Construction and Design Industry Outlook




“I share the optimism around the room,” said Pat McCown, CEO at McCownGordon Construction. He was speaking to the two dozen of his colleagues in attendance on a brisk February morning at McCownGordon’s headquarters on Kansas City’s Admiral Boulevard. The occasion was the 15th annual Building and Construction Industry Outlook assembly, organized by Ingram’s Magazine.

 McCown was assessing the opening round remarks of the participants. In truth, they were more optimistic than they had been at any time since 2007. As McCownGordon COO Ramin Cherafat confirmed, his company was coming off three record years of sales and was confident about the next two years.

Don Greenwell, president of The Builders’ Association, which co-sponsored the event, laid out some of the specifics. Technically, the construction sector’s recession lasted three years, from January 2009 through December 2011. Green-well’s organization, which focuses on the regional economy, recorded a 10 percent increase in activity in 2012 and in 2013, much of that driven by manufacturing and multi-family. Don Greenwell was not that bullish on 2014, but is solidly optimistic about 2015 and 2016.

For all the optimism in the room, McCown cautioned that there is a fragility to the economy and to the industry that cannot be ignored. “Things can change faster than they have in the past,” he noted, and no one disagreed.

 

Technology

Don Greenwell kicked off the conversation with a question about the relationship between technology and work-force development. Steve Hancock, vice president of project development for the Kansas City office of U.S. Engineering, has seen a lot of activity in this field.

As a mechanical contractor, his company has made a significant investment in technology. Specifically, they have taken 3-D modeling and driven it into their fabrication shops. As a result, “We are only doing projects once,” said Hancock, which makes the process much more efficient, greatly enhances scheduling, and produces savings that can be passed along to customers. These investments have helped U.S. Engineering work with its general contractor clients to do multi-trade fabrications.

Laura Lesniewski, a principal with BNIM Architects, has been scanning the horizon for many years now, looking for applicable innovations. “I feel like we are producing way more than we ever have because of the technology that is available,” said Lesniewski, “but more is demanded of us.”

Mike Bowman, vice president of the Kansas City office of Faith Technologies, an electrical contractor, explained how his company was doing everything pretty much in Revit, extracting detailed drawings out of that, and sending them to pre-fabrication. As useful as Revit has been, other trades use different platforms. The lack of standardization in platforms
is a problem he would like to see resolved.

“If you are working with different general contractors,” affirmed Phil Thomas, the President of A.L. Huber Construction, “you probably have at least 10 different platforms to give clients and to do project management.” He was glad to see that the Builders Association had been working to solve that problem.

“I would like to encourage everyone to at least give it a try to work for an industry standard to work on one platform,” said Thomas. “As a group, we have the ability to keep refining that and make it our best.”

The complication, said Lesniewski, is that as soon as the profession seems to settle on some standard platform, some new technology emerges to replace it. “We are still in that technology-innovation stage,” she added, “and I don’t know when it will settle down.”

Dennis Strait, a principal at Gould Evans Associates, observed that one of the results of the evolution in design technology is that architects are now involved in the construction phase in a much different way than they used to be. What still needs to be worked through, he added, is how this collaboration with contractor partners can be integrated into the fee structure. 

On significant projects, Shawn Burnum, the branch manager of Performance Contracting Inc., uses a cloud information system with digital systems out in the field. This way, those doing the work in the field have the details at hand. Said Burnum, “It’s current. It is streamlined. And we can communicate using cloud technology in real time so they can have the most current information that continuously changes.”

David Rezac, principal at 360 Architecture, is pleased with the technological progress within the industry, but sees a continuing problem with the delivery method, especially with more traditional clients. The choices these clients make can sometimes negate the potential of integrated delivery processes that allow architects, engineers, and building contractors to work together.

“A lot of times those delivery methods are chosen by the owner,” confirmed Ramin Cherafat. “So it is a trickle-down effect.” The ultimate goal, said Cherafat, is getting the owners to understand the potential of these integrated delivery systems. 

“I think sometimes the delivery method that the owner chooses isn’t conducive to their goals,” said Dan Rowe, president at Treanor Architects. He argued that owners may theoretically prefer integrated delivery, but they will often choose the lowest-cost option. 

“There seems to be a little trepidation by some of the owners,” said Bowman. He agreed, though, that the more carefully integrated the design process was, the more successful the project would be. “I think the challenge in this room is to convince the owners of that,” said Bowman. 

“We still hear a lot of ‘so what’ from the customer,” said Hancock. He noted that there was still a ”hard dollar mentality” in this economy. Because of its fragility, customers are less impressed by innovation than they might otherwise be.

“There needs to be a paradigm shift,” said Rezac. “The integrated process is a completely different way to look at [construction]. There are so many advantages to it, so it is very exciting. You just have to convince the owners and the clients out there that there is a value that comes out of that process.”

“The owners are going to start demanding some of this,” said Eric Bosch, the city architect for Kansas City, Missouri. As an “owner,” Bosch has been impressed by the improvement in the technical quality of initial presentations. “We don’t see renderings as much anymore,” said Bosch. “We see virtual walk-throughs.”

Paul Neidlein, senior vice president at J.E. Dunn Construction, sympathized with the frustration of owners when confronted with what seems just “a shinynew toy.” Said Neidlein, “I think we are at the beginning of that upward curve in technology. We still need to figure out what really makes sense to us.” 

“I would say that the industry has to do a better job of conveying the value proposition,” said Sam Alpert, executive director of the Construction Users Council, “and not just the users but to the owners as well.” As he explained, out in the larger market, “Cost-effective delivery is all the owner cares about.”

“We have got to convince and educate owners that what we do as a team, as professional consultants and as general contractors, is different than it was 20 years ago,” said Darin Heyen, president of Pearce Construction.

Gary Nevius, a principal at Momenta, cited one additional barrier to progress, namely, bureaucratic restrictions on design/build projects. “We need to be working with the state legislature,” he said, “to get some of those laws loosened up so we can take advantage of some of this technology.”

Vince Migliazzo, vice president of Mark One Electric, suggested an additional advantage to improved technology. “Having the ability to access documents from multiple general contractors to bid multiple projects has been a big advantage for us,” said Migliazzo. This accessibility also helps greatly in change orders as well.

In summing up the technology discussion, Cherafat spoke to the general consensus on the value of collaboration and the need to promote it better. He wondered “how do we come together outside of this meeting and promote that more?”

 

The Owner’s Perspective

Don Greenwell asked his colleagues what they might do to make owners more receptive to technological advance. 

“With a few exceptions, owners are driven by budget,” said Steve Swanson, partner at Centric Projects. Swanson argued that until the industry can prove that it’s actually cost effective to use BIM—Building Information Modeling, a sophisticated digital modeling system—to do prefabrication, owners will resist.

Another obstacle for owners, suggested Susan McGreevy, an attorney with Stinson Leonard Street, is that innovative delivery systems make it more complicated to assign blame if something goes wrong. “All of a sudden you get everybody scattering back to their corners,” said McGreevy. “And the spotlight stays on the person that stamped the drawings.”

Chuck Teter, vice president and unit manager of Construction Operations at Lockton Companies, was more optimistic. “The industry has evolved somewhat,” he said. “They are supporting design/build now.”

On the litigation front, David Rezac was also optimistic. He has found that the more integrated a delivery system is, the sooner collaborators work from an A/E perspective, the less risk there is and the less potential conflict. “Everybody’s at the table helping each other out,” said Rezac. “We’re not seeing the opposite. We’re seeing a very positive thing.” 

“You’re seeing in practice how it works out,” said McGreevy. “I’m talking about when you put pen to paper to do the contracts, people don’t realize in their minds that they have shifted res-ponsibilities.” That much said, she added, “If there’s never a problem, it never comes up.”

 

Persuasion

On the subject of integrated delivery, Don Greenwell asked how much of a sales job had been required to persuade owners to innovate. Or, did experience speak for itself? 

“The sales job,” said David Rezac, “is always to get a client to buy into bringing the trades, the contractors, everybody on board earlier to make sure they get a competitive price.” As Rezac admitted, he has not quite figured out how to do this consistently. He added, “It is a tough sell.”

Ramin Cherafat believes that most large owners understand that price is determined from the first minute someone sits down and begins designing the project. He sees the need for “a shift in thinking about what the bid is vs. the real value creation.”

For Shawn Burnum, whose firm’s specialty is metal-studded drywall, the idea of a collaborative effort sounds good but does not always work in the real world. “We’re spending more and more time on the budget phase,” he said, “and then we have to turn around and competitively bid that with no ability to sell those services, no preferential treatment for being on the front end. It’s incredibly frustrating and incredibly expensive.” 

Pat McCown understands Burnum’s frustration. He observed that most of the work on every job was performed by the trade contractors and subcontractors. To bring on the CDM early is one kind of sell. To bring on, say, a drywall contractor is another sell altogether.

“From the design perspective,” said Laura Lesniewski, “we love to get the contractors on board early, but it has to be a meaningful engagement.” She explained that there was still huge risk in those early processes, because if original projections don’t hold true as design decisions are being made, “Productivity is completely out the door.”

Lesniewski observed that there was a significant database of anecdotes about owners who had bought into a highly integrated process. “If we can leverage that database of knowledge,” Lesniewski said, “it might help owners make decisions to buy into that.”

Radd Way, the executive vice president of The Weitz Co., questioned how one could put a dollar value on those owner testimonials. How does one measure cost savings, safety, quality? “Trying to figure out how to measure those things is a real challenge,” said Way, “but mutually important.”

 

Training

Don Greenwell asked how well the industry had succeeded in training trades people, particularly in regards to new technology.

“Quite a bit. It’s ongoing,” said Steve Hancock. The trick is to get them to embrace the technology while still at the apprentice stage. As he explained, though, there is a lot of “junk” technology in the marketplace, things that seem cool but don’t pan out. There is still a lot of trial and error involved in finding the right tools.

“Getting some of the [experienced] guys to adapt to the ever-changing technology is as much of a challenge as get-ting the new folks coming in,” said Mike Bowman. He cited the case of one superintendent for whom a smart phone was a huge breakthrough. Six months later, though, he was reading digitized plans off a laptop.

“We’re finding that some of the young individuals coming into the marketplace are driving some of the seasoned, skilled folks out there in the marketplace to get on board or get left behind,” said Brett Gordon.

Darin Heyen believes that the young kids coming out of college may have the technological background, but they don’t know how to build a building or lay out form work to pour concrete. He is worried that the industry is losing too many of the people with real skills, and he is not sure who is going to replace them.

“That’s true in design as well,” said Laura Lesniewski. “We’re blinded by how cool some of this is,” she added, but she worries there is trouble ahead “if we don’t marry that with experience and people who know how to put a building together.”

 

Leadership Development

Dawn Taylor, executive director at AIA KC, was pleased to see leadership development on the agenda. About eight years ago, Taylor explained, the AIA launched its Pillars Leadership Program. Its purpose is to train individuals from within AIA membership to help shape both the profession and the larger community.

One of the unique features of the Pillars program is that participants develop their own goals and areas of emphasis. “That’s very intentional on our part,” said Taylor, “because this new generation of leaders in our industry is going to really want to make their own mark and put their own stamp on things.”

The Construction Leadership Council, a subgroup of the AGC, has a program much like the AIA’s. Angie McElhaney, a partner with the accounting firm Marks Nelson Vohland Campbell Radetic, also serves as chair this year of that council. The CLC provides educational programs, networking events, a leadership development course, and philanthropic opportunities, which, said McElhaney, “this generation is very excited about.”

One of the tools Treanor Architects uses, said Dan Rowe, is the sabbatical. The firm solicits white papers from staff members on what they would like to learn and offers grants in terms of time and money.

To Cherafat’s question of fostering leadership skills internally, Radd Way spoke to the 12–14-month program that Weitz puts on. As Way explained, the program deals with presentation skills, meeting management and other soft skills. “We see it as important for our field staff, superintendents and young superintendents coming up,” said Way.

Faith Technologies has a similar program, Mike Bowman pointed out. The three-year program is called “High Potential.” It involves team building and education and has a strong mentorship component.

 

Retention and Recruitment

One of the things McCownGordon has done to retain key individuals is to look at job descriptions and make sure a person’s role fits his strengths. Ramin Cherafat asked what his colleagues were doing to motivate their employees.

U.S. Engineering does a lot of work on surveys, said Steve Hancock. The company wants to be sure that it is paying its employees as well or better than competitive firms in the marketplace. 

“Where I think we are really missing the boat,” said Gary Nevius, “is we’re not looking at this issue from a high enough altitude.” Nevius meant looking beyond the immediate employee base and into the educational systems that will or will not produce next generation’s work force.

To this end, Sam Alpert recommended that his colleagues check out the iBuild event at Bartle Hall on April 17, an educational opportunity for middle and senior high students to be introduced to the careers in the construction industry. “This program is chipping away at the problem,” said Alpert, “but it does address making the younger kids aware of the build environment.”

Don Greenwell reviewed the sometimes useful but often inconsistent efforts made by trade groups and the educational establishment to make students aware of professional opportunities. “It’s up to us in the room to organize these programs and make them successful,” said Greenwell.

Reaching out to students, particularly to females and minorities, said Dawn Taylor, takes real commitment from volunteer mentors. “You have to be with them for 10 years to see any kind of real results,” said Taylor. “The challenge for us as an organization of volunteers is to carve out the time and the commitment.”

Although women are well represented on campus in architectural-degree programs, Laura Lesniewski observed, there is a significant gap in women who progress through their careers. “We are living in a complex environment,” said Lesniewski, “and I encourage everybody in this room to dig into that complexity and find women you could support and help them.” 

Don Greenwell was involved in a high school group mentorship program in which initially all the students expressed interest in being architects,” but it diversified once they actually saw what the industry was actually about.”

The challenge, said Susan McGreevy, “is how do you get people to stop looking at it as a job and start looking it as a career or profession?”

At McCownGordon Construction, said Pat McCown, the work-force development conversation focuses on three things: how do we attract, how do we develop, and how do we retain employees? There are any number of things companies do to make the workplace more literally attractive, he said, but there is no overlooking the value of training.

“[Employees] walk into our doors expecting training of some sort and on an ongoing basis,” said Pat McCown. “If we don’t do that as an industry, whether it’s at the trades level, in the field or at the office level, I think we are going to see a flock of people leaving this industry.”