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Sunday, 06 December 2015 23:32

Construction execs embrace collaboration in workforce development efforts

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Tom McGovern, president and COO at Rockford Construction Company Inc. Tom McGovern, president and COO at Rockford Construction Company Inc. PHOTO: Jeff Hage

With the economy several years into a sustained-yet-slow recovery, general contractors and subcontractors say they need to get creative to surmount a critical workforce development hurdle.

While executives acknowledge the workforce challenges have tangible impacts on their businesses, they’ve been focused for a number of years on solving the issue with new training and awareness campaigns. Now, thanks to myriad collaborative efforts, they’re starting to see some fruit from that labor.

To gain some perspective into the construction industry in 2015 and provide some outlook for the coming year, MiBiz convened a handful of industry experts and stakeholders for a roundtable discussion.

Participating in the roundtable were:

  • Aileen Leipprandt, construction attorney at Hilger Hammond PC
  • Scott Mattson, jobs training manager at Grand Rapids Community College
  • Tom McGovern, president and COO at Rockford Construction Company Inc.
  • Doug Phillips, business development manager at Walbridge Construction
  • Michael Smith, vice president of Associated General Contractors of Michigan
  • Ben Wickstrom, president of Erhardt Construction Co.

While workforce development efforts dominated the conversation, the executives say they remain focused on key legal issues and cost escalation. Here are some highlights from the discussion:

How have workforce development efforts impacted the construction industry in the last year?

SMITH: Workforce development — finding the right talent for the onsite work as well as inside the offices — is extremely difficult in the construction industry right now. A few years ago, that wasn’t the case given the state of the construction economy. Today, however, it is often mentioned as the number one challenge faced by contractors, not only here in Michigan but across the country. There was a survey done by AGC of America recently where nine of out of 10 (contractors) were asked what is the major issue they’re facing and that is it: finding the right workers for the jobsite. We at AGC have training programs and apprenticeship programs trying to address that issue.

MATTSON: I think we’re seeing more (interest from young people in the construction industry) than we have. I think for years, there has been that perception battle, whether it’s construction or manufacturing or skilled trades in general. I think that perception is changing for the good between high school counselors, teachers, parents (and) some of the decision makers. There’s a Construction Workforce Development Alliance here in West Michigan. They work closely with trying to recruit that next generation into these programs and really trying to raise the awareness that there are good careers in these fields.

LEIPPRANDT: I think high school counselors have said for a very long time: ‘Be a doctor or accountant. Go to college.’ Well, you can still be successful in a construction or design path and (we need to) help these kids understand that and actually help the parents understand that, too. The value proposition is there — it’s just not really understood.


What are some of the challenges contractors are experiencing?

MATTSON: Uniquely enough, what we are seeing (particularly for general laborers), is the … employees are in such demand for talent right now that they are almost kind of circumventing the training. They’re almost cutting out the middle man to some degree. It hasn’t had a huge effect on enrollment because they’re jumping right into the trades.

WICKSTROM:
I would agree with that. I would echo that it’s definitely the number one challenge facing our business. I think if you look in the West Michigan construction market, at any level of construction, you’d get a lot of consensus that it is probably the number one challenge. It’s going to continue that way until we do something about it. It definitely affects our business and all of our projects when it comes to capacity, especially when you consider the overall market returning close to pre-recession levels. But it’s not a new issue.


How have you seen it change over the years? 

WICKSTROM: I remember seeing industry experts and forecasters saying 10 or 12 years ago that there is a looming talent shortage coming for the construction industry. So the real question is what are we doing about it? I am convinced that in addition to having good training programs for workers already in the system, we need to be purposeful about attracting new talent to the industry. That’s one of my passions and it’s one of the focuses of the Construction Workforce Development Alliance that Scott mentioned. It’s a partnership between Associated Builders and Contractors (ABC), the Homebuilders Association of Grand Rapids and the American Subcontractors Association. We’re all having the same issue, so why don’t we work together to try to solve this problem.

LEIPPRANDT: I don’t think this is a response from the community but the Centers of Innovation by Grand Rapids Public Schools has a particular school called the Academy of Design and Construction. It’s been around for seven or eight years, and those students are on a construction track or a design track. That’s one way the community is helping grow those students who get mentors and have opportunities for internships and direct experiences in the construction trades. … These kinds of careers are valuable. They can be a career. There used to be silos out there. Today, there is far more cooperation between the groups, even here in Grand Rapids.


How do all these contractors come together to sell the idea that what’s good for us is good for the industry?

WICKSTROM: Historically, you would have seen each organization operate in a silo where there wasn’t much collaboration between them. But I think — and it’s definitely a positive thing — there’s more collaboration going on.


What are some examples of that collaboration?

WICKSTROM: Case in point is the Construction Workforce Development Alliance. We just happened to be in the same place at the same time, and realized we were dealing with the same thing. The subcontractors are doing the same thing. There’s a fair bit of crossover membership so we just decided to pool resources and tackle it together and bring in partners like GRCC and Michigan Works! I think there’s more of that going on. I think there could be more.


Are different organizations acting on their own or are the stakeholders coming together?

SMITH: AGC and ABC work together. There’s a group that meets every other month … called the Grand Rapids Monday Group sponsored by the city of Grand Rapids. A topic at a recent meeting was workforce development and how we can all work together and do what we are talking about here in terms of getting more folks into the talent pipeline. There may be some philosophical differences on different issues, but in the end, we’re one industry and we have to work together.


How are your companies doing in-house training?

McGOVERN: (There’s) a transfer of knowledge from the older generation that’s kind of sliding out of the industry and the new one coming in. That transfer of knowledge and that new team starting a project, you’ve got to have the senior leadership (and) you have to have the young (workers). They have to transfer that knowledge. That’s one of our challenges. It’s written about heavily. We have it in our company. We have older folks moving out and newer people coming in. As an industry, setting up opportunities for that collaboration and transfer of knowledge is just critical.

PHILLIPS: I think that’s an interesting observation about the senior talent. We have folks in our organization that are looking to retire that we are working with. Can we keep you on part-time and how can we actively team them with some of the more junior folks in their areas of study? We can get that knowledge transferred within the organization. The talent is irreplaceable, that 40-plus years of experience that someone has. We are trying to be creative and responsive to their desire and where they are going with their lives and yet, maybe keep them somewhat engaged for the next generation’s benefit.


Manufacturers also say they struggle to find skilled workers. Are the construction and manufacturing industries effectively competing for the same pool of labor?

PHILLIPS: We do have a bit of a unique access opportunity with young people. Recently, a lot of school bonds passed, which means we’ll be working in a lot of these K-12 school districts building some nice facilities and doing very professional work. As an industry, it’s an opportunity for us to work with our clients to expose those kids that are in middle school (to construction). You can start to spark an interest. Manufacturers don’t have that edge as we compete for that talent.

WICKSTROM: One example of that exposure to construction trades would be CareerQuest. (This) was the first year (for the event) and we had 6,000 students coming through DeVos Place Convention Center. It was a collaborative effort between four industries: construction, I.T., health care and manufacturing. Each industry had a quadrant within the convention center to basically tell the story of their industry. I was so pleased with the construction quadrant because it was packed the whole day. It showed the technology related to construction, which I don’t think we do a good enough job doing. There is a lot of technology involved. We are advanced in the way that we innovate and deliver our projects.


What has the growth in automotive manufacturing meant for the construction industry?

PHILLIPS: I think there’s a tremendous growth in the automotive market. The manufacturers are investing at unprecedented levels in their production facilities and research and design. You talk about competition for talent: All of the major automakers are investing dramatically in their R&D programs. They see themselves as competing with Google (or) Apple for the talent they need. I think that’s all good for Michigan.


Do you see that competition as a threat to the industry?

PHILLIPS: We continue to be very much an auto-dependent state. We’ve become more diverse as an economy. It’s always going to be a big part of what we do here. That is going to continue to push down through the tiers of the suppliers. We’ll see that especially on this side of the state. I don’t know if we’ll see a Ford facility on this side of the state, but all of the suppliers are absolutely going to continue as they need to keep up with that demand. As a state, we have some real bright things coming.


Switching gears, what are you seeing as far as rising construction costs?


WICKSTROM: If you track material prices, they’re actually pretty flat. Cost of labor is going up. It’s inevitable in a labor shortage, but in my opinion it’s not going up in an uncontrollable fashion. It’s probably going up to where it should be from an industry level. So costs are rising, but construction costs, in my opinion, are not escalating beyond normal economic conditions.

McGOVERN: You can’t argue with the data. Material price is probably staying the same. Labor is going up a bit, which ties directly into our discussions about labor shortages. As general contractors and construction managers, we find ourselves changing some of the ways we buy things. There’s more partnering going on and more innovation when your project comes online so that the labor is there to do it.


Are those partnerships having an impact on the bidding process?

McGOVERN: I see more negotiations going on. That’s basic economic principles. Supply, demand and price — right? On bid day, you may not have bidders. You have to have innovative strategies.

SMITH: It is a very unique situation today. As a trade association, we receive calls from general contractors who are seeking specialty contractors to bid. The specialty contractors are turning down work, which is almost unheard of. In one way, it’s a good (position) to be in (with) the economy and all. It’s also a good opportunity for smaller companies to grow their business or even to start a business if they have the right skills and experience.

PHILLIPS: From the perspective of escalation in the Michigan market, material prices are flat and that’s not expected to change. But who knows a trade contractor today who isn’t pretty much fully committed, which means for them to take on more work and get the bids we need for our clients, they need to add entire labor teams. That is a risky decision for a business owner to make. As the trades look at the question of do I grow my business, do I bring in a team of masons or electricians, you need a return to go with that. That’s where I think we’ll see escalation.


Given the amount of activity in the industry, how do you help subcontractors manage their growth?

WICKSTROM: With regard to subcontractor capacity, before we award a contract to a subcontractor, we make sure we sit down with them and communicate very clearly about the expectations of the project — specifically around schedule and their ability to perform according to that schedule. It starts with a clear understanding of expectations on what the project will take and making sure that we have not just commitment, but also their buy-in as it relates to the overall project schedule. That’s really where we focus on the front end.

McGOVERN: Subcontractors have a place at the table in that design process. More and more, whether it’s formal or informal, subcontractors are a part of our design development process. … Having all people at the table having discussions about the basis of design and the price of design and meeting our clients’ expectations has been rewarding.


What are some specific legal considerations contractors need to be mindful of these days?

LEIPPRANDT: I would say they’re on a positive end of the spectrum as opposed to five years ago when folks were fighting over the scraps on a project that went defunct. … Now it’s just contracts, contracts, contracts. Projects are moving so fast and so furious, and it’s more contract review and less litigation. It’s helping the parties just get to a fair contract. Those are positive things … those good economic development issues. People are in a much better mood — even investors.

SMITH: The positive impact of what contractors are experiencing today, while very good, we’d like to see it continue over a number of years. You’re looking out two or three years at least in terms of what’s in your pipeline. In informal surveys of our members, both at the board level and throughout the membership, some of the more mid-size to smaller contractors aren’t experiencing as robust of a turnaround as others. Some of the smaller ones are still living project-to-project. But they’re keeping the doors open and the lights on. So while we celebrate what we’re experiencing today versus just a few short years ago — or a decade ago, there’s still others hoping that turnaround will get better.

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