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CONTRACTOR REVIEW

Is it going up? Is it going down?
Recession? Depression? what will
2002 bring? Should we be laying people
off and canceling big-ticket purchases?
Are all our woes directly
attributable to Osama Bin Laden, or
were the events of Sept. 11 ,2001, just
the proverbial last straw on the back
of an already floundering economy?
The media paint their picture, but
what’s really going on?




The monthly survey of AWCI mem-bers
around the country shows it’s not
all doom and gloom, but it’s not all
moonshine and roses, either. Of those
surveyed, 35 percent are doing as well
as last year or better; 25 percent have
noticed a slight slowdown, particularly
on new bids and sales; and a full
40 percent are not doing well.



For one Alabama contractor, business
is going very well. “There was a slowdown
April through July-it was really
tight. But it started picking up after
that and work is lined up almost to
next summer already. It’s a very good
economy.”



Likewise, an Illinois contractor says,
“We’re still doing very well not
affected much by the Sept. 11 attacks.
The only thing we’ve noticed is, busy
as we’ve been all year long, our backlog
is not as great as it used to be. That
could change tomorrow, too; we
could be awarded another big job and
we’d be back to normal. Manpower wise
we’re where we’ve been all summer
long and for the last nine
months.”



Not everyone is so positive. A drywall
and acoustical ceilings contractor
from Arkansas is not finding conditions
so favorable. “Business is slow,”
he notes. “I don’t see a lot of jobs
coming in at the moment, and prices
are depressed as contractors underbid
below our cost. We work nationwide
and have noticed the East Coast and
the South are becoming depressed.
People are a little leery of where the
economy is heading. They’re trying to
get some work now, but they’re thinking
there may not be any future.”



“There’s maybe 20 percent less business
out there than half a year ago,”
complains a San Franciscan. “With
much less work to bid, you need to
look at projects more closely in terms
of deciding what you want to go after.
The margins are tighter—not below
cost yet but awfully slim. You can’t
afford to make a mistake.”


A Connecticut acoustics contractor is
also having a tough time. “Our business
has dropped off dramatically
since Sept. 11. We’ve gone from
probably 90 carpenters to 25. People
are scared to spend money and they’re
just holding back because they’re
uncertain of the future. I would never
have believed we would ever have
such a large and sudden cutback.”


September 11 – Before and After



Interestingly enough, only a quarter
of the contractors interviewed blamed
September’s catastrophe for their difficulties.
Some projects have been put
on hold and there has been a slowing
down in the market as a result of the
attacks. However, most of those contractors
who are having trouble say
that any slowing down began long
before Sept. 11, which only added to
an already existing decline.



A plastering contractor in Illinois
notes: “Sept. 11 hasn’t affected us at
all so far. We’re doing jobs that were
already well in progress. Things had
already slowed down a bit before
Sept. 11. Things have been so good
for so many years that it’s just a natural
slowing of the economy.”



“We don’t know if Sept. 11 has had an
effect yet,” says a Delaware contractor.
“I think some projects have been put
on hold and canceled. It hasn’t affected
us directly as most of our contracts are
already under way. We may see a slow some impact, but not perhaps as much
down at the end of 2002. I think the as the media would have one believe.
bidding has slowed down a little, but I
can’t attribute it to Sept. 11.”


“Business has been slow since spring,”
states a Mississippi contractor. “It
picked up a bit over the summer but
since September, with the attacks and
everything, business volume sagged
again. Money is becoming cheap but
people are still reluctant to borrow. The
state of everybody’s confidence level
with this war going on is low. We need
to see a successful outcome of the war
and then everybody out there spending
again. Until they do, businesses stop
expanding, banks stop renovating,
schools stop expanding. The whole
economy is affected.”



Others were directly affected by the terrorist
attacks and their consequences,
mostly in terms of projects put on hold
or canceled. “We’re probably 20 percent
off last year since the events of
Sept. 11, with several projects we were
working on being put on hold because
of the state of the economy.”
One contractor had a contract for a job
in Manhattan that had to be put on
hold. Similarly, a Texas contractor had
a sizable job placed on hold because the
company had lost income resources
from businesses in other parts of the
country.



An Oregon contractor sees it this way:
“Sept. 11 did make a difference. Three
or four jobs we thought we would
receive a contract for, were shelved. I
think that was probably the straw that
broke the camel’s back. In other words,
the jobs were kind of marginal and they
decided to wait for a year.”



Obviously the Sept. 11 horrors had
some impact, but not perhaps as much as the media would have one believe.


Keeping Old People, Buying New Things




The current business climate seems to
be resulting in no great change concerning
personnel and equipment purchase.
The general response varies from
no change in numbers (about 70 percent)
to those who are down on personnel
but haven’t had to lay off any of
their core people. Only one or two
companies expected to have to cut
down in numbers, losing office staff
and regular workers. However, no one
was taking on new staff and, in general,
fewer field workers are being hired.



As for the purchase of new equipment,
many contractors are moving ahead as
planned with purchasing what they
need. An element of caution has crept
in, however, and some companies are
postponing or canceling major expenditures.



“We’re looking to scale back,” notes an
Arkansas contractor. “We had some
purchases we were going to make this
year-lifts, forklifts and things like
that-but we’re waiting to see.”


A Florida contractor says, “We’re definitely
putting off large-equipment purchases
until we see some sort of turn around.”

An Alabama contractor, on the other
hand, says he just bought two pick-up trucks. Another from Illinois also says, “We’re not really putting off any large equipment purchases. We just bought a couple of new trucks.”




Yet another company, this one from
Texas, is looking ahead and investing in
expansion: “We’re buying whatever
equipment we need, not putting anything
off. We’re also expanding and
investing in the future by adding a training
facility. We’re not taking on more
people so much as doing some in house
training of some of the employees we
have.”







Most contractors are expressing some
caution regarding new purchases of
major ticket items, such as this one from
Texas: “On the purchasing side we’re
watching to see how everything goes.
We’re looking to make sure that we don’t
just keep buying and buying and then
all of a sudden everything is just shut off.
We’ll probably wait until spring to make
sure that things are still fine before we
just go out and make major purchases.”




And this one from Washington: “We’re
being more selective on our purchases
and we’re getting more quotes than we
were a year ago. Just like everyone else,
we’re making sure that we’re getting the
best for our money. A year or two ago,
we worked with one or two vendors but
now, even though we’re still trying to be
loyal to our suppliers, we’re making sure
we get the best deal on the market.”





A Mississippi contractor puts it this way:
“We’re trying to get leaner, cut over heads,
so major purchases have been
looked at. You have to tighten your belt.
It’s survival of the fittest and that’s the
way we’re looking at it.”


The lesson seems to be: Buy what you
hand, says he just bought two pick-up need, but shop wisely.



An Upbeat 2003



Looking ahead, only 20 percent of those
interviewed have a gloomy outlook
toward the new year. Even most of those
who are not doing well at the moment
are optimistic-which says a lot for the
resilience of the American construction
industry.



“There’s probably going to be about 5
percent growth in our area and it’s going
to be a great year, for those of us who are
going to be there to see it!” says the
Atlanta contractor. Another one, from
Arizona, has this to say: “We still have a
pretty good backlog of work and we are
continuing to bid. We have a lot of larger
projects coming out in our market
area. Hopefully we can get our fair share
of them.”



All but a few are optimistic, even if they
recognize that they have to change the
way they do business: “It’ll be more like
it was in the early 1990s,” says a Californian
contractor. “If you want a job,
you are going to have to get out there
and slug for it. If the economy is going
to get back to normal soon, most will be
fine, but if it drags out like in the early
1990s, some will go out of business.”




Some, a small minority, are discouraged.
An Idaho contractor predicts a fairly serious downturn locally. “I think 2002 will
be down a fair amount from 2001 a
30- to 40- percent decline in the amount
of work available. The uncertainty about
the economy in general is affecting all
areas of the economy and will slow
growth. The government and banks are
doing all they can to stimulate the economy,
but until the confidence is back, I
don’t see a dramatic change upward and
don’t anticipate it for a while. There are
fewer projects to bid on, and on those
that do exist, contractors are bidding
more aggressively because they are con-cerned
about getting the job, and that’s
depressing prices.”




Working for Uncle Sam




There seems to be a consensus that the
government and institutional markets
will be the ones that will be providing
much of the work. Says another contractor
from California, “We expect a
large number of jobs next year due largely
to hospital and biotech work. In California,
hospital retrofit work has been
mandated completed by 2005. As a
result, we are seeing a fair number of
large hospital jobs come out for bid. It’s
a local boon, but due to a lot of the
things we are experiencing right now,
government spending will be up in general.
Certainly, military-related projects
will result in more demand for production
facilities in California and other
states. The change in the economy over
the last few months has been pretty dramatic,
but it will pick up [in 2002].”



Another contractor from Washington
confirms this view. “We’re pretty optimistic
about 2002,” he says. “There
seem to be quite a few projects still on
the drawing board. In fact, we have a
flurry of bids happening just next
week—we’re bidding on $5 million to
$10 million of work for 2002. This is
government work—schools, universities,
hospitals—they’ve got a lot of stuff
going on. It’s only the privately funded
projects, which, if not entirely scrapped,
are at least being pushed off. But we’re
pretty bullish about 2002.”



So there is a future for the construction
industry. Are there any pointers how to
make sure your company thrives in 2002?


Words from the Wise



An Alabama contractor explains it is
way: “You can’t run scared in this business.
You have to sit down and think and
plan, and I don’t think enough people do
that.” He’s even decided to start a new
business in 2002, building housing as a
general contractor. “We figured it’s going
to be a good year for housing,” he adds, and with current low
interest rates, this makes sense.



A successful Arizona contractor gave this advice. “We just work
hard and try to pick up everything that comes out, trying to negotiate
work and looking for projects that other contractors might
not be interested in.” Flexibility and versatility are important.



And while some give sound advice and others wax philosophical,
this gentleman from Delaware turns to history for prece-dent:
“We’re not putting off any equipment purchases,” he says.
‘As a matter of fact, we’re looking at buying some trucks and I’m
actually building my own residence in spite of it all. The mortgage
rates should be terrific. Anyone with capital expenditures
to make, now’s the time to take advantage of the money being
so cheap. I’m not going to assume the worst. That was one of
the worst aspects of the Depression. Everything was there, but
nobody was spending money and that just killed the economy.
They didn’t understand it at the time until the government finally
started making things happen, creating work to get money
flowing. That’s all it is. It really just comes down to confidence.
I’ve been in this for 30 years and seen some severe downturns,
but we’ve always survived, so it doesn’t scare me.”



In saying “It really just comes down to confidence,” the man
from Delaware has hit the economic nail on the head. One noted
American author and humanitarian defined money as ”an
idea backed by confidence.” When the confidence disappears,
so does the value of the money. But confidence is a state of mind,
not a state of affairs.



Those who remain confident and don’t panic are continuing to
do well despite the current circumstances. And the media
deserves censure for its tendency to spread doom and gloom and
inflate the downside of life. Why not shine the spotlight on the
positive and publish some of the many stories of those who are
making the best of circumstances and staying on top? As we have
seen in our surveys, there are plenty of those about. The renewed
confidence will improve conditions for all of us.



To quote Admiral Farragut, “Damn the torpedoes. Full speed
ahead!” There’ll always be torpedoes, but those who make it
through won’t be the ones who stopped engines and hoped the
torpedoes would miss them.


About the Author


Steven Ferry is a free-lance writer for the construction industry
He is based in Clearwater, Fla.

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