July 1, 2010
SAN FRANCISCO - The Mechanical Contractors Association of America gave members quite a few reasons to attend this year’s convention in San Francisco. The organization hired some heavy hitters as speakers for the event. Former Secretary of State Condoleezza Rice was the opening keynote speaker, while Capt. Chesley “Sully” Sullenberger, the man responsible for safely landing U.S. Airways Flight 1549 on the Hudson River in New York, was the closing speaker.
MCAA also welcomed San Francisco 49ers coach Mike Singletary for its awards breakfast, and rock group Chicago played during the association’s March 31 Golden Lights Gala.
But it probably wasn’t all the high-profile names that got many attendees excited. The big message during the March 28-April 1 event was that the contracting business is coming back. While the mechanical contracting industry has struggled along with the rest of the U.S. economy in recent years, many speakers at the convention instructed attendees to start preparing for the jobs and projects that are set to come back in the next year.
While the good news was that business will start picking up, the sobering news is that contractors are going to need to rethink their business strategies, including technology and training. And while business is still slow, it is the time to start planning for success.
PreparationThe MCAA chose “Your bridge to success” as the theme for its 2010 conference and trade show. The theme was not only a nod to San Francisco’s Golden Gate Bridge, but also the figurative bridge that many MCAA members are attempting to cross.
While the construction industry has been struggling to navigate the turbulent economic waters, MCAA speakers made it very clear that the tides are turning. This was the message John Koontz gave during his March 29 presentation, “Upside of the Downturn.”
Koontz, the director for the MCAA’s national education initiative, says that he trains over 2,000 to 3,000 individuals a year through his consulting work. He said that many of the contractors he visits are great contractors who are always developing their competitive edges. To do this, they are constantly doing new things. This includes investing in new training, new employees and technology.
“The contractor that fails is the one that keeps doing the same thing,” Koontz said. “Regardless of market conditions, you have to be lean and mean. You have to always be hungry.”
He explained that some contractors are too worried about taking chances during a down economy. But as business picks up, there won’t be time to put new practices in place. Now is the time to prepare and lay the groundwork for future successes.
For example, Koontz said now is the time to start hiring. While many contractors cut back on their hiring, he said now is the time to find new workers.
“This is the best time to recruit,” he said. “There is talent out there. The best hires are during a down market.”
When the market picks up, Koontz explained that qualified workers would be difficult to find because every contractor will start hiring again. Now is the time to find great talent while they are still available. He recommends doing strategic hiring and recruiting - especially recruiting students from student chapters devoted to mechanical contracting.
There are over 40 MCAA-sponsored student chapters located across the country. Koontz said that these chapters are filled with talented students looking for careers after they graduate from college.
“Talent is finally available,” Koontz said. “A lot of kids need jobs now. They are really good at selling and marketing themselves. The best students are looking.”
And the best students are more capable of adapting to new technologies, which Koontz said contractors need to do to survive. One of those new technologies is building information modeling.
“I’m not a fad guy,” Koontz said about BIM. “I truly believe this is not a fad. This is going to change things big.”
He explained that building information modeling is the up-and-coming delivery mode of choice. It allows contractors and subcontractors to work together to create a living model of a project. All contractors work together to see where all of the mechanical systems will be placed. This allows all parties involved to plan the layout and work with the same plans in order to avoid installation conflicts in the field.
“BIM is everyone standing on the same island,” Koontz said.
He also said that when the business returns, BIM is going to be the normal way of working on projects. For contractors not familiar with BIM, Koontz said they need to start learning about it now and perfecting it while business is still slow.
“When the market comes back, this is going to be the normal market delivery,” he said.
BIM and beyondKoontz wasn’t the only one to encourage MCAA members to start getting on board with BIM.
Stephen Jones, senior director for McGraw Hill Construction, talked at length about the importance of BIM during his March 30 presentation, “Lessons Learned: The Keys to Building Your Bridge to Success.”
Jones explained that BIM is not being driven by any government mandates. Several states are demanding the use of BIM on all of its publically funded building projects. Also, the U.S. Department of Defense has made BIM mandatory for any contractor bidding on its projects. But local and federal governments have yet to mandate the use of BIM on all projects.
According to Jones, it is the private sector that is driving the use of BIM.
One of California’s largest health care organizations, Kaiser Permanente, have made BIM a mandatory part of the bid process for any new Kaiser building projects. The University of California-San Francisco has also decided that BIM must be used on any university building jobs.
Jones said that contractors using BIM doubled from 2007 to 2009.
“The West Coast is the epicenter of BIM use,” he said. And BIM is going to start spreading east.
“Those not using it (BIM) said they don’t have time,” Jones said. “Well, they’ve got the time now. This is the time to get people up to speed, especially young people who are better with new technologies.”
Jones is predicting that by 2014, 70 percent of all non-residential buildings will use BIM. To prepare, he said contractors should start creating working relationships with other subcontractors to win bids together. If a group of subcontractors learn how to successfully use BIM, they can also win big construction jobs together.
So where will the construction jobs be going forward? Jones said that most would be in the transportation, environmental and energy sectors. The stimulus bill that was passed by Congress last year will provide a great deal of funding toward projects that focus on energy-efficiency upgrades, he said. Most of those upgrades will be in federal buildings.
Jones also said that residential building projects should start rebounding later in 2010. Single-family housing has already seen a 27 percent rebound.
“We think we’ve bottomed out on this thing,” he said. Single-family housing “really got hammered.”
Even multifamily housing projects increased - approximately 10 percent - according to Jones.
The sector that will continue to struggle over the next year is education. With large budget deficits looming, Jones said that 20 states have implemented cuts to public education. This means that many school systems will put off new construction and retrofit projects.
Construction projects for colleges and universities will also be scarce. Jones said that university construction has always provided contractors with a wealth of building opportunities, but with a lack of funding, many universities will put off building new dorms and buildings.
Future outlookSeveral of the MCAA’s speakers said that while they can provide great advice to contractors, they aren’t economists and can’t say exactly when the economy will rebound.
But Brian Beaulieu, executive director of the Institute for Trend Research, said he could. Beaulieu, who has also spoken to the Heating, Airconditioning and Refrigeration Distributors International several times, presented “Economic Outlook for 2010 and Beyond.”
During his March 31 presentation, Beaulieu said that business would start turning around in the next six to nine months.
“There is a recovery at work,” he said.
And that recovery will continue until 2014, where he says there will be a dip in business, but then things will start rising again.
With this in mind, Beaulieu said contractors needed to prepare for the business that is waiting around the corner. Interest rates remain low.
“Borrow as much as you can now,” he said. “Buy yourself into new markets. Put away the ‘bomb shelter mentality’ and be an entrepreneur.”
In fact, Beaulieu said that if your spouse is not worried about how much money you’ve borrowed from the bank, you haven’t borrowed enough. Now is the time to lock in the low interest rates before they go back up.
He also said that now is the time to start buying. While some contractors may want to sock away all of their money, Beaulieu said there are deals that contractors won’t be able to find in the next year.
“Buy your hybrid (vehicle) now while they are still cheap,” he said.
He also said that if you have the cash, make selective and beneficial purchases. Buy machines now that will help you with your fabricating processes next year. Anything that will help with productivity and efficiency when business comes back is a wise decision.
Renegotiating contracts and vendor agreements is another wise choice. Beaulieu explained that there are many vendors that are struggling for business. By renegotiating contracts, there is a financial benefit for both parties.
Beaulieu ended his presentation by telling attendees that they must stop letting the past drive them. They must start looking at future opportunities and plan for success.
“The decline is over with,” he said. “It’s a long road back, but it’s the road back.”
For reprints of this article, contact Jill DeVries at (248) 244-1726 or e-mail firstname.lastname@example.org.