LETTER FROM THE PRESIDENT

Dear Members,

We are currently facing a familiar challenge in our industry: a down cycle with contracting markets and reduced opportunities. While this may seem concerning, there is hope on the horizon.

The primary issue is that multiple sectors are experiencing a contraction simultaneously. Residential construction, after a prolonged period of growth, is slowing down as new units are absorbed, exacerbated by relatively high interest rates. The educational and medical sectors, historically the backbone of our industry in the Philadelphia region, are also encountering significant challenges. Educational institutions are projecting enrollment declines for schools not in the top tier due to the "demographic cliff" resulting from the Great Recession. Fewer children were born between 2007 and 2013, and the oldest of them are now 17 years old.

Healthcare is facing a dual challenge of rising costs and federal reimbursement rates that are not keeping pace. As for the office sector, it is in a particularly dire state. A forecast commissioned by GBCA predicts that office declines will continue until 2026, after which steady square footage increases are expected.

Given these challenges, what can we do? While some factors are beyond our control, such as stimulating the economy through significant interest rate decreases, there are actions we can take. Increasing the regional population through quality-oflife improvements and business attraction efforts would boost demand for goods and services. Although this is achievable, it is difficult to do in a meaningful way.

One factor we can truly influence is addressing the legislative issues that make public work in Pennsylvania less efficient and less attractive to contractors. The Commonwealth of Pennsylvania is receiving a once-in-a-generation investment from federal and state governments to improve its infrastructure. Unfortunately, outdated laws from 1913 still govern construction procurement. Modernizing these laws will better equip us to deliver on the promise of this investment.

GBCA is diligently working to ensure that this market cycle is one in which you can thrive. However, we need your partnership. We urge you to support the GBCA PAC and share your thoughts on how we can help improve your experience engaging with the public sector. And, if you have a perspective that we should maintain the 1913 Separations Act, let us know. We would like to understand how we can all grow together.

Thank you for your continued commitment and support.

Benjamin J. Connors, Esq., CAE President & CEO

General Building Contractors Association