January 1, 2008

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Commercial Building and Construction

January 1, 2008

Staying busy in Utah’s bustling commercial building and construction market, industry experts are predicting another strong year in 2008. Maintaining quality standards remains key as workers transition from the residential market while green building continues to gain momentum. Experts also discuss concerns about availability of materials, the rising cost of health care and the impact of different delivery systems. A special thank you to Rich Thorn, president of Associated General Contractors-Utah, for moderating the discussion, and Holland & Hart for hosting the event. PARTICIPANTS: Clegg Mabey, Sahara Inc.; Chris Smith, Layton Construction Company, Inc.; Carl Tippets, Pentalon Construction Inc.; Carter Rohrbough, Granite Construction Inc.; Wilford Clyde, Clyde Companies; Richard Watts, Watts Construction; Dan Pennock, Okland Construction; David Zimmerman, Holland & Hart; Martin Lewis, Utah Business; Paul Clyde, Clyde Companies; Rich Thorn, Associated General Contractors-Utah; Dale Campbell, R&O Construction; Michael Kurz, Staker & Parson Companies; DeAnn Geary, Geary Construction; David Wadman, Wadman Corporation; Melissa Orien, Holland & Hart; Terry Buckner, The Buckner Company; Rick Higgins, Mountain States Fence; Bob Tempest, Tempest Enterprises; Jason Kilgore, Kilgore Paving; Rob Moore, Big-D Construction Corp.; Lonnie Bullard, Jacobsen Construction; Jim Gramoll, Gramoll Construction What’s the current state of Utah’s commercial construction industry? Let’s break that down into sectors: building, highway and then the underground work. BULLARD: I think the market is still active. All of us are looking around a little bit more because of the downturn in housing and wondering if that’s going to spill over to commercial. Certainly in the markets we deal in there’s a lot of work and I think that there’s a little more discipline in the market than a couple of years ago. We are better at anticipating prices in the marketplace, which means fewer surprises in terms of materials. WADMAN: I agree. Utah is a little more insulated than the rest of the nation, and with what’s going on here, I see next year as a strong year. WATTS: I think it is softening up a little bit in Southern Utah. The lease-up rate has slowed down considerably in the last two or three months in some of the commercial retail projects. That’s about the only thing I’ve seen. I’d just echo Lonnie’s concern about the problem in the housing market and the problems that the banks are having. Other than that, the commercial end is pretty strong. Let’s hop over to the highway side. What do you see going on there? KURZ: We feel like we have seen an increase in the commercial side. Housing has slowed down a little bit, but commercial is trying to catch up and do what the housing has done over the last few years. P. CLYDE: We have seen a strong market in transportation. UDOT has a lot of work out there. UTA has about a billion dollars worth of projects in Salt Lake County. With those combinations, we find a strong market in the heavy highway transportation sector of the business. A lot of this comes from excess funds in the state budget, so we hope that continues. They have been very kind to transportation as well as to education. As long as we have a strong economy, the needs in the highway sector and transportation are there, and I think it will continue. KILGORE: A lot of municipalities are also strong. They have a lot of streets that need to be reconstructed. There has been a lot of growth; now they have to catch up and rebuild a lot of the streets that are starting to fall apart. We are also optimistic about UDOT because they have a lot of work. From my point of view though, housing looks ugly. We do a lot of paving on the residential side in building new subdivisions, and we haven’t seen a subdivision to bid in the last month that’s worth looking at. GEARY: In the Park City area, with the Talisker purchase of The Canyons, there is supposedly another $600 million worth of real estate to be developed there. I think you’ll see additional roads and development, including around the Jordanelle area. Let’s talk about underground and utilities. What does the underground look like? TEMPEST: Through ‘07 we have enjoyed a very strong year. Not quite as good as the last two years, though. We are optimistic about ‘08, but we are seeing a definite drop-off in utility work. It is hard to put a percentage to it, and maybe that’s just our niche market, but we are starting to feel a pinch that we haven’t felt in almost five years. Is it across all sectors: water, sewer, gas, fiber optic? TEMPEST: I feel that it is. We focus on the smaller niche than the broad utility work, but the people I have talked to say it’s pretty much across the board in utility work. P. CLYDE: We do quite a bit of utility work. Definitely the subdivision type of underground work has dropped off, but some of the large diameter heavy water type projects are still fairly strong in that market. How are you going to continue to staff your work, and is that causing some pinches in schedules? MABEY: The job market is tight, and I think there are a lot of people hunting right now for people to staff their projects. It is difficult. I see a lot of people going from Sahara to Big D or vice versa. I see us taking people from others as well. I think there’s a lot of trading going on. We are also doing a lot of interviewing of out of state people who are just trying to move around. Is this a unique problem to Utah and do we anticipate it continuing for the next period of time here in Utah? SMITH: I think we saw it in Arizona and Nevada before Utah. This last year I think it hit its apex. We now have about 500 guys in the field and we hired half of those in the last year and a half. They all didn’t come from Utah. We have quite a few that came from Arizona coming back to Utah. I think wages rose a little this year. I know ours did. But that is going to top out because you’ve got the residential guys that have migrated into the commercial area. There’s going to be easing a little bit of the craft labor force this year. CAMPBELL: Outside of Utah it has softened a little bit. It’s easier to hire people now. In Utah we are just recycling our employees. We are looking forward to the housing market softening so that hopefully we can get some additional employees. Will those housing people be able to transition into the commercial side with a pretty seamless move, or is there going to be a learning curve? TIPPETS: It is certainly not going to be seamless; there are a lot of people coming out of the residential sector trying to transition into the commercial. However, it certainly is a labor pool that we have not had available to us in the past. When I-15 was rebuilt through the valley, it was a very labor intensive job. We have got some big work going on in the downtown area. Is that going to create a big sucking sound from the outlying areas to be able to ramp up to address the needs there? MOORE: I was just talking with our human resource folks this morning, and while there are an awful lot of large projects going on in Utah right now, we are able to staff our positions. We have got more resumes coming in than we have ever had in the history of Big D. A lot of these are guys coming from the housing industry. The tough thing about coming from the housing industry into commercial construction is they are not adapted to the safety standards that we use. Most of these guys are framers or jiffy formers of concrete. Most of us in the commercial business are doing a much different type of product and require a much different piece of labor. As far as management, unfortunately we are all losing people to each other. It’s a revolving door some days. We are seeing a lot of out-of-state management talent looking to come back into Utah. That’s kind of refreshing, actually. BUCKNER: A lot of the residential contractors we deal with who have stopped building homes are looking aggressively at trying to find commercial projects to get into. It worries me because I’m not sure the safety standards are what they should be, but they are somewhat frantic to get a hold of jobs to keep the crews busy. Are you seeing a lot of the residen-tial subcontractors now giving the prime commercial contractors numbers to go to work for you? BULLARD: It’s scary because in a bid situation you’re not sure that they are equipped to handle some of the things that we tackle on the commercial end. So you are faced with owners who have a real desire to see stable or lower numbers, but the pressure is still on for quality work. I think there’s a transition that has to happen. It doesn’t affect us in some of the very large jobs, but in the smaller jobs, I think clearly the bid lists grow longer. It’s treacherous. ZIMMERMAN: Aren’t there a lot of issues along that same line? It seems in the residential area there are a lot of guys with a backhoe and they think they can do it. But with the standards of quality and scheduling issues in the commercial side, it seems far more rigorous than the residential side in every aspect of subcontracting. MOORE: We see this cycle every time commercial is high and residential is low. There will always be some folks coming in with gym shoes, cut-offs and a backhoe. P. CLYDE: They last one or two jobs and they are gone. PENNOCK: Besides the safety aspect, they also don’t understand the risk that they are taking when they become involved in the kinds of work that we all do on a daily basis. What is a subcontractor’s perspective? Do you have anything to add here? HIGGINS: I think our business started dropping off a little bit in August and September, primarily because the competition has increased. It has picked up a little bit now, though. I suspect that a lot of the people that were doing residential fencing and projects are bidding industrial and commercial stuff. TEMPEST: We are seeing a crossover where contractors who have strictly stuck in the telecommunications setting are now jumping over to anything underground. There’s no question it’s tightening up. THORN: So it’s maybe bittersweet. The slowdown in the residential side is helping with some of the manpower issues, but it is also creating some challenges with regard to schedules and liabilities and risk. TIPPETS: We have all been through tough times and there are times when we all worried about starving to death. But I think that the bigger risk right now is death by indigestion, trying to process what we have taken in. It certainly requires infinitely more management from a general contractor’s side than it used to because of some of the unqualified subs that are out there. CAMPBELL: We are fortunate because we are all busy and we anticipate being busy. I think it’s up to us to police it. We need to spend more time pre-qualifying our subcontractors because we do have the safety issues. When you just go with the low bid the worst thing that can happen is you get a subcontractor on your job and they can’t finish the job, and then you are paying twice as much as what it cost originally. We do a lot of small jobs. We have special projects, and some of our smaller developers will look at cost only. Those are the ones you have problems with. We will lose some jobs this year because of residential crossovers, but shame on the developers. They have to put up with them. GEARY: It’s the small guys that, when the boom was on, ran out and bought their own back hoe and dump truck and a couple pieces of equipment. The good thing for us is that when they go out of business, they come in and ask for a job. They turn into really good operators from an excavation standpoint. Because they have had their own machine, they know what it costs to operate it and they take better care of your equipment. Some of my best operators have swung over when they couldn’t make it on their own. Let’s change gears and talk about green building. Are you seeing more of that in the day-to-day jobs that you are looking at or that you are proposing on? MOORE: Big-D has a gold LEED certified building. As we were looking at designing and putting our building into place, we really didn’t think about going out there and building a green or LEED certified building. We just wanted to do something that is responsible to the economy and to the environment. So we started a process. Three or four years ago “green construction” was kind of a buzz word, and government folks were talking about it. In the last year we have all become more aware that we have to be responsible to the environment, and we all know that there’s better ways to design and build a building. I think two years ago we all felt we had to have a LEED building on a resume or we couldn’t get a job with the government, and I think we all kind of freaked out about that for a minute and got our guys LEED certified. But I think the reality of it is it was a business development move at the time. In the last year, I think it’s changed to more of an environmental responsibility on our part. Now we are looking at lighting and mechanical systems and reusing certain things. The state of Utah doesn’t use the LEED system, but they have their own version of that. They have their own version of that. So everyone is thinking about it, and a lot of folks take a lot of pride in that. Do you think we will you see more of this in the future? BULLARD: I think a lot of good is coming from what’s happening. We are kind of picking the low-hanging fruit right now with this green building surge. In other words, it makes our people feel good that they can do these kind of things and end up with a LEED certified building. There’s a lot of waste in our business, and people would like to do this, but to move to a higher level is going to be difficult. You have a lot of owners that say, “I want a LEED certified building, but don’t spend any money to get there.” To move to another level of sustainable projects and the green projects is going to take some very difficult decisions about dollars. People are going to have to pay more to do that. MOORE: As Lonnie said, it’s not free. There is money involved. There are upgrades in mechanical systems, upgrades in electrical systems that obviously will be more energy efficient and save you money on a monthly basis. Once a customer sees a price tag, which is significant, there’s a decision-making process. Is the price tag going to be something that our industry can work to overcome and promote, or is it going to be legislated? MABEY: Right now I think we are being pulled by our clients to be LEED certified. We are doing a LEED certified platinum office building right now, and we are trying to do a retail center with a gold certification. I also see a lot of new technologies coming into the market that are making the savings in terms of energy and lighting easier to get to. The bottom line is having people understand and wanting to spend the money on it. SMITH: I think it is eventually going to be legislated. I liken it to like the Americans with Disabilities Act. When the ADA came out in 1990, we were all freaking out. I couldn’t even buy a sink that was ADA compliant. We were all worried that people in wheelchairs were going to sue us if we didn’t get the ramp correct. Now we don’t even think about the ADA. It’s in every project. It is part of the code. That’s where LEED is going to go. GRAMOLL: If you look nationally, there is information that says you’ll pay a three to five percent premium for a green building. Obviously the higher the certification, the higher the cost. I think this has pushed us to recognize that our industry has been wasteful in the past, and there are a lot of things we can do just as a matter of business that actually pay for themselves. There are things we can put into a building that will pay for itself over a life cycle. There are also things that will help us in construction that are more environmentally friendly and that are also cost-effective. Once we start talking about the gold and the platinum levels, we start talking about some real dollars to pay for things that really never pay for themselves. That’s where it is going to take either legislation or owners that are willing to pony up that money to be a good citizen. BULLARD: Doing what we are doing now is good, but we can do a lot more. I don’t even know that gold and platinum certification is getting us, as a country, where we need to be. It’s going to be interesting to see what it takes to move us to those higher levels. W. CLYDE: Is it really going to be a benefit to society or is it a feel-good type of thing? BULLARD: There is good coming from it, but we need to do more. TIPPETS: It is an evolutionary process. From a PR standpoint, I think Al Gore is probably responsible for taking it into the first level of reality. He has created an environment where people are environmentally conscious right now. But it is going to take something more significant — whether it is legislation or a mass public movement — to notch that thing up. MOORE: At the end of the day, we are going to see it become part of our code. [Green building] is going to become part of our plans and specs. It is going to be part of what we deal with every day. It is definitely not a fad; it will happen. It will be written in specifications and it will be adopted by cities, counties, and government. I think the ADA is a good analogy. Are we going to see more of that type of work in the highway side? KURZ: Yes. If you look at the highway community, pound for pound we do as much if not more than most industries as far as being green in our recycling efforts. If we have failed anywhere as an industry, I think we failed at marketing it. We use recycled asphalt and recycled oil products to heat our facilities and plants. We also have concrete and water at all of our facilities that we are recycling. As we roll forward we are even starting to see it in specifications. They are starting to specify a certain amount of recycle in the products. ROHRBOUGH: I agree 100 percent. I don’t think we get near enough credit for the efforts we put forth in recycling. We are recycling up to 30 percent of asphalt. We crush concrete to use as road base. We extract steel from the concrete to recycle. It wasn’t that long ago when recycled asphalt wasn’t allowed in the new mix. It’s something that the industry had to work on to educate the owner that we can make this, and it can be a viable product. W. CLYDE: We also should do a better job as we build permanent facilities and do landscaping. We need to make it look better for the community than we have in the past. GEARY: From a permitting standpoint in Summit County, the owners want to call it green so they can get their permits, because the cities are really pushing for it. They haven’t said you have to have it, but if you have it you are going to get your project approved quicker. Over the past few years there have been some challenges in material costs and access. Are we over that, finally? Are there still areas that are causing you to lose some sleep? HIGGINS: Steel is already going up. We have been informed by our suppliers that we have an 8 percent increase already, we are expecting another 8 percent increase in March. Steel is going to be a big issue in 2008. WATTS: We all know that we are going to see continual price increases in some of the areas like steel and concrete powder and copper. We all realize that we have got China and India over there and they want to be like the United States. The only problem is the United States has used up most of the world’s resources already. Recycling may help to some degree, but I don’t think that’s going to alleviate the problem completely. I expect prices are just going to continue to go up steadily because there are always going to be shortages. W. CLYDE: The price of cement powder has stabilized some because of the downturn in housing and other areas of the country. We need to realize that cement powder has become a world commodity, and most of the people in North America that own cement powder are international players. We are kind of at the mercy of how they want to play the game. For a while they were trying to increase their production. Has that now been completed? W. CLYDE: There are increased capacities coming on line in the next couple of years. Some of them have improved their abilities to import. Basically there’s been a downturn in consumption, so there seems to be ample cement powder. Petroleum-based products are a different issue. There’s going to be a constant struggle for petroleum-based products, and the asphalt for asphalt oil has continued to be a challenge because refiners are improving and changing their process to eliminate that product. One of the major suppliers to Utah has been Sinclair Oil. They are changing their process, so the price of asphalt oil has gone up. Are we anticipating a pinch on AC oil this coming year, or are we okay? ROHRBOUGH: I think we are going to see the price definitely go up. It is all supply and demand. W. CLYDE: It is going to be a challenge. ROHRBOUGH: As Sinclair’s coker comes on line and they cease production of bituminous asphalt, supply will be tighter and we will be an importer of bituminous asphalt. What’s happening with poly pipe? It sounds like we are hanging on and there’s not going to be any major crises like we have had the last few years W. CLYDE: It depends on the demand. If the economy strikes up again I’m sure there will be challenges. With cement powder, one of the things that happened is the suppliers got caught short. There was ample foreign supply but you have to arrange the transportation, and you don’t arrange transportation overnight on those types of things. It’s all anticipation of what they can supply into the market. BUCKNER: The surety markets right now have a lot of capacity in them, so I don’t see any kind of limitation going forward on that process. There is still underwriting. They are still looking at new contracts very carefully. But there’s a lot of capacity in the marketplace right now to grow with us. What is everybody’s read on the goings-on at the newly restored capitol building? Will there be things up there that we need to be actively engaged in? ZIMMERMAN: It seems like everybody wants to play with the lien laws every year. I’d love to have the thing settle down so that I can talk to my clients once and I don’t have to tell them every year what is changing. WATTS: In your mind, are they going to play around with it again? ZIMMERMAN: I have not heard any rumblings about playing with it yet, and I’m pleased about that. I’m interested to see what ramifications have come from the changes in the lien releases, if that’s had any impact on anybody. THORN: I think we will be watching the legislature for funding and investments into capital facilities and transportation. We want to work hand-in-hand with the educational community. I think we all realize that education is something that is important for all of our futures and we need to create that balance. MOORE: There are many of us that work with DFCM in higher education and funding that goes to those projects. Many of us are kind of teetering, just hoping that the projects that we have been working on for six months to a year in preconstruction are actually going to be funded. Hopefully with that surplus, that will have a positive effect on many of us in the room and projects that may or may not be funded. I think this is going to be an interesting year for that. There is an enormous number of programs on the list to be funded and a lot of requests. Let’s talk a little about project delivery. In the past few years we have seen huge swings to more CMGC, design/build and the old design/bid/build is still there. Are there trends that you are ramping up for or that owners should be aware of? BULLARD: I like the concept of setting the delivery method based on the needs of the project; there is no one delivery method that’s a panacea for all of an owner’s problems. They ought to look at a project and decide how it can be best delivered. Unfortunately, in a market that is beset by labor costs and material price increases, nothing looks good. Even though a process may be just fine and the process may be getting out of the marketplace the best and most efficient project for an owner at that time, things are being challenged because you lose faith in the process when you have to go back into your boss and say, “We are $5 million over budget.” So there has been a little bit of a backlash, and there has been some questioning from DFCM specifically as to why the CMGC is not delivering to us what we thought it would. I think a lot of those pressures are because the volume they have coming out is too big and they are unable to manage the process the way they should. Some of the higher levels are also unable to understand that we don’t dictate prices; the marketplace dictates the price and our job is to make sure that it’s an efficient process in getting the quality and the programming into a building that an owner wants. Unfortunately, there’s been some pressure directed at certain project delivery that’s unwarranted. It’s not just CMGC; it’s anything that doesn’t fulfill an owner’s expectations. Project delivery is just one element of that expectation. There’s even pressure outside of DFCM. I think it’s coming from a lot of different quarters where an owner that moved to CMGC five or six years ago and then sees surprising costs on a particular project says, “Let’s go back and bid everything,” as if that’s going to solve all the problems. MOORE: I agree with Lonnie. The delivery method is really based on the project type, project size and complexity. Also, there are many different levels of owner sophistication and understanding. There are many owners that we all work with who are looking for us to provide knowledge and experience prior to design being complete. The big picture of this is that the delivery methods need to be selected based upon the sophistication of the owners. There isn’t one method that works for everybody. Design/build works great at a certain time and on certain projects. We are all noticing, however, that the different delivery methods are a means for many of our owners to manage their risk. They are asking us to help manage their risk through different delivery systems. I don’t think there’s one answer for everybody. BULLARD: I think they are here to stay. We are seeing a shift toward alternative delivery systems as opposed to people moving back to a design/bid/build mentality. I think it is incumbent upon our industry to educate, promote good practices, and be willing to assist an owner in evaluating the risk. Then we have to make sure the risk is properly shifted to people who can control it and who are fairly compensated for taking on the risk. PENNOCK: To your point, it ties back to the discussion we had earlier about subcontractors coming into the marketplace that really may not be as qualified as they should be. Our ability to manage that in a CMGC environment is much, much stronger and definitely minimizes the owner’s risk. Our ability as an industry to be able to share that with an owner and let owners understand that concept is crucial to the survivability of the CMGC delivery method. CAMPBELL: Some of the problems we have run into are communication between our teams and the owners. They want you to take all the risk. They want to pay a smaller fee to the architect and pass the risk on to the general contractor to do all the coordination for them. We need to make sure there’s good communication up front between the owner and R&O to make sure what they expect and what we are providing is the same thing. We like design/build. We like design/assist. We like various methods, but we need to become more professional in the way we deal with some of our clients sometimes. MABEY: We are seeing a lot of design/ build, but we aren’t seeing a lot of design/bid/build. But we are not always looking for that sort of market. Most of our work right now has been negotiated. We are seeing more of that, regardless of the delivery. WATTS: We do a lot of design/build work mostly on buildings that are fairly simple. We don’t get into complicated buildings. We have our own architect, civil engineer, structural engineer, mechanical and electrical engineers right on staff. I can holler out my door and have them in my office in two minutes. For us, it’s important to have good coordination. But we do have our limitations. On certain projects, it works great, it saves a lot of time and saves the client a lot of money. WADMAN: If you look back years ago when you talked about the bid list in the building sector, that was common for each one of us and we were thrilled to be able to get on 10 to 15 bid lists. I don’t think any of us have any interest at all to be involved with bids like that now. WATTS: The first year I joined the Associated General Contractors was back in 1976. I went to a national convention in Atlanta that year, and they had a workshop on something called design/build. I had never heard of it. Back then, we were bidding state jobs and the architects would start the plans and a year later they would come out to bid and already they were over their budgets. Every time we bid a job the job would get thrown out and go back to redesign because they could no longer afford it. I thought, “There is something wrong in this system that we are working in.” When I ran into that design/build concept in Atlanta, it was the first time I had ever heard of anything that was offering an alternative delivery system, and I got interested in it. But it has taken since 1976 to today to even have design/build have any credibility. It has been a slow, hard slog. MOORE: The one thing that design/build and CMGC have done to all of us is we are all at a much higher level of sophistication with our teams — our personnel, our staff, our project managers, our estimators and our principals in charge. The staff and what we put on the project to help owners succeed has elevated every one of us in this room to a much higher level of sophistication of knowledge and experience. That’s certainly a good thing. Now owners have become accustomed to expect that from us. I have been told by many folks from Texas, California and other areas that Utah has some of the best contractors they have ever seen in the nation. In one little community. I think it’s because of delivery systems. And we are horribly competitive with each other. Nonetheless, it’s made us better, hasn’t it? It has made our teams better. We have extraordinary talent in this state — fortunately and unfortunately. Let’s also get the perspective on this from the highway builders. P. CLYDE: Design/build and CMGC is a relatively new concept in the heavy highway segment of the business, starting in ‘98 with the I-15 rebuild and progressing to today where we have CMGC and design/build on more of a regular basis. We have had to dress ourselves up differently to come into that arena, as far as sophistication and professional level of our staff people to be able to handle that. Terry, as an insurance outfit, do you look at CMGC type work differently than design/bid/build or design/build? BUCKNER: I think it’s taken the surety industry time to figure out what the market is doing. For the most part, they are going in with qualified partners and saying, “If you feel this is strong for you, we are with you.” We have seen in just the past few months the announcement of some new construction docu-ments. Twenty trade associations across the country got together to develop a new family of documents called Consensus Docs. Is that something that, as an industry, we should be educating owners on? ZIMMERMAN: It certainly is. One of Lonnie’s points was that not everything fits in one mold. The same goes with your contract documents. The Consensus documents, just like the AGC documents before them, are good documents for the particular situation you are using. If you’ve got the right project, it’s a fantastic document. I like it because it is easier to use and easier to understand. Anybody sitting around this room is not going to be a stranger to that document. What they have done is modernize it. They are tackling new issues. For example, one of the issues we are talking about is electronic documents and documenting things. They are taking or bringing the IT guy and making him part of that team and trying to analyze and decide how you are going to deal with electronic documentation on a project. THORN: And my intent is not to plug it. It is just to raise the awareness that there’s a family of documents that seems to be gaining some traction. When you’ve got 20 national trade associations that have embraced it, and then included in that 20 are at least two or three large national owner groups, I think it lends a great deal of credibility to the work that’s gone on there. What’s your take on health care costs? P. CLYDE: It’s going up. W. CLYDE: We just learn to accept it. THORN: Health care seems to be increasing all the time, at least with the people that we talk to. I think you just have to be able to deal with it, figure it, price it, and move forward. These days if you don’t have a benefit package to offer your employees, they are going to go to somebody who does. TEMPEST: We have seen the increases that everyone is talking about, but they have been manageable increases. I can think back seven or eight years ago when they were not manageable increases at 17 and 18 percent increases every year. I think the health care industry realized that they were out of control more than they thought. The last few years the increases have been relatively flat. BULLARD: We do our part in terms of commercial contractor employers and providing health care better than some other sectors of the economy. When you see the statistics, though, the number of companies providing health care to their employees is going down. In a political environment, they want everyone to have health care, so it is something that is going to hit us. Right now our health care premiums are paying for a whole sector of the populace that is getting treatment and not paying. It is a very important issue on a political level. W. CLYDE: The other thing you have to look at with benefits is that because of the tight labor market, we have all had to take a look at our benefits and what we offer to employees to attract employees to our business. Even though we have had some increased costs, sometimes those increased costs have been a result of putting together a benefit package above and beyond the wage that will attract people into our industry and attract people into our company. I can’t remember as many consecutive good quarters as we have seen in our industry. Is this a good time to be building? WATTS: At my age, I have been through a lot since 1968. But the people I have working in Watts Construction Company have never seen anything but good times. I think a lot of you can say that. When we are talking about our kids or people who are 35, 40, 45 years old, they have never seen anything like I have seen. I’m happy for them, but I am not sure they are prepared. BUCKNER: We represent both owners and contractors and we find a lot of owners who are right now looking at new projects and a little concerned they can’t find the interest level from a lot of builders. Builders are filled. They have lots of work on hand. Is it now time to build the building when the commercial construction industry is so full and running at such full steam? It’s good and bad on both sides of the table. THORN: It’s a machine you have to keep feeding. P. CLYDE: And the industry has also expanded their capacity to take on more work.
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