

I certainly don't want to rain on the parade or poop out on the party, but I'm just wondering if someone should have spiked the punch a bit. While, I'm sure some folks tried to pour a little vodka in the kool-aid, the compromise reached spreads money around the public sector like one would throw out feed to the hen house.

The construction work that is being funded is very specific to the highway, transit, and infrastructure industry. To get jobs in this particular field, you must have experience with DOTs, and publicly funded projects. There are very legitimate concerns out there that the commercial construction industry will not resurface until 2011 or (gulp) 2012.

However, this helps, and I'm happy for the folks with highway and transit experience who will be pouring concrete like there's no tomorrow. However, for those of us in the commercial world, tomorrow could be a long way away.

Stimulation? We sure hope so.

Blame the Economy

So you didn't do your laundry this week, or clean out the refrigerator. Blame the economy.

You got your wife a rifle with your name engraved on it instead of the necklace she wanted. Blame the economy.

Your construction company laid off 30% of its workers when its backlog of work and balance sheet do not show a necessity to discard this many people. Go ahead, blame the economy.

I know, I know, we can't control the economy. Business owners and executives are powerless victims of economic circumstance. Well, this is partially true. We cannot control the economy, but we can certainly better prepare for it. If you work for any period of time in the construction or development industry and you open your eyes beyond the RFI or change order on your desk, you will realize that there are more peaks and valleys in construction than a guided trek through the Himalayas.

However, in my relatively short career, I've seen very little preparation for this, especially among contractors. What I have seen however, is a mass frenzy of hiring from all walks of life to staff the latest job and then an equally hysteric axe dropping session that leaves their survivors shivering with fear. Nice huh.

Why is there not better foresight when it comes to economic downturns in an industry that is historically cyclical? Perhaps they prefer not to.

Could we be using the economy as an excuse to cut costs, drive profits, and to get rid of people for no other reason than we just didn't like them that much, umm, I mean the economic circumstances are such that we cannot substantiate our current man power?

But does this really go on? Do companies use economic downturns as a method of picking off the low hanging fruit? The answer, at least to some extent is yes. In the very least, the people that get laid off are those who are perceived as less capable or less driven, or even less politically connected than others. Can this be proven? Absolutely not, but it has certainly been my observation.

If this is going on more than we think (although it will never be admitted to or proven), we should at least realize the impact of what is happening. Laying-off workers due to unemployment is a hit on the insurance premium for the company, not to mention losing a trained employee. Searching for, hiring, and training new employees when things pick back up will certainly be costly. Basically, this is a long-term consequence to a short-term problem, or a very lazy way of cleansing your company of employees that are perceived as less capable. In my opinion more time should be spent on communicating, cultivating, and growing the team of employees that are already in place.

However, that would be a lot of work.

Blame the Economy

BIMing our way to better building

If the construction industry was the auto industry, then the advent of Building Information Modeling would be the equivalent of the invention of the assembly line. And if the construction industry was the textile industry, then BIM would be the equivalent of (dare I say) the cotton gin.

But since this is reality, and the construction industry could arguably be more similar to the entertainment industry than manufacturing or textiles, BIM is in the very least a technology that could produce great advancement in construction practice.

While BIM is in fact an underground rock band from Bangladesh, for our purposes, BIM is a method of modeling a building in three dimensions that integrates design and construction. This means that not only is every item in the building its own independent object, but the construction schedule can be modeled as well, producing a virtual construction illustration prior to breaking out a shovel. If you add an accounting element to this, BIM becomes 5 dimensions of valuable information in one model.

I attending a BIM conference and panel discussion in Philadelphia last week put on by Stephen Jones with McGraw-Hill Construction. Also giving presentations were representatives of contractors, architects and even law firms. The benefits of BIM were not difficult for this panel of professionals to illustrate, there was even talk from the legal side of making three dimensional models legal contract documents. However, the biggest problem presented was the reluctance of members of the AEC world to adopt this technology and feel comfortable with using it.

The construction industry has historically been very resistant to change and a new technology is often perceived as risky and when something has perceived risk, contractors treat it as a deadly tsunami of uncertainty.

Stephen talked about the glut of baby boomers at the management level in companies that are perhaps stalling the advent of new technology in hopes of it surfacing after their departure and hefty retirement payout. But as a baby boomer himself, Stephen is a strong proponent of BIM and suggested its use to be pushed rather than stalled. The benefits in coordination of design consultants and subcontractors as well as conflict prevention lead to undeniable cost saving to the owner, and far fewer headaches for designers and builders.

After working for nearly three years on the Arrabelle Hotel construction in Vail, CO, I saw literally millions of dollars thrown away from lack of coordination between the MEP trades with structural, architectural, and interior design work. BIM would not only have saved the cost of this conflict resolution but perhaps could have reduced impact to a project that was woefully behind schedule.

We need to embrace this change rather than shun it. It is obviously the direction in which our business is moving and the more time we spend stalling, the more time we spend in the two dimensional world of mediocre building and stagnant business practice.

BIMing our way to better building

Revelation

Ahhh, the Revel Casino on a foggy morning last summer before the steel podium was higher than the second level, before the two concrete hotel towers were able to be seen from 100 miles out to sea, and of course before Revel Entertainment was slowing and possibly halting construction on a sea-side project that was initially tagged at $2 billion.

I worked for the steel fabrication and erection contractor for this job (we kicked ass by the way), and it was probably the most difficult project with which I have ever been associated. Not only was it a very complicated and enormous steel design (over 26,000 tons), but the ownership and management of the project did nothing to make things any easier.

The contract was structured on a unit price per ton of steel billing schedule, however the unit prices varied among different types of steel sections. For example, a curved tube section on the exterior of the building was more expensive than a typical wide-flange section on the interior of the building. This seems relatively straightforward right? Well, I took three dimensional calculus classes that were more straightforward than this one.

The hope in a unit price contract is to reduce or eliminate change orders all together because additions to scope are automatically added to your contract. So no change orders right? Wrong.

Of course drawings were not nearly complete upon commencement of the job so when changes were issued they often affected steel that was already detailed and possibly already bought. This work and material was rendered useless since it was no longer part of the project and in order to get paid for it we needed a change order. I think you'd have a better chance of hitting the $2 million jackpot on a nickel slot machine than getting change orders from Revel Entertainment.

From what I've heard from the older folk in the business, casino owners are some of the toughest out there. Casinos have historically been very profitable (up until now) and the amount of money lost for one day of schedule extension can quickly approach the millions. Contractors are beat with a rubber stick to perform faster and at a lower cost - it's really a brutal game.

Nonetheless, the steel went up, the change order log kept growing, Revel hit the brakes on the project resulting in lay offs of half the workers (myself included), and Morgan Stanley (partner with Revel Entertainment) after changing to a bank holding company received debt relief.

When all the fog clears, we will undoubtedly have an impressive beach-front casino in Atlantic City.

Revelation

Building is Big Business

Let's face it, the construction industry is big - about $1 Trillion annually in the US, employing over 7 million people. If there were as many bloggers as folks in the architecture, engineering and construction world, the Internet would be swarmed with pseudo-journalists and hack writers throwing their left wing two cents at any mundane issue that could capture a nano-second of human attention. Oh wait.

But think about it, the construction business goes far beyond the nail bangers and equipment operators you see while driving by job sites. Behind every concrete pour, crane pick, and hammer swing, there are hours, months, and often years put into the design, planning, financing, insuring, bidding, supplying, managing, operating, and (unfortunately) litigating these projects. If we look at the construction industry to include lenders, insurance and bonding companies, accountants, inspection services, and law firms, as well as design consultants, the industry looks much bigger.

It is not a surprise that the U.S. government has often poured money into public construction projects as a method of boosting or maintaining the economy. This gives work to the slew of people in the AEC industry and puts money in their pockets that will undoubtedly get spent. Some of the greatest construction projects in the US have been built during very difficult economic times, including the Golden Gate Bridge, Empire State Building, and Hoover Dam.

While controversy rages about the effectiveness of publicly funded projects in stimulating the economy as a whole, it is very clear that many people will be working instead of going through fruitless job searches, collecting unemployment, and feeling like they aren't accomplishing anything (or worse, tipping back the bottle). And by the way, the country benefits from new and often very much needed infrastructure. With the leaders of our country pouring money into infrastructure projects like the Colorado River through open gates of the Hoover Dam, the reasoning must have some undeniable legitimacy.

This little discussion may have taken a bit more than a nano-second (you're still paying attention right), but I hope it suffciently kicks off a blog about the contruction industry and how the country may be affected by it's performance. Because honestly, it's really big.

Building is Big Business