Rigorous Risk Mitigation Offers Stronger Profitability and Productivity to Construction Firms, But Most Only Assess Risk
The complexity of construction projects creates greater risks for inefficiencies than those faced by other industries; thus, good project management must include good risk management, offers McGraw-Hill Construction’s latest SmartMarket Report, "Mitigation of Risk in Construction: Strategies for Reducing Risk and Maximizing Profitability.” Mitigating risk can yield significant cost benefits, yet risk assessment procedures are more widely adopted than risk mitigation, with 43 percent of owners, architectural and engineering firms, and contractors reporting that one quarter or less of firms use formal mitigation procedures. The report, sponsored by Navigant and Pepper Hamilton LLP, was released Dec. 15, 2011, at the 26th annual Construction SuperConference in San Francisco.
The in-depth report identifies the risks the industry is most concerned about today: schedule and scope creep (24 percent of projects are delayed), budget and cost overruns (19 percent go over budget), project process approvals, safety and site conditions. Bottom-line and performance risks are regarded as the most serious. However, these factors are under a firm’s control, so effective mitigation strategies can directly have a positive impact.
Addressing risk early helps firms reap the full benefits of risk mitigation and is one of the chief recommendations in the report. The report also suggests strategies such as building a strong project team, communicating clearly, embedding risk management into firm culture, implementing a rigorous risk assessment and mitigation process, engaging in activities that reduce the likelihood of litigation, and utilizing technologies such as building information modeling. More than 70 percent of respondents report that using integrated teams and BIM software reduces project risk.
The most complex projects in the construction industry are often those in the infrastructure sector, and the report takes an in-depth look at that while also detailing risks related to the energy sector, healthcare, insurance considerations and sustainability, as well as insights into how design-build and integrated project delivery can reduce risk. Expert interviews and case studies offer insights from around the United States and world, such as the Pentagon Renovation Wedges 2-5, Utah’s I-15 Corridor Reconstruction, and New York City’s World Trade Center 2, 3 and 4.
McGraw-Hill Construction conducted the 2011 Risk Mitigation Study in October 2011 to assess the level of impact caused by risks, the scope of use of risk assessment and mitigation procedures, and the frequency and causes of litigation, particularly for firms that work on infrastructure projects worth $100 million or more. In addition to the primary study and dozens of interviews, an online survey focusing on risk mitigation in the energy sector was also carried out among Construction Users Roundtable members. For more information or to download the free report, visit www.mcgraw-hill.com.
List of Improving Housing Markets Nearly Doubles in January
The number of housing markets showing measurable improvement nearly doubled in January with the addition of 40 new metros to the National Association of Home Builders/First American Improving Markets Index released Jan. 9. The IMI now boasts 76 improving markets, up from 41 in December, with 31 states and the District of Columbia represented by at least one entry.
The index identifies metropolitan areas that have shown improvement from their respective troughs in housing permits, employment and house prices for at least six consecutive months.
"The fact that the list of improving housing markets nearly doubled … shows that a significant, positive trend is developing, and is even more relevant when you consider the expanding geographic distribution of the list, which now includes 31 states and the District of Columbia,” noted NAHB Chairman Bob Nielsen, a home builder from Reno, Nev. "This trend could be even stronger if not for the numerous impediments that continue to slow a housing and economic recovery, including overly restrictive lending policies and the growing inventory of distressed properties in certain markets.”
"While relatively small metropolitan areas continue to dominate the list of improving housing markets, it’s important to note that several major metros in diverse parts of the country have now joined the field as well, including such metros as Dallas, Denver, Honolulu, Indianapolis, Nashville and Philadelphia,” added NAHB Chief Economist David Crowe. "This is an encouraging sign that gradually strengthening economic conditions are starting to take hold across a broader swath of America.”
The IMI is designed to track housing markets throughout the country that are showing signs of improving economic health. The index measures three sets of independent monthly data to get a mark on the top improving Metropolitan Statistical Areas. The three indicators that are analyzed are employment growth from the Bureau of Labor Statistics, house price appreciation from Freddie Mac and single-family housing permit growth from the U.S. Census Bureau. NAHB uses the latest available data from these sources to generate a list of improving markets. A metropolitan area must see improvement in all three areas for at least six months following their respective troughs before being included on the improving markets list.
Only five metropolitan areas dropped from the NAHB/First American Improving Markets Index in January. These included Anchorage, Alaska; Fort Wayne, Ind.; Canton, Ohio; Scranton, Pa.; and Charleston, W. Va. A complete list of all 76 metropolitan areas currently on the IMI is available at www.nahb.org/imi.
November Construction Slides 11 Percent
At a seasonally adjusted annual rate of $417.6 billion, new construction starts in November 2011 dropped 11 percent from October’s elevated pace, according to McGraw-Hill Construction, a division of The McGraw-Hill Companies. Nonresidential building retreated after being boosted in October by the start of a massive manufacturing plant, and nonbuilding construction showed electric utilities pulling back from the brisk pace of recent months. Meanwhile, residential building in November registered moderate growth, helped by further strengthening for multifamily housing. During the first 11 months of 2011, total construction on an unadjusted basis was reported at $390.5 billion, down 2 percent from the same period a year ago.
Nonresidential building in November fell 20 percent to $142.4 billion (annual rate), following its 36 percent surge in the previous month, according to McGraw-Hill. The largest decline was reported for the manufacturing plant category, which plunged 72 percent from an October that included $3.0 billion for work on the Adam’s Fork coal-to-gasoline facility in West Virginia. If the Adam’s Fork project is excluded from the October statistics, then the manufacturing plant category in November would be up 140 percent, nonresidential building would be steady, and total construction would be down a more moderate 4 percent. The manufacturing plant category in November did feature several large projects, such as a $500 million pipe manufacturing plant in Texas, although not to the same extent as what took place in October. For commercial building, office construction in November retreated 26 percent from October, which had been supported by the start of a $285 million office building in New York, N.Y. At the same time, the office category in November did include the start of such projects as a $150 million renovation of a corporate headquarters in Plainsboro, N.J., and a $79 million FBI office building in San Diego. Stores and warehouses weakened in November, with respective declines of 9 percent and 16 percent, while hotel construction was flat.
The institutional categories showed mixed behavior in November. Healthcare facilities jumped 41 percent. The educational building category, down just 1 percent, was essentially steady in November. The smaller institutional categories reported decreased activity, with churches down 27 percent; transportation terminals down 31 percent; recreation-related projects down 33 percent; and public buildings, down 38 percent.
For the first 11 months of 2011, nonresidential building came in 4 percent below a year ago. The institutional sector fell 12 percent, with weaker activity for educational buildings, down 12 percent; churches, down 15 percent; recreation-related projects, down 20 percent; public buildings, down 21 percent; and transportation terminals, down 26 percent. Healthcare facilities during the first 11 months of 2011 rose 4 percent, running counter to the downward trend for the other institutional project types. Commercial building during the first 11 months of 2011 increased 6 percent, helped by gains for hotels, up 43 percent; and warehouses, up 10 percent; while only slight declines were reported for stores, down 1 percent; and offices, down 2 percent. The manufacturing plant category in the first 11 months of 2011 jumped 51 percent, helped by the start of several very large projects over the course of the year.
Residential building in November 2011 advanced 4 percent to $138.2 billion (annual rate). Like recent months, multifamily housing provided the upward momentum, rising 25 percent. Single-family housing retreated 1 percent, settling back after the modest improvement of the previous month, as this category continues to struggle to achieve any upward traction, according to McGraw-Hill.
During the first 11 months of 2011, residential building was reported to be steady with its dollar amount for the same period a year ago. Multifamily housing was up 17 percent, as the result of this year-to-date performance by geography: the West, up 33 percent; the South Atlantic, up 27 percent; the Northeast, up 19 percent; the South Central, up 10 percent; and the Midwest, down 1 percent. The top five metropolitan areas in terms of the dollar amount of multifamily starts were New York, N.Y., up 26 percent; Washington, D.C., up 56 percent; Boston, up 35 percent; Dallas–Ft. Worth, up 140 percent; and Chicago, up 20 percent. The large percentage increase for multifamily housing in the West was helped by gains in such metropolitan areas as Seattle, up 139 percent; Los Angeles, up 61 percent; and San Francisco, up 41 percent. Single-family housing in the January–November period of 2011 was down 3 percent, as the result of this performance by geography: the South Atlantic, up 1 percent; the South Central, down 2 percent; the West, down 3 percent; the Midwest, down 6 percent; and the Northeast, down 12 percent.
The 2 percent decline for total construction starts at the national level during the first 11 months of 2011 was reflected in a mixed performance at the five region levels. Year-to-date declines for total construction were shown by three regions: the South Central, down 4 percent; the Northeast, down 11 percent; and the Midwest, down 12 percent. Year-to-date gains were shown by the South Atlantic, up 5 percent; and the West, up 10 percent, with particularly large increases for new electric utility starts helping the total construction amount for each region.
Builder Confidence Rises for the Third Consecutive Month
Builder confidence in the market for newly built, single-family homes edged up two points from a downwardly revised number to 21 on the National Association of Home Builders/Wells Fargo Housing Market Index for December, released Dec. 19. This marks a third consecutive month in which builder confidence has improved, and brings the index to its highest point since May 2010.
"This is the first time that builder confidence has improved for three consecutive months since mid-2009, which signifies a legitimate though slowly emerging upward trend,” said NAHB Chief Economist David Crowe. "While large inventories of foreclosed properties continue to plague the most distressed markets and consumer worries about job security and the challenges of selling an existing home remain significant factors, builders are reporting more inquiries and more interest among potential buyers than they have seen in previous months.”
Each of the HMI’s three component indexes registered a third consecutive month of improvement in December. The component gauging current sales conditions rose two points in December to 22, while the component gauging sales expectations in the next six months edged up one point to 26. The component gauging traffic of prospective buyers gained three points to 18, which is its highest level since May 2008.
Builder confidence primarily gained strength in the South in December, where a four-point gain to 25 brought that region’s HMI score to its highest level since March of 2008. A one-point gain to 16 was registered in the West, while the Midwest held unchanged at 24 and the Northeast slipped one point to 15.
ASA Report: Texas Was State with Most Improved Public Policy Environment for Construction Subcontractors in 2011
2011 was a good year for construction subcontractors in Texas. Not only did the Texas economy suffer the effects of the "Great Recession” less than other states, but also legislators tackled many priority issues of the state’s subcontractors, according to The ASA Report: The Policy Environment in the States.
The annual report published by the American Subcontractors Association shows that Texas increased from 29th overall to 10th overall among states, in terms of the report’s grading of the public policy environment for construction subcontractors.
The report also shows that Alabama, California and Iowa made major gains in their rankings, thanks to subcontractor-friendly changes in their laws.
The ASA Report: The Policy Environment in the States is available on the ASA website, www.asaonline.com.
EIMA Applauds the DOE’s Program and Promotes Energy Efficiency Performance with EIFS
The EIFS Industry Members Association applauds the U.S. Department of Energy’s Building Technologies Program, on their intent to issue a Funding Opportunity Announcement for the development of innovative clean energy technologies for buildings that can be market-ready within five years of the award.
BTP is seeking innovative energy savings ideas through mechanical systems and building envelope technologies. The timing of the Notice of Intent will allow for potential applicants to begin developing the potential partnerships and engage in all positive research and planning that will be needed to meet the requirements of the application for the program. The Notice of Intent states, "BTP’s goal is to create marketable technologies and design approaches that address energy consumption in existing and new buildings.”
The National Institute of Standards and Technology have evaluated the five life cycle stages of the environmental impact of EIFS. NIST determined over the 50 year life cycle of a building’s carbon footprint, EIF systems are five times less than brick and three times less than that of stucco.
For additional information about the Department of Energy’s Building Technologies’ Notice of Intent, visit www.eima.com/news.shtml.
Evaluation Report Reissued
ICC Evaluation Service, LLC (ICC-ES) Evaluation Report ESR-1338, sponsored by the Gypsum Association, Hyattsville, Md., has been reissued by ICC-ES with an effective date of Feb. 1, 2012. The reissued report supersedes the February 2010 edition and will remain in use for one year.
The report indicates compliance with the 2009 International Building Code and the 2009 International Residential Code; it makes no technical changes to the predecessor edition. It continues to incorporate a reference to the current edition of GA-600, Fire Resistance Design Manual as an acceptable source of fire-resistance and sound-control systems.
People in the News
Affiliated Distributors, Wayne, Pa., has promoted Dan Maroni to president of the AMAROK (Drywall and Building Materials) Division.
In addition to Maroni’s promotion, Mary Stamm was promoted to services coordinator, AMAROK Division. In her new role, Stamm will focus on the AMAROK Division and will be the direct coordinator for all marketing, administration and corporate services.
California Drywall Company, San Jose, Calif., has announced that Tony Hughes has joined the company as senior project manager. Hughes brings more than 28 years of drywall and plaster industry experience to his new position where he will be responsible for providing overall project management for large scale projects from award to close out.
Three members of ClarkDietrich™ Building Systems’ engineering services team have achieved Leadership in Energy and Environmental Design® accreditation.
ClarkDietrich recognizes Keith Johnson, senior technical services representative, and Brent Owens, general manager, for their achievements in becoming LEED Green Associates.
Robert Warr, P.E., director of engineering services, achieved his LEED AP credential by specializing in LEED Building, Design + Construction.
The Portland Cement Association has named Gregory M. Scott senior vice president of government affairs. He will head the association’s Washington office and represent PCA and its members before Congress, the administration and the White House.
Mel Kurpinski, an industry icon and Plastic Components’ architectural representative for Florida, died unexpectedly on Jan. 9 in Margate, Fla. He was 83.
Kurpinski spent nearly 50 years in the construction industry. He knew "everything” about the industry and never stopped learning. As technology revolutionized the architectural and construction industries, he embraced it. His latest interest was learning about BIM and promoting its use to young people entering the industry, citing its ability to "keep architects, engineers and other parties informed in a complete and uniform method.”
He is survived by his two daughters and their spouses, four grandchildren and one great-grandchild.
Companies in the News
In a recognition for appearing in the Oct. 31, 2011, issue of ENR Mountain States published by McGraw-Hill, Heartland Acoustics & Interiors has been honored for its work on the Denver IKEA store in the magazine’s selection of 2011 Best Projects of the Year in the category of "Best Retail/Mixed Use Development Project.”
Heartland overcame the accelerated schedule to meet an earlier opening date. Jason Gordon, Heartland’s president/CEO, says their crews "pushed through with every resource we had to meet the challenge.” Heartland installed 260,000 square feet of suspended ceilings in the parking garage and 190,000 square feet of interior decorative-beam ceilings inside the store.
Universal Fastener Outsourcing has appointed PAM Fastening Technology, Charlotte, N.C., as its exclusive Master Distributor for United States and Eastern Canada locations.
New on the ’net
The new design of the Delmhorst Instrument Co. website, www.delmhorst.com, has a modern and intuitive user interface that allows for quick and easy navigation to information on the company’s full line of moisture meters and accessories. Other improvements include the addition of products not found on the previous site, an integrated search feature, font size adjustment, print optimization, "email to a friend” option and links to industry association partners.
The EIFS Industry Members Association has launched its new website, www.eima.com, adding several features for those interested in EIFS and the association’s work. Visitors to the new EIMA site will notice a very image driven look showcasing the widespread use of EIFS nationwide and the inspirational designs of EIFS projects. In addition to the new site layout, several other pages and features are included, such as a project gallery, a directory of EIMA members and information on EIFS education and insurance.
The newly redesigned website for Stuc-O-Flex International, Inc. features expanded content and streaming media with educational videos related to product application, wall system design and various rainscreen configurations. In addition to product data, specifications, wall assemblies, test reports, detail drawings, BIM objects, warranty information and other online research tools, the website contains project images, architectural elements and advanced wall system design options. This new site was created specifically for construction professionals interested in architectural coatings, wall design and envelope integrity but also for the general public who simply enjoy browsing for ideas. Preview the new website at www.stucoflex.com.