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VOL. 41 | NO. 33 | Friday, August 18, 2017

Millions for roads but who will build them?

State faces construction labor shortage

By Kathy Carlson

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Tennessee’s aging workforce is creating a shortage of welders, heavy-equipment operators, formwork carpenters, iron workers, concrete finishers and construction supervisors – all while the state is ramping up to spend an additional $350 million a year on road projects.

“It’s a challenge facing the industry right now,” says Kent Starwalt, executive director of the Tennessee Road Builders Association.

“But do we think it’s going to have impact on the ability of road builders in the state of Tennessee to implement their TDOT contracts? No, we don’t think it’s going to. There’s enough capacity within the industry itself to do the projects.”

The IMPROVE Act, which the Tennessee Legislature passed this past spring, increased vehicle-registration fees and fuel taxes to fund road and bridge projects over the next 13-15 years.

When fully implemented, the IMPROVE Act will add $250 million in funding each year for state projects and $100 million at the local level. The state spent close to $800 million in highway funding in 2015 and 2016, TDOT bid award records show.

Construction companies and the state Department of Transportation alike are taking steps to help ensure the roads get built. Construction companies are shifting workers from job to job, increasing overtime and beefing up recruitment and training capabilities. Wages are rising, as well.

On the state side, TDOT officials know they need to stagger projects so contractors can tackle work in a gradual, orderly way. IMPROVE Act projects generally will start coming up for bid this December and next March, and the law envisioned a 13-15-year time frame for the road and bridge projects it would fund, state officials say.

The worker shortage stems from an aging construction workforce, with fewer young workers lining up to replace older workers. The state unemployment rate was 3.6 percent in June, the lowest since 2000.

The rate signals ongoing competition for workers throughout the economy. Industry and state officials also say younger workers aren’t aware that they can make good careers in construction. Programs are in place to get the word out.

“What you’re hitting on is really a national issue with regard to skilled labor, (such as) welders, carpenters,” explains Will Reid, assistant chief engineer with the Tennessee Department of Transportation. … “There aren’t as many of those folks out there” as there used to be.

Workers install safety cables on beams at the site on the new flyover bridge at Memorial Boulevard and Broad Street in Murfreesboro.

-- Michelle Morrow | The Ledger

For Brentwood-based Bell and Associates Construction, L.P., the most pressing needs are for operators of excavation equipment and cranes, formwork carpenters, concrete finishers and construction supervisors. The supply of workers is tighter in Nashville where construction, in general, is booming.

Stephen Wright, president of the Chattanooga-area construction firm Wright Brothers, says in an email that “all trades are needed from entry-level laborers through the highly skilled carpenters, iron workers, heavy equipment operators and all types of leadership.”

The state bidding system includes precautions to make sure bidders on state jobs have the required staffing. Bidders are the prime contractors, who are in charge of the project. They must perform at least 30 percent of the work themselves and subcontract what they cannot do, usually specialty work like striping. But they can’t simply turn in a bid.

The state first must qualify contractors to bid. TDOT looks “at how much work (they have). … Let’s say it’s a relatively small company with five jobs going on. We consider that before we allow them to bid,” Reid explains.

A prime contractor is telling the state it has the resources to do the job when it submits a bid, Reid adds. There also are insurance requirements. Contractors must be bonded to bid on the project, giving the state assurance that it won’t have to pay more to the contractor if prices rise.

A performance bond also is required, assuring the state the bonding company would provide another contractor to finish the job if the winning bidder were to go out of business.

It’s rare to call in either type of bond, Reid acknowledges.

IMPROVE Act funding won’t be the first time the state received an infusion of new money for roads. The state and its contractors dealt with this situation when it received federal stimulus funds tied to the Great Recession, Reid says.

“We have a very qualified and strong pool of contractors. A lot of our contractors have done our jobs for years,” he points out. When the state received funds under the federal stimulus package, “this pool of contractors was able to deliver.”

In Middle Tennessee, for example, the state was ready to bid on the I-40 flyover ramps at White Bridge Road in West Nashville, and contractors were ready to submit proposals. Not all states were able to act quickly enough to take advantage of federal stimulus funds for road projects, he says.

On the labor side, road contractors will be helped because construction workers’ skills are transferable, says Joey Hatch, executive vice president executive vice president and general manager for Skanska USA in the Midwest U.S. overseeing offices in Tennessee and Ohio.

Hatch has 44 years of experience in the vertical side of the construction industry – high-rise and mid-rise buildings. He says a welder or carpenter on the vertical side can use the same skills on the horizontal or highway side.

On the other hand, it means that all types of contractors and subcontractors compete for the same workers.

Moreover, he adds, more efficient construction equipment has somewhat softened the shortage of workers.

Construction also is one field in which workers can work their way up through the ranks, from unskilled to skilled labor through on-the-job training, Starwalt and Hatch say.

Wright Brothers Construction, for example, has hired a full-time training director. That person will “lead a staff to train our existing workers, recruit and train new workers and work with the local school systems to reach out to the young adults who are not interested in a four-year degree but still would like to learn a skill that can provide a good quality of life,” Wright says. Other companies also have hired training personnel, he notes.

Construction workers have always moved, either on their own or at their employer’s request, and that’s happening these days, as well.

Other companies are paying people overtime and adding second shifts to get more work done with fewer people, Hatch says, noting there’s a downside because productivity tends to drop when workers are tired.

“I have seen for 20-30 years that the immigrant labor force has been extremely strong and vibrant in many parts of the United States, especially in the South and Southwest,” Hatch explains.

“It’s not uncommon to go on a job in Nashville and 50 percent of the workers are immigrants. I don’t know what the construction industry would have done without these great immigrant workers. … [Immigrants are] in all the trades. We’re lucky to have that.”

Turning to equipment and supplies, Starwalt says, “There’s plenty of rock, plenty of equipment – that’s not an issue. … Clearly the price of oil can have an impact on transportation costs. … It hasn’t lately had a huge impact on the price of liquid asphalt.”

Hatch notes equipment availability isn’t an issue, either. “It’s available or you make it available,” he says. …

Interestingly, in this hugely hot economy in last five years, there’s been virtually no shortages of raw or fabricated materials.

Interest rates “have little effect on the market segments we serve as a heavy civil contractor,” Wright says. “Our work is over 50 percent for public entities.

“An expanding economy drives the work we do for industry more than interest rates.”

People in the construction industry wonder if or when the day will come that there’s a project that just can’t get done because the resources aren’t available, Wright says.

“That’s never going to happen,” he adds. “It might take a little longer and will certainly cost a little more as time goes by.”

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