Volume 38, Issue 6, June 2003


Economist Expects Full Recovery for 
Non-Commercial Construction in 2004

According to Kermit Baker, chief economist with the American Institute of Architects, 2004 is likely to offer the non-residential construction industry a full recovery. Baker presented national economic trends and business issues affecting the economy on April 10 during Reed Construction Data’s eighth annual CEO breakfast at the CSI show in Chicago. Baker’s data was taken from AIA surveys conducted earlier this year, as well as other industry sources.

In his presentation, Baker said the economy seemed to be moving along well, despite mixed signals and economic cycles seen in the broader economy. He said there was a new wave of cyclicality being seen in construction. 

“If you look at the most recent 13-year period, non-residential construction declined in six of those years,” Baker said, “so even during a period of stable national growth, non-residential construction could not avoid its traditional boom or bust conditions. As the broader economy turns to greater cyclicality, we can expect greater swings in the construction sector moving ahead.” 

Economic Recovery is Healthy but Slowing 
Change from year-ago; GDP; 1996$

Source: U.S. Department of Commerce

Construction More Volatile Than Broader Economy
Annual % change, nonresidential construction contracts, 1996 $

Source: McGraw-Hill Construction and U.S. Dept. of Commerce

Baker added that a recovery in construction activity can be expected later this year, due to the number of inquiries from architecture firms. 

Regionally, Baker said construction activity in the Northeast is volatile; last year it was strong and has since dipped, but is starting to recover.

In the Midwest, he said firms are reporting stable levels of activity.

In terms of construction activity, Baker said the South has been the strongest region in recent years. And the West, like the Northeast, has seen volatile conditions.

Also in his presentation, Baker talked about each sector in the construction industry. He said the commercial and industrial markets are expected to continue to be weaker than institutional markets overall for 2003. In the residential sector single-family construction is strengthening modestly on a national basis, while multi-family is weakening. Baker predicts the decline will be smaller than last year’s decline.

Overall, Baker reported that this year is a “transition year” for non-residential construction. Commercial and industrial sectors, he said, are going through changes that will likely result in better numbers next year, and institutional sectors are “fighting their way through a funding problem caused by the stock market slump and government deficits.” It should, however, remain relatively stable through the remainder of this year and through next year. 
Info: www.nacf.com.

Glazing Contractor to Pay Costs of Unexpected Glass Replacement
Home to the Chicago Bears, Soldier Field has been undergoing a $606 million renovation job ($200 million from the Bears and $406 million from the sale of Illinois Sports Facilities Authority bonds). But a recent tour of the facility’s new 133 skyboxes led to additional costs of $1.5 million. According to an article in the Chicago Sun-Times, when Bears president Ted Phillips, along with other team officials, toured the boxes, they were unsatisfied with the windows, as the view was “marred.”

According to Barnaby Dinges, project spokesperson, the frit, which included ½-inch opaque strips, was placed on the windows facing west to reduce glare. 

“We had hoped it would be more transparent,” said Dinges. “The lower glass is transparent and sloped toward the field … but the frit part obscured the view across the field and the stadium, so it wasn’t as good for the experience of attending a Bears game.” 

The boxes each have a fixed main pane of clear glass that rises approximately 6 feet from the floor, and angled toward the field. The 34-inch high frit, which can be cranked open, is on top of that, and there’s another “strip” of glass atop that, which cannot be opened. 

In an effort to “restore the view” the decision was made to remove the frit, which carries a cost of $1.5 million. However, building envelope/cladding contractor Permasteelisa sent the wrong replacement glass. The article said the contractor did absorb the cost of sending the wrong order. Now that the correct order of glass has been received, installation is expected to take one month.

The Sun-Times also reported that the Bears are now “trying to find a home for 532 [lites]—several hundred dollars worth—of greenish, tempered glass that are 34 inches high and 4 feet wide.” 

Neither Permasteelisa nor general contractor Turner Construction Co. were available for comment.

The Race Against Retainage
In the recently published paper titled Retainage: An Idea Whose Time Has Come, and Gone, author David Mendes, discusses retainage. Mendes, the director of communication 
for the American Subcontractors Association, says that while the construction industry is drastically different than it was when the system was initiated during the 1840s, many subcontractors are still held by the restraints of the antiquated practice.

Mendes says individual subcontracting firms can make a difference in the fight to reduce and eliminate retainage from the construction industry. Following are the strategies he enlists to protect subcontractors:

• Ensure that any proposed retainage is consistent with your state’s laws;

• Do not accept a level of retainage that is higher than is being retained from your customer by the owner;

• Determine if retainage will be handled differently at different stages of the project;

• Have a clear understanding of when funds will be released;

• Obtain a written guarantee that funds owed to your firm will be segregated from other project funds;

• Insist on being paid interest on retainage;

• Ask for “line-item” release of funds for work’s completed successfully; and

• Especially on bonded projects, ask to eliminate retainage. 


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