Building Communities: The Importance of Exceptional Construction in the Public and Municipal Space
2024 Q1 Economic Indicator
Contrary to earlier predictions of a recession in early 2024, the AIA and FMI now suggest a potential slowdown in the back half of 2024. While our indicators do point to a deceleration, our internal data and anecdotal evidence consistently demonstrate the robustness of the construction industry, which does not align with the notion of a significant downturn.
To summarize the AIA and FMI reports, they expect an increase in construction spending between 2-3% in 2024, followed by a rise of 1% in 2025. Accounting for the anticipated slowdown of construction over the next two years, the AIA points to three factors that, when combined, cause banks to tighten up lending, resulting in difficulty in getting projects started:
- Rising long-term interest rates.
- Higher construction input costs with input prices remaining 35% to 40% higher than pre-pandemic rates.
- Construction labor costs are continuing to rise at a 4% annual pace.
Despite the AIA Billing Index remaining below 50 for 9 consecutive months and the Dodge Momentum Index staying low for the past 10 months, the Charlotte and Columbus construction markets are still brimming with potential. Contractor backlogs, as measured by ABC and FMI, saw an increase at the end of Q1. This positive trend is mirrored at Miles-McClellan, where our backlog is higher today than it was at the end of Q1.
As you read the full report, you will learn more details about these numbers and trends.
Recent MM Bidding Experience
Immediately below is a summary from one recent bid effort, but it indicates what our teams are experiencing as they continue to price projects for our clients actively.
Sharing a recent bidding experience, Brad Bloomberg, MM Vice President, expressed, “Our most recent bid was for a local office remodel in downtown Columbus. The project primarily focuses on updating elevator lobbies, restrooms’ finishes, lighting, and ceilings. We had a prequalified list of limited subcontractors invited to the project. While the coverage was average on drywall and fire suppression, we received feedback from painters, electricians, and HVAC contractors that they were too busy with the existing backlog over the summer months to take on any new work.”
- Painting: 2 bidders of the 7 invited.
- Electrical: 2 bidders of the 10 invited.
- HVAC: 1 bidder of the 10 invited.
- Flooring: 2 bidders of the 6 invited.
- Drywall & Demo: 4 bidders of the 5 invited.
- Fire Suppression: 3 bidders of the 6 invited.
This level of bidding activity is typical for the summer months. We will monitor the trends and report on contractor backlogs in Q3.
Miles-McClellan Construction Director of Field Operations Steve Parsons Discusses the Benefits of Owner’s Representation in Construction
Construction projects are complex and require effective management of many different moving parts, such as groups of subcontractors, estimating costs and supervising work to ensure it is of the highest quality. Our owner’s representation services offer support during the planning, design and construction cycles of a project, and allow a project to meet the owner’s expectations in terms of scope, quality, schedule and budget. We customize our owner’s representation services to be flexible based on the owner’s needs, and the owner decides how much involvement and decision-making authority we receive. This leads to exceptional results with a project completed on schedule and on budget.
In this interview with Miles-McClellan Construction director of field operations Steve Parsons, learn about his experience being an owner’s representative and how it has allowed him to “save the day” for his clients.
Let’s Hear More From Steve Parsons:
Q: What experience do you have as an owner’s representative on projects?
A: Greasecycle’s Charlotte facility was my first assignment as an owner’s representative. I look forward to my next opportunity as an owner’s representative.
Q: Why do you like being an owner’s representative for clients?
A: As a contractor, it is rewarding and challenging to experience the owner’s vision and assist them with their project’s planning, financial and schedule goals.
Q: What do you bring to the table – why would a client want to work with you?
A: Experience. I have fourty-four years of commercial construction experience with a diverse and long list of successful projects.
Q: Can you name an example of “how you saved the day” for a client?
A: During COVID-19 and Greasecycle’s project, we were advised that the lead time for the electrical switch gear equipment would be twenty-eight months after it was approved and released due to severe supply chain issues. This was unacceptable for a project with a goal of completion within nine months. Through my electrical supply contacts, I sourced a used and refurbished switch gear from a supply house in California and finished the project by the nine month deadline.
Q: Do you have any specific advice for those in the construction industry working as an owner’s representative for clients?
A: Be a good steward. Treat concerns and your client’s money like you would your own. Think outside the box of a typical contractor and bring creative solutions to the table. Listen to the owner’s concerns and draw down on all your experience. Pride the owner with your professional advice. Advise the owner of the risks before they become a problem. Always be fair but firm with everyone.
Do you want to make sure your next construction project goes smoothly, on time and without numerous unforeseen obstacles? Then learn more about our owner’s representation services and contact us if you have any questions.
Building Excellence from the Beginning: The Benefits of Construction Management at Risk
For over 46 years, our customers have trusted us to build excellence and find smarter solutions for all their construction needs to ensure the best possible outcome for any project. With comprehensive Construction Management at Risk (CMR) services, our strategic approach to crucial components of a construction project that include project and risk management, project cost estimate and budgeting and design and engineering services, we help our customers minimize risks, control costs and get projects completed on time and at the highest standard of excellence.
How Does Miles-McClellan Construction Approach Construction Management at Risk?
As with all of our projects, the process begins with one of our talented leaders serving as Project Executive and committing to delivering a construction project within a guaranteed maximum price (GMP). From there, the Project Executive takes on the role as consultant throughout the development and design phase, and does everything possible to ensure a project is prepared and ready to enter the next phase.
How Can Construction Management at Risk Benefit My Next Project?
In our experience, CMR with Miles-McClellan Construction provides several benefits that ensure a project is successful from beginning to end. These include:
- Projects Completed on Time – When a construction manager is involved early in the process, they can optimize the construction schedule and plan for multiple aspects of a project, including delivery of materials, procuring labor and equipment, coordinating various timelines, etc. Ultimately, this allows for increased speed of project execution.
- Construction Managers With Decades of Experience – Our construction managers have decades of experience, and are dedicated to client satisfaction and building excellence. They have worked with clients of all sizes in all industries, and found ways to overcome a variety of construction challenges. Learn more about their approach to construction and why they are the best in the business.
- Enhanced Synergies Between Stakeholders- Talented construction managers have the ability to foster a culture of collaboration and transparency amongst stakeholders involved in a project, which allows stakeholders to identify areas for improvement and construction managers to adapt and plan for changing project requirements. This goes a long way in enhancing stakeholder satisfaction.
- Cost and Pricing Transparency- As stated earlier, one of the hallmark features of CMR is the creation of a Guaranteed Maximum Price (GMP), which provides owners with cost certainty and transparency and ensures that projects remain within allocated budget constraints. This requires significant planning and cost monitoring from construction managers, and helps minimize the risk of budget overruns.
Ready for Project Success? Then Ask About Our Construction Management at Risk Services!
We believe in building excellence before construction ever begins and have the talent and expertise to provide a seamless and efficient design process that leads to exceptional results. Contact us to learn more about our CMR services and experience on time, on budget construction!
From Concept to Completion: The Value of Owner’s Representation Services in Commercial Construction
Commercial construction projects are complex and involve multiple moving parts. Tasks such as organizing logistics, estimating costs and supervising the quality of work take time and experience. The result if not done correctly? Construction mistakes that can cost an owner millions and completely derail critical deadlines and schedules.
At Miles-McClellan Construction, we consider ourselves an extension of your team, and our owner’s representation services offer full support and service throughout the lifecycle of a construction project. We offer these services at varying levels based on your needs, and as the owner, you decide how much involvement and decision making authority we have as your representative.
Our owner’s representation services include the following:
Team Building- Creating a cohesive construction team you can trust.
Budgeting- Providing accurate and conservative budgets.
Inspections- Evaluating quality and specification conformance.
Schedules- Monitoring timelines and managing decisions.
Meetings- Meetings allow us to make client needs our focus and priority through the entirety of a project.
Discover How Our Owner’s Representation Services Allowed Greasecycle® to Save Money and Reduce Stress
Greasecycle®, a company that provides comprehensive grease services and sustainable waste solutions, partnered with Miles-McClellan Construction on a new 9,000 SF recycling facility for cooking oil and grease trap waste in Charlotte, NC. This project included the complete renovation of an existing building, site work, new process equipment and below ground storage tanks. Through our owner’s representation services, we guided them throughout the project in the following ways:
Permitting- Miles-McClellan Construction led the design team in securing permit approval from the County’s zoning, traffic, civil, architectural, mechanical and electrical departments. We also worked closely with the County Fire Marshals to secure their approval.
Team Formation- We vetted, selected and interviewed all contractors to build the best possible team. We ensured that there were industrial process professionals on-site and managed every part of the construction and the process systems to maintain timely project completion.
Change Order Review- We required all change order requests to be broken down in detail and thoroughly reviewed to ensure fair costs for additional requested work.
Contract Resolution- Miles-McClellan Construction resolved all contract disputes by leading all negotiations without the need for expensive legal actions.
The Result? Owner’s Representation That Paid for Itself
Our owner’s representation services saved Greasecycle® 7%, a total of $457,330, of the overall construction budget by dividing all work into numerous contract packages and providing thorough and detailed scope descriptions and schedules within the bid packages to the prospective contractors. Pretty impressive when you consider that our fee was $164,185!
Check out our case study to learn more about his project.
Our owner’s representation services keep our clients covered from beginning to end of a construction project, regardless of size or scope. If you’re ready to build excellence with owner’s representation services that allow you to save big and stress less, then contact our team!
2023 Q4 Economic Indicator
The follow excerpt it taken from the FMI 2024 North American Engineering and Construction Industry Overview, First Quarter Edition.
“Best case assumptions for our forecast is for a recession in 2024, likely sometime during the first half of the year. These expectations are based on a range of predictive economic indicators, but especially the inverted yield curve. The duration of the economic contraction will depend on the U.S. policy response, but as with historical cycles, the impact on the construction industry will likely be longer lasting.”
All the lead indicators presented in our Q4 2023 Economic Indicator continue to reflect a downward trend and support the statement made by FMI above. Additionally, what we are experiencing in the market only supports this story further.
- We have watched private bidding opportunities almost completely dry-up. We attribute this to current interest rates, owners’ fear of a recession, and the sheer number of vacant office spaces available.
- With less private bidding opportunities we have had to jump into the public bid market which makes up just over 90% of our total bid opportunities. For the first two months of 2024, in both Columbus and Charlotte, we have seen an average of 6-8 general contractors per bid list, when a year ago at this time there were only 2-3 bidders per list.
- Our teams have also seen a wider geographic area of subcontractors bidding on projects. Previously our subcontract bidders were contained to the Columbus market. Now we are receiving bids from subcontractors we have never received bids from before, including out of state firms from West Virginia, Michigan, Indiana, and Illinois.
- Additionally, the sheer number of bids that we are receiving per subcontractor trade has more than doubled. Previously, we would receive 2-3 bids per trade category, and now we are receiving 6-7, the only exception being mechanical, electrical and plumbing. We are still only receiving 2-3 subcontractor bids in these skilled trade categories, and we assume that is because of a shortage in skilled labor in Columbus driven by the number of large, technical projects.
Using Our Construction Experience to Build Excellence
Building excellence and exceeding client expectations has been our core philosophy for over 45 years, and it is our exceptional team that allows us to accomplish this mission. Throughout the years, our team members have worked on a magnitude of different complex projects for clients of all sizes in all industries. This provides our clients with many advantages. Whatever your construction project or needs, we have the skills and expertise to ensure your satisfaction!
Let’s explore how we can make our construction experience work for you.
Diverse Expertise
From residential, commercial, healthcare, higher education, manufacturing, and hotels, we have done it all! Having this knowledge and experience allows us to handle different project complexities and requirements effectively. Wherever there is a construction challenge, we have a smarter construction solution.
We Know the Industry
Our range of experience means we know the intricacies of a variety of industries and their environments. Every industry has unique needs that must be met, best practices that must be observed and certain technology that is required to help operations run more smoothly. We have had years of experience working within these different guidelines depending on our client, which is why we are confident we are more than prepared to handle even the most complex details of your construction project.
We Build Lifelong Relationship
Being a top construction company since 1978, and having numerous team members with a vast array of broad construction experience, means we have built strong relationships with our clients, suppliers, subcontractors, architects, engineers and other industry partners. This also allows us to provide a variety of different services that other construction companies can’t offer. Whatever your dreams are for your next construction project, we know an expert that can turn that vision into a reality!
Efficient Project Management
Having broad construction experience means our project management systems and processes have been refined to be as efficient as possible. Every Miles-McClellan project is guided by some of the most respected and experienced construction professionals in the industry along with an IMMPact team that shares insights and knowledge with each other to achieve building excellence.
Client Satisfaction is Top Priority
Experienced construction firms recognize the significance of pleasing the client. This is why at Miles-McClellan Construction, we stress communication, transparency and collaboration throughout the life of a construction project. We want to know all of our clients’ needs, get their feedback and help them with tough decisions. This results in building lifelong relationships.
How can our broad construction experience make your next project a success? Contact us and let’s work together to find out!
Fourth Quarter Economic Indicator – Looking Ahead
Going into the first quarter of any year, we expect the bid market to pick up with the expectation of spring projects that have been in design throughout the winter. What we are seeing is a mixed bag of trends, and we hope sharing these trends with you will help you plan your pending projects.
Below is a quick summary of what we have been seeing over the last 60 days:
- The broad trend speaks to the rising interest rates and rising construction costs. The private market has slowed down. Our private clients request budgets, but only some projects are heading into construction. We have currently been bidding and working on more public projects. We don’t expect this to continue because the slowdown in demand will drive construction pricing lower, which will eventually offset the rising interest rates in proformas.
- There has been an increased sense of urgency to get formal approval for change orders on our existing projects and across all types of projects we work on. Subcontractors are hesitant to hold their pricing for over a few weeks, so we are forced to push owners and construction managers to get signed approval to lock in pricing. We support our subcontractor team in this effort, but in return and to help protect our clients, we ask for secured manpower so that our clients receive the service on time.
- Owner’s preconstruction budgets continue to underestimate the cost of future construction. This creates rebid situations for public and private projects, resulting in project delays and frustrated owners before the project starts. We recommend multiple looks at the budgets you are creating today: one by your architect and one by your contractor. Then lock the project leaders in a room until they agree on the budget.
As a recent example, we bid on a health clinic in early August 2022. It was a competitive bid and Miles-McClellan was not the lower bidder. Our bid was 94% over the owner’s budget, coming in at $1.4M. The owner and architect rebid the project after taking the time to redesign and go through value engineering. The revised budget was raised 55% over the original budget, and our revised bid in October 2023 was submitted just above the revised budget. We were awarded the project 14 months after the initial bid.
While at times it may feel like we are spinning our wheels with all the budgets and rebidding, we would rather provide realistic, inclusive budgets and bids then submit low numbers with the hope of winning and not failing.
Self-Performing Various Trades Offers Many Project Benefits
Miles-McClellan Construction has been a part of building thriving communities since 1978. Not only do we understand how to manage construction, we know how to construct the building—and all that comes with it.
At Miles-McClellan we can handle all aspects of a project, from owner’s representation to complete project management to masonry to concrete to caulking! That’s because of the vast specialized experience our team has – including self-performing work in multiple construction trades.
There are a lot of benefits of keeping your project within the Miles-McClellan Construction team of professionals:
- We are in control of the project schedule, so our ability to self-perform the work mitigates delays!
- We manage the communication with our team so our clients always know the correct status of their project.
- Our ability to control more of the trades without having to sub out work creates time and cost efficiencies!
- Plus, we can guarantee the same Building Excellence standard that Miles-McClellan is known for!
When you work with Miles-McClellan Construction, one of our expert Vice Presidents will lead a group we call an IMMPact Team. This team works closely with clients throughout the entire project, enabling our team to work quickly, be more flexible and responsive to what our clients’ need. This is one more advantage that differentiate us from other commercial construction companies.
Miles-McClellan Construction takes great pride in building success to grow thriving communities. Contact us today to learn more about how our ability to self-perform various construction trades can add value to your next commercial construction project. We build success by Building Excellence!