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Beware the Contract You Never Signed
Beyond the Ballot Box
Buy, Sell or Hold
Food for Thought
From Concept to Production
On the Job
Seeing is Believing
The College of Hard Knocks
The Right Financing
P. CAMPBELL: From an equipment side, we have seen a tremendous slowdown. Everyone is holding on to what they’ve got and getting as much out of their equipment as they can. From a timing standpoint, there is a concern with the price of commodities. The cost of regulation, the cost of commodities—all are going up and going up a lot. So in the industry, where margin pressure exists now, it’s not going to get easier; it’s going to get harder.
With regards to overall revenue and volume, we don’t see the industry changing a whole lot for several years. Each of those markets are all flat. There is not a lot of hope out there right now. It will get better. As we’ve mentioned, we live in a great place to do construction long term. Just natural population growth is going to drive construction in the state for a long time.
How our government funds our infrastructure is a big issue. From a risk standpoint, that is moving up the chain where contractors are being asked to take on more risk. Equipment distributors are being asked to take on more risk, and where that risk transfer stops is a good question. We are all being squeezed from a margin standpoint and from a risk standpoint—without a whole lot of revenue upside. So how we manage our businesses is going to be critical, not only today but over the next several years.
Let’s discuss the underground business—water, sewer, gas pipe, fiber, etc. What are you seeing?
NOLAND: Truthfully, if it wasn’t for the big road jobs and the road contractors, I would not have any work. That industry has been helping me through the summer extensively.
On the equipment side, we were doing the same thing. We are doing a lot of repairs, Band Aiding back together and making it last. With the road work, we were able to do some purchases. But I don’t see that happening very much in the future. It’s going to be putting it back together and kick it out the door and keep working with it.
On the private side, we are working hard with certain customers. I want to get paid at the end of the day, and our company has been around for quite a few years. My dad passed on to me the importance of quality. In the long run, that will win out. As subs, we are getting kicked around pretty hard, but there is kind of a line drawn in the sand that we won’t do substandard work, and our competition out there is willing to do things that I just will not do.
It’s going to be an uphill battle, but there is a positive light out there. The initial shock of this economy coming on and hitting us the way it did, we were all trying to be positive and say it will only last two years. Now the shock and the realization of that has come about, and we are saying, okay, it’s time to go back to work, and we are going to just work ourselves out of this mess. That is where we are.
Some of the big work that we’ve all seen is coming to a conclusion—City Creek, I-15 Core, Mountain View, SR-92, etc. What is backfilling that?
MOORE: We have been able to double our employment from 400 to 800 this past year, but is that sustainable? The answer is that any of these big projects out there are just a part of the big picture. We have many of the partners here on some large projects like the NSA data center, but that is going to be over after a while. And, fortunately, we can put some folks to work and fortunately there are plenty of people to hire right now, but that is kind of a cycle again. Some guys are laying off right now and we’re able to pick some folks up, but next year it’s going to be just the opposite. Hopefully Lonnie has got a whole bunch of work starting or I’m going to be having some craftsmen that I am not going to be able to maintain, and that is scary.
The highs and lows of projects are both good and bad. It’s good because you work so hard on the large projects. It’s bad because you have to replace it, and replacement projects are simply not there when you are gearing up like that.
There’s some great professional folks in the business right now—managers, estimators, superintendents and great craftsmen. We could not say that in 2008 and 2009, but today there are great craftsmen out there.
BULLARD: We have done an amazing job in Utah at having the local groups step up, especially on the general building side, to build most of the notable projects. I don’t think you could find a market in the country where the local firms have such a high share of the work.
Every national company in the country has an office in Phoenix and other markets around us, but in Utah, that is not the case. That speaks very highly toward the quality of the construction professionals in Utah, and that will be important when things come back. We are coming back from a platform of quality people and that is notable. You don’t replace some of the big projects like City Creek, but you work hard at placing the people.