Q1 2022 Economic Indicators

Q1 2022 Economic Indicators In our last issue of the Economic Indicator Report, I cited several issues that will dramatically impact the economy in 2022. Specifically, 4 issues were noted by Anirban Basu, Chief Economist for the Associated Builders and Contractors Association:

  1. less growth in federal spending,
  2. ongoing global supply chain disruptions,
  3. rampant worker shortages, and
  4. an increasing cost of capital.

Implied but missing from the list above is inflation. Because our clients will face inflation challenges, we plan to present specific job cost data throughout 2022 and 2023. Every chance we get to reprice a project, we will share our findings.

This quarter’s case study today is a hotel – the same hotel brand; basically, the same building – built between March 2019 and March 2020 and then repriced in May 2022 (2 years apart). The costs exclude all site work costs to keep the percentage increases as close to apples-to-apples as possible. Over those two years, we experienced and shared with our repeat client a 38% increase in total project cost

Here are few key components of that increase:

I started by looking at structural elements:

  • Concrete +95%
  • Masonry +74%
  • Structural steel +49%
  • Carpentry and Framing +117%

Then I immediately jumped to the MEP trades:

  • Fire Protection +140%
  • Plumbing +19%
  • Electrical +4% (we eliminated the structured cabling)
  • Mechanical +75%

We have achieved an overall increase of 38% by finding other ways to reduce scope and find additional efficiencies. It is important to note that this is the same hotel brand; however, design changes were made with the final budget in mind. I am afraid that a true building to building comparison would have resulted in some factor much greater than 38%.

In preparation for our next EI issue, we will rebid a set of drawings for a project that we bid and built 1 year ago. I look forward to learning and sharing these results.

Miles-McClellan General Superintendent, Steve Johnson, Shares Advice for Owners as They Start a Construction Project

Building Excellence requires communication, collaboration and connection. As part of your IMMPact team, it’s my job and my commitment to you to set the right expectations and gain your trust as you approach your construction project. You can have the confidence in knowing that the success of your project is as important to us as it is to you. We take pride in the final product, and if my name is behind the building, you can be assured I will do everything possible to make sure the work is done right and on time and budget.

Your best money and time spent is during the pre-construction. Everyone has their own opinions about how to get projects done, so creating a shared vision and plan is a great starting point. This can be accomplished by walking the property early in the process, as well as after drawings are completed, to make adjustments and to get on the same page prior to project approval and permit submissions. Once construction begins, it’s very difficult to stop or change, so let me share some tips on creating the vision and expectations for your project before construction begins.

Have a Blueprint for Construction Success

Nothing slows down construction progress more than change orders and revisions. Therefore, it is important to have your drawings complete prior to starting construction. Avoid changing the plan if possible. Finalize the details of your project early on to ensure it is “buildable” and to provide more inclusive plans to sub-contractors, so they can provide their most accurate bids.

One thing to consider before starting construction is that unforeseen circumstances are bound to happen. They always do. So, trusting your construction team and making sure there is enough contingency in the budget can help to avoid uncomfortable conversations and surprises throughout the process.

Be Realistic About Your Involvement in the Construction Process

Construction is time-consuming. Be realistic in assessing how much time you can devote to the project and be sure to choose a contractor you trust so you can give the right amount of attention to your project and to your company’s operations and overall well-being.

Don’t Judge a Bid by Its Cover Price

My mother always told me, “If it seems too good to be true, it probably is.” Seemingly minor details can significantly affect the price you pay in the end. For example, a low bid may look attractive on the surface, but it may not include things like materials and installation costs. Make sure to ask questions about what is included in the pricing and where the project team costs can be found. You will need to be able to put each bid into perspective to accurately assess whether you are getting a fair price per square foot. Working with a construction company you trust can avoid costly surprises.

Ask Questions About Your Project — Lots of Questions!

Clear communication is vital in any partnership, and we know you need a clear picture of what is happening with your investment. As construction professionals, we sometimes use industry jargon or explain techniques and processes using technical terms. It’s a second language to us, and we often forget that we are speaking a language not everyone knows. So, ask questions! Ask until you understand the answer! Ask until you have no more questions! Your construction team should guide you through the process and take the time to explain everything so everyone is on the same page and there aren’t any assumptions that can turn negative.

Remember, your project’s success is also a personal success to every construction professional who works on your facility. Your team at Miles-McClellan wants to make sure your project is set up for success from the very beginning. We are on your side. That’s why Miles-McClellan strives for Building Excellence through relationships with communication, collaboration and connection that results in exceeding client expectations.

Contact Miles-McClellan to learn more about how we strive to resolve issues before they become problems.

Q4 2021 Economic Indicators

Q3 2021 Economic Indicators The following is an excellent summary of what 2022 will bring to our industry, as written by Anirban Basu, Chief Economist for Associated Builders and Contractors, in December 2021.

“After the dramatic pace of economic recovery that characterized 2020’s final eight months and the early months of 2021, economic growth is set to soften in 2022. While recession appears unlikely in the near-term, there are many factors suggesting that the year to come will not produce a further boom in activity.

“Among these factors are:

  1. Less growth in federal spending;
  2. Ongoing global supply chain disruptions; and
  3. Rampant worker shortages.

“While there may be some alleviation of the challenges produced by the latter two factors, the economy will continue to face substantial headwinds.

“With so much going on, it is simple to forget what really matters. More than anything else, economic activity is driven by flows of capital. That capital could become more expansive in 2022 as monetary policy shifts, producing likely increases in interest rates in the process. With so many economic actors so fully leveraged, even small increases in interest rates can produce substantial drag on the economy. A sudden surge in borrowing costs could be enough to throw the 2022 economy into reverse, though such a surge appears unlikely. Still, contractors and other construction industry stakeholders should be eyeing interest rates closely over the year(s) to come.”

Miles-McClellan is experiencing all three factors listed above. However, our backlog remains very strong. There continue to be more opportunities available than we can pursue because of our internal bottleneck of lacking team availability.

While it is challenging, we will continue to focus on our client’s needs and work hard to NOT over-promise and under-deliver!

Basu, A. (2021, December 1). 2022 Construction Economic Forecast – The Recovery Could Have Been So Much Better. Retrieved from constructionexec.com : https://constructionexec.com/article/2022-construction-economic-forecast

Miles-McClellan Helps Columbus City Schools Reorganize and Repurpose to Combat Overcrowding, Safety Concerns and Aging Buildings

In 2019, more than 630 children were attending Dominion Middle School, which was built to house 409 students, and the popularity of the high-achieving school suggested a future of rapid growth. At the same time, there was an aging high school in the area that could handle the growth but needed major renovations.

That is when Columbus City Schools (CCS) hired Miles-McClellan as the design/build contractor for the building envelope project of the former North High School. The historically registered building opened its doors in 1924. The design/build team was tasked with making the building safe and dry for students and staff, while preserving the building’s beauty, character and history.

former North High School

The project replaced the roofing, windows, skylight systems and completed masonry restoration. Each component of this project came with its challenges. The existing windows were installed in plaster containing asbestos that had to be removed, the roofing and masonry work had to be coordinated and, of course, the labor shortage and strict timeline to make sure kids could start school as scheduled in the fall played a role. But this project had the additional challenge of working with the Historical Preservation Committee to ensure all design, materials and construction techniques were approved during the design/pre-construction phase.

One of the historical requirements was to mimic the original historic sightlines of the original windows. After a great deal of preparation work, multiple manufacturer bids and an extensive review of three products to make sure they fit the design and performance specification, the Historical Preservation Committee was pleased, and the approval process went smoothly.

With a highly scrutinized budget by nature of working with a public school system, Miles-McClellan delivered a dry, safer school $19,637 under budget. In a 2020 interview with The Columbus Dispatch, Dominion Middle School Principal Dorothy Flanagan said, “We couldn’t have asked for a smoother process from district leadership and our design and construction team.”

Overall, Miles-McClellan has managed 11 projects to improve the safety and learning environment for CCS, including one current project to replace the HVAC systems in Valleyview Elementary, Westgate Elementary and West Broad Elementary schools.

Other HVAC upgrades, electrical upgrades and facilities renovations include Brookhaven High School, which now houses the Columbus North International High School, and the former Dominion Middle School, which is now the New World Language Middle School.

Safer schools are a priority for Columbus City Schools and Miles-McClellan. We are proud to have helped CCS provide more secure entrances to 10 district school buildings — adding new security checkpoints in five schools and upgrading security vestibules at another five schools. The work included demolition, casework, aluminum storefronts, wood doors, hollow metal frames, door hardware, drywall, painting, HVAC and electrical.

“The team at Miles-McClellan not only produce good work, they are very personable, responsive and organized. They have a great system in place to manage projects and they have helped Columbus City Schools make our schools better and safer for our students.”
-Columbus City Schools Facilities Rep

We build success by Building Excellence! We take pride in our people, and we take pride in our work. Contact Miles-McClellan Construction to put that pride to work on your next project.

Miles-McClellan Is Building Excellence With People

Miles-McClellan Is Building Excellence With People

While technically speaking, all our construction projects start with building materials at a job site. Our projects really start with our incredible employees who come together to form experienced and reliable teams that plan, facilitate and complete dynamic projects that are customer-centric.

So how does Miles-McClellan Construction (MMC) stand above the rest?

With our hands – Our team uses our hands to build quality structures and each project has our unique MMC thumbprint on it. Our construction projects are a major part of our clients’ stories and our company’s story and legacy.

With our heads – We offer our employees opportunities for career and leadership development, which help them with planning and problem-solving in their positions.

With our heart – The positive impact our projects make for people in local communities means everything to us. Client satisfaction is of paramount importance; it guides our work and recruitment. We believe in hiring the best people who will bring their valuable experiences and skill set to every project. Combine this with a purpose-driven heart and you have the answer to why Miles-McClellan has been a leader in commercial construction for over four decades (and counting!).

We are proud of our relationships with our employees and our clients. Simply put, pride is why we do it!

Below are a few ways Miles-McClellan distinguishes itself from other commercial construction companies with how we approach our team, starting with recruitment. Building excellence starts with attracting and supporting excellent employees.

Recruit and Develop Leaders on Our Strong Foundation

One of the best ways to sustain and grow a business is from within. Successfully recruiting talented individuals to join our team is not just about filling a specific position in the present. When we recruit and interview applicants, we focus on their current skillset and experience and their future potential. By seeing the talent and potential of our employees, we provide opportunities for them to develop into leaders at Miles-McClellan, which translates to employees and senior management being on the same page. For example, we work with the Builders Exchange of Central Ohio to provide leadership classes for some of our employees called BXFlex (Field Excellence Leadership Series). Just like we envision the potential of our projects and our employees.

Provide Career Path Development

When a job feels static with little or no opportunity to grow in a company, that can negatively affect employees’ work production and morale. That’s why we pride ourselves on providing career path development. Employees who will feel their work is appreciated and that there are chances for promotions and increased responsibility positively impacts their work and the company. Investing in our people for the long-term is an investment we make in them, and we make to drive building excellence for our clients.

Personal Ownership of Projects

Miles-McClellan ensures our expectations and our clients’ expectations are always being met by taking personal ownership of projects. When people feel personally responsible for getting something done, large or small, it promotes a culture of excellence. Our IMMPact approach illustrates this point of personal ownership by emphasizing knowledge sharing, which allows our team members to trust one another and hold each other accountable throughout a project life cycle.

Client Reassurances

Investing in our people is an investment in our clients’ projects. This level of continued investment and support directly correlates to our more than four decades of building excellence in Ohio and North Carolina. There are many non-tangibles that go into constructing a facility and we make sure to account for these factors to ensure we are always doing things the right way.

We take a lot of pride in our work at Miles-McClellan; it’s why we do it! And our pride is visible in every level of our company and with our great employees throughout their career experiences and development. Miles-McClellan strives for building excellence for a better community, for you.

Miles-McClellan Turns Buildings into Art for Franklin Park Conservatory

If you’ve been to Franklin Park Conservatory in Columbus, Ohio, you have seen firsthand how nature meets art through their displays of beautiful flowers, plants and organic landscapes, enhanced with real pieces of art. But did you notice how the buildings themselves fit into those landscapes and how, through lighting and innovative architectural design, they have become an art exhibit of their own?

With the Conservatory’s vision to restore the vitality, grandeur and beauty of Franklin Park while retaining its original charm and character, Miles-McClellan Construction has managed a variety of projects for The Conservatory, including the expansion of the John F. Wolfe Palm House, a registered Historical Place. As part of a four-phase, two-year expansion campaign, Miles-McClellan completed the expansion of The Palm House by building two 5,000 square foot additions that flank the building’s existing corridor, one designed for special events and the other for administrative offices. The versatility and creativity of the design added 10,000 square feet of flexible space for open air gardens, water features and elegant gatherings, while conquering the roadblocks that come with historical renovations.

In addition to the expansion of The Palm House, Miles-McClellan oversaw the construction of the Bride’s Garden, community gardens with education pavilion, and LIGHT RAMIENT II, an inspiring light display which illuminates The Palm House and was designed by internationally renowned, award-winning artist James Turrell.

Franklin Park Conservatory before and after

In 2015, as classes, programs and community outreach increased for the Conservatory, a new space was needed, so the organization relocated an historic barn’s timber frame, which was set to be dismantled, from northern Ohio to its campus. Miles-McClellan took on the transformation of the Wells Barn, which is not only a piece of history, but a construction marvel filled with engineering innovation, including a basement with classroom space, an elevator, a large event space, a commercial kitchen, and a bar.

“The project was completed on time and on budget, which is critical for a non-profit organization, in large part due to Miles-McClellan’s commitment to problem solving, open communication and outstanding project planning and budgeting.”

Garry Clarke, Vice President of Planning
Franklin Park Conservatory and Botanical Gardens

Building Excellence takes teamwork and Miles-McClellan would like to thank its architecture, engineering and landscape partners, and the Franklin Park Conservatory, for helping to create these amazing spaces.

Q3 2021 Economic Indicators

Q3 2021 Economic Indicators It’s always interesting to watch the trends of construction’s big four leading economic indicators while comparing those results to our conversations with our designer and contractor peers. Overwhelmingly, the discussions focus on inflation – both in material and labor inputs. Yet, the amount of work in the system continues to expand.

  • The AIA Billing Index rose nominally from 55.6 to 56.6, indicating that architects billed more in September than in August 2021. More importantly, backlogs of architects across the country reached a new all-time high since the AIA started collecting the data quarterly in late 2010, now averaging 6.6 months.
  • One additional note worth mentioning from the AIA September survey is that the Project Inquiries Index jumped above 60 to 62.0, which tells us there are plenty of opportunities in the market to pursue.
  • 17 new projects, each $100 million and greater, entered the Dodge tracking system.
  • The Dodge Momentum Index jumped from 148.0 in August to 164.9 in September 2021. This is the single strongest predictor of our market over the upcoming 12 months.
  • While the ABC Backlog Indicator fell nominally from 7.7 to 7.6 months, Miles-McClellan’s backlog, as well as those backlogs of our contemporaries here in Ohio and North Carolina, all remain strong.

All the signs outlined suggest that owners and developers are looking past the current pricing concerns, the continued spread of COVID-19 variants, and the political climate are moving forward with projects to meet demand.

Relationship Lessons Learned – How to Develop Lifelong Clients in the Construction Industry

With over 43 years of experience in the construction industry, Miles-McClellan Construction has learned valuable lessons about building lasting relationships with partners and clients. Our focusing on building strong relationships has resulted in many positive outcomes:

  • 85% repeat clients by volume
  • $71 million average annual sales volume
  • 10-year average employee tenure
  • Long-lasting success, even through difficult times

Our success in building trust with those we work with is no accident. It’s part of who we are and who we have always intended to be. So, what exactly do we do to cultivate trusting relationships?

How Miles-McClellan Cultivates Trusting Client Relationships

Focus on Positivity When Working With Clients and Partners

Negativity often seems to dominate the news headlines, social media chatter, and public discourse. Many people experience negativity seeping into their workplace, family life or social life. Negativity is pervasive – so why not stand out by being a source of positivity?

By focusing on the good, it’s far easier to stand out to your clients and partners. That’s not to say that negative things never happen or that they should be swept under the rug. Being candid and open is important but staying stuck on the negative is counterproductive. By actively focusing on genuine and positive interactions, we notice that we build better and more productive relationships.

Don’t Forget to Show Gratitude.
One important aspect of positivity we try to practice is showing gratitude, which can easily be taken for granted when busy. This includes gratitude to our clients and our colleagues and can be accomplished with small and simple ways of saying thanks, like emails, hand-written notes, small gifts or favors, highlighting the individual or organization’s accomplishments, or by sharing time over lunch.

Always Act with High Integrity
Integrity is one of our core values—and it contributes greatly to our ability to provide excellent customer service. When we communicate proactively, tell the truth, keep our word, act fairly and take responsibility for our actions, our clients see those behaviors as representing integrity. Practicing integrity isn’t always easy, but it always pays off in the long run.

The most important reason integrity is so critical to building long-lasting relationships is that it forms the foundation of trust. By showing clients and partners that we act with integrity through our day-to-day actions, we cultivate the type of trust needed to build repeat, long-lasting client relationships.

At Miles-McClellan, we practice integrity by focusing on:

  • Being true to our word — always
  • Being intensely loyal to our colleagues, clients and partners
  • Being honest and straightforward
  • Taking personal responsibility for the successes of our projects
  • Not taking shortcuts when it comes to problem solving
  • Taking pride in the quality of our work

Focus on Long-Term Sustainability Instead of Shortsighted Goals
So many organizations these days focus heavily on short-term goals. A lot of being long-term focused comes down to not forgetting about the bigger things that matter amidst day-to-day work. By not being exclusively short-term focused, we can once again stand out from other organizations while laying the groundwork that ensures our success down the road.

By taking a step back and focusing on the longer term, we allow ourselves to cultivate relationships, develop new capabilities and strengths and be proactive in managing risks, both on the job site and in the office. Our long-term approach allows us to:

  • Be actively involved in our community Invest in our own workforce and cultivate a culture of taking care of each other
  • Stay up to date on trends and new opportunities to proactively stay ahead of our peers
  • Actively build relationships with everyone we work with, even if there is no immediate reward or benefit
  • Focus on integrity, quality and service at all times

These strategies improve the quality of our work and relationships and help to ensure high continuity within our workforce. This leads to less client turnover, less disruption and higher overall satisfaction.

Focus on Beating Expectations in Client Service
Finally, beating client expectations in service is one of our founding principles. Our founders walked away from large international construction companies because they believed there was a better way to deliver construction services. There was a key component missing in the construction industry – customer service.

By building Miles-McClellan from the ground up with customer service at our core, we’ve separated ourselves from most other construction companies in the best way possible. This not only enables better relationships with our customers, but by aligning our model around our IMMPact Approach, we reduce bureaucracy, decrease miscommunication and improve the overall quality of the work we provide our long-term clients.

By building long-term relationships we are building excellence. Contact us today to learn more about our capabilities.

Construction Momentum and Development Remains Hot Going Into the 4th Quarter of 2021

Every economic indicator for construction tracked by Miles-McClellan indicates strong growth in the most recent quarter, and a strong likelihood of continued growth heading into the 4th quarter of 2021.

To get a read on commercial and industrial construction, Miles-McClellan looks at:

  • ABC Construction Backlog: Amount of commercial construction to be performed in coming months.
  • AIA Architectural Billing Index: The Architecture Billings Index is an economic indicator for nonresidential construction activity, with a lead time of approximately 9–12 months.
  • FMI Non-Residential Construction Index: This index is an indicator that provides a leading look into construction projects.
  • Dodge Momentum Index: A unique 12-month leading indicator of construction spending for nonresidential building.

Accelerating Growth and Demand in Construction
From the above publications, not only are all the indicators quite far into “growth” territory, they have all been accelerating on a quarterly basis. The Architectural Billing Index and Dodge Momentum Index decreased slightly in June but are still very far into growth territory.

Construction Outlook for Q4 2021 Going into 2022
Based on the reports, we believe that barring any unforeseen shock to the economy, construction demand will remain very strong in the coming quarters. Lowered costs of financing have allowed many projects that were previously delayed to get started, and many of the COVID-19 oriented constraints have started to ease.

As a result, overall growth remains strong, and the previous issues of bottlenecks have become less of a burden to the construction industry. The largest constraint to the construction industry continues to be labor shortages and escalated pricing.

Are We at Peak Construction Growth?
One question some may be asking is whether we have hit peak construction growth. Many of the indicators tracked within this report have hit highs not seen since before the 2008 financial crisis. Keep in mind, peak growth does not mean that a decline in the growth rate entails contraction, just that the rate of growth is not accelerating beyond the current pace.

Questions over peak growth stem from lingering COVID-19 bottlenecks, reduction in consumer confidence due to many of the consumer stimulus programs winding down, and anticipation of rising interest rates in the future as the economy recovers and government / central bank policies become less accommodative.

While we don’t know whether we’ve hit peak growth yet, the indicators we watch have a long lead time, and provide a lot of confidence that the environment should be in “growth” mode for some time to come. With that said, we may see growth level off or moderate a bit, which may not be a bad thing as we work through labor and material bottlenecks.