Building Locally

by K. Paul Holt, CentexAGC, President/CEO

A community has been defined as a social unit with commonality such as norms, religion, values, customs, or identity. Communities may share a sense of place situated in a given geographical area. In this instance, we will look at community as a social and economic entity, recognizing that we all share the same tax base. As our economic substructure grows, our cities and county benefit.

When local building contractors are hired for construction projects within the community, the benefit is significant on several levels! Local specialty or subcontractors are employed and supplies and materials are purchased from local vendors. It is estimated by Dr. M. Ray Perryman of The Perryman Group, that for every $1 of a $10 million construction project paid to a local contractor, it benefits $3.10 to the community. That means 68 percent of those tax dollars “churn” in the local economy after the general contractors receive payments. When an out-of-town contractor is hired, there is a decline of at least 35 percent in economic benefit to the local community.

There was a time when our Central Texas economy was agrarian, with farms, ranches and all the support services that go with them. Picture a “barn raising” where a farmer had been gathering the materials necessary to construct a huge storage facility for equipment, hay, feed, and animals. The entire community would come and spend the day helping one family achieve their dream of a new barn.

The ladies would prepare food for the crowd; children were assigned tasks; and draught horses would help hoist timbers into place. The framework would be assembled with delicacy and brute force. No single individual or pair could achieve this fabrication. The community, working together, could easily make it happen.

These barn raisings achieved an almost festival-like atmosphere of an “all for one, one for all” spirit and helped create a stronger community and economy.

What is to be gained by hiring local contractors?

As a new company is moving into our area, there is a sense of familiarity and of community as its place of business is being prepared and it is integrated into the community more rapidly. It benefits from the pride of local constructors and are drawn into the local business community.

As local contractors work on site preparation and erection of the building, more is learned about the place that facility and its employees will have in our community. Conversations over coffee, meals, at church and at the grocery store spread the word of a new entry into our area.

The Greater Waco area is blessed to have a strong and vibrant commercial construction community as well. There is an array of general contractors, specialty contractors, suppliers and service providers offering services in the McLennan County MSA (Metropolitan Statistical Area). Construction firms make up 6.8 percent of the employment, according to the United States Bureau of Labor Statistics (BLS). While this number is a smaller percentage than government, education, health care, and retail workers, the construction industry supports each and every one of these other sectors.

The focus of this article is on “vertical” commercial construction, such as churches, schools, libraries, office buildings, industrial buildings, retail complexes, apartment complexes, and city and county buildings. Two companion areas of construction are “horizontal” or road and bridge construction, and single family residential.

The Centex AGC is delighted to participate in this special edition of Greater Waco Business. The major turning point for supporting local businesses was borne from two city council sessions in December 2009. Commercial contractors packed the two work sessions to bring awareness to council members that local tax paying firms deserved an opportunity to construct buildings commissioned by tax supported entities. Procurement methods were being used that put the local folk at a distinct disadvantage.

There are Three Prevalent Myths with Regard to Local Versus Traveling Contractors

1. Using a local contractor really does not make a difference to the local economy

One of the main factors that helped the Greater Waco economy survive the 2008 economic meltdown was the passage of bond issues in 2006-07 by several scholastic and municipal entities. The economy was booming, and people felt that this was a good time to invest in their communities. There were, however, organic issues that minimized the positive impact on the local commercial construction industry including the use of “hard bids” by municipalities to give out-of-town contractors an opportunity.

The local contracting community made it very clear that they were being impacted by the repeated hiring of “big city” contractors who did not always pay their subcontractors, and frequently ran up the tab with change orders. Neither of these practices were common by the folks at home. In many cases, deadlines were missed and projects ran over schedule. These delays cost the owner, and the final price paid was rarely the price quoted at the time of the bid.

One of the advantages of hiring locals is the pride in workmanship in delivering the project on time and on budget. A local firm’s reputation is at stake on each project.

2. An “out of town” general contractor will hire local subcontractors

The Perryman study illustrated that local subcontractors may not always be hired. Some municipalities began to recognize this and began using Competitive Sealed Proposals (CSP) in lieu of the hard bid method. This proposal method is graded on a points scale, where price is not the only factor considered. The general contractor lists specialty contractors to be used, as well as subcontractors and suppliers. The impact on the community can be measured.

In our area, the price quoted and accepted on a bid was final. With out of town firms, the quoted bid was often treated as a “starting” point, not the final price. The scope of work was not expected to change, just the price.

3. Local contractors cannot perform the same quality of work as “big city” firms

One local school district official convinced their school board that local contractors could not deliver the quality of work that the school district deserved. The proactive outreach of a large group of local contractors made their case for quality performance. As a result, district officials changed their practices for more local contractor consideration.

Ironically, there was already a local example of a taxing entity who made sure that local bidders were aware of projects and encouraged them to bid. That was McLennan Community College (MCC), who had begun this practice in the 1990’s for all phases of purchasing, be it supplies, furniture or construction. MCC utilized local design professionals, local contractors, and local suppliers to construction a number of LEED® (Leadership in Energy and Environmental Design) certified buildings following a $74.5 million bond passed in 2006. Three new buildings and a number of renovations took place to vastly expand the classroom space for the College.

LEED® Leadership in Energy and Environmental Design

During MCC’s deliberations for campus expansion, the Board of Trustees was leaning towards embracing LEED® principles. As an educational institution, they felt it was important to set a positive example regarding energy savings and sustainability. Simultaneously, the Greater Waco Chamber was planning to design and construct the first greencertified Chamber headquarters in America. That made it very easy for MCC to commit to LEED® certified construction. The new Chamber headquarters resulted in a state award winning office as well.

To prepare the community for LEED® certified construction the CentexAGC brought in trainers to educate and qualify our contractors for LEED® certification.

In tallying the various general contractors, specialty contractors, subcontractors, and suppliers, it was estimated that almost 95 percent of the work at MCC was achieved by local firms. Science laboratory equipment had do be ordered from out of state, but all else was ordered through McLennan County suppliers, or at least Texas based suppliers.

For over a decade, MCC was already utilizing Construction Manager at Risk (CMAR) and Competitive Sealed Proposals to procure construction services. The results were state award-winning projects that more than proved local designers and contractor’s ability to perform at a very high and competitive level.

A new science building and the Michaelis Academic Center were certified as LEED® Gold, and the Emergency Services Education Center was certified as LEED® Platinum! Older buildings were retrofitted with energy efficient windows and solar power and LEED® certified as well. The Science and Emergency Service buildings won Outstanding Construction Awards from the Associated General Contractors – Texas Building Branch. These projects were in competition with projects from Austin, Dallas-Fort Worth, Houston, and San Antonio. Our local design professionals and contractors put Central Texas construction quality at the forefront of Texas. The Academic Building was recognized by the National Masonry Council as an award winner in its category.

Meanwhile, choices being made by the local school district in hiring out of town general contractors actually resulted in their students’ parents being unemployed because non-local contractors were hired.

Fortunately, this tide has turned, and governmental entities recognize that the people who pay their taxes deserve the opportunity and privilege to construct new projects and renovate older ones. They also take pride in workmanship, of meeting deadlines, and sharing the project with friends and neighbors that enhances the relationships throughout the city and county. People at church and at the grocery store ask about progress and completion, inspiring them to meet those deadlines, and exceed them whenever possible.

There is also the importance of warranties on various systems such as HVAC, Plumbing, Roofing, and the like. Why have one contractor perform work, and have another one perform the warranty work? Start local and stay local.

Welcome to Waco-McLennan County

We welcome the new community members recruited by the Greater Waco Chamber. Greater opportunities to be involved in the construction of their facilities would be an added benefit to our economy. New jobs in the community are terrific and necessary to keep our economy growing. Enhanced maintenance of local businesses and industries would be a boon to our economy as well. Additional incentives for utilization of local contractors and suppliers could encourage this inclusion earlier in their integration into our community. Local building contractors make huge contributions to the local economy on several levels. First, there is the impact of employing citizens, which includes payroll, benefits, employment taxes. There are the employees living expenses, such as housing, transportation, clothing, and many other expenses. Next, is the economic impact of purchasing building materials and supplies to construct those projects. We recognize that requirements are disincentives, but positive incentives can benefit even more folks.

Coronavirus Impacts

Safety training, and efforts towards protecting our workforce have minimized the incursion of the novel coronavirus on our local jobsites. Thanks to best practices adopted by the local construction workforce Central Texas construction has been minimally impacted by absenteeism on the jobsite. Of course, there have been brief quarantines, and occasional positive testing workers, but the show has gone on.

Innovation and ingenuity created handwashing stations on jobsite. Wearing masks in transport vehicles protects workers from one another, and social distancing whenever possible prevents cross contamination. Construction has been deemed “essential” by Southern governors and CISA, the Cybersecurity & Infrastructure Security Agency. CISA is part of the Department of Homeland Security.

By working strategically at the State and National levels and by providing educational and safety materials at the local level, we have persevered against the coronavirus.

This type of esprit de corps is the hallmark of our local construction community. Is this not the team you want working to welcome you into your new home?