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CEO Roundtable: Commercial Construction

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Each month, we gather around the table with a different group of Springfield business leaders to discuss industry trends, workforce and company operations. Join us as we get a behind-the-scenes look into our business community from the C-suite.

Springfield Business Journal Executive Editor Christine Temple discusses commercial construction with Michael Nesbitt, president of Nesbitt Construction Inc.; Gregg Scholtens, executive vice president of Nabholz Construction Corp.; and GR Stovall, president of DeWitt & Associates Inc. Listen to the full conversation for discussion on materials procurement, office expansions, a shift to the construction manager at risk model in public work and technology advancements in the field.

Christine Temple: I want to start talking about the local health of the industry, so curious what your current workload is and your backlog, and if you could give insight into the types of projects you’re working on.
GR Stovall: If change is an indicator of health, then we’re healthy. Being able to adapt to the things that have happened to us in the last three or four years has been important. I think it’s taught us a lot. Our backlog is relatively strong. I think we’ve learned a little bit about how not to say yes all the time. We’re careful about what we look for, and we try to be smart about who we serve. Our current workload is not bad.
Gregg Scholtens: Our current backlog is very strong; current project load is very good. We are seeing some indicators from the architectural billing index that would indicate that there’s a slump headed our direction in the commercial construction industry. We are seeing some changes in market pursuits, a lot more civil projects. Obviously, the Missouri legislature and governor passed our budget for 2024 that had a really heavy civil impact along (Interstate) 70, but that will also affect some of the road construction and bridge construction here in southwest Missouri as well.
Michael Nesbitt: The health of our industry seems pretty good. The projects I deal with are a little more small-business oriented than maybe what GR and Gregg deal with, so kind of seeing a little more of an effect on what we’re bidding on and chasing. Our backlog is OK; it’s relatively good for right now. I’d like to have more. We’ve been pretty insulated from the last couple incidences of the economy, but I do feel that slowdown a little bit.
Temple: What kind of projects primarily make up your workload?
Nesbitt: We’re more small-business oriented, so I’m not seeing the office remodels or new construction, as many of those – the kind of smaller projects up to maybe $4 or $5 million. They’re more related to bank financing than some of the large projects that are government funding coming in.
Stovall: A lot of government funding, higher ed, K-12. That being said, we’re very proud of our private clients and we’ve got some fairly good-sized projects that are going on. There’s no real indicator to us that any one thing is weakening or prevailing. I’m not saying I don’t agree that there probably is going to be a slump coming, but I tend to want to look the other direction as much as I can and focus on our issues today.

Materials costs
Temple: The Associated Builders and Contractors did an analysis of U.S. Bureau of Labor Statistics data and found that construction input prices are just 0.3% higher than a year ago. That’s really leveled off since before COVID. If you look at that overall, prices increased 41% since February 2020. Have you seen that leveling off of materials?
Stovall: I would agree that it’s leveled off. I think we want to see it dip back down, and I don’t think that’s going to happen.
Scholtens: It definitely has leveled off, and I don’t anticipate some sort of drastic decline in the materials market anytime soon.
Nesbitt: It’s nice to see it steady – that we’re not seeing these wild swings, that we’re not kind of hedging our bets on every estimate we put out there.
Temple: Are there any materials that are still volatile?
Scholtens: Steel seems to be a little bit still.
Temple: Is that changing the way you’re building?
Scholtens: It’s a little challenging to avoid steel in the construction industry, but yes, there’s always a constant look for other materials. Some of our markets not too far away – northwest Arkansas would be a good example of this – where they’re starting to utilize products like cross laminated timber, mass timber construction, which is wood in place of steel.
Temple: Have you seen that used locally?
Scholtens: Not so far. It’s a manufacturing challenge. Most of that is manufactured either overseas or up in the Northwest. They are starting to see some manufacturing of that product out of central Arkansas. I think there’s a manufacturing plant in Alabama as well. So, trying to understand how it works with the southern yellow pine industry. I think we will start to see more of it here in our local market in the future.

Labor challenges
Temple: Maybe construction prices aren’t the big kicker on costs, but it’s probably labor. How are you meeting demand with that challenge? What are some of the shifts that you’re making?
Stovall: Labor is up, and it’s not coming down. We’re all general contractors and there’s a lot of trades that we don’t perform. We have to partner with the subcontractors and being careful that every subcontractor that quotes us a price on something, we need to make sure they’re able to commit to that in that time period. We’ve been through a period here in the last three, four years that subcontractors have called and said, “All of my people are sick, I can’t meet the demand.” We have a unique opportunity at DeWitt because we have a large in-house workforce, and we’ve been able to turn around and supplement those people and make that work.
Scholtens: We’ve got a great stable of self-performed employees that we lean on very heavily. Over half our workforce is some sort of craftsperson in the field. That’s a huge key to how we perform work in the future. Wage rates have increased for all of our employees across the board. Flexible schedules has become extremely important. That’s just a change in how we manage our workforce. Some of the other things that we’ve started to focus on is really how to get more student engagement. How to get kids, even at middle school level, excited about going into the construction industry. It’s just part of what we have to do and change how people perceive the construction industry. It’s a great place to come to work, a great place to make a great living. We’ve done that through things like Build My Future.
Nesbitt: On the labor side, obviously it’s up. From our perspective, the subcontractors, as GR said, whether or not they have the labor on their side is a big deal to us. Whether or not we want to admit it, I think sometimes we’re at the mercy of the subcontractors. We can do everything we want, and can do legally, to get them to be on the job and finish on time. But at the same time, if the subcontractors don’t have the labor, then that’s where you’re getting into troubles.

Excerpts by Christine Temple, ctemple@sbj.net.

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