CEOs of Nevada’s largest commercial contracting firms met recently to discuss pressing issues in their industry, which is one of the driving forces behind the state’s economy. Connie Brennan, publisher of Nevada Business Journal, served as the moderator for the event, which included topics such as: staffing and recruitment, the entitlement process and upcoming legislative initiatives. The meeting was part of Nevada Business Journal’s monthly Industry Focus series, which brings CEOs together to discuss pertinent issues in their industry or profession. Following is a condensed version of the discussion, which began with introductions. Participants were asked to name their company’s biggest challenge.
Kevin Burke: Burke & Associates is a locally based general contractor that has been here about 22 years. We’re in a number of different markets, from gaming and hospitality to office, retail, industrial and multi-family. Our No. 1 challenge is recruiting talented employees.
Joe Crisci: Seventeen years ago, Crisci Custom Builders began as a home builder, but today we do a lot of tenant improvements and office buildings. I agree with Kevin about finding quality people. Our staff represents us, and finding the right people is getting tougher and tougher, with our economy as busy as it is right now.
Frank Martin: Martin-Harris Construction became incorporated 30 years ago. I would like to comment on the amount of employee poaching that occurs within the Southern Nevada market. A number of companies seem to feed on the internal market rather than looking outside for employees. Probably 95 percent of the people we recruited in the last three years have been from outside the market, and most of them from the East Coast.
Robert Potter: Clearly the biggest obstacle today for Affordable Concepts is the labor shortage, and not just within our company, but also with subcontractors. They are facing the same problem getting qualified supervisors and skilled workers, and it creates a domino effect.
Wade Pope: Roche Constructors is a Colorado-based corporation. We’ve been in Las Vegas since 1986, building primarily commercial big-box projects and a lot of public works projects. We have a shortage of field management and also office staff and have trouble getting the proper coverage with qualified subcontractors.
Linda Harris: I am the “L” in LF Harris and Company, which has been in business for 15 years. We are certified as a woman-owned business enterprise. We do a lot of tenant improvements in the high-end retail market, and over the last few years we’ve probably done 40 bank branches. Our biggest challenge, of course, is skilled labor. We’ve made an effort to recruit out of the military. We also provide on-the-job training, which seems to have had positive results. Material costs are terrible, so that’s another challenge.
Greg Korte: The Korte Company is a national design/build firm based out of the Southern Illinois/St. Louis area. Here in Las Vegas, we’ve been in operation for four years. In addition to manpower shortages, I think the real crisis is the subcontractor pool. General contractors are turning down work because they can’t get subs, so frustrated clients are bringing in contractors from other parts of the country. It’s not that we don’t welcome them; it’s just that they don’t understand this market and where it’s going. And as Project CityCenter continues to gear up and these out-of-market contractors come in left and right, it’s going to be tougher and tougher to get the subs out on our jobs – unless these guys are going to bring a whole busload of subs along with them.
Gary Siroky: I would echo the same issues that have been mentioned so far. Core Construction is a 69-year-old company based in California, and we’ve been in Las Vegas since 1999. We’re in various markets, from institutional to office, healthcare and multi-family. Where I see the problem being amplified is in the mega-projects that are coming on the Strip, especially Project CityCenter. We’re all vying for the same resources, which artificially inflates rates.
Larry Monkarsh: In addition to staffing, one of the biggest issues for my company, LM Construction, is explaining to developer clients from outside this market about the timeframe it takes to develop, construct and complete their projects. The cities and counties are losing a lot of experienced people to the private sector, especially engineers, which slows their processes down considerably. I currently have a $30 million backlog of projects needing permits.
Matthew Ryba: I’m with TWC Construction, which has been in business for eight years. I agree with Frank [Martin] about employee poaching. I don’t know how the headhunters do it, but they get hold of your employee list and call every day, and they’re even contacting people on their cell phones. So, one concern of ours is the amount of aggressive behavior by these headhunters chasing our people and trying to woo them away.
Jeff Vilkin: Tradewinds Construction is a multiple-scope subcontractor in its 19th year in business. Our biggest challenge is the organizational side of exponential growth. We need to manage that growth so we don’t get overextended, either with financial resources or personnel, so we can always execute our jobs.
Mike Young: I opened the Nevada market three years ago for Huffman Builders, which has been in business for 30 years in Dallas. We’re mainly a developer in this market, and our biggest challenge is land prices, which are making it very difficult to do deals.
Robert Leidig: At Oakview Construction, some of the hurdles we’re running into are mid-level management availability and cost. The other thing is the length of time it takes to get permits, and what that does to the prices we present to owners.
Steve Bellew: Summit Builders is based in Phoenix, with offices in Arizona, Nevada and California. We do pretty much the whole gamut of commercial construction. Personnel is one of our largest issues, also projects being costed out of existence because of the lack of resources and subcontractors. A lot of off-Strip work simply doesn’t pencil, because you are competing for the same resources as projects on the Strip. It’s a very difficult time right now.
Randy Highland: I’m the president of the Nevada division of McCarthy Construction, which has eight offices nationally and does more than $2 billion a year in construction volume. We do everything in Southern Nevada from high-rise residential to gaming and hospitality, also public projects like schools. We’re also interested in and participating in building in Reno. To deal with the shortage of people, we actively participate in college recruiting and like to home-grow our own. One of our big challenges is growing our folks quickly enough and getting them enough experience so we can move them into project manager and superintendent roles.
Douglas Crook: Christopher Commercial builds retail and office buildings. We’re building a 52,000-square-foot hotel in Summerlin, and also some loft projects. It’s been tough to find good people. We’ve gone through staffing agencies and headhunters. We outsource as much as possible, but it’s real tough.
Richard Rizzo: Perini Construction has something like $7 billion worth of backlog right now, and we’re hiring 200 to 250 professional staff to try to keep up. We’re hiring them mainly from out-of-market.
Shortages of Staff and Subcontractors
Connie Brennan: Is the biggest shortage with superintendents and project managers, or is it across the board?
Ryba: I would say primarily superintendents. We need one of those for each project, whereas the project manager can take on three or four jobs at the same time.
Monkarsh: Subcontractors and field personnel, along with superintendents, are at crisis levels. Subcontractors are just shuttling people from one job to the next, working on one job for three hours in the morning and another job for three hours in the afternoon, just to make a showing. Documentation of workers is also going to be a big issue here real soon. It’s going to take even more people out of the market unless something happens with the immigration process.
Ryba: The municipalities are not turning over the permits or entitlements quickly enough, and then one or two will pop and all these jobs kick off at once, which creates chaos. We can’t really plan things out, and neither can subs. All of a sudden, it’s, “Okay, these jobs are ready, get staff up here, get men up, get ready to go.” That really does impact us in trying to balance the limited resources we have.
Potter: If I’m delayed on a project for 30 or 60 days, I’ll go back to all the subcontractors who gave me quotes on the job, and in some cases I’ll have to go to the third-highest bidder to get someone who will commit to do the job. Then, I have to go back to the owner and say, “It’s going to cost you another $30,000 to get somebody to come and man your job.” Then, whether the subcontractor will come when he’s supposed to is another issue.
Bellew: This is an industry that’s centered around the lowest bidder, but it’s becoming the highest bidder who’s going to get the personnel. We’re already hearing about union workers being paid above scale. In Atlantic City in the late ’70s and early ’80s, there was such a demand for manpower because of the new gaming projects that you couldn’t get people unless you went on overtime, and it’s starting to look like that here.
Leidig: I put certain subs on a two-week pay schedule just to get them to commit to my jobs, even though we don’t get payment for 30 to 60 days, and that’s been helping bring good guys over to commit to my work, but it’s a little tough on the pocketbook.
Brennan: Is this a national issue?
Korte: It’s definitely a national issue. Rebuilding after last year’s hurricanes is demanding a lot of people, but the real problem is that the industry as a whole is not nearly as glamorous as it used to be. The newer generations don’t want to dig ditches or swing a hammer all day, so they’re going into other lines of work. As an industry, we need to start focusing on supplying the pipeline again and getting into the grade schools and the high schools, telling the kids what a great opportunity construction is – not only in Las Vegas, but nationally.
Highland: I couldn’t agree with Greg more. Our industry has historically done an incredibly poor job in marketing itself. I think part of the equation is portraying construction as a positive industry where people can grow and have great careers and build really great things. It’s really a dynamic industry – ever-changing and exciting – and we have to do a better job of promoting that all the way down to the K-12 level.
Pope: We try to grow from within and recruit construction management graduates, but we are having a hard time finding college kids who want to move to Las Vegas. It’s real hard. It may have to do with the cost of entry-level housing, which is affecting our industry and other support industries within the Valley.
Brennan: Do you see a different work ethic in college-age people versus older workers?
Bellew: Kids nowadays don’t want to spend any time at a given level; they want to move up the ladder very fast – faster than they’re really capable of moving. They don’t want to take the time to become seasoned and do the nuts-and-bolts kinds of things that give you the experience base you need to be a good manager.
Martin: And it doesn’t seem to make any difference whether that grunt work is pick-and-shovel, hammer-and-nail, or computer. Over the last three years or so, we’ve been hit hard in the engineering department. We bring a young engineer out of college, take him through three years of training, and he’s still about two years away from making a really good manager. Someone else hires him away and promotes him to a project manager position for an extra $5,000 a year. He has the title of project manager, but is he really qualified? Not a chance.
Ryba: But he knows enough to get through the job interview. We’re just running training schools for these guys.
Harris: Have you noticed that when they do jump ship for that five or 10 grand a year, you’ll hear in less than a year that they’re someplace else?
Several Voices: Yes. Absolutely.
Harris: And then someplace else after that.
Leidig: I think that’s inherent in the new generation that’s coming up. Kids won’t stay. We’re generating some programs to get them more involved in the company, trying to turn them into long-term employees through other benefits and programs.
Crisci: It isn’t just young people. I’m getting résumés from superintendents, and they seem proud that they can list all these different contractors they worked for in the last year. They’ve been in town six months and worked 30 contracts. And they move for that extra $5,000, too.
Leidig: We pass on those guys.
Harris: You have to.
Siroky: But, unfortunately, there are those who are desperate for help who don’t pass on them, and that’s the problem.
Harris: They just want a warm body.
Monkarsh: What do you think about women entering the field these days?
Harris: The percentage really hasn’t increased over the years. I’ve had female project managers, and most of the time I have let them go.
Ryba: I’ve had a female superintendent, female project managers and project engineers.
Harris: Some of them are extremely qualified. It’s just that the industry isn’t high on their list to check out.
Ryba: They have a tough time getting the respect they deserve, especially in the field.
Harris: Right. It’s tough.
Monkarsh: After you pay people five or 10 grand as a moving expense, they’re here for six or nine months, you train them and then they jump. They end up getting headhunted away.
Martin: Our company did a study on headhunters. We found that about 65 percent to 70 percent of the headhunters have a list of 50 or 60 people they know they can call every 14 months and they’re going to be able to turn over that commission every single time. Every one of them has that list of people they know will leave for a title, for more pay or for that big, one-shot deal that’s going to last for 14 months.
Brennan: Do you see any relief in the labor shortage, or do you think it’s going to get more severe?
Potter: It’s going to be worse. When Project CityCenter and other large resort projects get going, their wages will determine the going rate. They have the ability to pay more, and they’re going to come to my jobsite and to other non-union projects and offer my guys twice what I can pay them to be journeymen on their projects. They’re going to suck this market dry and put all the workers on the Strip.
Siroky: Statistics I’ve seen on Project CityCenter say that at its peak it has the capacity to absorb 20 percent of the available workforce.
Burke: The laws of supply and demand are going to kick in. As costs keep rising, at some point it doesn’t pencil out for all the developers to be building, so I think some way it’s going to correct itself.
Potter: That may very well be, but during that peak or before the market is able to adjust itself, it’s going to be very difficult to man our jobs and deliver that product on schedule.
Vilkin: We will see labor costs increasing, especially with the more skilled trades like electricians or mechanic technicians. People are already visiting the merit-shop subcontractors and offering them more money to come to their job. If you want to keep your guys, you’ll have to give them raises. That means that, as a subcontractor, my prices to the general contractors in the community are going to have to go up because I’m going to be paying more for labor. We also have to consider that costs for materials like copper and drywall just keep going up and up.
Monkarsh: There will come a time when people are going to get too greedy on what they want for their land, and nothing’s going to make sense. You can put a 50-story tower on it, but if it’s selling at $30 million an acre, it’s just not going to happen.
The Permitting Process
Young: It’s not only the land – it’s the time from entitlements to permit. With rising interest costs, you’re adding a substantial amount of money to your project before you even get to the construction site. I’ve had to hire two $80,000-a-year project managers who have no other responsibility besides managing my architects and engineers. Ninety-nine percent of the time we’re telling them when permits are ready, when submittals are due, and following them down. It is a necessity that we absolutely babysit the engineers we’re paying to do the job for us.
Potter: That’s a good point. I had some design/build projects in the pipeline, and I had to hire an assistant because I found myself spending all my time chasing the civil engineers and the architects to do what they agreed to do in the first place in a timely manner. I didn’t have time to do any of my other responsibilities. Architectural has been moving through the system reasonably well in terms of permits, but the civil [engineering] aspect continues to get worse and worse. Part of it is that all the governmental entities are losing their workforce to private industry.
Vilkin: And even in private industry, they’re all moving around. You’re in the middle of a project and you call to talk with Fred the civil engineer, and you find out he doesn’t work there anymore.
Potter: And nobody knows where your file is.
Ryba: The most important cog in the chain is getting through the municipalities, and they’re as short-handed as everyone else.
Monkarsh: It’s difficult to explain to your client what’s happening in the 12- to 18-month process of entitlements and permitting. That’s the timeframe, and there’s really nothing you can do about it. Clients want to go to see the county commissioners, or the governor or the president of the United States, but that won’t change anything. You want to be an honest guy and tell everybody up-front what’s going on, but they don’t want to hear that it’s going to take 12 to 18 months, and then they might be priced out of the market. The carrying costs can kill the deal, and many times these projects are folding.
Brennan: Every year this issue comes up at this roundtable, and the frustration’s really clear. We’ve interviewed the people at the city and county governments, and they seem to think they’re doing a pretty good job.
Martin: I think the plan checkers are doing a reasonably good job. It’s the public works department that has its own process, and they won’t budge. The City of Las Vegas does a reasonably good job of plans-check, as far as turnaround and plan comments. Clark County is maybe down there just a little bit more. I think the City of Henderson is doing an awesome job right now. But where it breaks down every single time is when it comes to public works, for the flood study or something else you need.
You cannot get a set of drawings examined in North Las Vegas until your drainage study is approved. They won’t examine utilities or anything else until the flood study is approved. Well, it takes eight weeks to get the first set of comments, and somewhere between four and six weeks for every subsequent set of comments.
Brennan: Is there a process to get an express review?
Martin: Yes.
Harris: Yes, but “express” is 30 days out.
Siroky: The express is becoming the norm. We all pay the express fee so we can get in line to wait six months.
Monkarsh: Once you get your first correction letter, though, the express no longer is valid, and you’re thrown right back into the mix.
Ryba: That’s complicated by the employees available to the civil engineers, and all of them are struggling. You may get the drainage study back, and discover the engineer didn’t take care of one of the comments from the previous time.
Young: That happens over and over. That’s why I’ve had to hire babysitters.
Brennan: The municipalities say these delays are not their fault, because they’re getting plans with too many errors in them.
Potter: There is some truth in that. Some of the stuff is being rushed to get in, and it’s probably not up to the standards that it used to be. However, I’ll give you an example of what happens. I’ve waited seven weeks on a permit for one tenant improvement from North Las Vegas, because they have one plan checker for that section, and he went on vacation. Then he got back, then he got sick, and then he quit. Their attitude is, “We’ll get to it when we get to it.” There is really not a sense of urgency, in my opinion, from the elected officials all the way down to the work bench.
Highland: You can make an argument that each individual agency does a decent job, but from my perspective, where it’s really lacking is the collaboration between the different agencies. I’ve been to a couple of other cities where it’s one-stop shopping, and you have coordination between civil and building and the fire department. Those groups have gotten together and streamlined the process so one hands you off to another, and you don’t have to go to 15 different places.
Monkarsh: I have seen one good change, and that is Nevada Power. We were having major problems getting our drawings designed. They would take 12 to 16 weeks, usually right in the middle of your project. Now Nevada Power is mandating that they won’t sign your Mylars unless you’ve already designed the project. So at least Nevada Power is taking some steps to design it on the front end, and at the end of the project we’re not sitting for two months waiting for power.
Martin: I think the City of Henderson has done a phenomenal job with the building department, even their public works department.
Several voices: I agree.
Martin: They do the most outstanding job in the Valley. The level of accountability and responsibility by the employees at City of Henderson is astonishing.
Ryba: And they treat you like a customer.
Korte: They talk within their departments and communicate, which is lacking in some of the other entities.
Vilkin: Eight or 10 years ago, they actually called a meeting of everybody in Henderson who had anything to do with issuing permits, and they invited a bunch of contractors to come in and tell them how they could improve. It really seemed like they listened and made changes.
Harris: Could we get the other entities to outsource to the City of Henderson?
(Laughter)
Ryba: And Henderson can track it. They went to a new software that keeps track of all of the submittals. They put in milestones, and celebrate when they meet their goals, which are to get submittals in and back out. Every now and then when you walk in, they have balloons tied up. They’re celebrating meeting a goal. That’s a whole different philosophy. When you go to another municipality, they act like you’re insulting them or inconveniencing them.
Legislative Agenda
Brennan: The Legislature will be in session again shortly. Is there any pending legislation affecting your industry?
Martin: Yes. In the Beazer case, the Nevada State Supreme Court decided courts could no longer allow class-action suits on homes. In other words, each home and the defects in that home had to be a stand-alone case. In a tract of 200 homes, attorneys couldn’t go in and tear one home apart and automatically assume that all the defects they found in that home applied to all 200 homes. The trial lawyers are now trying to get legislation rewritten through Barbara Buckley, who is also a trial lawyer, which will make that decision null and void. The trial lawyers will have their way with the Legislature if we don’t pay attention. We get focused on lien-law issues and other things, and in the meantime the trial lawyers are going to come in the back door. We need to get involved, and Barbara Buckley is the key.
Harris: I’m not sure I want to talk to Ms. Buckley.
Martin: I understand, but remember this: trial lawyers have no scruples whatsoever. They don’t care whether you’re a Republican or a Democrat. If you can do what they want, you’re their best friend, and we have to start acting exactly that way. Steve Holloway at AGC (Associated General Contractors) started preaching that a year and a half ago, because it’s a fact of life that Democrats control the Assembly. We have to get in there and make our voices strong enough and the purse strings big enough that we’ve got their attention, and if you don’t do it, you’re killing yourself.
Siroky: We, around this table and as an industry, have been slow to get out our wallets, and it’s time we do that. The Nevada Subcontractors Association recently raised their PAC fund. Each one of the major subcontractors put in $10,000. And here we are as general contractors crying the blues when somebody asks us for a thousand dollars. We definitely need to open up our purse strings and start realizing that money equals power, and that’s what’s making the government go around. We have to get our PAC built up as a group.
Martin: You can either write the check now or write the check later, and it’s a heck of a lot cheaper to write it now.
Pope: Be proactive instead of reactive.
Brennan: Are there other ways for builders to get involved?
Martin: AGC, Southern Nevada Home Builders, NAIOP and ABC (Associated Builders and Contractors) all have PACs.
Korte: If you’re in this room and don’t belong to an industry organization, then you’re riding on the coattails of the organizations that are out there fighting for us and putting legislation in place. We need to get together, like the trial lawyers are doing, and focus our money into one spot, as opposed to each one of us giving a thousand dollars apiece to our representatives.