AGC and ABC – What Builders Want from the Legislature

Members of two Alabama construction trade associations say they will be looking to the state Legislature this spring to give their industry an economic boost.

Representatives with Associated General Contractors (AGC), Alabama chapter and Associated Builders and Contractors (ABC) of Alabama say their industry took a heavy hit during the recession and has been slow to recover since then. In fact, according to the U.S. Bureau of Labor Statistics, Alabama had more than 113, 000 construction jobs in November of 2007. But during the same month in 2014, even as the economy improved, construction jobs were still down at just over 84, 000.

“It’s definitely been a slower recovery, ” says Billy Norrell, the AGC’s CEO, “but we’re seeing some positive economic signs that we hope are headed in the right direction. We’re going to do everything we can to get our industry prepared for a full economic recovery, in hopes that that’s the way we’re headed.”

ABC President Jay Reed says members of his organization also have expressed concerns about the economy’s impact on the construction industry.

“But the saving grace for the Alabama market was our base of federal contractors, ” Reed says. “While the private sector did dry up and consumer confidence dried up, the federal government wheel had to keep turning. And that, in turn, generated projects for Alabama-based federal contractors.”

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To create more construction jobs, both groups say they want the Legislature to pass a workforce development or craft training bill. If passed, the law would require contractors to pay $1 per $1, 000 on building permits. The state would then collect and distribute the money to community colleges that offer courses in the building trades.

A slower-than-expected recovery has left builders looking for a little help from the Legislature, says Billy Norrell of the Associated General Contractors, Alabama chapter.

“We’re looking to get that in place so we can offer scholarship money to people who want to pursue a career in construction and fill in this employment gap that we see out there in our industry, ” Norrell says. “We have an awful lot of older construction employees who are retiring and leaving the workforce, and this will be a great incentive to bridge that gap and fill in those holes that we’ll ultimately hit when those members of the workforce leave.”

Another item on the ABC and AGC legislative wish list is passage of an alternative bid method for public works projects. Currently, Alabama only allows the traditional bid method, known in the industry as design-bid-build, for public works projects. Contracts are awarded to the lowest bidder.

Both groups say they want state lawmakers to pass a bill allowing an alternate bid method called the construction manager-at-risk delivery system for public works projects costing $15 million or more. With construction manager-at-risk, a contractor acts as the construction manager or agent for the project owner. The construction manager hires all of the subcontractors, works with the architect on the design and has to guarantee the cost of the project.

“What this piece of legislation would do is allow a best-value concept that would ensure qualified, competent contractors were performing work when the projects were over $15 million, ” Reed says.

Bill Caton, the AGC’s chief operating officer, says his organization pushed for the $15 million threshold.

“All of our membership statewide — big, small, commercial, all of them — have come to a consensus that we would be for such a delivery system if there was a $15 million threshold, ” Caton says. “So a public owner could not use that delivery system except on the jobs that are $15 million and larger. That way you don’t take away the market for the small and mid-sized contractors.”

Norrell says the AGC also is waiting to see what the state Legislature or the federal government will do to address crumbling highways and bridges in Alabama. The problem is that revenues from the Federal Highway Trust Fund, which pays for highway construction and repairs, is shrinking as cars have become more fuel efficient. But Norrell says falling gas prices are an opportunity for elected leaders to find ways to address the state’s infrastructure shortfalls.

“Whether it’s through increased gasoline taxes or other methods that some other states have tried and been successful with, ” says Norrell, “we’re hoping that either Washington, the state or both will use this window of opportunity to really address the tremendous backlog in construction highway jobs that are out there.”

State Rep. Lynn Greer, R-Rogersville, chairman of the House Transportation, Utilities and Infrastructure Committee, says something must be done.

“We’re getting less money now, ” Greer says. “Mileage has improved, and we’re just getting less dollars than we were getting 20 years ago. And that doesn’t even consider inflation. We need some more money for highways in Alabama, and we’ll look at anything that the governor sends over.”

Gov. Robert Bentley said publically last fall that he was not in favor of raising the state’s gas tax. Instead, the state will use a current $508 million bond issue to pay for road projects.

Another item on the AGC’s legislative agenda is the issue of retainage. Retainage is the part of the contract price that is withheld until a project is substantially complete.

Caton says such a measure would aid subcontractors in particular, whose work is often finished well ahead of the completion of a project.

“You get a guy out there who is pouring the foundation or moving dirt, he’s through with his job maybe a year or two before the job’s done, ” he says.

He says the AGC wants a bill that would allow subcontractors to get paid once they complete the terms of their contact.

Associated Builders and Contractors of Alabama President Jay Reed supports a bill that would help homeowners and others upgrade buildings in terms of efficiency and resilience.

Meanwhile, Reed says the ABC is putting its support behind the Property Assessed Clean Energy and Resilience Program (PACER) bill sponsored by state Sen. Bill Hightower, R-Mobile. The PACER program would help homeowners and owners of commercial buildings to pay for upgrades to their homes and buildings for energy efficiency and resilience against storm damage. Payment in the program would be assessed through a building owner’s property tax, Hightower says.

“Most people know that the insurance company will give a 30 to 40 percent discount sometimes for the type of improved structure that you have, ” says Hightower, “and this translates into dollars. So, there’s plenty of incentive to both invest in a building for energy efficiency and resilience, and this program pays for both.”

But ABC and AGC have shelved one agenda item for now, a bond issue to raise close to $500 million to upgrade state buildings and thereby create more construction. They say the reason is the state’s General Fund budget deficit.

“Unfortunately, the state of the economy and the budgets right now are not in a position to where elected officials are going to take on more debt, ” Reed says. “And even though there is undisputable evidence that says it would long term save money, this is just not a climate to where there needs to be additional bond issues. They want to button up the state’s budget and get the financial house in order before they continue to move forward with taking the state into more debt.”

Reed says his organization will take up the proposal for a bond issue during next year’s legislative session instead. But for 2015, the ABC and AGC say they are still hopeful that legislators in Montgomery will pass bills that will give their industry a much-needed stimulus.

“We’re keeping our eye out for anything else, ” Norrell says. “Inevitably, there will be 10 or 15 pieces of legislation that we’ll end up tracking throughout the course of the session that we had no idea were coming that will have an impact on the construction industry for the good or for the bad. But we have a team that will be watching through the course of the session.”

Gail Allyn Short is a freelance writer for Business Alabama. She lives in Birmingham.

Text by Gail Allyn Short

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