Compliance News Blog

McGraw-Hill Construction in conjunction with Associated General Contractors of California hosted their First Annual Economic Outlook for 2007 at the Doubletree Hotel in Ontario on Thursday February 15, 2007 with almost 100 contractors in attendance.

The briefing spelled out what will in all probability be the economic state of affairs for California and the nation.

Let us begin by citing the national prognosis.

Total construction dollars for 2006 and 2007 amounted to $671.7 billion for 2006 and the projection for this year is $668.0 billion which is only off by one per cent.

Public Works spending was $104.4 billion last year and probably will be $109.1 billion in ‘07 and this translates into an increase of ten per cent in ‘06 and potentially a plus five per cent this year.

Of some interest may be the “PPI” or Producer Price Index for construction materials. In 2006 the first eight months brought a seven per cent increase in the cost of these materials however the most dramatic increase was for copper wire which ramped up 73% also in the first eight months of last year. And that actually makes the copper penny worth more than one cent so the U.S. Mint may ultimately decide to give us plastic pennies… we hope this isn’t being pennywise and poundfoolish, guys and gals….

On the other hand back in August copper started a steep decline as supply suddenly began to catch up with demand. Ah, those speculators are apparently at it again.

Now we will look at asphalt paving. During the initial eight months of last year material costs were up 27% due to the increase in the cost of oil which also affected plastic construction products to the tune of a 20% jump. However it’s not all doom and gloom as the price of a barrel of crude is currently hovering at $59.80 as of this writing.

NATIONAL OUTLOOK FOR TRANSPORTATION PUBLIC WORKS

In 2005 federal legislation enacted as “SAFETEA-LU” (for the Safe, Accountable, Flexible, Efficient Transportation Equity Act, a Legacy for Users) covering 2004-2009 was passed which took the place of “TEA-21” which expired in September 2003. In 2006 this act mandated seven per cent more for bridges and highways totalling $44.2 billion. The new bill provides 38% more funding over its six-year time frame than its predecessor.

Their prognosticators expect highway and bridge construction to rise 13% to almost $50 billion. During the first nine months of 2006 the top five states for hwy and bridge construction found:

Texas up five per cent.

California up 50%

Florida down 15%

Illinois up 49%

Pennsylvania up 38%

New York however was sixth with plus four per cent.

Ohio gained 17%

Georgia increased 59%

The state of Louisiana was ranked ninth with a gain of 122% primarily due to Hurricane Katrina.

And lastly Michigan nudged up to seven per cent.

In the case of New York voters approved in November 2005 almost $3 billion most probably for the massive Second Avenue subway project plus other biggies regarding the Big Apple.

Ohio voters approved a $2 billion bond measure that will go to infrastructure upgrades this year.

And in California it looks like construction will begin shortly on the $1.4 billion suspension span for our San Francisco-Oakland Bay Bridge.

Expect to find that highway and bridge construction regarding the entire nation may rise an additional nine per cent in 2007 to $54.6 billion however… higher material costs bite into the actual growth which would probably be closer to five per cent.

FORECAST FOR ADDITIONAL NATIONAL CONSTRUCTION STARTS

Environmental Public Works: $33.7 Billion +2%

Other Public Works: $20.8 Billion -2%

Total Public Works: $109.1 Billion +5%

Educational Buildings: $53.3 Billion +9%

In summation one can begin to visualize that the federal-aid highway program is up five per cent regarding 2007 and we can expect mass transit construction to also gain 12% and finally airport improvement grants ramping up two per cent.

All in all the outlook certainly appears to be quite rosey to great for our primes and subs so time’s a-wasting, get in there and bid before the plume contracts are all gone… guys and gals.

Have a great year as the opportunities are out there just waiting for you.

That’s it for now from your lobbyist in Sacramento.