🔒CT construction industry’s challenges among toughest in U.S.

1 of 2

When Allstate Fire Systems submitted a bid in August to install sprinkler systems as part of a $4 million Hartford Public Library interior-renovation project, five other companies competed for the job.

While the work, which will accommodate the library's space-sharing arrangement with UConn's downtown Hartford campus and include buildout of classrooms and study areas, has not yet been awarded, the sprinkler-system bids ranged from $39,400 to more than $86,000, said Allstate Vice President David K. Thompson.

The numerous companies vying for the job underscores the intense competition for construction work in Connecticut, experts say, as the industry still faces a slow recovery from the Great Recession. Although there are fewer construction workers and firms in the state than there were in 2008, contractors and subcontractors are pursuing as many jobs as they can, making it harder for firms to win contracts.

That's also putting pressure on construction firms to shave margin on their bids so they can compete in a price-sensitive environment in which the lowest bidder, particularly for government projects, often rules the day.

Thompson said Allstate's more detailed bid wound up at the high end and may not be selected as a result.

“It's difficult,” he said, “because you're looking at a project anticipating what the scope is, trying to be as detailed and thorough as you can, all the time knowing you're competing against others who may not be as detailed or informed. You spend a lot of time putting something together when others may be just taking a stab at it.”

Industry slowdown

The Great Recession put a major damper on Connecticut's construction industry, and although the sector is in better shape today than it was a few years ago, the recovery has been slow.

In 2015, for example, Connecticut's private construction industry was tied with New York's for offering the least economic impact in the U.S. when measured as a percentage of gross domestic product (GDP), according to a recent report by the Associated Builders and Contractors (ABC).

In its report, ABC found the direct economic value added by the private construction industry — largely measured by the value of the labor force — accounted for just 3.1 percent of GDP in Connecticut, below the national average of 3.9 percent. (The number in Connecticut reached as low as 2.1 percent of GDP in 2010.)

Meantime, Connecticut's construction unemployment rate in July was the sixth highest in the country at 6.3 percent, compared to the nation's 4.5 percent jobless rate, according to ABC. The industry employs about 58,000 people in Connecticut, which remains 11,400 jobs short of 2008's peak employment of 69,400, state Department of Labor numbers show. 

Chris Syrek, president of ABC's Connecticut chapter, attributes the hardships to a challenging economic environment, continuing state budget deficits and the “high cost of doing business” in Connecticut, whether because of competition, taxes, utility costs or bureaucratic delays.

Some firms are also having a hard time finding qualified workers, due to the sector's aging workforce and the significant number of people who left the industry following the recession.

Don Shubert, president of the Connecticut Construction Industries Association (CCIA), which has more than 300 members, said a smattering of 30-plus jobs posted online by members at the end of August reflects that shrinking workforce.

Attracting commercial work remains a challenge regardless, he said.

“The pool of work hasn't come back to the point where contractors are at full capacity, so there's still a lot of pressure and competition in the marketplace,” Shubert said. “We're getting a sense that we're stalling out.”

Professional firms like Allstate and KBE Building Corp. of Farmington agree.

Part of the problem is “red tape,” said Tim O'Brien, KBE's executive vice president.

For example, the Connecticut Commission on Human Rights and Opportunities (CHRO) has had to expand its scope from state to municipal projects when overseeing affirmative-action plans and setting targets for small business minority hiring.

While the outcome is desirable, O'Brien and Syrek said, it has added a new regulatory burden.

Contract work often will be completed before a CHRO hiring plan is put forth, but until there is an approved plan, the state holds back 2 percent of the value of the contract. That delays a contractor's ability to reinvest in other jobs or employees, Syrek said. A proposed state Senate bill that would have required CHRO action on such plans within 90 days never materialized, but ABC plans to resurrect the proposal next session, he said.

O'Brien called the approval process cumbersome.

“Documentation and compliance adds an administrative cost to every business that must follow the [CHRO] programs put in place in the state,” he said. “Builders who want to build, spend more time trying to comply than they do building buildings.”

Impact of changing workplace

In late August, a quarterly overview known as the Marcum Commercial Construction Index reported a softening nationwide in nonresidential construction spending. June's spending shrank 0.6 percent to $682 billion on a seasonally adjusted, annualized basis — the first period of negative year-over-year growth since July of 2013, the report said.

The changing commercial workplace where more people telecommute also has contributed to the commercial construction industry challenges, said Peter Gioia, vice president and economist at the Connecticut Business & Industry Association.

“Connecticut hasn't been attracting enough new businesses into the state and the [state] population is pretty stagnant,” Gioia said. “What needs to improve is, on the municipal level, towns have got to decide whether they want economic development and the state has got to say, 'How can we speed this up?' ”

The not-in-my-backyard (NIMBY) attitude is deterring development, yet NIMBY parents are complaining their children are moving out of state for lack of jobs, Gioia said. But without economic development, there are fewer jobs to keep young adults here, he added.

Shubert, of the CCIA, argues that an aggressive transportation improvement effort by the state Department of Transportation would lead to transit-oriented development and more construction work. There already has been increased development activity proposed or underway along the 9.4-mile CTfastrak busway route, including office and residential projects.

As for O'Brien, he is relieved that ABC will be pursuing legislation to circumvent delays in CHRO's affirmative-action process.

Meantime, both his firm and ABC are trying to attract students from technical high schools to the workforce. The industry needs more trade craftsmen and field superintendents — managers on constructions sites, he said, so KBE will bring some students directly into the firm in a new program launching this fall.

“We're showing kids there's another path,” he said. “The trades can be a great career.”