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Construction Day 2014

Industry executives, public agencies see slight improvement in 2014

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Local construction executives from the public and private sector who attended at The Daily Transcript’s third annual Construction Day discussion April 30 said the industry is slowly getting better but still has limited areas of growth.

“I would say we are cautiously optimistic,” said Wayne Hickey, general manger of Suffolk Construction’s San Diego office. “Competition is still extremely fierce out there.”

Hickey said that multifamily housing and the hospitality industry are the few hotbeds where he sees new construction projects.

George H. Rogers, president and CEO of RQ Construction, echoed similar sentiments about the construction industry and added that his company, which primarily performs work for the Department of Defense, is seeing a slowdown of federal work in San Diego and across the Western region.

“We have had to diversify our business and become less of a local company and more of a small national company,” Rogers said.

His general contracting company is now looking for government work outside of the United States and was recently awarded a project at Guantanamo Bay.

“There are still too many companies for the little amount of work there is locally,” Rogers said.

Hickey said there are about a dozen “great” general contractors in San Diego that do exceptional work.

“It’s a very competitive market with very slim margins of profit,” Hickey said.

Suffolk has just completed construction on the San Diego County Operations Center and was awarded an office building project for the Irvine Company in La Jolla.

Watkins Landmark Construction recently finished the Indian Wells Tennis Garden in 10 months and 10 days.

Jody Watkins, president and CEO of Watkins Landmark Construction, said that more private companies and government agencies are talking about investing in new facilities and infrastructure.

“In the past we have steered away from public agencies and government projects. We kind of ignored it,” Watkins said, because there wasn’t enough public sector work to go around to all of the general contractors. “But now we see more people talking about public projects.”

Watkins said that his company recently was awarded a contract to build a courthouse in Riverside and another contract for a water park.

“Margins are not where we would like them to be, but they are getting better,” Watkins said.

On the public side of construction, representatives from the San Diego Unified School District and California Department of Transportation said their agencies will be advertising more work in the near future, compared with the last few years.

San Diego Unified has two active voter-approved construction bond programs in Propositions S and Z. They combine for $4.9 billion in bonds to pay for school improvements. The build-out is expected to take 15 to 18 years, depending on the market and the ability to sell the construction bonds.

Alma Banuelos, small business coordinator for facilities planning and construction at the San Diego Unified School District, said the construction bond market is getting slightly better and that the school district expects to award $200 million to $300 million in construction projects this year.

“The types of projects we are talking about are technical buildings for our culinary arts program, auto shop, wood shop and other vocational studies,” Banuelos said, adding that the district is also renovating existing schools with new classrooms, sports venues and administration offices.

Cory Binns, chief deputy director of Caltrans District 11, said there is more than $730 million in highway improvement projects in San Diego County, from pavement work, new carpool lanes, bridges, connector ramps, bus rapid transit stations and seismic upgrades.

Funding for these highway projects comes from the American Recovery and Reinvestment Act, federal and state gas taxes, California’s Proposition 1B and the TransNet half-cent sales tax.

Banuelos and Binns agreed that because of the high competition among contractors, their agencies can still be picky and get the best price for school and highway projects.

But with margins still at record lows, contractors asked why more public sector agencies don’t go to a best value or responsible bidder -- the way the federal government selects contractors -- instead of using the lowest-bidder method.

Banuelos said that even though the school district still goes with the lowest bidder, she has heard other agencies talking about awarding projects via the “lowest responsible bidder” method, in which a short list of the lowest bidders is compiled, and those bidders are interviewed and chosen on experience and their vision of the project.

Rogers said construction firm owners need to realize what “best value” is and have a clear definition of the concept to get the best contractors to work for them, like the military does.

“Owners and contractors need to value a team concept,” Rogers said.

He added that for the private sector to grow, there needs to be more incentives such as tax breaks to lure companies to California.

“Wealth goes where it’s treated well,” Rogers said.

Construction Day Panel

Alma Banuelos, Business Program Outreach Coordinator,
San Diego Unified School District

Cory Binns, Chief Deputy Director, District 11,
Caltrans

Wayne Hickey, General Manager, Suffolk Construction

George H. Rogers, CEO/President, RQ Construction

J. Scott Scheper, Member, Seltzer Caplan McMahon Vitek (sponsor)

Jody Watkins, CEO/President, Watkins Landmark Construction

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