Challenging Times

Contractors Faced With Many Issues in 2003

by Natalie Keith

The past year was rough on area contractors.

Statistics compiled by McGraw-Hill Construction show that construction activity in the New York, New Jersey and Connecticut in 2003 fell by 13 percent, from $40.1 billion to $34.7 billion.

James McKenna, senior vice president of Turner Construction Co., said the company's business in New York City dropped 10 percent last year. Turner topped New York Construction magazine's list of Top Contractors in 2003 in tri-state, worldwide and general building revenue.

"The commercial activity is drying up," McKenna added. "But there's still work in the institutional and infrastructure sectors."

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Despite what many saw as a challenging year for the industry, several notable projects were completed. The Time Warner Center opened its doors late in the year after a three-year construction schedule that was completed on time and on budget. Several major office projects, such as the 300 Madison Ave. and the Times Square Tower, were completed.

The temporary PATH station at the World Trade Center site opened in November, and the first phase of the East River Access project, which involved the construction of a new facility at Highbridge Yard in the Bronx, was completed. The project at 330 Jay St. in Brooklyn - which will house the New York State Supreme Court and the Kings County Family Court - is nearing completion.

"It was a slightly better year than my members expected," said Raymond McGuire, managing director of the Contractors Association of Greater New York Inc.

Among companies that had a better-than-expected year was HRH Construction of New York City. After landing a job in White Plains, N.Y., HRH opened an office there, and the greater visibility in Westchester County helped the company secure additional work, said Brad Singer, HRH's president and chief operating officer.

"Establishing our name there was a challenge," he added.

Despite a slight drop from 2002 in construction of multifamily housing, this sector still provided much work for the industry in 2003, according to contractors. For example, Bovis Lend Lease broke ground on several new residential projects, including Avalon Chrystie Place and Trump Place, Building G, said Peter Marchetto, president, Bovis Lend Lease LMB.

Contractors doing heavy and highway jobs seemed to fare somewhat better than those more heavily concentrated in other areas. Michael Lembo, executive vice president, Slattery Skanska, said 2003 was a pretty good year for the firm due, in part, to work secured late in 2002. Skanska ranked second among contractors in the tri-state area in New York Construction's 2003 list.

"New business was tight, but the backlog of work was good," Lembo added.

Among projects completed last year are the $230 million Brooklyn-Queens Expressway Rehabilitation and power plant jobs, including the new Ravenswood Combined Cycle Power Plant in Long Island City, Queens. Slattery Skanska also began work on the Newtown Creek Water Pollution Control Plant, a $493 million project in Brooklyn.

"The power plant work filled in the gaps for us," Lembo said.

Turner has dealt with the weak market conditions by diversifying its customer base. For instance, a few years ago the company sought to strengthen its school division because of the number of K-12 school projects that were available. Although that market has softened in recent years, the higher-education market has strengthened.

In recent years, Turner has worked with the Dormitory Authority of the State of New York, the City College of New York, the New York City Economic Development Corp., the Port Authority of New York and New Jersey, and the Metropolitan Transportation Authority, among other agencies and private owners.

"We're pretty active out there," McKenna said. "Where there's construction, we go after it."

Marchetto also stressed the need to pursue and manage projects in sectors that are performing better than others.

"The days of specializing in one or two market sectors have disappeared," Marchetto said.

Francis McArdle, managing director of the General Contractors Association of New York Inc., said it was an active year for members but pointed to several issues that posed challenges, including insurance costs and the price and availability of steel. Several factors have impacted steel prices, such as the enormous consumption of steel in China.

"With steel, our members are facing much higher prices and limited availability," McArdle added.

Several contractors named rising insurance costs as one of the most difficult challenges faced by the industry. They also said it was an issue the industry would continue to face over the next few years.

Lembo said the weather has posed difficulties for the company, not just in New York but in other parts of the country. Rain has put a damper on road projects across the country and atypical amounts of rain, snow and wind have posed challenges in the New York area.

"With any job that uses a big crane, if you get winds in excess of 25 miles per hour, you have to shut it down," Lembo said.

Marchetto also cited the weather as challenge. Because of the record snowfall and harsh conditions, Bovis faced instances where entire buildings had to be cleared of snow that drifted into the project horizontally because of the wind.

"In short, the winter of 2002-2003 was a bear," Marchetto said. "The intense weather delayed construction schedules throughout the city."

Ongoing concern over security in the industry in the post-Sept. 11 era is also an issue that involves not just designing buildings to withstand terrorist and other attacks, but also ensuring that workers on security-sensitive projects are properly screened.

"The major challenge has been the uncertainty created by the security issues," McGuire said.

The Port Authority is considering adopting a program that would require background checks of workers, and many contractors have called the effort the "tip of the iceberg" with respect to the future of jobsite security. "That's a harbinger of what's to come in the industry," McArdle said.

The possibility of background checks raises another issue with respect to workers who are illegal immigrants. Closer scrutiny of citizenship could have a dampening impact on the workforce at a time when the labor force is limited and several large construction projects, such as a new stadium for the New York Jets and a new arena for the New Jersey Nets, could begin, McArdle said.

With this in mind, industry officials are keeping close tabs on President Bush's proposal to allow undocumented workers to keep their jobs and attain legal status.

The Associated General Contractors of America has come out in favor of the measure, saying it would alleviate the construction industry's long-term workforce shortage. The AGC also supports allowing additional workers to immigrate to the United States when there are jobs immediately available to them.

"Immigrants have always been an important part of the construction workforce," Stephen E. Sandherr, the AGC's CEO, said in a written statement. "By creating an immigration policy that rewards workers who are working, the construction industry and the nation will benefit economically. The policy may even help to harness illegal immigration."

Meanwhile, many contractors were hopeful that more work would be available by the end of 2004 as projects that are either being considered or are in the design phases come to fruition.

"Going forward, people expect things to heat up at the end of 2004 and into 2005," McGuire said.