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Plan For Prosperity 16See The AGC of America’s plan to boost the nation’s construction industry.

Volume 15, Issue 1The Builder is a publication of Builders Association, Inc.,

a chapter of the AGC of America, proud to have been serving Chicagoland’s construction industry since 1906.March 2011

This Issue’s Cornerstones:Government Relations 4Safety 8Financial 12

How Will The Changes Proposed By The Financial Accounting Standards How Will The Changes Proposed By The Financial Accounting Standards Board Impact Your Business, And When Might Those Changes Take Effect?Board Impact Your Business, And When Might Those Changes Take Effect?

Page 3Page 3

Looming Looming LiabilityLiability

The Builder is a quarterly publicati on of Builders Associati on, Inc., a trade associati on of commercial, industrial and insti tuti onal contractors and affi liated

industry fi rms dedicated to quality constructi on in the Chicagoland area since 1906. The Builders Associati on is proud to be a charter member of the AGC of America.

ChairmanHoward Strong

The George Sollitt Constructi on Company

Vice ChairmanBenjamin Johnston

James McHugh Constructi on Company

TreasurerJimmy Akintonde

Ujamaa Constructi on, Inc.

Immediate Past ChairmanR. Lynn Treat

Ryan Companies US, Inc.

9550 W. Higgins Road, Suite 380Rosemont, IL 60018 (847)318-8585 www.bldrs.org

Ken EgidiPepper Constructi on Company

Leon LaJeunesseCustom Contracti ng, Ltd.

Michael MozalJoseph J. Duff y Company

Jeff RadayMcShane Constructi on Company

Brad SwabackJust Rite Acousti cs, Inc.

Ray WojkovichBulley & Andrews, LLC

Board Of Directors

Builders Association StaffHave a constructi on-related problem or

questi on? Speak directly to the individual who has primary responsibility for a parti cular area:

Al Leitschuh, PresidentIndustry Relati ons, Strategic Planning,

Government Relati ons

Denise Herdrich, Director of Labor Relati onsLabor Relati ons, Membership Recruitment

Andy Cole, Communicati ons ManagerPublic Relati ons, Website

Stacey Kelly, Project ManagerIndustry Liaison Acti viti es, Safety,

Special Projects, Builders Foundati on

Patricia Heier, Offi ce Coordinator

Saiqa Malik, Communicati ons Intern

The Builder

In This Issue...career-minded 4Six promising students looking for careers in constructi on are singled out for Builders Foundati on Scholarships.

mcshane goes home 9Associati on member earns a CISCO Project of the Year Award for a job well done in Pilsen.

beating back broke 12The recession may be grinding to a halt, but when will contractors begin to see the positi ve eff ects of that? According to the AGC of America, Reed Constructi on Data and FMI, sooner than you might think.

get some answers 28Labor experts from SmithAmundsen LLP and Ogletree Deakins will serve as presenters at an April 20 Builders Associati on event that can answer your questi ons about workers’ compensati on, subcontracti ng clauses and much, much more.

labor 3

Rocky Road To Disclosure

As one of the nation’s foremost experts on multiemployer pension funds, Rocky Miller has logged a lot of airline miles in over 20 years as a labor lawyer.

These days, contractors are in need of his expertise more than ever.

Miller presented the program Plugging Pension Holes to a packed house of Builders Association members and AGC executives from chapters all over the Midwest at The Drake Hotel in February. He alerted contractors to how the industry’s woefully underfunded pensions could impact their business, and what they could do about it in the meantime.

The advice of Rocky and experts like him have taken on more importance in the last year, as the Financial Accounting Standards Board has moved to force construction companies to record withdrawal liability on their balance sheets. The AGC of America has been fi ghting the proposal since it came out, and the number of negative comment letters received from the construction industry pushed FASB to postpone implementation.

At a Financial Accounting Standards Advisory Council meeting in March, the Council decided the following:

To conclude an ongoing fi eld test by March 31 focused on how to gather fi nancial information on unfunded liability and its attendant issues. To perform industry outreach and address construction’s concerns after receiving unfavorable comments on the initial proposal. The Board referred to previous and an upcoming meeting (at which the AGC of America will participate) with the construction industry. Staff discussed the need to have an additional two to three Board meetings to deliberate a new multiemployer disclosure standard, with the fi rst meeting to discuss quantitative issues in late April or

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Rocky Miller (left) speaks at Plugging Pension Holes, an event designed by the Builders Association to give Presidents and CFOs a better handle on what pension troubles and withdrawal liability mean to their business. Above, AGC of California CEO Tom Holsman speaks to BA members about FASB.

Even If You’ve Been And Will Be A Union Business Forever, Withdrawal Liability Could Be On Your Balance Sheet In 2012

early May. A second meeting would discuss qualitative issues. To create and implement the new rule by the end of the Second Quarter 2011.

“They are undecided as of now of an effective date for the new rule,” said Builders Association President Albert Leitschuh in a notice to members. “My opinion, we’re most likely to see it for the 2012 Fiscal Year, but no later than that date.

“The bottom line is that FASB is still interested in increasing disclosure, but recognizes that it should be done in a cost-effective manner for companies. It appears that FASB is committed to this disclosure and is now working on the how.”

Originally scheduled for implementation in December of 2010, FASB’s fi rst postponement put the item off until the second quarter of third year. Had the draft passed as written, it would have greatly increased the diffi culty in securing fi nancing for contractors. The AGC of America

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submitted comments urging FASB to reconsider the entire draft on the basis that it under-appreciates the costs associated with compliance and overestimates the relevancy of the required information. The draft also didn’t take into account the complexity of the relationship between employers and multiemployer plans.

The AGC formed committees to better articulate its position on four major sticking points in the proposal:

Loss contingencyRevenue RecognitionMultiemployer disclosureLeases

An AGC press release pointed out that, while the comments have been received well, it’s unclear what impact they will have on the fi nal rule.

The AGC of America continues to provide input on these standards and how they may change. The Builders Association will keep members updated on developments as they occour. For more information, contact Al Leitschuh at aleitschuh@bldrs.org.

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Assisting Future Industry LeadersBlanco Goss Lapinskas Hampel White-Miller Zouras

BY SAIQA MALIK

In order to be successful in any fi eld, education is of utmost importance. Since 2003, the Builders Foundation has awarded more than $100,000 in scholarships for emerging construction industry leaders majoring in Construction Management or Construction Engineering. This has helped many energetic and ambitious young people make their dreams of a career in construction materialize.

For the year 2011, the Foundation has

awarded six scholarships at $3,000 per year:

Karla BlancoKarla is a Civil Engineering major at

Bradley University. The sophomore feels very passionate about the work that the construction industry does in strengthening the communities and this idea was the driving force behind her choice of the construction major. Karla’s interest in Habitat for Humanity supports her idea of creating a community-friendly environment

by using various means of construction leadership.

“By working in the construction industry, I could improve or shorten a person’s commute to work, make roads safer or build a community center that would bring people together,” Blanco said.

Keegan GossKeegan Goss is an Iowa State University

sophomore in the Civil Engineering department. Keegan’s immense interest in building and design has motivated him to

4 education

step into the construction education. He is a winner of the Edwin R. & Ruth Adland Civil Engineering Scholarship which projects his passion for the fi eld of his choice.

College Planners of America President Michael McKinnon was among his references.

“Keegan is a dedicated and determined young man who has the drive needed to succeed in the fi eld of engineering,” McKinnon wrote.

Brian HampelAnother recipient from Iowa State

University is sophomore Brian Hampel. His passion for the construction business started to form roots when he was two years old, and he sees himself working for a large commercial contractor in the future. He served last summer as a Technician Intern for the Illinois Department of Transportation.

“Being able to walk through a city and point out certain projects that I either worked on or contributed to in some way is what I dream about,” he said. “I have never had any doubt that construction is what I want to do for the rest of my life.”

Alius LapinskasIowa State sophomore Alius Lapinskas

is a Construction Engineering major with a passion to make a difference in the construction industry.

Alius’s interest in the construction business goes back to his childhood days and he anticipates a career as an engineer, designing buildings and constructing modern facilities.

“What interests me in the construction industry is the life of a structure or building,” Lapinskas said. “From the transportation of materials to changes in the building and machinery used, this process fascinates me.”

Moses White-MillerMoses White-Miller of Bradley

University is a junior pursuing a career in Civil Engineering. Moses has always been inclined towards creating buildings and plans to impact the lives of other people through innovation and modern technology.

“My work experiences with PACE Suburban Bus Co. have benefi tted me greatly in the construction industry,” White-

Help Us Help ThemThe Builders Foundation is proud to assist future industry leaders as they chip away at their college debt en route to reaching the fairway of a long career in Chicagoland’s construction industry.

The Builders Foundation Golf Outing is the sole fundraiser for the scholarships. Mark your calendar and join us for a round of golf and camaraderie Thursday, July 21 at Orchard Valley Golf Course in Aurora. Look for sponsorship and pricing information soon on www.bldrs.org, and contact Stacey Kelly at 847-318-8585 for more information.

Miller said. “I served as a transportation planning intern. The data I helped collect was used to effectively update the Suburban Chicago Transit system route information in accordance with ongoing traffi c construction.”

Ellen ZourasPurdue University’s Ellen Zouras is a

senior Building Construction Management major. Ellen has fi eld experience at both Hardt Electric and Spartan Builders, and her zeal for building “green” has her looking forward to a career in the industry. She hopes to be a LEED AP Project Manager for healthcare projects.

“Living in Chicago my entire life

afforded me to opportunity to be amongst many of the world’s greatest architectural and technological achievements,” Zouras said. “I plan to play a role in developing sustainable construction solutions that would preserve our planet for future generations.”

www.bldrs.org 5

6 government relations

Glass Half FullLobbyist Encouraged That Legislators Are

Hearing Industry RepresentativesAnother election year, another non-stop media blitz. Through a

parade of television news features, stories in print and ballgame-interrupting advertisements, hundreds of candidates in Illinois did everything they could to get the people to listen to them.

Despite recently passed increases in taxes on both individuals and businesses, there’s been some encouraging signs that the listening isn’t just happening in one direction, as Builders Association lobbyist Jeff Glass of Capitol Consulting Group is enthusiastic about legislators listening to what the Chicagoland commercial construction industry is saying.

“We’ve opened that door of communication with lawmakers and now we’re being invited to meetings on a regular basis when those legislators deal with building issues at the state level,” Glass said. “They know who the Builders are and what they do.

“Like anything else, you have to start from square one. I’m happy to say at this point that we’ve moved a few squares.”

As Republicans stormed through national House and Senate races, some signs of unhappiness due to the recession and the state of the job market were evident at the state level, as well. Those signs weren’t enough to unseat Governor Pat Quinn, who narrowly defeated Republican Bill Brady despite losing the vast majority of counties in the state. Quinn - who stated at the Builders Association Annual Meeting in 2009 that he wanted to be the “building Governor,” then irked some builders by stepping into the middle of last summer’s labor strike – mentioned a desperate

www.bldrs.org 7

need for a signifi cant tax increase to balance the state’s constantly fl atlining budget.

“Pat Quinn, to his credit, did run on raising taxes,” Glass said. “He didn’t sugarcoat things. He was telling people at campaign stops ‘Guys, we’re in a crisis here, and nobody’s got a band aid and there’s no easy solution.’

“What he was also saying, though, is that his victory was a ‘mandate’ for that tax raise. When there’s 102 counties in Illinois and you lose all but four or fi ve of them, I don’t know how much of a mandate that is.”

Job creation and cuts to spending may be the focus of the Illinois legislature before the details of a tax increase, as Democratic majorities have shrunk slightly in both the House and the Senate.

The Builders Association is grateful for the participation of its members in legislative activities, both in donations to the PAC Fund and by participating in the Government Relations Committee.

For the state election this fall, the Builders Association donated over $35,500 from the PAC Fund to both sides of the aisle in state races. Candidates receiving those donations are listed in the graphs below.

“We can be proud of getting past the party labels and doing our due diligence,” Glass said. “Every donation we made was a careful consideration based on both our relationship with the candidate and the candidate’s background. There’s a lot more to speak of in terms of relationships with those lawmakers than there was three

years ago, and we look forward to continuing to cultivate that and be a source of information on the construction industry and what would help it.”

Chicago’s fi rst new Mayor since The Simpsons fi rst aired will be faced with a City Council that will also see a lot of new faces.

“Obviously, it’s going to be a bit of a waiting game,” Glass said. “We don’t know enough to really say what (the new Mayor and Aldermen) will do for construction yet.

“Everyone wants a strong economy. One of the best signs of a strong economy are cranes at work when you head into town. That’s the message we want to get out there.”

Glass is pleased with the inroads the Association has made in Springfi eld in a short amount of time.

“When we were hired, we got clear direction from the Builders Association,” he said. “The organization wanted to play a background role, but wanted to make sure also that legislators knew the Builders Association and that we could make an impact when we felt it was needed.

“In the course of three years, we’ve been able to sit down and talk to these guys and explain our positions. We’ve been able to pick and choose our battles and we’re to the point now where legislators will ask our opinion before considering legislation that might impact the industry.”

To get involved in our Government Relations activities, contact Albert Leitschuh at aleitschuh@bldrs.org.

8 safety

February Contractor Safety Forum Covers PPE, “Near Miss” Reporting

A Bit Of Funk, A Bit Of Funk, A Lot of Safety A Lot of Safety

BY SAIQA MALIK

The value of human life matters more than any material gain, and Builders Association and its members are well aware of that, as exhibited by a packed house at the February 10 Contractor Safety Forum at the Chicagoland Construction Safety Council in Hillside.

The Forum focused on the most recent advances and techniques introduced in Personal Protective Equipment. Bill Funk of Advanced Supply Company presented the innovative technological tools that are now available in the market to make job sites more secure and safe.

“The new technology coming in and creating user-friendly products will make the construction sites safer,” said Funk, while demonstrating the use of new safety devices. While classroom demonstrations may have been the norm in the past, Funk mentioned that the idea now is to show tradespeople exactly how to use the equipment on the jobsite.

“This technique has to be far more effective than just using the classroom knowledge,” he said.

Mike Murphy of Association member Sperian Protection also contributed to the presentation, touting an investment made by Honeywell that modernizes construction site trailers.

“Technology and innovation will lead the way,” Murphy said. “Honeywell has invested $50,000 in each of its trailers as a step towards modernization. They have installed fl at screen T.Vs on which the workers can view the safety videos and there are a lot of other features that just wouldn’t have been there in the past. The idea is to use the technology we have access to and make the jobsite as safe as possible.”

A fl ashing stop sign standing in the corner of the room caught the attention of attendees immediately. Funk mentioned that the latest LED Technology used in that stop light could be seen for over a mile, yet another technology related safety measure

for employees working at night and in dark conditions. The Altair 4X Multigas Detector also uses new MSA XCELL Sensors. The sensor will tell the workers six weeks ahead of time if the battery needs to be replaced.

“This is helping fi eld employees truly improve the safety program,” Funk said.

He also mentioned the importance of hand protection on a site, demonstrating and passing out new cut resistant gloves with a resistance level of 5 and water resistant gloves. A detailed presentation on Fall Limiters followed, conducted by both Murphy and Funk. A fall competency inspection is done on every piece, every year in order to retain laborers safety.

“We’ve found that fall limiters, as opposed to harnesses or other protection equipment, is growing in use,” Funk said. “Workers fi nd that the fall limiters offer equal protection and allow them to move and work in a bigger area than the harnesses.”

The second half of the meeting, Safety Committee Chair Paul Flentge of Pepper Construction Company opened up the fl oor for discussion on other jobsite safety concerns.

The issue of reporting a “near miss” incident was brought into light by a number of safety professionals. It was mutually agreed upon that a number of incidents go unreported, primarily due to fear of being fi red or penalized.

Jake Scott of the Occupational Safety & Health Administration mentioned that OSHA provides incentives to the workers for reporting those incidents, but that tough economic conditions might also be a contributing factor in reluctance shown by workers to report them. The group also appreciated the good job that OSHA is doing in Chicago, hence reducing the number of construction site accidents in the area.

There was also a discussion on the lead testing issue in regards to the renovation projects initiated by John Kubicek of The Levy Co.

Safety Forums provide an essential platform for the members to raise concerns regarding safety related issues and discover resolutions for them.

If your company hasn’t been sending its safety professional to these quarterly meetings, fi nd out what you’ve been missing out on by contacting Stacey Kelly at 847-318-8585 or skelly@bldrs.org.

McShane’s Home Delivery

BY SAIQA MALIK

With a reputation for exceptional talent who complete daunting construction tasks since opening in 1984, McShane Construction Company doesn’t need awards to prove itself to current and future clients.

That being said, they’re always nice to have.

The Casa Morelos and Casa Maravilla project is one of the most recent examples of that commitment to excellence and was recognized as such by CISCO (Construction Industry Service Corporation), which named it Project of the Year in Residential Construction for 2010. The honor was part of CISCO’s 2010 Pride in Construction Award Program.

“We take on challenging tasks because we can provide the necessary expertise,” said McShane Construction Company Executive Vice President Mark T. Tritschler.

The feeling of accomplishment is never complete without mentioning the obstacles encountered, and this project was no exception. One of the foremost challenges was the access to the site since there was an existing building between the construction site and the path to deliverables.

“It was like building in the city’s downtown due to the tight side considerations,” Tritschler stated. “The transportation of materials to the site was not easy but we found the way around it.”

A $25.2 million, two building development located in Chicago’s Pilsen neighborhood is an admirable model of today’s architectural innovation. Casa Morelos includes 45 units of affordable housing apartments at 2015 S. Morgan Street, while Casa Maravilla’s 73 senior-living units are located at 2021 S. Morgan Street.

The installation of geothermal heating in the Casa Maravilla building was another major piece of the project, as a part of

Casa Morelos, Casa Maravilla

Take CISCO Award

McShane’s unwavering ‘green’ building effort and in compliance with the Chicago Green Homes Program.

“We always encourage the people we work with to think ‘green’ as a part of being good citizens,” said Tritschler, adding that the geothermal aspects of the project set it apart in both energy effi ciency and design.

“Geothermal technology provides cost effective heating and cooling, and with the continued increase in energy costs, the savings can be substantial,” said Megan Brody, Senior Marketing Communications Coordinator of The McShane Companies. “We are seeing long-term owners, such as the Resurrection Project, incorporating these systems into new and renovated buildings.”

Tritschler also mentioned that due to fi nancial consideration in a senior community it is important to build cost effective structures. Since the rents at Casa Morelos will incorporate the utility bills, those costs will go down over time with the use of geothermal technology, ultimately resulting in a lower operating expenditure.

The Resurrection Project, a community-based nonprofi t, is the owner of both residential complexes.

“The client believed in our work and gave us a second project,” Tritschler said, referring to Casa Morelos after the

completion of Casa Maravilla. “We all like to be appreciated, so the award from CISCO is a great compliment to our team. They did a tremendous job.”

In addition to the award, the project team received a strong endorsement from Guacolda Reyes, the Vice President for Community Development at The Resurrection Project.

“We are very impressed with the work McShane has done and the attention they have paid to our request,” Reyes said. “They fi nished the project on time and within budget, which is very important. They did everything the right way and the results are just phenomenal.”

The Resurrection Project is serving as the owner’s representative for the Instituto Health Science Career Academy and recently tapped McShane Construction for the completion of this new charter school assignment. The construction for this unique secondary school, located in Chicago’s Pilsen neighborhood, recently broke ground with Governor Pat Quinn, Senator Richard Durbin, State Senate Tony Munoz, State Representative Edward Acevedo, Cook County Board President Toni Preckwinkle and Alderman Daniel Solis, among others, in attendance. The educational facility will support students seeking careers in the healthcare and science industries.

Pilsen’s Casa Morelos affordable housing complex completed by McShane Construction Company.

www.bldrs.org 9

Chicago Area Building Specialties303 W. Irving Park Road

Roselle, IL 60172Judd Guldberg, Sales Manager

630-894-5801 ext. 20; www.cabs-4-u.com

Chicago Area Building Specialties is a full line distributor of drywall and acoustical products. We also provide tools and accessories for primary services that include the following trades: Drywall Contractors; Acoustical Contractors; Insulation Contractors; Flooring Contractors; and General Contractors.

Duane Morris LLP190 S. LaSalle Street, Suite 3700

Chicago, IL 60603Charles B. Lewis, Partner

312-499-6740; www.duanemorris.com

Evolving from a partnership of prominent lawyers in Philadelphia a century ago, Duane Morris now has offi ces in many major markets and continues to expand across the country and overseas through nonmerger growth. Duane Morris lawyers hold leadership positions in bar associations, as well as in educational, cultural and charitable organizations and with community groups across the country. The Duane Morris offi ce in Chicago includes over 10 professionals in the Construction Practice Group.

Harris Winick LLP333 W. Wacker Drive, Suite 2060

Chicago, IL 60606Daniel Dorfman, Attorney

312-662-4600; www.harriswinick.com

The practice of Harris Winick LLP is focused on the construction industry. Our lawyers represent a wide range of contractors, trade specialists and other professionals in all aspects of their business, from the negotiation of contractors and other transactional matters to dispute resolution, mediation and litigation.

Kingdom Community Construction, LLC3820 W. Ogden Avenue

Chicago, IL 60624John T. Abercrombie, President

773-522-1945; www.kingdomcommunityconstruction.com

Kingdom Community Construction, LLC is a full service construction company specializing in all facets of commercial construction, including renovation projects and new construction as well as construction management and design/build work. Our trade specialties are drywall and carpentry.

Perfect Promotions (Division of RJB Associates, Inc.)11 N. Skokie Highway Lake Bluff, IL 60044

Parker Melvin, Account Executive847-295-6990; www.promoman.net

Since 1991, Perfect Promotions has offered the fi nest custom imprinted products for marketing, customer appreciation, employee incentives and recognition and trade show giveaways. With over 800,000 items in our database, we work very closely with our clients to ensure that their brand and message are represented in the best possible manner.

XL Insurance190 S. LaSalle StreetChicago, IL 60603

K. Scott Merchant, Vice President-Construction Risk Manager312-444-6514; www.xlgroup.com

XL Insurance and its North America Construction Group have brought together a group of experienced construction insurance professionals. Our goal is to provide the construction industry the broad fi nancial services needed by contractors and project owners. Our products include a wide package of property-casualty, specialty, auto and surety services. In addition, our products include environmental, builder’s risk, contractors block and excess.

New MembersNew Members

...with a bunch of Tweets. Follow us on Twitter or join the Builders Association’s LinkedIn group to get information relevant to the construction industry and keep up to date with timely happenings in labor, safety, government relations and a other topics. If your business has a page, let us know so we can follow you! Thanks to those we’re following already: Duane Morris; James McHugh Construction; Ryan Companies; and Seyfarth Shaw.

We’re A Bunch Of Twits...We’re A Bunch Of Twits...

10 membership

Become A Green LEEDer

Finding ways to stimulate demand for new, more environmentally friendly buildings, power facilities and factories will deliver signifi cant environmental benefi ts. At the same time, investing in new public infrastructure will ease pollution-causing traffi c congestion and ensure safe and healthy supplies of drinking water for decades to come. You can’t wish for a green future – you have to build it.

The nation’s built environment sustains our quality of life and our economic productivity, but our infrastructure and our lifestyles also directly impact the natural environment. The Associated General Contractors of America has discussed how contractors and other partners in the building professions have responded to the call to reduce the impact of the built environment on our natural environment.

In the article entitled “Building a Green Future,” the AGC takes a deeper look at ways to reduce the impact of buildings and other man-made creations on the natural environment. According to the article, we need a comprehensive and coordinated national strategy for building a greener future.

The AGC provides suggestions and recommendations for federal, state and local governments, government agencies, developers and professionals in design and construction fi elds to embrace in order to realize a greener future:

1) Make Buildings Greener – improving the environmental performance and energy effi ciency of existing and new buildings and industrial facilities

2) Make Transportation Greener – reducing transportation congestion and pollution through expansion and improvements to these vital infrastructure and the construction of mass transit options

3) Make Water and Land Resources Greener – cleaning up and protecting our communities through renewed commitments to water treatment, updating failing water systems and the remediation of contaminate sites

4) Make Power Generation Greener – increasing the availability and effi ciency of energy production through upgrades to existing power plants and the construction of new and diverse sources of energy that will also bring us to greater energy dependence

According to the article, nearly 40 percent of the energy used

in the U.S. is used to power buildings, for lighting, heating and cooling purposes, etc. Buildings also account for 35 percent of the nation’s total man-made greenhouse gas (GHG) emissions in 2008. By 2013, the amount of non-residential construction starts in the green market is expected to grow 20-25 percent.

In order for environmental performance of buildings and building materials and products to be improved, policymakers and industry need to support new research. The industry would also benefi t from: tax incentives; supporting the Building STAR; modernizing government buildings; establishing local incentives for green buildings; preempting the Clean Air Act for Greenhouse Gas Emissions; and funding green building research and programs.

The transportation infrastructure literally carries our economy through the transport of goods and people. However, transportation currently counts for 27 percent of the total U.S. energy consumption almost exclusively through the combustion of fossil fuels. Fortunately, transportation agencies and the construction industry are expanding efforts to increase transportation options while doing the right thing for communities and the environment.

To create a better transportation environment, policy makers can work to: double investment levels in federal highway, transit, aviation, freight and rail programs; right size the Federal Gas Tax and transition to Vehicle Miles Tax; make use of the Harbor Maintenance Fund; reform the current “New Starts” program; streamline environmental reviews for infrastructure projects; and preserve the U.S. Department of Transportation’s authority for Transportation Planning.

The nation’s drinking water and wastewater infrastructure is aging, and is in critical need of attention. New treatment facilities, pipe replacement and rehabilitation, and replacements of sanitary and combined sewer systems are needed.

In order to make environmental resources better, it is necessary to: reauthorize and expand federal contribution to state revolving loans; establish a dedicated trust fund for water infrastructure; increase funding for water resources programs of the U.S. Army Corps of Engineers and the Bureau of Reclamation; support long-term investment for water resources navigation, fl ood control and environmental restoration; reform and expand current laws that address contaminated sites; and continue to support jobs training for environmental cleanups.

In 2008, the emissions for electricity generation accounted for 34 percent of GHG emissions. This statistical data shows that new technological developments need research and support. The AGC states that it is important to develop a comprehensive National Energy Plan and to accelerate the licensing of new nuclear power plants.

The AGC recognizes that the construction process affects the environment, and that careless practices can lead to unnecessary pollution. The following are steps to make practices greener:

1) Invest in construction equipment2) Reduce waste from construction and demolition3) Increase use of recycled materials and industrial materials

in construction4) Incorporate environmental stewardship into day-to-day

operations

www.bldrs.org 11

For more information about utilizing greener practices in the construction industry, please visit www.agc.org.

12 financial

2011 FMI Forecast Looking Ahead: Signs of Emergence In the 4th quarter of 2008, the NRCI (FMI Nonresidential Construction Index) was only 34.1. Now, at 60.8 for the 1st quarter 2011, it appears markets are emerging from wherever it is that they go to “hunker down.” The Great Recession officially ended in June 2009 according to the Business Cycle Dating Committee of the National Bureau of Economic Research, although that news wasn’t announced until September 2010. Few would have believed it in 2009 anyway, but now we have significant signs the recession clouds are beginning to clear over the construction economy. Construction Markets For 2011, and likely into 2012 and beyond, we can expect a significant decline in federal and municipal construction projects as the federal government and states go into budget repair mode. The hope is that private owners will begin to come back into the market. However, the transition will not be smooth. Nonresidential construction will dip another 2% after falling 15% in 2010. Some of this change can be accounted for in lower prices, so actual physical construction put-in-place may be higher than for 2010. Three of the largest components of the nonresidential construction sector will continue to struggle in 2011, commercial, lodging and office construction. Of the three, commercial construction may be the strongest as the unemployment numbers begin to level off, and the residential sector slowly returns in some areas of the country. Education construction will continue to weaken, especially K-12, as states roll back spending on everything. This will cause challenges across the country especially in areas where the population is growing the fastest. There are still some federal funding programs directed at schools that will help offset the loss and make it easier to sell bonds, but it will be tough to get higher school budget passed in 2011. Although the health care construction market has been in decline in 2010, it will remain at a historically high level. Hospital construction will allow the segment to maintain its volume. Special care construction will help drive future growth. Nonetheless, there are major concerns to watch in this sector, chief among them will be how the contentious fight over the Healthcare bill will affect the markets.

www.bldrs.org 13

Transportation construction is expected to recover in 2010. The size of the market should double between 1999 and 2013 if bills pass for rail and airport construction. As in other areas of the economy, the need is there, but the money is not easy to find. High-speed rail has yet to catch on, and there will be a continuing debate about its cost effectiveness. It will be helped by another $2.5 billion in addition to the $8 billion in federal stimulus “down payment for high-speed and intercity passenger rail.” U. S. Construction Markets Overview While improving, our forecast indicates that it will be 2014 before put in place construction starts to approach the peak levels of 2007. Of course, there are pockets of health and counter-trending companies. However, a slow recovery does not mean inactivity in the industry. On the contrary, construction firms must work harder to position their firms for changing markets. Business development is once again becoming a major area of focus. Those efforts do not just include finding new customers and maintaining relationships, both important initiatives, construction industry firms need to be greener, employ new technologies like BIM on a broader scale, be more productive and be ethical and more collaborative in their business dealings.

52.6 46.1 46.5

44.7 34.1

35.6 45.0 44.8 47.7 48.4

54.5 51.3 53.060.8

0.0 10.0 20.0 30.0 40.0 50.0 60.0 70.0 80.0 90.0

100.0

NRCI Q4, 2007

NRCI Q1, 2008

NRCI Q2, 2008

NRCI Q3, 2008

NRCI Q4, 2008

NRCI Q1, 2009

NRCI Q2, 2009

NRCI Q3, 2009

NRCI Q4, 2009

NRCI Q1, 2010

NRCI Q2, 2010

NRCI Q3, 2010

NRCI Q4, 2010

NRCI Q1, 2011

NR

CI S

core

FMI Nonresidential Construction Index (NRCI) Scores Since Inception of NRCI: Q4, 2007 to Q1, 2011 (Scores higher than 50 indicate expansion, below 50 indicate contraction.)

46.1 44.7 44 7 35 6

14 financial

On The Upswing?While None Know For Sure, Construction Economists See

Encouraging Signs For Industry

BY SAIQA MALIK

The title of the March 3 economic webinar said it all: Time To Spring Forward?

Nobody’s better qualifi ed to remove that question mark than three of the leading construction economists in the country.Ken Simonson of the AGC of America, Jim Haughey of Reed Construction Data and Kermit Baker of the AIA were on hand as presenters for this Market Insights webcast series event, providing fi nancial status updates in relation to the construction industry. A very insightful overview of the fi nancial highs and lows was laid out for industry professionals.

Baker pointed out that, while the home building market continues to be a disappointment due to low demand, he expected it to make a more complete recovery by the end of the year.

“The existing home sales are up only 10% while the new home sales are below 20%,” said Baker. The architectural billings index indicated strong signs last November, when it reached its highest point since January of 2008. Baker indicated spikes in oil prices and a potential government shutdown as threats to the industry’s bounce-back.

Haughey envisioned the future of the construction industry through the lens of optimism. Health care construction helps with that, as Reed Construction projects spending on those institutions to be up 2.5 percent this year and over 12 percent in 2012.

“Things have changed in terms of consumer confi dence,” he stated. “There is a big pickup in the multifamily market and the apartment market is moving as well. “The most rapid economic growth has been in Michigan due to the recovery of the automobile market.”

Haughey cited a three percent boost in the economy due to stimulus spending as a positive sign, and feels that we will soon see the private building space coming back. While numbers are skewed by how low the industry sank in the previous year, Haughey expects the education and public safety markets to increase over 10 percent each in 2012.

Simonson, as well, sketched a sanguine outline of the fi nancial situation of the industry. Simonson was pleased to mention that the employment picture was changing towards the better side.

“Employment has increased for ten straight months which is a good sign,” Simonson said. “Federal spending is at its maximum level now. Highway trust fund and water and waste water funding have also risen. This is a year in which federal programs are at a higher level, but they will decline.”

That substantial growth in Federal spending was boosted by $135 billion in construction related work from the American Reinvestment and Recovery Act, in addition to Gulf Coast reconstruction projects.

“Residential spending is low but on the other hand the non-residential construction has increased,” Simonson said, mentioning specifi cally rising warehouse construction trends.

There should be less demand for shopping centers in the next year, but an expanded market for hotel renovations. On the jobs front, Simonson said that engineering jobs have been added.

The residential sector has lost jobs but fourteen states have added jobs from December 2009 to December 2010. Texas and Oklahoma have shown the biggest growth in that time, with the biggest losses coming in Idaho and Kentucky.

All told, the AGC anticipates an increase in total construction spending of between 3 and 7 percent this year.

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Sources: AGC, Census Bureau construction spending reports

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Building a Stronger FutureA New Blueprint for Economic Growth 20

11

A New Blueprint for Economic Growth 1

The Recession That Never EndedWhile the recession officially ended in June 2009, the construction industry has continued to suffer from job losses and ever-tighter margins. At the start of 2011, the industry’s unemployment rate was 20.7 percent, roughly twice the overall unemployment rate. During the past twelve months alone, the industry has lost over 100,000 jobs. Few regions have been immune as construction employment continued to decline in two-thirds of the 337 metropolitan areas for which employment data is available. In short, the construction industry continues to suffer from depression-like conditions.

The industry continues to shed jobs because demand for construction remains weak. While $884 billion was invested in construction in 2009, that amount shrank $100 billion in 2010 to a ten year low. That decline in construction activity has largely been driven by a collapse in private sector demand. Since 2008, the percentage of overall construction activity that is financed by the private sector has declined from 76 percent to 60 percent. Developer financed construction sectors, like new office, retail and hotel development, have been particularly decimated, experiencing between fifty and thirty percent declines in activity.

In addition to the private sector declines, the industry also suffered from drops in local and state construction funding. Indeed, many state and municipal governments made dramatic reductions to their capitol programs in reaction to declining tax revenue. These steep drops in private and public sector con-

struction activity were offset somewhat by large, temporary federal programs, including the base realignment and stimulus programs.

The stimulus in particular proved helpful. The roughly $135 billion in con-struction investments kept many construction firms from shutting down and saved tens of thousands of construction jobs. Outside of the $49 billion in transportation related investments, however, much of the stimulus’ construction funds have been invested more slowly than many anticipated. As a result, the impact of the stimulus has been diluted as the investments spread out over what is likely to be a five-year period.

Worse, the amount of money the stimulus brought to the construction market proved much smaller than the overall contractions being driven by diminishing private, state and local demand for construction. In other words, the broader downturn in construction activity eliminated far more jobs than the stimulus was able to save or create.

Even as the construction market has continued to tumble, robust economic recov-eries in Asia and South America have begun driving prices up for key construction commodities. Since 2009, the cost of diesel has risen 28 percent, copper shapes 13 percent and aluminum and brass mill shapes 12 percent. Overall, the cost of construction materials has risen nearly five percent between January 2010 and January 2011.

These price increases are not as extreme as the dou-ble-digit increases from earlier in the decade. How-ever, they are occurring at a time when the amount construction firms can charge for finished projects has stagnated because of the intense competition for an ever diminishing amount of work. The most recent data available from the U.S. Census Bureau shows that the price for completed projects re-mained almost flat during the past twelve months.

As if declining demand, rising costs and stagnant returns weren’t enough, federal investment policies are causing considerable uncertainty for the growing numbers of construction firms that have come to focus on federally-funded projects. That is because Congress has yet to pass long-term infrastructure in-vestment legislation addressing our aging inventory of water, road, transit or aviation systems.

The Need

Construction Spending is Down 34%

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2 2011 BUILDING A STRONGER FUTURE

Construction Matters to the EconomyThe ongoing construction downturn is not only devastating to people work-ing directly in construction. It is serving as a drag on U.S. economic growth. That is because construction spending accounts for more than eight percent of U.S. gross domestic product and is responsible for one out of every 10 U.S. manufacturing shipments and one out of every 12 machinery shipments. Given that the vast majority of construction firms are small, local businesses, the strength of the sector has a disproportionate impact on all communities.

Reviving demand for construction, particularly private sector construction activity, is essential to sustaining broader economic growth. That is because:

Inefficient buildings and manufacturing facilities cost American businesses millions of dollars each year in needless power consumption and lost worker productiv-ity. Meanwhile congested and unsafe transportation networks cost busi-nesses billions in wasted fuel, late shipments and delayed workers. Indeed, the construction industry alone loses billions each year to congestion and unreliable roads. Enacting policies designed to encourage businesses to in-vest in more energy- and work-efficient structures will help them compete with similar businesses in China, India, Brazil and elsewhere. Meanwhile, improving aging transportation, water and energy infrastructure will allow domestic employers to cut delivery times, optimize just-in-time shipping schedules, reduce costs and increase competitiveness.

While the construction sector has made significant increases in productivity, especially with the advent of new design and planning tech-nology, the fact remains that it is a labor-intensive industry. Construction firms can’t put the receptionist to work laying bricks or the accountant to work pouring concrete. The busier firms are, the more jobs they add. We’ve seen the inverse during the downturn – construction firms have little capac-ity to support idle workers – which is why the industry’s job losses have been so severe. That means, however, that as soon as firms experience an increase in activity, they will begin adding jobs. And unlike service-sector jobs, the average pay for construction workers is $49,000, eight percent more than the average for all private-sector employees.

Improving the efficiency of our built envi-ronment – including commercial buildings, transportation infrastructure and water sys-tems – presents one of the greatest opportu-nities to reduce power consumption and cut greenhouse gas emissions. After all, the en-ergy consumed by the nation’s aging build-ing inventory accounts for 35 percent of the nation’s manmade greenhouse gas emissions and consumes 40 percent of the nation’s en-ergy, while traffic jams along our aging and inefficient transportation network account for another 27 percent of energy consumption and

27 percent of greenhouse gas emissions. In other words, we can significantly improve our environment in a way that won’t stifle economic growth or impose costly new taxes on economic activity.

The health of the construction industry is vital to our economic strength, employment levels and quality of life. Yet the industry continues to suffer from a prolonged downturn and as a result is serving as a drag on broader economic expansion. It is clear that a new approach is needed… one that puts particular emphasis on boosting private sector demand and providing economic certainty. That is why the association has prepared a new national plan to revive the construction industry and return the nation to a period of sustained economic growth. The plan outlines a series of commonsense regulatory, tax, finance and trade reforms that will boost economic activity and stimulate private sector demand for construction. Taken together, these changes will allow sound private-sector construction projects easier access to credit and financing, encourage greater efficiency upgrades in our buildings and facilities and keep construction costs competitive.

The plan also calls for pragmatic new long-term investments in infrastructure that will help businesses while enhancing our economic capacity for decades to come. There’s simply no doubt that the long term health of our economy depends on reduced federal spending and a significantly smaller federal debt. Indeed, the federal reforms and investments identified in this plan are de-signed to protect taxpayers from the far more significant costs and economic hardships that would come with allowing our national infrastructure to dete-riorate to the point of disrepair. It costs a lot less to maintain roads, bridges and water systems than it does to repair them, after all.

The plan also identifies regulatory and policy changes that, when made, will eliminate bureaucratic delays that inflate costs, frustrate taxpayers and benefit no one. The plan is ambitious, yet it is calibrated to meet a significant chal-lenge. Given the critical role the construction industry plays in our broader economy, this plan deserves broad, bipartisan support.

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A New Blueprint for Economic Growth 3

Boost Private Sector DemandAny effort to reinvigorate the construction industry must successfully jump-start new privately-funded construction. The strength of the private sector market is the single largest determining factor in the health of the construc-tion industry. Unfortunately, private sector demand continues to decline at alarming rates. Of course, the private sector won’t begin building again until employent expands, retail demand grows and manufacturing increases. That is why the best way to boost private demand for construction is to put in place pro-growth policies that will boost economic expansion.

Current law allows owners to deduct the cost of installing energy efficient systems, like new heating and cooling units, in commercial buildings. The amount of the deduction is up to $1.80 per square foot that will see at least a 50 percent efficiency improvement. Given the limited impact this deduction has had on boosting energy-efficient installations, Congress should raise the deduction amount to $3.00 per square foot, saving en-ergy and energy costs.

In addition to boosting the deduction amount for efficiency upgrades to commercial buildings, Congress should convert the tax benefit into a tax credit. In an environment where many commercial building owners are likely to experience losses in 2010 and 2011, tax deductions will have limited to no impact. Converting deductions into credits will provide a significant financial incentive for property owners to improve the efficiency of commercial buildings.

Some members of Congress are trying to increase the tax on carried interest from 15 percent to 38 percent. Such an increase would undercut the economic incentive to build projects or redevelop underutilized properties and drive away invest-ments from the commercial real estate sector.

Passage of pending trade agreements with Korea, Colombia and Panama will boost demand for construction of domestic shipping and manufacturing facilities while providing a needed boost to the overall private sector. Restoring “Fast Track” authority, meanwhile, will allow the President the freedom and flexibility to negotiate bilateral free trade agreements that can be presented to Congress for an ‘up-or-down’ amendment-free vote, restoring confidence on the part of potential new trade partners and accelerating completion of new pro-growth trade agreements. Streamlining trade negotiating authority will make it easier to open new markets for U.S. exports, while boosting demand for the construction of manufacturing and shipping facilities nationwide.

-Instituting a 30 percent investment tax credit for

cleaner construction equipment will boost demand for new, domestically-manufactured equipment while allowing construction firms to improve their overall efficiency. The new tax credit would apply both to manufac-turers of new, cleaner diesel-powered construction equipment and con-struction firms that purchase the new equipment or improve the efficiency of existing equipment.

As part of the Hiring Incen-tives to Restore Employment (HIRE) Act, employers that hire unemployed workers in 2010 may qualify for a 6.2 percent payroll tax incentive. This incentive has proven particularly popular with the construction industry, given the seasonal nature of many construction jobs, especially in northern-tier states. Congress and the Administration should act now to extend this exemption into 2011 so construction firms will have an additional incentive to expand their workforce in time for the spring construction season.

As property values fall and lenders adopt more restrictive standards, new sources of equity capital will be needed. Congress should provide temporary tax in-centives to attract new equity for existing projects. The incentives would provide bonus depreciation on the new investment equity and deduction of losses that are not subject to passive loss limits. At least 80 percent of the invested capital must be directed to reducing the outstanding balance of the commercial mortgage debt with the remainder going to capital im-provement to qualify for the incentive. This will ease debt market con-cerns and boost the broader economy.

-Tax provisions shortening the cost recovery period of

certain leasehold, retail and restaurant improvements from 39 to 15 years expired at the end of 2009. Making those provisions permanent will provide an important incentive for retail and restaurant operations to make capital improvements to their leasehold space.

As part of the Tax Relief, Unemployment Insurance Reau-thorization, and Job Creation Act, businesses are able to immediately write-off 100 percent of the cost of new tangible depreciable property (like construction equipment) placed in service starting September 9, 2010 through 2011. The law also allows for 50 percent bonus depreciation for business investments placed in service in 2012. In addition, the current law allows small business taxpayers to write-off capital expenditures of up to $500,000 made in 2010 and 2011 and up to $250,000 made in 2012. Taxpayers also are allowed to expense up to $250,000 of the cost of quali-

The Plan

4 2011 BUILDING A STRONGER FUTURE

fied leasehold improvement prop-erty, qualified restaurant property and qualified retail improvement property. While these temporary measures will provide some relief, the limited duration of these benefits undermines their ability to stimu-late growth. Congress should make permanent the current depreciation bonus & capital expenditure write-off levels. Congress also should make permanent the special rule for long-term contract accounting that decouples bonus depreciation from allocation of contract costs.

Busi-nesses that experienced net operating losses in 2008 and 2009 are able to carry those losses back over the pre-ceding five years. The provision allows businesses with deductions exceed-ing their income to get a refund for taxes paid in previous years. This provision had little impact on construction companies because fewer firms experienced losses in 2008 or 2009 than are expected to in 2010 and 2011. Expanding the provision to cover net operating losses incurred in 2010 and 2011 for all businesses will allow cash-strapped construction firms to convert future tax benefits into cash today that can be used to expand payrolls, retain workers and invest in equipment.

While the broad range of tax cuts enacted in 2001 and 2003 were extended through 2012, uncertainty about future tax rates after 2012 will limit the full benefits of the rate extension. As a result, Congress should make permanent the reductions in individual income, dividend and capital gains tax rates from the past decade. Congress also should make permanent the estate tax at or below levels enacted in December 2010. Taken together, making these cuts permanent will strengthen capital markets and make it easier for businesses (construction and other) to grow, expand and build new facilities.

-Unlike most of our global competitors, the U.S.

punishes domestic businesses that succeed in international markets by forcing them to pay taxes on their overseas profits twice – in the host country and then again here. Given the increasing globalization of mar-kets, this puts U.S. businesses at a distinct competitive disadvantage and discourages many firms from using overseas profits to invest in domes-tic operations. Congress and the Administration should work to tran-sition from our current “worldwide” tax system to the “territorial” tax system our competitors use. Under this system, overseas profits would not be taxed a second time, making it easier for domestic firms to in-vest in manufacturing, office and distribution facilities here in the U.S.

Since the vast majority of America’s businesses are taxed as individuals instead of as corpora-tions, the alternative minimum tax undercuts potential earnings that otherwise will be reinvested as re-tained earnings each year. These retained earnings provide the capi-tal needed for businesses to invest in real estate, renovations and new manufacturing equipment, all of which is essential to the private con-struction market. Congress should repeal the alternative minimum

tax before it saps more capital out of the economy and undermines future construction projects.

Tackle the Infrastructure DebtThe nation’s transportation, water

and energy infrastructure serves as the foundation for private sector growth. Access to reliable and affordable power, clean water systems and a trans-portation network that for much of the 20th century was the envy of the world has given American businesses a significant competitive advantage. However, that competitive edge is being undermined by federal misalloca-tion of infrastructure resources and the resultant mistrust taxpayers have in the federal government’s ability to use any increases in infrastructure funding wisely. As a result, our national infrastructure has been allowed to age and deteriorate to the point where the American Society of Civil Engineers now estimates that our country is dealing with a trillion dollar infrastructure debt.

As our infrastructure deteriorates, American businesses suffer. Traffic conges-tion alone costs businesses nearly $100 billion a year in lost productivity and costly delays. Worse, aging infrastructure is undermining our quality of life, causing an enormous waste of fuel, water and other natural resources and is threatening to undermine decades of environmental improvements. Fixing our infrastructure debt, however, isn’t just about increasing investment levels. Just as important is making serious reforms to federal infrastructure programs to refocus them on core missions, eliminate wasteful and/or questionable spending and restore taxpayers’ trust in the federal government’s ability to wisely invest their money.

Transportation projects are often complex, multi-year projects that take time to plan, fund and complete. Many multi-year surface and aviation projects are now months late because long-term surface and avia-tion transportation bills have languished. Congress and the Administration need to reform both programs to eliminate spending programs that aren’t in the direct federal interest. For example, even though bicycle programs and transportation museums may be important, they represent the kind of

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A New Blueprint for Economic Growth 5

spending that have prompted taxpay-ers to lose faith in the federal program and resist needed increases in highway user fees. Likewise, both the aviation and surface transportation bills need to include revisions to the federal review process to significantly reduce the time it takes to approve projects. Mean-while, additional funding sources must be identified to finance new transpor-tation programs like High Speed Rail if these programs are to move from dream to reality.

Congress and the Administration must establish a clear timeline for transitioning from the current gas tax to a vehicle miles tax (VMT). The VMT will serve as a more accurate user fee by requiring drivers to pay for their road use regardless of whether they operate a hybrid, electric vehicle or traditionally-powered automo-bile. The VMT could also be significantly less-regressive than the gas tax, as different rates could be set based on income levels and/or type of vehicle used. Given the challenges associated with this transition and the average life-cycle of the automobile fleet, this switchover will take years, which is why the process must start now. In the meantime, Congress and the Administration should adjust the gas tax to $.334 per gallon to ensure the highway trust fund remains viable until the transition is completed.

- Congress and the Administration can provide immediate new oppor-

tunities for unemployed construction workers and significant long-term savings for taxpayers by addressing unmet maintenance and moderniza-tion needs in its building inventory. The Government Accountability Of-fice has identified $4 billion worth of needs in over 900 federal buildings. Aging federal facilities undermine government productivity and waste sig-nificant amounts of energy. For approximately half of one percent of its stimulus program, the federal government can boost construction employ-ment, increase federal productivity and reduce energy consumption.

Congress and the Administration should begin to address unmet navigation and flood control needs by increasing funding for the U.S. Army Corps of Engineers’ Civil Works program to a minimum of $7 billion in 2010. In addition, Congress should agree to allow only projects that have been vetted and identified by the Corps to be funded. Today there are simply too many Congressionally-selected projects that are undermining investments in the projects that the Corps has identified as true national priorities. The Harbor Maintenance Trust Fund also must be used for its intended purpose.

Congress should increase funding for the Clean Water State Revolving Loan fund and Safe Drinking Water State Loan Fund to a combined $6 billion annually. In addition, the Adminis-

tration and Congress should work to-gether to establish a Water Trust Fund that will allow for future investments to come from dedicated and sustain-able long-term funding sources, in-stead of depending on unreliable and unpredictable annual appropriations out of the General Fund.

Consolidate existing federal infrastructure lending programs,

such as the Railroad Rehabilita-tion and Improvement Financing (RRIF), Transportation Infrastruc-ture Finance and Innovation Act

loans (TIFIA), Federal Ship Financing (Title XI) and other similar pro-grams into a single national infrastructure bank. (The Ship Financing Program also should be expanded so needed port infrastructure invest-ments can qualify.) This independent institution would have a mandate to evaluate and make loans available to support up to 33 percent of the cost of infrastructure projects. The bank would have sections dedicated to specific types of infrastructure and would guarantee that those percentages of loans go to specific types of infrastructure. Assuming current interest rates and performance comparable to TIFIA, if the bank were capital-ized at $1 billion annually, it could leverage those resources into as much as $51 billion worth of infrastructure projects. This would allow certain projects an opportunity to attract and repay financing and could comple-ment, but not substitute, more traditional funding streams.

All earmarked transportation funds that have been unused for at least 10 years, worth over $620 million, should be consolidated into a single Public Private Partnership Innovation Fund. The Department of Transportation would use this fund to encourage states to enact new, or revise existing, public private partnership legislation to encourage greater private-sector funding for transportation infrastructure projects. States will be able to win competitive grants from this fund based on their success in enacting permissive legislation and entering into viable public private partnerships.

The Recovery Act created the Build America Bonds program as a new financing tool to allow state and local governments to obtain much-needed funding, at lower borrowing costs, for projects such as construction of schools, hospitals, transportation infrastructure and water & sewer upgrades. Unfortunately, this progam expired in 2010. Congress should reestablish it, make it perma-nent, and expand eligibility to cover certain private activities with national benefits, such as energy infrastructure and efficiency upgrades at commer-cial, manufacturing and health care buildings.

Private Activity Bonds are a form of financing that allows private entities to partner with state or municipal governments to receive tax-exempt financing for private- or pub-

6 2011 BUILDING A STRONGER FUTURE

licly-owned projects in the public’s interest. However, the rules governing these bonds limit the total dollar amount that can be issued based on a state’s population. Eliminating these caps would qualify significantly more water, sewer and mass transit projects, among others, for this kind of financing.

Ease Regulatory BurdensAny serious effort to improve the economy and boost private sector demand for construction must include a comprehensive effort to reduce costly, time consuming and needless regulatory burdens. Unfortunately, those burdens have only increased over the past two years as the government has taken an increasingly anti-business approach to crafting regulations and interacting with regulated businesses. Nobody questions the government’s essential role in protecting the environment, ensuring workplace safety and promot-ing ethical business behavior. But the expansion of reporting requirements, growth in oversight audits and widespread reports that federal inspectors are striving to meet minimum fine quotas are forcing businesses to spend an increasing amount of their time and capital on regulatory compliance.

In the construction industry alone, projects often languish for years awaiting environmental and permitting reviews. These reviews are crafted in a way that even a minimum of resistance can delay decision making, yet virtually no amount of effort can accelerate the process. Nobody questions the need to ask tough questions and demand good answers about construction’s impact on the environment, the quality of work and whether the government is getting a good value for its investment. But it shouldn’t take years of effort, dozens of staff and miles of red tape to answer those questions. That is why the associa-tion recommends the following regulatory and policy revisions.

Congress should pass, and the Administration should sign, proposed legislation that would require Congressional approval before any regulations costing the econ-omy over $100 million can be established. This would allow for more robust debate and consideration before costly new regulations are put in place than the current rulemaking process provides.

Congress and the Ad-ministration should craft a comprehensive national energy plan. This plan would eliminate the uncertainty and confusion that have come with an ad hoc energy policy that encourages boom and bust cycles with temporary and varying energy incentives and tax breaks. It also would streamline the permitting process for alternative power generation facilities and ef-ficiency upgrades to existing plants. Such a plan also should allow for a greater private-sector involvement in planning, developing and expanding alternative energy sources.

The current federal environmental review process for federally-funded infra-

structure projects is unnecessarily slow and expensive. For example, it takes an average of 13 years for highway and 12 years for transit projects to receive federal approval. As a result, every effort should be made to streamline the environmental review process while protecting the envi-ronment by designating lead federal agencies, establishing and meeting clear timelines, simplifying analysis requirements and placing a statute of limitations on claims.

Be-ginning in 2012, federal, state and local governments with total annual expenditures of $100 million or more will be required to withhold 3 per-cent from all payments for goods and services they purchase. Given the extremely narrow margins on which most construction firms are now op-erating — on average 3.4 percent — this new measure will force contrac-tors to either break even or operate at a loss. Worse, firms won’t be eligible to receive interest earned on the withheld funds when they are returned after as long as 2-3 years.

-Past efforts to enact climate and energy legislation

have included efforts to give the Environmental Protection Agency in-creased review and permitting authority when it comes to transportation issues. Should these ideas become law, they would only add new and needlessly redundant layers of oversight that would prolong the already lengthy review process for vital transportation projects. Congress and the Administration should resist any effort to expand the EPA’s regulatory reach into the transportation arena.

While the New Starts program has led to greater accuracy in planning transit projects and projecting traffic volumes, its review process is lengthy and costly. The program should be reformed to allow for reviews that ask and answer the same tough questions about a project’s viability in a significantly shorter amount of time.

The Green Jobs Act of 2007 limits training grant funding to entities that coordinate with labor organizations, needlessly limiting the range of organizations that can help out-of-work construction workers take advantage of growing demand for green construction. Congress should enact the Green Jobs Improvement Act and allow any accredited training program, regardless of its relation-ships with unions, to compete for taxpayer grants.

- Establishing a federal multiyear capital budget for public works

will make it easier for officials to plan for, and finance, major, multiyear infrastructure projects. Most states already successfully use multiyear capital budgets. Such an approach is preferable to the current federal budgeting

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A New Blueprint for Economic Growth 7

process for key infrastructure like water and wastewater facilities that discourages good long-term asset management by focusing on funding short-term needs only.

The Administration is report-edly considering implement-ing “High Road” contracting reforms that would allow con-struction firms to be blacklisted from federal work based on anonymous accusations. The premise of the proposed reforms ignores current federal contract-ing law as well as the rigorous legal obligations and financial risk that federal contractors are currently required to meet.

Congress may again consider legislation that would significantly expand federal jurisdiction over waters and wetlands under the Clean Water Act. Were this legislation to become law, all construction activity impacting any water or wet area in the United States would be required to obtain a Clean Water Act permit. Where these permits are currently required, they have proven both costly and time-consuming. On average, it already costs an applicant $30,000 and takes up to 313 days for the federal government to grant a general permit, and over $270,000 and 788 days for the federal government to grant an individual permit. To avoid needlessly delaying billions of dollars worth of construction projects, Congress should preserve state and local author-ity over local land and water use.

With demand for electricity projected to grow substantially within the next two decades, Congress and the Administration need to act on the 30 pending nuclear power plant applications that have been submitted to the Nuclear Regula-tory Commission. As one of the few sources that can generate electricity reliably, efficiently and without greenhouse gas emissions, nuclear power must remain an essential component of our power grid. Unfortunately, today’s 104 U.S. nuclear reactors operate at more than 90 percent ca-pacity. Constructing a nuclear plant takes years, however. Further need-less permitting delays will only increase our national reliance on foreign sources of energy.

--

Environmental legislation should encourage de-mand for energy-efficient buildings and infrastructure. Those op-portunities should not be limited by proposals that would increase the cost of construction or reduce demand for new commercial, manufacturing and industrial facil-ities. In that light, environmental legislation must not add new per-mitting requirements that block or delay the development of com-mercial and residential build-ings. Congress should encourage cost-effective improvements to

our environment and air quality by funding energy efficient infrastructure along the lines of AGC’s “Building a Green Future” plan. Congress also should pass legislation to pre-empt use of the Clean Air Act to regulate greenhouse gas emissions, an approach economists agree stifles economic growth and construction activity.

Gov-ernment-mandated project labor agreements have been proven to limit competition for construction work, needlessly denying work-ers the opportunity to benefit from publicly-funded projects. Worse,

government mandated project labor agreements put public officials with little to no experience in construction in charge of setting work rules and schedules, creating inefficiencies and undermining workplace safety. The Administration should avoid using government-mandated project labor agreements at all costs and instead let workers and construction firms negotiate terms of employment and work.

Well-meaning efforts to stimulate purchases of American-made products too often cause needless delays to construction projects while inflating construction costs. Invariably, sig-nificantly more construction workers are impacted by these delays than the limited number of workers that benefit from these requirements. Con-gress and the Administration should rescind Buy American requirements included in the stimulus and avoid further temptations to expand these requirements beyond their traditional and limited use in federal procure-ment and highway programs.

8 2011 BUILDING A STRONGER FUTURE

No doubt some will argue that new measures and regulatory reforms aren’t needed and that the construction industry will recover on its own. But just looking at the construction industry’s performance in the year and a half since the official end of the reccession, it should be pretty clear that the sec-tor’s revival is anything but guaranteed. Allowing this industry to continue to stagnate will have significant long-term impacts both on the strength of the domestic labor market and on the quality of America’s public and private infrastructure and buildings.

The construction industry has accounted for twenty percent of the jobs lost during the economic downturn, even though it accounts for just five percent of the workforce. That means a significant portion of the jobs lost over the past two years won’t return until the construction industry revives. Given the construction industry’s heavy consumption of manufactured goods and shipped equipment and supplies, any prolonged downturn for the sector will drag on the hard-hit manufacturing and shipping industries.

A prolonged construction downturn also means that the private sector will not be making needed upgrades to office, shipping, power generation, re-search or manufacturing facilities. This will put private firms at a distinct competitive disadvantage as they work to expand exports and increase do-mestic market share against foreign, often state-funded, rivals.

U.S. businesses will also be hamstrung by our failure to reform, streamline and invest public and private resources in our critical infrastructure. If we continue to allow roads to congest, bridges to age, water systems to deterio-rate and the power grid to remain inefficient, we will undermine domestic employers. How can we expect our businesses to succeed if their shipments are stuck in traffic, their utilities are unreliable and their cost of operating continues to increase?

The U.S. Chamber of Commerce, for example, has found a direct cor-relation between the quality of our infrastructure and the viability of our business community. Meanwhile, the U.S. Department of Treasury has noted that America invests a smaller amount in maintaining and expand-ing its infrastructure than Europe or Asia, as measured by percent of GDP. Should this be allowed to continue, the costs to our economic viability will be profound and protracted.

On the other hand, the benefits of acting on this plan will be significant. Enacting measures to boost the economy and expand private sector demand for construction will immediately improve employment levels. It will lead to an increase in domestic demand for manufactured goods, shipping services and construction supplies and materials. And it will bring new vitality to many of our hardest hit communities.

A resurgence in private and public sector construction will also boost our global economic competitiveness. It will allow our businesses to operate more efficiently and improve their productivity. It will lower shipping costs, helping farmers earn more for what they grow and shoppers to spend less of what they earn. It will improve quality of life for all Americans, better safeguard our environment and reduce the amount of water, energy and fuel we consume each year.

In other words, the benefits of this plan are greater than the costs associated with it and far greater than the costs associated with doing nothing. That is why it is our hope that each of its recommendations will be acted on with urgency and speed. Not only are millions of unemployed construc-tion workers looking for relief, but our broader economic health needs the competitive advantage that comes with much-needed improvements to our built environment.

The Cost Of Inaction Vs. The Benefits Of Action

Photo credits:

Page 4, D.H. Griffin Company, Greensboro, N.C.

Page 5, Cianbro Corporation, Thames River Bridge Rehabilitation, New London and Groton, Conn.

Page 7, Kiewit Western Company and Sundt Construction, Inc., Interstate 10, Tucson, Ariz.

24 upcoming events

www.bldrs.org 25

The Associated General Contractors of America 2300 Wilson Blvd., Suite 400, Arlington, VA 22201 | (703) 548-3118

The Associated General Contractors of America (AGC) is the leading association for the construction industry. AGC represents more than 33,000 firms, including 7,500 of America’s leading general contractors, and over 12,500 specialty-contracting firms. More than 13,000

service providers and suppliers are associated with AGC through a nationwide network of chapters. Visit the AGC Web site at www.agc.org.

26 upcoming events

Come To An All-NEW Half Day Seminar Exclusively For Builders Association Members

Ask The Legal ExpertsA Candid Q&A Session With

Construction Labor Law Specialists

Wednesday, April 20, 2011 • 8:00 a.m. Noon • Hyatt Rosemont

From E-Verify to OFCCP, from short form agreements to workers’ compensation claims, construction labor law is always changing — and it’s expensive to schedule a private legal consultation every time you need advice. So the Builders Association ispleased to provide a forum where you can get one-on-one answers to your most complex questions … and learn from what other contractors are asking … at the significantly low price of $129 per member ($99 for additional company representatives). You’ll be in the good company of three well-known Chicagoland attorneys with over 80 combined years of construction labor law experience:

Robert Lessman, Partner, SmithAmundsen LLP and Chair, Builders Association Legal Advisory Committee Jeffrey Risch, Partner, SmithAmundsen LLP and Chapter Attorney, Associated Builders & Contractors of Illinois Robert Casey, Shareholder, Ogletree Deakins Nash Smoak & Stewart and past Chair, Associated General Contractors Labor and Employment Lawyers Council

As well as our scheduled presentations and open Q&A, you’ll have plenty of time to network with our panelists and other attendees over Continental Breakfast and during break. We expect a full house, so please register today to assure your seat. Simply fax back the accompanying registration form, or register online at www.bldrs.org. And to enhance your exposure among peers and potential clients, just contact Denise Herdrich about sponsorship opportunities at dherdrich@bldrs.org or 847-318-8585.

What is the rightway to handle grievances & jurisdictional

disputes?

What is thedifference

between an 8(f) and 9(a)

contract?

When areessentialfunctionsanalyses

appropriate?

www.bldrs.org 27

Ask The Legal ExpertsWednesday, April 20, 2011, 8 a.m.-Noon

Hyatt Rosemont, 6350 N. River Road, Rosemont

Registration Information:THIS IS A MEMBERS ONLY EVENT

$129 fee; $99 per each additional registrant from the same company Continental breakfast included; Full payment must accompany all registrations. Mail check registrations to: Builders Association, 9550 W. Higgins Rd., Suite 380, Rosemont, IL 60018 Fax credit card registrations to: (847) 318-8586

Company Information: Company Address City, State, Zip Phone Fax

People Attending: Name, Title Name, Title Name, Title Name, Title Payment:Amount Enclosed Charge To: VISA MasterCard AmEx Vcode (on back) Card Number Expiration DateBilling AddressName on Card Signature

Cancellation Policy: All cancellations must be made three business days in advance in writing to the Builders Association.

Due to cost commitments, refunds for cancellations less than 72 hours in advance will not be provided.

Sponsorship OpportunityPROGRAM SPONSOR - $500

Benefi ts include:Signage at eventOne event registrationRecognition in promotion of the event

Get your company’s name in front of Chicagoland’s construction industry. Contact Denise Herdrich at dherdrich@bldrs.org

28 safety

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ssociated General C

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merica …

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participating com

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Sponsored one of the fi rst nationwide

construction safety competitions

Developed a safer w

ay of hoisting tradespeople

Instrumental in creating the

Chicagoland C

onstruction Safety C

ouncil

Formed one of the nation’s prem

ier safety partnerships w

ith OSH

A

The Builders A

ssociation has a long history of helping keep C

hicagoland’s construction w

orkers safe on jobsites. This brochure highlights three of our m

ost important safety initiatives. W

e encourage you to fi nd out m

ore about our program

s and partnerships and how

they can benefi t your fi rm and

your employees.

www.bldrs.org 29

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The Builders A

ssociation rewards our

mem

berfi rms w

ho demonstrate a

continuing dedication to keeping workers

safe.

Every year at our S

pring Meeting, based

on injury and illness data, companies are

honored for: S

afety Excellence

Safety R

ecognitionM

ost Improved P

rogram

In addition, many of our m

ember

contractors have won national aw

ards from

Associated G

eneral Contractors of A

merica.

•••

Since 2000, quarterly C

ontractor S

afety Forums, exclusively for B

uilders A

ssociation mem

bers, have been bringing professionals together to openly discuss jobsite challenges and best practices to solve them

.

Past topics have included:

Protective E

quipment

Site S

ecurityE

xecutive Com

mitm

ent to Safety

Electrical S

afetyFall P

rotectionR

isk Managem

ent

••••••

Builders A

ssociation mem

bers are entitled to participate in the only C

hicago area O

SH

A safety partnership program

— providing an alternative to traditional

enforcement. It includes oversight by

OS

HA

, good faith penalty reductions, and the opportunity to rem

edy non serious violations w

ithout citation.

“It lets OS

HA know

you’re a safety-conscious com

pany willing to w

ork collaboratively.”P

aull Hellerm

ann, CO

OB

ulley & A

ndrews LLC

“It’s not just about following standards. It’s

about the best way to treat tradespeople.”

R. Lynn Treat, D

irector of Field Operations

Ryan C

ompanies U

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BUILDING PLANS FOR SUCCESS

• Claims Litigation• Defect Litigation• Contract Preparation and Negotiation• Mechanics Liens• Arbitration/Mediation• Project Administration and Closeout• Labor and Employment Counseling

Our practice involves the representation of general contractors, subcontractors, construction managers and design-builders from project conception through project closeout.

Two First National Plaza, 25th Floor • Chicago, Illinois 60603 • 312.558.1220 • www.ogletreedeakins.com

CONSTRUCTION LAW ATTORNEYS

The Builders Association offers its deepest condolences to the family and friends of George P. Henry, who passed away January 6 at the age of 90.

Mr. Henry (pictured second from the right in the bottom row, with other Henry Bros. representatives at the Association’s Annual Meeting in 2006) and William H. Callaghan, Sr. were second generation owners of Henry Bros., running the business from 1965 through 1987. The company was founded by George’s father Patrick and his uncle Robert.

George P. Henry helped continue the company’s long history with the Builders Association. Henry Bros. joined the Association in 1936. Mr. Henry, of Palos Park, is survived by many nieces and nephews.

George P. Henry, 90George P. Henry, 90

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To find out more about these or other benefits, contact Denise Herdrich at 847.318.8585 or visit www.bldrs.org

“Membershipgives you the competitiveadvantage.”

Membership Benefits

The Builders Association and the AGC of America offer a wide variety of discounts on products and services to benefit member companies. Products and services at member discounts can save your company money over the long haul.

Simplify your management of pre-construction services using GradeBeam’s web-based construction communication networks. Upload documents, use online bid invitation tools, manage subcontractor databases and more.

Discounts on fleet operations, vehicle pricing, flexible vehicle funding, vehicle maintenance programs, a fuel program and a disposal program.

Take advantage of discounts and deals available for Builders Association member companies through Verizon Wireless, which can total a savings of over 20 percent off your current company wireless service.

Add photos of your projects to our website via Ascribe, which virtually showcases your work and drives traffic back to your website.

The Benchmark of Craftsmanship

4619 North Ravenswood Ave Suite 201 Chicago, IL 60640 P. 773.275.0700 F. 773.275.0900 info@chicagoarchitecturalmetals.com

Architectural Metals Ornamental Iron Miscellaneous Metals Restoration Engineering Fabrication Installation

From the traditional styles of the past to the contemporary designs of today, Chicago Architectural Metals works hard

to carry on a reputation of quality craftsmanship. As a full service metal fabricator in both the commercial and public

sector, our projects range from monumental staircases to the restoration of Chicago city landmarks. Utilizing the newest

technologies in metal fabrication we are dedicated to achieving the highest standards.

www.chicagoarchitecturalmetals.com 773.275.0700

Barneys Chicago