Protecting Owners During Construction Labor Shortages
Updated: Jun 4, 2020
The cranes are back. For those of us in commercial construction, it’s a long overdue vision of growth and opportunity confirming that the economy has recovered and investment spending has returned. The proof is that unemployment now stands at a very low 5.4% and wages are on the rise (May 2015, Bureau of Labor). And one of the fastest-growing sectors contributing to our economic recovery is construction.
Atlanta is just one example of what’s going on throughout the country. Here, we’re watching two mega sports complexes go up. We’re seeing a wide assortment of mixed-use facilities under construction. Hospital construction is rampant. And long-overdue municipal investment is finally getting the green light as tax revenues rise.
Throughout the Southeast, universities are breaking ground as enrollment projections rise. Healthcare facilities are expanding in anticipation of new patients (thanks to the Affordable Care Act and an aging Baby Boomer population). New car plants, corporate relocations, high tech facilities, and the list goes on. While this growth is fantastic, the sudden surge in large-scale construction has created a very troublesome workforce labor shortage. There are just not enough qualified craftsmen to fill all the jobs.
Back in 2008, when it became clear the recession was going to last a long time, much of the labor force either moved into new occupations or chased construction opportunities elsewhere. Fast-forward to today and we see that our revitalized construction industry has bumped smack into the law of supply and demand. Since the Southeast cannot expect a return migration of craftsmen, as great job opportunities exist where they already live, we’ll have to manage through a workforce shortage for the next few years.
General contractors are the first to feel the pain of the shortage, but often lay this problem at the foot of the owner citing “local conditions” as the culprit. While that’s true, it’s the owner who takes the real hit. Remember, owners bear the risk as they fund everything and the sooner they can take ownership, the quicker they can monetize that investment. Conversely, the longer they have to wait for transfer, or pay more money due to cost-of-labor overruns, the bigger the financial pain for them and their investors.
So how can we (owner representatives) advise owners to manage through this labor shortage during current and upcoming projects?
I’ve posed this question to many experts. While growing the pool of trained labor requires a long-term commitment, it does not solve the immediate need to attract and retain qualified craftsmen to the site now. Since highly trained craftsmen have their pick of where to work, I offer some highly effective short- and long-term solutions you may want to consider.
Short-term
Worksite incentives. Assuming the project is large, this site will be their home for a few years. Make it easy for them. Workers don’t want to waste time getting to the site because they’re not getting paid for that. Shuttle busses, badges, temporary toilets instead of restroom trailers, limited access to food with limited food choices – all of it can create worker dissatisfaction very quickly, which leads to high turnover and project interruption. Sites that provide better options are at a distinct advantage.
Site logistics and sequencing. A big, planned project is far more attractive than one that does not showcase true due-diligence. A well-planned project assures the trades they won’t spend much time fixing unforeseen problems.
Owner visibility. Workers want to be valued and appreciated. A frequent and engaged owner goes a long way toward achieving worker loyalty and commitment, which drives on-site productivity and can help attract new workers. Convincing owners to be active on-site participants will have a powerful, positive financial effect to the successful completion of the project.
Protective contract language. Owners need to move away from typical RFP and bid language norms. Try to get contractors to guarantee trade-pricing quotes for 90 days rather than the standard 30, ask for crew size commitments and the number of skilled crewmen. While this may up the total bid, it pays out as it adds needed financial security and helps ensure a smooth and timely project.
Long-term
Develop direct relationships with High Schools and Technical Colleges. Get to know the teachers, the principals, the professors, the Deans. Help prepare their curriculum so students gain the expertise you need on your job sites. Become a guest speaker in their classrooms. Show them the types of cool, high-tech work you’re doing and the kind of money they can earn.
Mentorships. Offer mentoring programs to students. On-the-job training not only provides them with real-life, resume-building experience, it gives you an opportunity to ‘test drive’ these people and get first option on hiring them. New hires also need on-site mentorship so they learn the inter-personal traits they’ll need to succeed on your projects.
Wages and benefits are certainly the largest influencer on attracting qualified labor, and to compete you need to offer a competitive wage. Sadly, rates are going through the roof right now – especially in concrete, reinforcement, and drywall. And it’s starting to go up in mechanical, electrical, and plumbing. Non-monetary incentives could make the difference to attracting and retaining labor without adding significant cost.
Remember, an owner hired a team of experts who assured them a labor shortage workaround can occur. As program managers, we have to bring all our expertise and marketplace knowhow to n every project as well as active engagement and a deep understanding of the core issues and current conditions driving or inhibiting success. Those who cannot manage the labor problem not only put project success at risk, they put their expert reputations and value-propositions in jeopardy — along with the owner’s multi-million dollar investment.