On October 16, 2002, 11 CEOs representing some of Nevada’s largest commercial construction companies gathered at the Four Seasons Hotel in Las Vegas for a roundtable discussion of issues affecting their industry. The roundtable was a part of Nevada Business Journal’s monthly Industry Outlook series. Those in attendance have built millions of dollars worth of commercial projects in Northern and Southern Nevada and represent a broad cross-section of the building industry, including both contractors and subcontractors, union and non-union firms. The group discussed topics ranging from market conditions to land prices, and from permitting challenges to workforce recruitment.
John Frye- Morning, I’m John Frye with McCarty Building Companies. We have a large focus here in the Nevada area that we’ve been building here for about 22 years and we like to focus here in the last 40 years to establish a business presence and over the years we’ve gone with that … Our largest project that we are currently doing is Green Valley Hospital. It is a seven million dollar development for universal health services and they are a Nevada Corporation. The project starting … that we’ll be breaking ground for them in December its about a 70 million dollar … facility called the shops at Green Valley Ranch and we are real excited to have that in our back burner for next year and a number of other things in our back burner as well, so our prospects for next year are growing exciting. Challenges for the future as we move in quality people from other regions in … in attracting new people … that’s … personnel for the projects.
Jeff Ehert- Hi, my name is Jeff Ehert, I’m president of The Penta Building Group based here in Las Vegas, NV. Actually, quite different from John, I don’t know if you are aware, we are a new company, we are only 2 years old, relatively new player, locally based and have had some pretty good success in growth in a couple of years. The largest project currently is we are doing a 65 million dollar time-share resort for Hilton Grand Vacation on Las Vegas Blvd. The vast majority of our work actually is hospitality, mainly related where we do a portion of off-strip work, a little bit of big box work but we are actually doing some retail work as well. It’s been a great ride for us. We are privately held, myself and two partners, we actually came from a larger contractor that does a lot of work here in town. We see this as a real vibrant market and we’ve been having a lot of fun.
Greg Korte– Hi, I’m Greg Korte, currently with KBA Construction that is currently short lived at this point. We have two more weeks that we will have our doors open and we are currently closing. The reason for that closure is a non-payment by the Aladdin Performing Arts Theatre, the Aladdin Casino and so, shortly Nov. 1 I will be going on board with the Korte Company. They are out of St. Louis area, a family owned business started by my father some 45 years ago and I will be heading up a division of the Korte company here in the Las Vegas area. The challenges that I see is something that is very close to what I’ve been going through for the last 2 years and that is a non-payment by owner and what the bond … for payments is truly set up for in legislation in regards to what the payment in performance bond should pay and shouldn’t pay and ultimately also the paid when paid clause which apparently we’ve got in our contracts, sub-contracts agreements with our sub-contractors and the courts have ruled that as unlawful in the state of Nevada. Currently we are out of money. I’ve … ¾ of the million dollars over the last few years to try and divide the Aladdin to get my money. We are out of money to fight that legal battle of the paid when paid but hopefully, fireman’s fund will be taking on that battle for all of us here in the state of Nevada.
Brooks Williams- I’m Brooks Williams with the Jaynes Corporation, I’m the senior Vice President of Urban Operations we’ve been here since 1988 primarily working the private market we do a few public works projects from time to time. Our major customers are Wal-Mart, Lowes, … Electronics right now. These last couple of years we’ve been pretty strong in the retail business, Courtesy car dealerships currently right now we have 13 projects under construction. Our biggest challenge in this market and have been the biggest challenges in this market is acquiring new people in a continuous…
Mike Pack- my name is Mike Pack, I’m president of Frehner Construction Company. We’ve been around since 1970 we a civil contractor throughout the west coast. We’ve got offices in Las Vegas, Reno, Elko, Southern California, Salt Lake City. Our large projects that we build are in the 50 million dollar range although we are looking are the smarter business in the 100 to 200 dollar range mainly … throughout the west. Here locally we’ve had a strong presence with the addition of some economic grooves and … here on business as well as … business which we are physically a … contractor although we have to start construction somewhere. Our biggest challenged person is me is getting quality people to do the work. Percent of our work is … fairly large periods and we need people to regenerate year after year and anyone who has a generation gap …. So that is probably our biggest challenge at this point…. Something about rising insurance cost.
Bill Hoover- Hi, I’m Bill Hoover, I’m president of Pageantry. We are a locally owned residential and commercial developer and builder … On the residential side, we’ve got 300,000 Sierra Nevada on the commercial side we’ve got primarily office and office condominiums we actually buy the land, develop projects, we have contracts … only out for ourselves at this point we have about 220,000 – 300 … under construction right now. We also have a division up in Seattle that is residential at this time. I’d say the biggest challenge that we have is the availability of land because we actually oversee all of our projects and the rising price of land on both residential and commercial side it’s getting pretty difficult to get a project penciled. Keep in mind that with a relatively soft office market and vacancies and some major players now we try and dish against on both the residential and the commercial side it is a little challenging. The good side of it is most of our lenders are knocking on our door telling us that they have plenty of money to lend on the …. In our market place. So, they are chasing us instead of our chasing them which is a unique situation.
Jeffrey Vilkin– I’m Jeff Vilkin with Tradewinds Construction. We are the only sub-contractor in the room. A lot of our clients are in the room. We’re probably amongst the largest if not the largest of the non-union carpentry sub-contractors in the valley who do commercial industrial work. We employ about 250 people 2-300 depending upon how busy we are and we complete somewhere around 350 contracts a year. Some big, we just finished a 3 million dollar drywall job and then lots of small jobs. Our biggest challenge I think these days is the insurance crisis the liability insurance crisis because we have’nt seen the … bottom yet and the quotes for insurance any more are around 3-4-500% a year has been a …
Kevin Burke– I’m Kevin Burke, president of Burke and Associates General Contractors. We are a local firm formed in 1983, so we’ve been in this economy and this work place for quite some time. We’ve got a pretty diverse work place underneath as we work in the hospitality gaming industry and we do public works with, the majority of that public works is with the Clark County school district and we also do quite a bit of retail and office work. [Our] largest project we’ve got is the Crossrute Common it is a retail for the McColby Corporation, we are also doing a convention center expansion for the JW Marriot out in Summerlin. I think our biggest challenge is the same, I think it is a common thing here, really trying to find the qualified talented engineers, project managers, to manage our work it’s certainly, where the national economy is suffering, it certainly helps to recruit other people from other markets and that is something that we are focusing on right now.
Bob Wallace– Good morning, I’m Bob Wallace from Kitchell Contractors. We’ve been licensed in Nevada since 1952. We’d work over the years, come into a project and leave then come back to it with a plan to bring us back. About twelve years ago we decided that we wanted to be a full time member of this community so we opened an office at that time. We are just recently finishing up Anopolis retail center downtown, but our major emphasis has been health care. We are working on four major projects on hospitals around the community, Saint Rose, …Campus, Sunrise Campus at Maryland Pkwy and Moutain View Hospital. Our largest project is the Seven Hills Hospital for … on the southwest portion of the community. I would say a 300,000 sq. ft. new hospital. Five stories, still structured with ethos installments exterior skin have 12 operating rooms, it will have a staff of about 450 per shift. That project will open January 2004 and as soon as that job is done we will be doing a new Saint Rose hospital and Saint Mary’s will be an … hospital. So between the McCarthy and Kitchell we will have 3 brand new hospitals within a 4 mile radius. We are really excited about this market we feel this is a great place to be and a great time to be here. We think that there is going to be a new wave of mega resort work coming up that will generate all sorts of incerlerate work all around in these communities.
Connie- Is anyone working in the Reno market?
Frehner- We do quite a bit of work up there. We are currently building a large spaghetti bowl project up there about 55 million dollars. I believe it is the largest Northern Nevada … ever led. So that is the reason construction on I80 and 395 is around for the last five months.
Mike Fauci- My name is Mike Fauci, I am the president of MJ Fauci Construction. I’ve been in business here since 1959 it is a family owned, at one time my dad owned the company it was called Fauci and Sons and brothers all broke up and went to different parts of the country. My brothers all still have Fauci and Son Construction. I specialize in Commercial Building but at one time I only specialized in interior construction that was the days when they had interior contractors and shelf contractors. There is no such thing anymore. Where a general would build the shelf and then an interior would come in and take over the insides but through the years everybody decided that they wanted to do both and so I do both now and the project I’m doing now is for Mercedes Benz. It is one of the largest dealerships in Nevada. There is one close to it back east somewhere. It is about 200,000 s.f. around 25 million dollars. It has an acre of parking 12 ft below ground and it is actually three levels. It is going to be a state of the art building for Nevada for automobiles. You will be able to go there and get your car serviced, get your hair done, get your nails done sit there and do your business, plug into your modem, your computer, and do your business while you are waiting for your car. It is going to be a beautiful dealership. I have to tell this story about a friend of mine who when to Reno about 1956, he was in the real estate business and he was told, you need to get out of Las Vegas because Las Vegas is short lived, the government is going to shut you down. So, you need to move to Reno because Las Vegas is never going to make it. To make a long story short, he became a pretty big realtor here in town, he died just a few years ago, but he always told that story that Reno always thought we weren’t going to make it. I kind of like las Vegas, I came here around 1959, it was kind of a sin to live here. My mom was all upset, going into the construction business in Las Vegas, but, it has come a long way, I think it is a great town, there is going to be a lot of work for the next 20 years anyway.
Connie- So, the first item that we are going to talk about as a group this morning is the market outlook for the next 12 – 24 months. I think in our economy we’ve enjoyed a really strong economy, but what is happening in your industry. Do you see a slow down? I know that it has gotten more competitive, I see a lot of builders moving in from out of state, what do you think Jeff, what is the economy?
Ehret- I guess from our perspective, again with the majority of our work being hospitality and gaming related, and I guess you could say as goes gaming, so goes Nevada or Clark County in particular. We really see the next 12-24 months as being very robust. Obviously our company took a big hit after 9-11 as did a lot of companies. Probably everyone here did. A key part of our business is client selection and picking the right clients, the right projects, and really going after them. Again, for speaking from our perspective, we see hospitality and gaming as being very strong in the next 12-24 months, at all ends of the spectrum there is always a certain amount of renovation, remodeling, work that is a little bit more recession. But, there is a lot of big stuff that is on the drawing boards, and it certainly looks like a lot of it will come to fruition.
Connie- Any other comments on the economy.
Frye- If you look at the building permits issued they are doubled in 2002 from where they were in 2001 and I really agree with Jeff in that we expect to see a second building burst in the last 10 years than what there were in the 90’s. If the gaming market is the leading edge of that building boom, then the infrastructionr will fololow in the next five years, if it happens the way it has in the past. So, no matter what market we are in, … the state we are going to get a share of that either today or within the next five years.
Burke- Connie, I think we are all ready for Steve Wynn, everybody is rooting for him.
Connie– Well if Steve Wynn were up North, he’d see a totally different economy. Does anyone in here disagree with the fact the economy will continue to be strong in terms of your industry?
Mike Pack– I would agree that So. NV, I wouldn’t agree in No. NV, No. NV is definitely on the decline. There is less work and less government work up in No NV because, the majority of the work is getting sucked down in Clark County which .. contractor down here is … repair, but, the No. contractor is a real problem.
Williams– We work with quite a few national retailers but they are very busy procuring properties and they have made plans to build quite a few new properties within the next several years. …
Connie- I think Jeff brought up a really good point and I think that we should probably address it. How was your businesses affected by 9-11?
Vilkin- I can tell you that we were already in a slowdown and really starting the second quarter which nobody seemed to be predicting. Remember I went to the CB Richard Ellis Market watch event in April, March or April 2001, and for instance, in industrial, they were predicting a 100 to 2% vacancy rate by year end in 2001 and that number increased by 9% in year end 2001 and we really started to drop off second and third quarter and then when 9/11 hit and a bunch of work evaporated. We got the scapel out for the first time in twelve years, we’ve been undergrowth for 12 years and we cut 85,000 dollars a month worth of people. We were fat too, we’ve gotten used to the good life and not running the lean machine so we’ve probably put back 25-30% since then. For us, it is a much reduced volume level. We work for a lot of different contractors.
Connie- You mentioned earlier, which is interesting because it is the next topic which is the construction litigation issue. Our magazine has done a ton of stuff and in the next issue there is going to be a 32 page supplement, specifically devoted to the issue of construction litigation. I’m sure you are all familiar with the coalition for fairness in construction. They came to us and asked if we would do an educational piece to try and educate the market, I think that even the movers and shakers in the business community, unless they are in construction development issues. They don’t understand what the issues are. So, I know that everyone in this room is affected by this, the question is, how affected are you by it? Is it something that, I know what is happening with the insurance premiums, is there some point where you just say you can’t … like the doctors and move out of town.
Williams- I don’t think it has really hit the commercial market that bad yet. I mean, it hasn’t really liability rates up. It is hurting a lot of sub-contractors across the community. The condo, housing and commercial market, they are suffering dramatically, as far as actually litigation in the commercial industry I don’t think it has really increased over the years. Now, I think … has become an issue and has become an issue in the commericial market also. And I think that is getting a lot worse.
Kathleen– I’ve heard that is kind of the next thing that lawyers are going to jump on.
Ehret- Oh, it is, already.
Frye- One of the elements in the comparative Nevada brought … apartments. We’ve had a problem attracting some contractors that the insurer will risk, to be able to do these with the apartements. The concern is that they be turned into condominiums in the future, and this project won’t, but you never know. But, the sub-contracting units really in regards to insuring rates really is killing them sooner than we are as a general contractor. We do a lot of condo’s and those are the most susceptible projects to this issue. We haven’t seen it yet but we might in the future. If NV doesn’t take care of tort reform the way Ca has done and other states, we could be gone … industry in regards to the malpractice problems. The biggest thing that Ca has done that I think is important that we adopt here is really a quick fix and that is really the things like the proper notice, where the homeowners are required to the developers and the builders before they enter into the litigation. That is the biggest problem with litigation is the 150 day notice they have to meet that, they jump into litigation, and they can really … about issues and solve them without having to go to that step. If we handle the required notices and allow us to extend the required deadline, I think we can solve a lot of these claims with homeowners before they go into the court process.
Burke- Connie, I don’t think you are really going to see it cross over into commercial construction as you follow Ca that overwhelmed majority of construction defect is very much limited to residential and condo work. You just don’t see … and they tend to be following Ca in that, I don’t and our insurance company don’t really see that as a real threat to the commercial construction. What it is, is I think, Brooke’s mentioned it is the crossover of a subcontractor who does residential into commercial, and I know we spend a tremendous amount of time trying to manage our risk in insurance with subcontractors. Five, ten years ago you used to be able to get insurance certificate you didn’t have to go through with a fine toothed comb and make sure you’ve got the good quality insurance, it is written probably without the additional riders and so forth and so on. It is becoming a real issue. I think what happens with the sub-base is that people have crossed over it is hard for them to get insurance and when they get it they don’t necessarily have the right coverage they are paying 2 or 3 times the premium and then it becomes a cash flow issue for the subcontractor because typically they have to come out of pocket at the beginning of their year at 30%, 40%. I think it is a problem we are going to see a number of smaller subcontractors get into real difficult times because this insurance situation because they may have a tail in the construction defect on the residential side.
Vilkin– I can speak from first hand experience, we used to do a lot of high end residential work in our earlier days. We haven’t done a residential job in probably five years, either apartments then like apartments or townships but no homes or condos or townhouses. A house, a custom home that we … for a doctor in 1993 decided he wanted to redecorate his home so he filed a construction defect … they direct every sub into the process, we didn’t do anything wrong, we were just part of the process and my legal bills and settlement bills were about 70,000 dollars. Zurich, the biggest insurer in town in ten years and only had one client for liability, they … us and then they offered us new insurance at a 230% increase and we were already at a 6 figure premium there. That was the best quote I could get. The other quotes that I could even get were 450-700% increases and everybody else said no, you’ve done residential work in the past, we are not interested in insuring you.
Burnett– I’m Ross Burnett, well, Burnett House Construction were working on Stephanie and Promenade right now at about 30,000 ft. of retail, probably our largest ongoing project, we do office warehouse and some retail.
Connie- Taxes, Governors Tax Force Concern?
Wallace– We are concerned about the approach to taxing revenues, in our industry, we have fairly large revenues and fairly small profits. I think across the country profits for construction companies range from ¾ to 1% of total revenue. If you have 100 million dollars worth of revenue and 1 million dollars worth of profit, we are paying taxes on the total amount of revenue. Then you have multiple layers. If the subcontractors are paying taxes on revenue we are in affect being double, triple times the same as we did now. We are concerned about the approach of taxing revenues and we would hope that we could get some groups together, coalitions, to present our arguments. If they want to tax our business it should be our profits rather than revenues.
Frye– If they call that tax approach cease tax similar to Arizona and Mexico. I mean, none of us are individualy penalized, but because we all have to apply the gross for cease tax to project cost and the main user and developers will pay for that. Put our industry on hold because we will be paying a fair share of taxes. The best thing about Nv is that everyone will be paying a fair share of taxes. A colorado defecit situation or projection deficit but the construction industry definitely can’t pick up its fair share of taxes.
Connie– Gaming overtaxed. Land availibility? Permitting Process?
Fauci- It’s got worse through the years. There used to be a lot of stuff we could get over the counter then it got to be a week, then it got to be a month and then it got to be 3 months and now it is pusing 4 months to get a building permit any more. Generals seem to be able to put up with it and I don’t know why. They seem to put up with it cause there is nothing you can do about it. The bureacracy down there is pretty bad. At one time they were going to turn the building permits over to engineering firms to check the plans so they could get them in and out but they stopped that in a hurry because the plan checkers didn’t want that to happen. At one time they were shipping them to Co and if anybody remembers that they would ship the plans to Co and three days later you get them back with some comments on them then in two or three weeks you had a permit. They were actual bona fide engineering firms that were checking plans. They need to go back to something like that or do something with the building dept. They purposely shelf them take their time. Even with the Mercedes Benz we’ve been in there 6, 7 mo we still don’t have all our permits yet. Every time there is a revision it takes 2 or 3 mo to get a revision improved. It’s gotten pretty bad.
Hoover- It’s actually even more complicated than that because if you go through technical process they are holding up a lot of our discretionary permits on projects itself and whereas you try and time everything so that when you get your grading permit you can do your off sites and whenever you do your off sites your …, things like that. We’re getting gcompletely out of sink now with all of our permits. I’ve got building permits but I don’t have the gradin permits in time and so now I’m sitting on the building permit when I’ve paid all my fees and then I’ve got to go give them something, on my projects out in Henderson, I’ve got to go do some work on intersection and I can’t get the barracade planned on the traffic in Henderson. They just simply are sitting on it and that is holding me up from getting the roads done so I can then, and I’ve got …, so the whole thing, it seems like every jurisdiction in almost every department is not only taking longer, they are almost getting to the point where some of them are, you just wonder what they are doing. Why is it taking you so long? All I’m asking you to do is to do your job. We all have to do our jobs, and be responsible to our clients, and we are their clients, but they don’t seem to have that attitude. This building industry, the entire industry actually builds cities for the municipalities. We are the only industry, when we are talking about taxes in this industry because we kind of get taxes in a different way, we have to go out and put in the sewer lines and put in the power graphs and bring in the water lines and really, and those types of things a really … facilities, but everybody shares it. Yet we do that out of our own pocket. All we are asking for, we’d be happy to do that, but don’t penalize us by taking an extremely long period of time when you can find out the cost of land in valley today on a month can raise 50,000 dollars easily and in … If there is a person that doesn’t even match … sitting on your plans and being nonresponsive to you, you can’t do anything at all. They just don’t understand.
Williams– I share the chairs permit inspection commitees for … I’ve done that for many years, I think that there is really two issues that are driving the permit process. One has been litigation and the, everytime the city or the county gets sued and it becomes an issue and then they go back and they go talk to the director of the building department and they get tougher and tougher on checking drawings. So, they are checking the drawings these days a lot more thouroughly than they really should be, the county building should be on the engineering and the architects, and they should do the cursory review, make sure there is the right safety and some of the basics, but now they are getting where they are going into detail checking the drawings and they’ll come up with a bunch of contracts and they will go through 3 or 4 or sometimes 5 resubmitals before they finally get stuff resloved. I think another issue that I kind of see out there is that 37% that live in this town come from Cal. My … bureacratic state and so if you’ve got that kind of average of folks movin into our permit department, they are kind of bring their ways of doing business to our building department. I think that those two things are really starting to extend the process. The biggest clog I think is in public works. The building dept seem to be turning their stuff fairly quickly but how it works that you have to do a … study and a grading study before you can even submit a grading plan. That process in itself is 3 months. They need to work on their systems. I think that there needs to be a real focus on look your engineers and your architects are … to these projects and not you and take some of the responsibilty away from the cities and the counties.
Burnett- In addition to your comment there, I’ve had some conversation with some plan checkers in different entiities, the problem that we are dealing with there is that … seminars that you get an attorney up there that starts talking about how a city has been sued in Timbuktu and that the individual inspector has been sued personally for this and that he was sued for a 100,000 dollars personally. You can imagine why an inspector or a plan checker is going to, as you said, he is making 45, so to be sued for a 100,000, he is scared spitless at this point. So, that is how they are scaring these guys into believing and of course we all know that the city and the municipalities can be sued for 50,000 dollars max and then it never holds anyway. There needs to be a coalition or something that people stand up and say you know you have to mobility here, just do your job and let them build here because the liabilty cities have it.
Vilkin- Does anybody have any recollection in any building department in this valley ever getting fired?
Fauci- Yes, years ago in NLV they fired the head of the building department, that was the days that it took like two weeks to get a building permit and a bunch of general contractors go together and went down to NLV and filed a class action suit against this guy and they fired him, now that was probably 25 years ago.
Wallace– Probably didn’t come over to transfer …
Vilkin- I don’t think they ever really let anybody go so you can lay down on the job as much as you want and you still have a job tomorrow and that’s, we’d all be gone if we did that.
Burnett– There is an inspector in the city of Las Vegas, and you might be dealing with him. He’s been there for 10 years, but he is constantly being run out of certain jurisdictions and areas because builders go crazy. Then they put him on a different jurisdiction, you can’t fire him.
Connie– At the last roundtable, a couple of developers decided that it may be a good idea that they were willing to pay an expedite fee to have some one walk them through. They’re frustration, as yours is that the plans were just going into a deep hole and not coming out so the developers were willing to pay an additional cost to have somebody walk them through and have them accountable for it.
Fauci- That is being done now.
Hoover- They have that, it doesn’t save us.
Ehret- It is an inter-related process because there are some many processes in getting a building going.
Frye- It seems to be a revenue generator for them, for the county and state services.
Connie- Do you think that the problem is the same in different municipalities or do some municipalities seem to handle it better than others? Last issue, I know we picked pretty heavily on NLV but how do they compare? Are some better than others?
Fauci- They are all about the same. At one time the city was better than the county and then there was a few years the county was better than the city, it just goes back and forth, but they are all about the same. They kind of follow each other to see what somebody else was doing, to do what someone else was doing, so they do the same thing. It used to be that NLV was pretty good for a while. The Boulder City, I think Boulder city is pretty bad now and nobody pulls permits in Boulder City. Henderson was great at one time, it was one of the best places to pull permit. They are all following suit.
Hoover– On all fronts it has progressively gotten worse. I think from our standpoint, all I want is predictability. I can manage any schedule, but what I can’t manage is when they don’t hold their schedule. They can tell me that it is going to take 6 weeks and if I know that I can get the design professionals and everybody started long enough so that it comes out at the right time. So when you put in this project in Henderson, I had a traffic plan they wanted to … 3 times and it literally took 6 weeks before they got everything worked out and I am just sitting there with the rest of my crew and plans, and final map, ready to go and for 6 weeks it just sat. I don’t think that it is a staffing issue, they don’t work Fridays and yet it can take them weeks and weeks to get anything done.
Burnett– That particular issue is a personnel issue. There is a person in that department.
Frye- Clark County had some different codes that honestly architects aren’t used to and I think that it is important that they get local partners to help them understand local codes, and maybe do a project period work the building department.
Ehret- We are pretty vocal in that same way. If we have an owner that is really high on an out of state architect we are real big on making sure that they allign themselves with someone locally because they get picked. As cumbersome and as long as the process takes anyway, it is just dead. You’ve got an out of state guy that really doesn’t understand the little nuances of how the local jurisdictions interpret the codes here.
Wallace- Or, if they come with the attitude that they are from a big city come down to Las Vegas and they going to tell your building dept how to do it.
Williams- That comes from some of the locals too. We talk about permit process and we’ve wandered pretty close. A lot of the problem is with the architects because with the city for instance, they will have comments back and being their cue only a couple days and sometimes engineers and architects will sit on it for weeks and weeks and the city will take the rap for it, so, it works both ways. We monitor the permit process in a couple projects and they would pull all the records and they have response back to the architect and 2-3 wks later the architect will return them back and then tell the customer that the city is responsible. So, it’s a two way street.
Wallace- The real shame in the whole process is that there is a delay to the project and normally by the time the contractors get it were trying to make up a day. We’ve got to work a hundred people overtime to make up one day. …
Korte- Permit schedule, that is what actually happened, we had 6 months to do it, by the time we got the permit we had 77 days. They said, can you still do and we said, don’t screw us, and we will. We worked 24 hours, 7 days a week for 77 days and did it.
Fauci- I found that the general contractor gets the comment letters along with the architect they move a lot faster. These last two projects that I was working on, we actually see copies of the comment letters that go to the architects and the owner says, well why would you want to see that. Well, maybe because we can help it along and sure enough, it does help. I know you don’t want to see it but if you’ve got a copy of it and know the architect is sitting on it for 2 wks you can pick up the phone and all him and he doesn’t like that.
Korte- I think a lot of times, the architects are so busy, the minute they get it off the desk and into the building dept they can move on to the next project and so they’ve done their job. If you look at their … they’ve got 80-90% of their money, the last is in their final permit and if they’ve got the construction management and so they kind of lose interest and the person that is most interested at that point is the general contractor and so you’ve got staff and people you’ve already to take the helm there and start. Then all of the sudden they got another offer because your job isn’t going to start for another month or two. It can be a real manager problem on the general contractors side.
Fauci- I think a few years ago it was going that direction, I think that a lot of people, a lot of generals backed off of that design build thing because there is a lot of liability involved. They are trying to partner up with an architect where they are doing design build but partnering up. I personally think that it is pretty dangerous. In small jobs I think design build is fine but the big stuff will get you in a lot of trouble. You basically are an architect as a general contractor. Architects would like to team up with you on a design build because all of the liability goes to you. I’ve done a few jobs and it is kind of scary. I don’t know how many guys in this room do design build.
Frye- They seem to be doing okay.
Fauci- I think if you team up with an architect it is probably okay.
Ehret- We see that as being the most successful approach is to get involved early in a job. If you are fortunate enough to get on board early, I had some contract with an owner, and we will be partners. The architect is still under contract to the owner. There is no contractional relationship between the contractor and architect. If you can get on the same page as the architect and the owner, and you get some good chemistry going you can have some great results as far as managering the duration, the design phase, managing keeping the job between the bumpers budget wise. If you have a good approach, we see it as being really good as opposed to getting a set 100% construction documents and you see a lot of holes or problems with them. We are real big on that.
Wallace– In our market we’d see an emphasis on the partnering concept. At the beginning of the project everyone gets together to try and identify some common goals, the owners, the architects, designers, sub-contractors, suppliers, contractors and it is surprising if you can just think about what the common goals are, everyone wants to make a fair and reasonable fee for the work that we are doing. We don’t want to go to litigation. We want a safe job, we want high quality and if we can agree on those goals at the beginning it seems that disputes and the arguments and those things kind of go away and we are able to pack them during the course of the project. I see that as a real good process to allow to permiate our entire industry for the betterment of what we are doing.
Connie- How competitive? Is there any specializing?
Fauci- At one time I specialized in a certain area. I’ve kind of gone in different directions now. At one time I was strictly medical. Now I do a little bit of everything. You have to for survival. I never thought I would be building automobile dealerships and I’ve build 8 or 9 of them. For some reason people in the automobile business think it is some kind of a trick business and you have to be sombody special to build a dealership. It is building hospitals that is about the hardest thing to build. I go in a lot of different directions, you have to go where you have to go.
Ehret- I don’t think it is much different than a lot of businesses. I think all of us, there is no question going around the table, I think all of us there is no question you have to find a certain niche, whether it is project sized, client based type of project and you like to have a niche where you specialize and hopefully you get a good fair share of the work but the catch 22 is obviously if that niche market goes in the tank your stuck so you have to juggle ball a couple of different ways.
Korte- Plus the fear of getting labeled.
Fauci- Well, I was labelled as an interior contractor for many years. I couldn’t get to building buildings for a couple of years, it took a long time, they said oh, well he is a tenant improvement contractor, you couple label them like that, it took a while. Now it is both.
Connie- Earlier when we went around the room, two or 3 of mentioned that one of your biggest challenges was finding qualified people. What is that about?
Ehret- Trade craftsmen- bottom-up.
Vilkin- We are an aging breed. Young people today have a lot more options than we did when we were coming out of school, for their career choices. There was a survey done of like 50 couriers and construction was like 49 in terms of 20 year old’s and what do you see as your career choice, construction was the bottom of the list. I think one it is an older industry, and two it is kind of stale, and there hasn’t really been an effort to make it sexy or attractive. Also in the field, most of us are in terms of gc and I actually employ a lot of the people wearing the tool belts, it is predominately spanish speaking work force now. Fifteen years ago it wasn’t that way. Ten years ago it wasn’t that way, in the last 7 to 8 years, it is just predominately gone hispanic. Bilingual people in the workforce is a must. I have somebody that is bilingual at my front desk because some of the potential employees that come in don’t speak english. You can’t communicate with them. So, young intelligent americans, in large part are choosing other career fields, and that is I think what we are all feeling.
Korte- I think too this society, this industry was brought up on a lot of entrepreuners that came up through the ranks, just guys that worked their butt off seven days a week. Now days, I think society, particularly of the younger generation, has got a lot of the what is in it for me and I want to retire when I am 30, 35 type of attitude. I am exagerating, but they want an 8-5 job where they don’t have to work the long hours and pay their dues and so forth. I think it is a big change in philosophy of society.
Frye- It is at the management level. Engineers want to be a manager now in 3 years where it used to be where it would take 10-12 years for an engineer to be a manager to go on to … and superintentants or whatever. The want a high … they want it now, it is me.
Wallace- And the workers are given the option of do they want to open where they are climbing up and down scafolds or down in a ditch out in the hot sun, or sitting at a computer in the air conditioned space. They are going to go to the latter.
Connie- So where do you find your talent?
Ehret- It is an industry wide challenge. I know AGC, which we are a member too, and in a lot of the contractors associations, you really have to start, there are programs where you have to start in elementary school, as far as an awareness to the industry. Show it as just planting the seeds, then you step it up a notch in high school. There is not as much here, but I used to live in Pheonix and we are very active with promoting through the high schools and high school guidance counselors in particular, career choices in the industry, both that they would consider vocational level and a crafts person level, as well as higher education. UNLV has a good program. Actually, regional, there are several good programs at colleges and a lot of people are aware. It is an industry wide challenge to promote this industry. Going back, as a personal example, I’m third generation in the business as far as running the business. My son is the classic, he looked at the hours that me and my dad worked and he is ready to go to college and he knows that he doesn’t want it, he wants to major in something where he can make a lot of money and not have to work hard. I said, you find out what that is and you let me know.
Burke- He wants to inherit that from his dad.
Connie- Do you think it is a problem that is unique to NV or is it an national thing?
Frye- McCarthy across the nation has a process of hiring in terms of co-ops. We try to get students in freshman year and have them serve three internships and by the time they graduate from college, they are just pretty in McCarthy and they go to work for us. They are some of our best employees 20 years later. We always have a graduating class of 20+ engineers, whether we have a project or not, it is just good for growth for industry.
Connie– Do we need to reach into the hispanic depths to get people to build the projects?
Vilkin- There is no question and it is all the trades. Plumbers, electricians, carpenters, painters, there are other ethnic groups represented, no question, but to speak frankly, a lot of the “white guys” that are there, some of the older one’s are pretty good and occasionally you will find some, we have some good younger ones, I don’t want it to be a real broad stroke that eliminates everybody. A lot of the guys doing it that are white, you don’t want them. They have drug problems, or they are unreliable. Hispanics, I spent a lot of time in Mexico and the structural work in Mexico makes about a dollar an hour, so for them to be able to come to work in the U.S. and make 15-20-25 dollars an hour and they all huddle up and live together and send the money home and they are kings, in their world, they are kings. That gets communicated to Mexico and those guys are coming across the border and a lot of them have incredible work ethic and they are kings. Their world is in great shape, and they want to come and work as much and as hard as they can to make as much money as they can to send it home or take it back to mexico. Not all of them, a lot of them are living here and have made families or careers here, but that is just the predominate you watch one of your jobs a lot, 70% of the guys are hispanic. It is just the way it is.
Ehret- I think, we all came from, our ancestors came from somewhere and the way I look at it, I’m sure a lot of you have, I have as far as you observe construction in Mexico and then you observe construction here by Mexican-Americans or Hispanics. The thing that you clearly see is that those that are motivated to immigrate or take a chance come here are those that have a really good work ethic typically just like a lot of other people. Typically if you are motivated and you are willing to take the risk, the gamble, to come to a strange place and. I think quite frankly our industry would have a time with that, with … otherwise.
Vilkins- I think one thing that is interesting is that Mexico is emerging from 3rd world status. It doesn’t happen overnight, but think if a wage in Mexico ever became competitive, if they ever had a lot of industrial growtha and infrastructure growth. They started building highways and power plants and roads and communications systems and every mexican who wanted to stay in this country and make 15 dollars an hour could do it. That is not inconcievable. I’d be done. If I can’t find service for a subcontract, we don’t have a workplace without it.
You- What about training programs, are they producing a workforce?
Vilkin- It is a teeny percentage
Williams- 25% more
Pack- We pay our non-union people. It costs the same in UT or Cal.
Vilkin– If we build a fire station or a police station we will pay a carpenter 35 or 33 dollars an hour and that same guy is going to make 18 dollars an hour in the private sector. I was just wondering, in terms of total gov dollars spent if they wanted to save and look for that budget deficit, I think it is all there, but they want to insist on paying more and to get court productotiveity they want to make that job. They aren’t going to have speed because they are getting paid twice as much as they should. The gov insists upon it. If you take guys that normally make 18 dollars and now are making 35 it is one in a hundred that is going to say I really need to work for my money, he is going to make it last.
Fauci- But you can’t change it any more, it is to late.
Frye- It can be changed, but it won’t happen. In other areas, such as Washington D.C. abc has a trade organization, it is trying to change it that way to get it more of a mix of non-union and union and we need to do that here. We are a union contractor, but I am also looking at it from the area of the economy.
Fauci- But I think the unions are stronger, is the problem.