Skoda Minotti

This issue of Construction Connections includes the following articles:

2010 Construction Outlook

The construction market ended 2009 in as bad a shape as it has been in for almost two decades, with non-residential construction plummeting and housing construction at record post-World War II lows. For the overall economy, however, the year ended with a host of indications that recession was morphing into recovery.

Some of the boldest pronouncements came from the National Association of Business Economists (NABE). NABE conducted its annual meeting in October in St. Louis, and made headlines by declaring that the Great Recession was over. On the heels of their annual meeting NABE published its 2010 outlook. The forecast contained a number of major points:

Gross domestic product will grow at a 3.2% rate for all of 2010 (this is an upward adjustment from NABE's earlier forecast).
The jobless recovery will turn to a recovery adding jobs in the first quarter of 2010. NABE's economist panel predicted a decline in unemployment to 9.6% by fourth quarter 2010.
Household spending will remain sluggish but the housing will gain momentum. Experts forecast a 38% jump in housing starts and an 8% increase in residential investment in 2010 due to low prices and low interest rates.
Business investment will be the main engine of growth in 2010
Corporate profits will climb 12.4% in 2010
The dollar will remain weak. Short-term interest rates will remain below one percent and inflation will not be a problem in 2010.

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Ten Steps to Safety
By Joseph Ventura, Safety Controls Technologies

The construction industry has struggled for many years with the answer to the question, "Can Management Prevent Accidents or Are Workers Responsible for Their Own Actions?" In the litigious society that we live, it has become more important to find someone "at fault" for an accident than it is to find out how we can prevent it from ever happening again. Consider this:

20% of the nation's workplace fatalities occur in the construction industry
The construction industry has the highest number of occupational injuries - 10% of all industries
The cost of accidents accounts for approximately 6.5% of all construction dollars spent
Construction companies with an effective written safety program have 36% lower accident rates, on average
Maintaining a good safety record for at least two or three years can reduce a company's workers' comp and general liability insurance (GLI) premiums by as much as 40%

Most successful companies subscribe to the theme that "all accidents can be prevented." They institute training and qualification programs, safe performance incentives, and culture change; yet we still see construction accidents that result in lost time, and occasionally death, which is extremely costly in the shortsighted measure of money and, in real terms, impact to the worker's family.

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Constructing a Claim for Lost Productivity Damages
(as seen in our Valuation & Litigation Advisory Insights e-newsletter)

Quantifying the cost of lost productivity when a construction project is disrupted through no fault of the contractor is a difficult challenge. An unanticipated disruption of the project typically causes the contractor to work less efficiently, which can lead to additional labor, equipment and material costs. This article explains that appraisers can use several methods when quantifying lost productivity damages, depending on the particular job's facts and circumstances and also notes that lawyers and damages experts need to work together closely to establish lost productivity and measure it appropriately.

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Surety Market Update

In early fall 2009 the National Association of Surety Bond Producers (NASBP) held it national seminar in Washington DC and, as you might imagine, the mood was less than cheery.

The association released its mid-year and 2009 projected results, which showed a 28.9% loss ratio, more than double the loss ratio for 2008. Beyond the negative results, the prevailing feeling that losses will continue to mount throughout the coming year influenced the mood. After five straight years of significant profits the surety industry is bracing for a difficult year in 2010; and it's making the kinds of adjustments that usually accompany a recessionary cycle.

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Prior issues are available at our E-Newsletter Archive. If you would like to subscribe to this free quarterly e-newsletter, send an email to info@skodaminotti.com.

If you have any questions about any of these articles, post a comment below or please contact our Real Estate & Construction Group at 440-449-6800.