The Official Publication of the Power & Communication Contractors Association 4th Quarter 2013 Also Inside • Rocketing To Success: Achieving Growth in the Face of Scarcity • PCCA Sets Sights on St. Thomas • Notice on Notice: The Consequences of Insufficient Notice Can Be Severe PRODUCT SHOWCASE
Eastern / Central USA 921 S. Burleson Blvd., Burleson, TX 76028 800-666-6567 Fax : (817) 447-8917 Western USA 19020B S.W. Cipole Rd., Tualatin, OR 97062 800-444-7064 Fax : (503) 692-0474 E-mail: sales@wagnersmithequipment.com Burleson, TX Dayton, OH Tualatin, OR Lawrenceville, IL Sanford, FL Phoenix, AZ Ontario, CA • Full line of heavy-duty stringing equipment • All equipment comes with operator training videos • Heavy-duty construction with higher ratings and more safety features • Backed by 85 years of industry experience Now Buy Or Rent Powerline Construction Equipment ONLINE! wagnersmithequipment.com wagnersmithequipment.com PLUS a Full Line of Stringing Blocks, Tools and Equipment. For pricing and specs, please visit our website at: Equipment_Ad_4C_7.25x10.25_TX-OR1 1 8/22/07 2:52:20 PM
) %+ #* % * &) %+ #* &$ ... % * &) %+ #* &$ (,!'$ %+ & +!&%* )&, &,+ &)+ $ )! +!&%.! )-! % ' !) +.&)" ! # +!&% & + & # %!+* $$ ! + (,!'$ %+ - !# !#!+0 # /! # *!% '+!&%*
Toll Free 877-860-5666 International 630-860-5666 www.tallmanequipment.com THE PROFESSIONAL LINEMAN’S SUPERSTORE Call Tallman Equipment Co. for SALES • RENTAL • REPAIRS
4th Quarter 2013 Officer Directors Official Publication of the Power & Communication Contractors Association Board of Directors Publication Staff 1908 Mt. Vernon Avenue, 2nd Floor Alexandria, Virginia 22301 (800) 542-PCCA • www.pccaweb.org ©2013 Power & Communication Contractors Association Craig Amerine Amerine Utilities Construction, Inc. David Aubrey Okay Construction Robert Breeden ElectriCom, Inc. Tony Briggs Vermeer Manufacturing Ed Campbell Henkels & McCoy, Inc. Marty Ferguson FS3, Inc. John Fluharty Mears Group, Inc. Mark Frosaker MasTec North America, Inc. Matthew Gabrielse Gabe’s Construction Co., Inc. John Hale John Deere Jerrod Henschel Michels Corporation Chase Lapcinski Push, Inc. Kevin Mason ElectriCom, Inc. Tommy Muse Aubrey Silvey Enterprises, Inc. Rob Pribyl MP Nexlevel, LLC Jameson Ringger NESCO, LLC Heath Sellenriek Sellenriek Construction Don Stephens Tjader & Highstrom Lindsley Thulin Michels Corporation Publisher Timothy Wagner Editor Michael Ancell Membership & Marketing Stacy Bowdring Membership & Marketing Dana Gilbertson Photography Steven Purcell Information Technology Greg Smela President Glen Amerine Amerine Utilities Construction, Inc. President-Elect Steve Sellenriek Sellenriek Construction 1st Vice President Timothy D. Killoren CCI Systems, Inc. 2nd Vice President Todd Myers Kenneth G. Myers Construction Treasurer James Dillahunty Henkels & McCoy, Inc. Secretary Larry Pribyl MP Nexlevel, LLC Rocketing to Success: Achieving Growth in the Face of Scarcity 13 By Mark Bridgers and Nate Scott The 2014 Utility Outlook investigates the spending, scarcity, and opportunity in the electric and gas transmission and distribution and communication sectors. Forecasted growth for these segments is flat or slightly falling in 2014 with growth beyond that point. Picking the right geographies, market segments, customers, and services will prove critical. Successful contractors will recognize that this situation demands innovative solutions to thrive in an environment of scarcity, and they will “Rocket to Success.” PCCA Sets Sights on St. Thomas 39 Registration is now open for the 2014 PCCA Convention, March 14-19, in St. Thomas, U.S. Virgin Islands. The convention features industry-specific education, valuable networking opportunities, unbelievable tours of the islands, and lots of other fun times. Turn to page 39 for details. Year-End Product Showcase 47 Anyone who attended ICUEE in Louisville, Ky., in October saw that many PCCA members developed marketing campaigns especially for the show, promoting new equipment lines, new models, expanded services, etc. Our people put in a lot of work, and the campaigns were very impressive. To help them, as well as associate members who weren’t at ICUEE, further spread their message, PCCA presents its annual Year-End Product Showcase. PCCA News 7 Legal Watch | By Matthew Straub 9 RDUP News 21 Power News 24 Telecom News 29 Industry Calendar 51 Advertiser Index 53 Final Word 66
800.435.9340 • mightymole.com Vermeer vacuum systems built by McLaughlin set the standard with exclusive 3-stage cyclonic filtration, patented cam-over hydraulic rear door and patented in-tank washdown system, and are available exclusively through the industry-leading Vermeer dealer network. From utilities and pipeline to telecom, fiber and beyond, nothing handles your jobsite demands like McLaughlin. Offering reliable equipment for trenchless boring, accurate utility location and safe excavation, McLaughlin has the complete underground installation process covered. For more than 90 years, we’ve built our leadership on dependable, low-maintenance trenchless construction equipment, along with the knowledge, experience and support to make it all work. We’re the one that gets it done — for you. Providing Solutions Since 1921. by VERMEER VACS Vermeer and the VERMEER LOGO are trademarks of Vermeer Manufacturing in the U.S. and/or other countries. MCLAUGHLIN and the MCLAUGHLIN LOGO are trademarks of McLaughlin Group, Inc. © 2013 McLaughlin Group, Inc. All Rights Reserved. Pneumatic Piercing Tools Auger/Cradle Boring Machines Utility Locators Moleing Equipment Vacuum Excavation Systems
PCCA Journal|4th Quarter 2013 7 PCCA News It is with great sadness that PCCA passes along the news that John S. Gabrielse of Gabe’s Construction passed away on September 6, following a brief illness. John is survived by his wife, Ella, of 69 years; his daughter Sharon (Ben) Snoeyink; daughter Phyllis (Jim) Kramer; his son Tim (Kris) Gabrielse—current President and CEO of Gabe’s Construction, his grandson Matthew (Danielle) Gabrielse—current Vice President and CFO of Gabe’s Construction, and his son Greg (Cheri) Gabrielse. He has 12 grandchildren and 25 great grandchildren. John Gabrielse helped found Gabe’s Construction Co. in 1942 with his father, Jacob, and two brothers, George and Edwin. Gabe’s Construction is currently managed by the third and fourth generation family. John served the United States in the U.S. Navy during World War II from 1944 until his honorable discharge in 1946. He retired from active involvement in the operation of the company in 1982. John and Ella moved to Lynden, Wash., in 1998. John was preceded in death by his parents, older sister Gertrude, and younger brothers George and Edwin. Memorials in John Gabrielse’s name can be sent to Sonlight Community Church Youth Ministry Program, 8400 Bender Road, Lynden, WA 98264 or Whatcom Hospice, 2806 Douglas Ave., Bellingham, WA 98225. PCCA Announces Prayer Breakfast Speaker PCCA is proud to announce that Rob Wood of Unite Church in Fayetteville, Ark., will be the speaker at the Annual PCCA Prayer Breakfast during the association’s 2014 Convention, March 14-19 at the Frenchman’s Reef & Morning Star Marriott Beach Resort in St. Thomas, U.S. Virgin Islands. Wood is the Teaching Pastor of Unite Church (a new church plant), and he is passionate about the global mission of the church to make disciples of all nations. He is currently working with eight pastors in Pune, India, teaching the Bible and encouraging their ministries, as well as developing relationships with two local pastors in Pakistan for future church planting opportunities. He is also closely connected to a small orphanage in Pune, India, that houses nine beautiful children that were rescued off of the streets. These kids are his closest friends in the world. Rob lives with his wife, Hollie, of ten years and their fiveyear-old son in Fayetteville. In Memoriam: John Gabrielse
Vermeer, the Vermeer logo and Equipped to Do More are trademarks of Vermeer Manufacturing Company in the U.S. and/or other countries. © 2013 Vermeer Corporation. All Rights Reserved.
PCCA Journal|4th Quarter 2013 9 Notice on Notice: The Consequences of Insufficient Notice Can Be Severe By Matthew Straub Legal Watch Continued on page 10 Does it really matter if a contractor’s notice of a claim was communicated to an owner a few days late or was not written as required by the contract? Unfortunately, no universal answers exist to these questions. Rather, the answers depend on a host of factors. The factors range from the terms of the notice provision to the state in which the project is located. This article discusses how the law treats notice provisions in contracts, the consequences of insufficient notice, and best practices for avoiding the consequences of improper or untimely notice. Notice provisions are typically designed to give an upstream party (such as an owner) as much information about a new claim as early as possible. This gives the owner a chance to investigate and consider all options to minimize the impact of a claim. It also affords the owner an opportunity to determine ways to finance or fund the new claim. A notice provision also deters the practice of many sloppy (or failing) contractors and subcontractors: waiting until the end of the project to unload a batch of change order requests to offset losses on the project. On public projects, these notice provisions are rarely negotiable and often require near-impossible amounts of information within a laughably short timeframe. Therefore, public projects typically require routine vigilance of notice time periods. Understanding how the law treats improper notice will help contractors to minimize risk associated with notice and protect interests on future projects. Generally, courts have applied one of two standards to notice provisions: the prejudice standard or the strict-compliance standard. The Prejudice Standard The prejudice standard provides that failure to precisely follow contractual claims procedures will not defeat the contractor’s right to compensation unless that procedural error causes prejudice to the owner. Prejudice exists when an upstream party’s legal rights and obligations are substantially affected by the claimant’s late notice. For example, if an engineer’s error does not permit the application of a specified product and the contractor selects an alternative product without providing notice, the owner is prejudiced because it may have been able to select a different product or method from that chosen by the contractor. The owner’s knowledge of a claim will likely play a role in determining whether it has been prejudiced. An owner with knowledge of a claim is likely an owner without prejudice. An example of a court applying the prejudice standard is found in Paragon Const. Co. v. Department of Public Works, 2013 WL 1943953 (Conn.Super, Apr. 19, 2013). In that case, the contractor performed work for a correctional center. It sued Connecticut’s Department of Public Works for cost overruns and construction delays. The Department of Public Works countered that the contract required the contractor to make a claim within seven days and that the contractor gave late notice (15 days) and therefore was barred from asserting its claims. The Superior Court disagreed, finding that the contractor only had to substantially comply with the contract provision and highlighting the fact that that the Department of Public Works knew about the claims and made no claim of prejudice from the late notice. The Strict-Compliance Standard The strict-compliance standard requires that a claimant strictly comply with the notice provisions in the contract. Failure to strictly adhere to these standards results in a waiver of such claims. The strict-compliance standard is illustrated in Dan Nelson Construction v. Nodland & Dickson, 2000 ND 61, 608 N.W.2d 267 (2000). In that North Dakota case, a contractor entered a contract with the State of Wyoming to reclaim a portion of an open-pit uranium mine. The prime contract contained the following provisions: “CONTRACTOR shall promptly notify OWNER and ENGI-
PCCA Journal|4th Quarter 2013 10 NEER in writing, within 15 days, of any subsurface or latent physical conditions at the site differing materially from those indicated on the Surface or in the Contract Documents. “Any claim for an increase in the Contract Price shall be based on written notice delivered to OWNER and ENGINEER within 15 days of the occurrence of the event giving rise to the claim.” The contractor encountered significantly different subsurface conditions (120,000 cubic yards of rock as opposed to the anticipated 600 cubic yards) in January 1991 but did not make a claim or identify the nature of the subsurface conditions until May 1991. When the contractor wasn’t paid, it sued the State of Wyoming. The state argued that the contractor waived its claim because of untimely notice. In response, the contractor argued that the state waived the notice requirement because it had actual knowledge of the contractor’s rock and water problems in January 1991 and even assisted it in preparing a draft claim form for the changed conditions. The trial court disagreed, citing the contractor’s failure to adhere to the strict notice requirements of the contract and dismissing the contractor’s waiver of notice requirement argument. The North Dakota Supreme Court affirmed the ruling of the trial court. This case demonstrates that the strict-compliance standard can be applied to nullify claims even when the owner has full knowledge of the claim! This permits an owner to receive a windfall: extra work performed with its knowledge, perhaps even at its direction, when the contractor fails to provide full and complete notice under the contract. This is a draconian result that has sweeping consequences. The strict-compliance standard shifts the focus from the nature of the claim to the procedure of the claim. Fights over when the notice period commenced or whether the notice satisfied all the content requirements are inevitable in jurisdictions that have adopted the strict-compliance standard. Despite these consequences, the strict-compliance standard is being adopted in more jurisdictions across the country. Indiana, Ohio, New York, North Dakota, and Washington are just a few of the states that have adopted some form of strict-compliance standard for notice. Many jurisdictions still abide by the prejudice standard because it allows for a more meritorious resolution of claims, rather than preclusion by foot-fault. Federal courts interpreting federal contracts have traditionally applied the prejudice standard. But the real challenge is determining which standard (prejudice or strict-compliance) applies to a contract in a particular jurisdiction. These standards are usually articulated in case law, not in statutes. This means that degrees of strictcompliance or prejudice may exist based on the particular facts of a dispute. For instance, a court may have found that a claim was waived for failure to strictly comply but held so because the contract had language that provided that failure to strictly comply with the notice provisions waived claims. That case, however, did not address whether untimely notice would waive claims in the absence of such language. Unfortunately, no bright line rule or collective jurisdiction-by-jurisdiction resource exists. An attorney should be able to help you to identify the standard applicable to a particular notice provision in a given contract, but full compliance is always preferable to attorney involvement. Waiver of Notice Requirement Contractors who fail to issue proper, timely notice on a project may have a way to retain the claim. If a contractor can show that an owner waived the notice requirement, the contractor may be able to recover for a claim that lacked the formal notice requirements. Prevailing on owner-waiver claims is difficult. Contractors usually must prove the owner waived the notice provision by clear and convincing evidence, an elevated evidentiary standard. This is a last-ditch effort to save a notice-deficient claim from becoming unrecoverable. Giving proper notice of claims avoids this weak strategy. Managing the Claims of Subcontractors Contractors must carefully coordinate the notice provisions of their subcontracts with the notice provisions of the prime contract. Failure to coordinate such notice provisions may expose a contractor to liability for subcontractor claims. When (1) a subcontract has a longer notice provision than the prime contract and (2) the subcontract does not properly flow down the notice provisions of the prime contract, a subcontractor may provide timely notice of a claim to a contractor, but the contractor may not be able to pass through the claims to the owner because of a shorter notice provision in the prime contract. The exposure to a contractor under these circumstances could be significant. Best Practices The following practices should help to minimize exposure for untimely claims. General Best Practices • Know your notice periods and don’t let them pass without full compliance. • Oral notice is not written notice. ◆◆ Take the time to put into writing the content required by Legal Watch Continued from page 9
PCCA Journal|4th Quarter 2013 11 contract. • If you can’t completely comply with a notice provision, comply with the provision as best as possible under the circumstances. ◆◆ If you can’t provide an estimate of costs in time, submit timely explanation of the reasons and immediately follow up in writing when an estimate is available. ◆◆ If you can’t send certified mail as required by the contract, send an email. • Provide proper notice of the claim even when an owner knows about or even directs the work pertaining to the claim. • Give notice of a claim even if the owner has previously paid a claim without proper notice. Drafting Best Practices • As a contractor, make certain that all notice requirements flow down to subcontractors and that the notice provisions of the prime contract prevail over any inconsistent notice provisions in the subcontract. • As a contractor, consider adding language that subcontractor’s failure to comply with notice provisions will waive the claim. ◆◆ This should make it easier to defeat untimely subcontract claims than without it. • The notice period should be clear. “Three business days” is much clearer than “three days.” ◆◆ Disputes over whether a contract meant calendar days or business days increase litigation but are easily avoided with precise language. • As a subcontractor, consider how flow-down provisions in the prime contract may reduce notice time periods in the subcontract. Matthew Straub is an attorney in the Construction Industry Group of Ogletree, Deakins, Nash, Smoak and Stewart P.C. He counsels construction clients on private and public projects across the country. He emphasizes risk management at the earliest phases of a project and the prevention and avoidance of disputes. He develops, negotiates, and drafts contracts, subcontracts, and other construction documents necessary for successful construction projects. When litigation cannot be avoided, he prosecutes and defends construction claims. He can be reached at (312) 558-1424 or matthew.straub@ ogletreedeakins.com. EVERYTHING BUT NOT EVERYONE SEES IT. Unmask the potential of each of your candidates. GHRR rede nes HR. We believe in simplicity, alongside the improvement of the hiring process. We deliver intuitive and diagnostic technology that streamlines your abilities to assess, screen, and hire quali ed candidates. With comprehensive and integrated services, GHRR provides signi cant savings in cost, time, and effort. Our all-in-one suite of services are customized to mirror and enhance your talent screening, talent assessment, and talent acquisition needs. Let Global HR Research Rede ne Your HR Expectations™. WWW.GLOBALHRRESEARCH.COM 800.790.1205 TALENT ACQUISITION TALENT SCREENING TALENT ASSESSMENT HAS BEAUTY,
Ryan Zimmerman knows the Ditch Witch®JT100 All Terrain. In fact, he drilled with the rst one off the line. So when Apex Directional Drilling was called in to handle the near impossible bores on a mountainside in the Cascades, he knew they were up to the challenge. 20-foot snow drifts. 90-mph wind gusts. Solid and fractured rock. The All Terrain handled it all. Share your “My Ditch Witch® Drilled It” pics on facebook.com/ditchwitch. ©2013 The Charles Machine Works, Inc. ®
PCCA Journal|4th Quarter 2013 13 In Samuel Taylor Coleridge’s, “The Rime of the Ancient Mariner,” the poem presents the unforgettable line, “Water, water, everywhere, Nor any drop to drink.” This line is an allusion to the age of abundance that surrounds us and pervades our thinking while concepts of scarcity are for others to deal with. In this age of abundance, the utility market faces decades of scarcity and a thirst for solutions. The types of scarcity include: • Labor: Low birth rates, aging population, and lower percentage participating in the workforce.1 • Utility Internal Workforce Over Age 55: 40 percent of inspectors, 30 percent of boilermakers, 25 percent of surveying and mapping specialists, 25 percent of surveying and mapping specialists, 25 percent petroleum engineers, 25 percent frontline supervisors, etc.2 • Electricity Demand: Demographic trends, energy efficiency or management, and distributed generation hold electric demand growth below 1 percent.3 • User Rate Increases: Ratepayer and PUC fatigue due to rates rising faster than inflation since 2005.4 • Alternative Funding: Innovation in securing funding for infrastructure construction and replacement. • Political Will and Agency Vision: The recent government funding issues speak for themselves. • Technology Innovation: The pace of change in the construction industry is glacial and must accelerate. The obvious reaction to scarcity is to see challenges. We offer a more opportunistic way to look at this market environment and believe successful firms will embrace it as one filled with promise and opportunity. 2014 Utility Outlook As one example of this thirst, this fall’s torrential rains and severe flooding in Colorado offer insights. Prior to the flooding, the Northern Colorado infrastructure market was mature, with modest activity except for the Niobrara oil and gas exploration. Post flooding, it is overwhelmed with more infrastructure construction than there are resources. For example, the Colorado Department of Transportation Rocketing to Success: Achieving Growth in the Face of Scarcity By Mark Bridgers and Nate Scott Continued on page 14
PCCA Journal|4th Quarter 2013 14 authorized spending its $100 million contingency fund within seven days of the flooding, as did several local utilities. Northern Colorado must overcome the challenge of scarcity, be it money, labor, equipment, or other factors in order to rebuild.5 These events serve as an example of the situation facing the utility industry. There is a flood of work to be completed while resources of all types are scarce. Said another way, there is “Water, water, everywhere, Nor any drop to drink.” The 2014 Utility Outlook investigates the spending, scarcity, and opportunity in electric and gas transmission and distribution and communication sectors. In Exhibit 1, forecasted growth for these segments is flat or slightly falling in 2014 with growth beyond that point. Picking the right geographies, market segments, customers, and services will prove critical. Successful contractors will recognize that this situation demands innovative solutions to thrive in an environment of scarcity and they will “Rocket to Success.” Transmission & Distribution - Electric and Gas Spending Forecast The transmission & distribution (T&D) segment in total weathered the financial crisis relatively unscathed supported by strong spending on gas and liquid pipelines. The electric sector is not as healthy. The last two years have seen rapid pipeline spending growth fueled by economic, government, tax, and interest rate incentives that overpowered the underlying slow economic growth obstacles. In addition, low natural gas prices have allowed gas distribution utilities to undertake large infrastructure replacement projects with users seeing very little effect on their bills. Gas prices have bottomed and will slowly rise, changing this dynamic. Moving forward, a slowing of the growth rate from 2012 and 2013 is forecast (Exhibit 2). A brief and shallow economic slowdown is forecasted in late 2014 or early 2015, as is weak electric power demand, increasing utility bills, and the slow rise in natural gas prices. All of that will combine to temper the enthusiasm for additional infrastructure replacement projects. By 2016, an improving economy and housing market and a gradual increase in electricity demand will accelerate spending on both pipelines and electric lines. Growth is forecast to slow in 2017, by which point we will have experienced more than a decade of spending growth within Rocketing to Success Continued from page 13 Exhibit 1 Electric/Gas T&D and Telecom Construction Put in Place Historical Figures and Forecasts Millions of current dollars Exhibit 2 Electric/Gas T&D Construction Put in Place Historical Figures and Forecasts Millions of current dollars
PCCA Journal|4th Quarter 2013 15 this sector, moving from approximately $20 billion in 2004 to $80 billion in 2017. A combination of rising interest rates and wage pressures will yield inflation that will slow spending as the first wave of large programs and projects near completion and ratepayer/PUC fatigue limits the size and scope of new programs. T&D Abundance vs. Scarcity The disparity between abundance and scarcity is the difference between the gas and electric markets. The positive economic and safety aspects of natural gas exploration, production, gathering, and T&D are so powerful as to drive construction activity in both the pipeline and electric line sector. On the electric side, the lower cost to produce power by burning natural gas yields savings to electric utility customers and creates some breathing room for growth in electric T&D construction activity. Hurdles still exist. Labor scarcity, particularly for the capital construction and O&M workforce within gas and electric utilities, will prove a high hurdle. Twenty-four percent and 25 percent of the electric T&D (Exhibit 3) and gas T&D workforce (Exhibit 4) respectively are over the age of 55. Most of the Northern U.S. states have a particularly old workforce.6 Normally we would expect the next generation, those currently 35 to 50 years old, to be stepping in to fill the roles of the current baby boom generation as they retire. Unfortunately this next generation is some 4 million individuals smaller. In addition, participation in the workforce is falling. The 2008 recession had a major effect on the labor force participation rate, though this only accelerated a trend rooted in demographics. The participation rate will not recover to previous levels regardless of economic performance7 (Exhibit 5). For perspective, if the participation rate was today what it was in 2003, there would be an additional 5 million individuals in the workforce. Overcoming this coming labor scarcity will require attracting the younger generation, 20 to 35 year olds, as well as learning to do more with less labor and management. Continued on page 16 Exhibit 3 Electric T&D Workforce over age 55 by State Percent of Total Workforce (No data for Mass.) Exhibit 4 Gas T&D Workforce over age 55 by State Percent of Total Workforce (No data for Del., Mass. & Vt.) Abundance Scarcity • Gas-related activity • Electric-related activity
PCCA Journal|4th Quarter 2013 16 Flat electricity demand has proven a particularly stubborn challenge for electric utilities since 2008. This was first attributed to the economic slowdown, then conservation effectiveness, with many expecting that growth would soon return. There is a strong case to be made that the age of increasing electricity demand may have passed. Demographic trends, improvements in energy efficiency, energy management, and distributed generation will keep electric demand growth below 1 percent in the future8 (Exhibit 6). Operating and securing funding needed for capital construction in an era of low or no growth is a challenge for all industry participants. Funding the needed spending on electric infrastructure in the absence of demand increases will fall on ratepayers at higher levels than in the past. Pushing needed rate increases through utility commissions will prove more difficult as rates have been rising above the rate of inflation since 2005.9 For a family earning $50,000 per year in 2001, electricity consumed 2.8 percent of after-tax income. By 2012, this same family would spend 3.9 percent of income on electric power.10 There is regional variation to this challenge that is counter intuitive. States that have the lowest power cost may have the most difficulty raising rates. In traditionally low-cost states that rely on coal for electric generation (South, Midwest, and Mountain West), power prices have been increasing as regulation has resulted in significant spending on or shuttering of coal plants. These areas, such as West Virginia, have seen the largest cost increase and are already under rate pressure due to increased generation cost. Efforts to obtain funding for T&D projects will be competing with these spending priorities. The Northeast, which relies primarily on natural gas, is seeing falling power prices. This creates an opportunity for utilities in these markets to invest in infrastructure improvement with less impact on ratepayers. Gas pipelines face different challenges. The cost decline of natural gas along with very little demand for new construction related to housing growth have allowed utilities to invest in infrastructure replacement while the consumers’ gas bills Rocketing to Success Continued from page 15 Exhibit 5 U.S. Labor Participation Rate Percent of Population > 16 in Workforce Exhibit 6 U.S. Electricity Demand Growth, 1950-2040 Annual percentage change and 3-year moving average
PCCA Journal|4th Quarter 2013 17 remained flat or even declined. This trend is unlikely to continue, meaning that future expansions will require additional monies from ratepayers. Current accelerated infrastructure replacement programs won’t be threatened, but future programs are likely to be less robust in scope and scale. We are ultimately very bullish on the pipeline space over the next 20 years and anticipate three waves of capital construction spending and pipeline replacement. The first wave is coming to an end, after which we anticipate the industry taking a “breather” and preparing for a second wave of five to nine years of spending growth. Communication Spending Forecast The last peak in communications spending was 2007/2008 with only modest recovery. The underlying demand for data centers and wireless to wired bandwidth expansion has continued to support construction spending, but the current wave of spending, particularly around 4G infrastructure, is concluding. Nationally, we forecast little improvement in overall construction spending until 2015/2016 (Exhibit 7). The absence of any new revolutionary technology, particularly in the mobile network space, results in spending growth driven by incremental capacity improvements. Communication Abundance vs. Scarcity Within the communication construction segment, there are areas of abundance in juxtaposition versus scarcity. The abundance of spending and rapid rollout of 4G LTE networks is supporting construction service providers operating in the wireless space. Unfortunately, this phase of the wireless revolution is coming to an end. • Verizon’s rollout is essentially complete with 4G now covering 99 percent of its legacy 3G footprint.11 • AT&T will complete its initial 4G efforts in late 2014, Continued on page 18 Exhibit 7 Communications Construction Put in Place Historical Figures and Forecasts Millions of current dollars Abundance Scarcity • Proliferation of smart devices • Clarity on technology and nature of 5G wave • Data bandwidth demand • Qualified construction technician and supervisory talent • Rapid rollout of 4G technology • Government and regulatory support • Ability to apply telecom workforce into other utility segments • National or common operator qualification requirements Exhibit 8 Verizon 4G LTE coverage as of 10/30/13
PCCA Journal|4th Quarter 2013 18 though most major markets are already complete (Exhibit 8).12 • Sprint, plans to cover 200 million Americans by the end of 2013, well short of Verizon’s 300 million. Sprint will likely be building out its 4G network into 2015.13 • T-mobile was the last to begin rollout of a 4G network, though implementation is moving fast. In one year, the network grew to cover 157 million people and is well ahead of schedule.14 As 4G networks are completed, the industry is now ahead of the next wave of technology for the first time in its history. While investment in networks will not stop, focus will shift to providing additional capacity. The smartphone market is also approaching maturity with 56 percent of U.S. cell phone owners on smart platforms as of May 2013. This is a 20 percent increase from May 2011.15 Relative to the rest of the utility industry, the communications workforce is relatively young. Only 12 percent of telecommunications line installers are over age 55, while 19 percent of equipment installers are over 55.16 With some skills that are applicable in the electric distribution and gas distribution market space, the relatively modest growth of spending in this segment over the next two years offers opportunity to apply a younger workforce in the broader utility industry. Moving forward, communication industry participants will need to adapt to a market shifting from massive efforts to build new networks to one that is focused on incremental improvement through 2020. Contractors should monitor progress on 5G technologies to identify niche tech that will drive spending and prepare for the next wave of network construction in the next decade. Overall Conclusions Coleridge’s mariner ultimately survives the scarcity he is subject to by recognizing that his choices are what will save him. In the utility construction space, embracing the environment we are faced with as one filled with the promise and opportunity will yield the same outcome—survival. For successful contractors, merely surviving is not enough; they seek innovative solutions to thrive in an environment of scarcity. We offer the following tools to help these successful contractors thrive: • Strategic Thinking: Picking the right geographies, market segments, customers, and service types will prove critical, and applying strategic-thinking techniques to this challenge is one powerful solution. • Skill Building: Given the various types of scarcity, and particularly labor scarcity, building internal skills through training can provide the stamina needed in a challenging environment. Three types of training are necessary. ◆◆ Technical - To sharpen skills and meet quality specifications. ◆◆ Management - To drive production improvement and waste elimination. ◆◆ Cross Functional - To thrive in an environment that demands more than simply construction. • Embrace Innovation, Disruption, and Scarcity: Three tactical areas require particular attention. ◆◆ Smart Building/Smart Infrastructure - Communication, facility management, and asset management tools integrated into the facility design and construction. ◆◆ Building Information Modeling (BIM) - Investigate the application and use of this transformative technology married to management process to achieve performance improvement. ◆◆ Integrated Project Delivery - Build capability to delivery under multiple sourcing strategies and among various project delivery systems. Rocketing to Success Continued from page 17 • Buy a single kit that repairs one hole - less waste • Hardens just like wood - gaffable • Expanding foam integrates with wood - superior adhesion • No special deployment tools needed - less expensive REPAIRS WOODPECKER DAMAGE 800-328-9384 www.polywater.com/UPR.asp Before After
PCCA Journal|4th Quarter 2013 19 Utility capital asset owners, facility operators, and utility construction service providers must pick the right markets, build their skills, and embrace scarcity for the opportunities it presents to thrive and “Rocket to Success.” Mark Bridgers and Nate Scott are consultants with Continuum Advisory Group, which provides management consulting, training, and investment banking services to the worldwide utility and infrastructure construction industry. They can be reached at (919) 345-0403 or mbridgers@continuumag.com and followed on twitter at @markbridgers. For more information on Continuum, visit www.continuumag.com. Notes 1. “Civilian Labor Force Participation Rate,” Bureau of Labor Statistics, October 1, 2013. 2. “Current Population Survey,” Bureau of Labor Statistics. 3. “Annual Energy Outlook 2013, Market Trends—Electricity,” U.S. Energy Information Administration, April 15, 2013. 4. “Electric Power Monthly,” U.S. Energy Information Administration, September 30, 2013. 5. The dedicated professionals at the local Colorado utilities deserve recognition for their response to this disaster. The staff at my local water utility, Left Hand Water District (www.lefthandwater.org) in Niwot, Colo., did an excellent job restoring service and getting the boil-water order lifted. In a matter of days, they had the system up and running despite large sections of main being destroyed, all while access to their offices and facilities was cut off by floodwaters. 6. “Current Population Survey,” Bureau of Labor Statistics. 7. “Civilian Labor Force Participation Rate,” Bureau of Labor Statistics, October 1, 2013. 8. “Annual Energy Outlook 2013, Market Trends—Electricity,” U.S. Energy Information Administration, April 15, 2013. 9. “Electric Power Monthly,” U.S. Energy Information Administration, September 30, 2013. 10. “Energy Cost Impacts on American Families,” American Coalition for Clean Coal Electricity, February 2012. 11. Kameka, Andrew. “Verizon 4G LTE network reaches its 500th market and covers 99 percent of 3G footprint,” June 27, 2013. 12. AT&T, “About Our Network,” 2013. 13. Cheng, Roger. “Why Sprint is taking its sweet time with 4G LTE,” CNET, July 24, 2013. 14. Freml, John. “T-Mobile shows Sprint how a proper LTE rollout is done,” Pocketables, July 11, 2013. 15. Bostic, Kevin. “Smartphones now account for 56 percent of U.S. market, Apple’s iPhone at 25 percent share,” Apple Insider, September 9, 2013. 16. Bureau of Labor Statistics, 2012 employment data. EECI10208-S01-01 BRON logo is a registered trademark of RWF Industries • Static or Vibratory • 84” (213 cm) Plow Depth • Left/Right Offset ADD-ONUTILITY PLOWS GET UNDERWAY
Chris Daum | 919.785.9264 | cdaum@fminet.com www.fminet.com/ca Knowledge • Expertise • Relationships * Represented by FMI Capital Advisors, Inc. Your trusted advisor since 1953. FMI’s exclusive focus on the engineering and construction industry has led to more than 600 successful M&A transactions. FMI professionals have extensive industry knowledge, relationships and transaction experience that has made FMI one of the industry’s most trusted advisors for 60 years. Investment banking services provided by FMI Capital Advisors, Inc., a registered broker-dealer and wholly owned subsidiary of FMI.
PCCA Journal|4th Quarter 2013 21 RDUP News Continued on page 22 USDA Announces Electric System Improvements in 23 States Agriculture Secretary Tom Vilsack on October 24 announced funding for rural electric utility system improvements that will benefit residential and business customers in 23 states. The projects include more than $14.3 million to implement smart grid technology and nearly $11 million to improve electric service for Native Americans. The $960 million in USDA loan guarantees announced in October will help build 3,587 miles of line, benefit approximately 17,000 rural residential and business customers, and make other system improvements. USDA funding is contingent upon the recipient meeting the terms of the loan agreement. Alabama Covington Electric Cooperative, Inc., $42.5 million to build 539 miles of distribution line and make other system improvements. Arkansas and Oklahoma Rich Mountain Electric Cooperative, Inc., $16.6 million to build 98 miles of distribution line and 1 mile of transmission line and make other system improvements. Colorado Delta-Montrose Electric Association, $6.6 million to build 20 miles of distribution line and make other system improvments. San Miguel Power Association, Inc., $8.4 million to build 55 miles of distribution line and make other system improvements. Florida Tri-County Electric Cooperative, Inc., $9.9 million to build 115 miles of distribution line and make other system improvements. Georgia Colquitt Electric Membership Corporation, $9.8 million to be used entirely for smart grid projects. Georgia, Alabama, and Florida Georgia Transmission Corporation, $83.8 million to build 5 miles of transmission line, three substations, and make other system improvements. Illinois Monroe County Electric Cooperative, Inc., $7.8 million to build 45 miles of distribution line and make other system improvements. Indiana Hoosier Energy Rural Electric Cooperative, Inc., $118.3 million to build two headquarters projects and for system improvements. Maine Eastern Maine Electric Cooperative, $5.9 million to build 71 miles of distribution line and make other system improvements. Michigan Cloverland Electric Cooperative, $46.8 million to build 237 miles of distribution line and make other system improvements. Minnesota People’s Cooperative Services, $18.8 million to build 219 miles of distribution line and 14 miles of transmission line and make other system improvements. South Central Electric Association, $7.5 million to build 170 miles of distribution line and make other system improvements. Steele-Waseca Cooperative Electric, $7.7 million to build 42 miles of distribution line and make other system improvements. Missouri Callaway Electric Cooperative, $9.3 million to build 40 miles of distribution line and make other system improvements. New Mexico Sierra Electric Cooperative, Inc., $4.3 million to build 34 miles of distribution line and make other system improvements. North Carolina North Carolina Electric Membership Corporation, $60.6 million. The borrower’s share of capital system improvement projects for the Units 1 and 2 at the Catawba Nuclear Station. North Carolina Electric Membership Corporation, $33 million to construct Hamlet Unit 6, a simple-cycle combustion turbine generator that will provide 56.6 MW of peaking power. North Dakota and Minnesota Minnkota Power Cooperative, Inc., $41.6 million for generation system improvements, transmission line and station changes, new substations, and telecommunication upgrades and modifications.
PCCA Journal|4th Quarter 2013 22 RDUP News Continued from page 21 Ohio Adams Rural Electric Cooperative, Inc., $7.7 million to build 81 miles of distribution line and make other system improvements. Oklahoma Rural Electric Cooperative, Inc., $15.6 million to build 134 miles of distribution line and make other system improvements. Canadian Valley Electric Cooperative, Inc., $22.2 million to build 374 miles of distribution line and make other system improvements. Pennsylvania REA Energy Cooperative, Inc., $15 million to build 77 miles of distribution line and make other system improvements. United Electric Cooperative, Inc., $15.3 million to build 141 miles of distribution line and make other system improvements. South Carolina Little River Electric Cooperative, Inc., $11 million to build 259 miles of distribution line and make other system improvements. South Dakota Moreau-Grand Electric Cooperative, Inc., $10 million to build 165 miles of distribution line and 10 miles of transmission line and make other system improvements Oahe Electric Cooperative, Inc., $4.9 million to build 78 miles of distribution line and make other system improvements. Texas and Louisiana Northeast Texas Electric Cooperative, Inc., $30 million for plant improvement projects at the Dolet Hills Power Station Unit 1 and Henry W. Pirkey Station Unit 1. Texas Brazos Electric Cooperative, Inc., $271.8 million to build 287 miles of transmission line, build and improve a substation and switching stations, and make other system improvements. Wisconsin Jump River Electric Cooperative, Inc., $2.3 million to build a branch office and warehouse complex. Wisconsin and Michigan Bayfield Electric Cooperative, $10 million to build 191 miles of distribution line and make other system improvements. Wyoming Wheatland Rural Electric Association, $4.6 million to build 85 miles of distribution line and make other system improvements. USDA Announces Broadband Funds for Unserved Rural Communities Agriculture Secretary Tom Vilsack on October 24 announced 14 awards for projects to bring broadband to unserved rural communities. Rural Utilities Service Administrator John Padalino made the announcement on the secretary’s behalf while addressing a regional meeting of the National Rural Electric Cooperative Association in San Antonio, Tex. “Access to broadband is one of the most important investments in rural communities today,” Vilsack said. “These awards will help create jobs and give rural residents greater access to educational, health care, and social services.” USDA is providing $20.3 million in grants through the Community Connect Grant program. These are the first awards made under the program’s new guidelines that now allow applicants to fund broadband infrastructure for more than one community and raise the minimum required speed. Projects funded must deliver broadband at five megabits per second (Mbps). The following is a list of awardees that will receive USDA funding contingent upon the recipient meeting the terms of the grant agreement: Alaska Matanuska Telephone Association, Inc., $2,941,246 grant to construct fiber optic cables to expand broadband service at speeds ranging from 5 Mbps to 10 Mbps. The association is working closely with the Matanuska Susitna Borough School District to provide enhanced broadband service to the Glacier View School and construct a community center where all residents will have access to free 5 Mbps service for at least two years. Kentucky Crystal Broadband Networks, $480,420 grant to deploy highspeed broadband in and around the community of Idamay. This project will allow access to real-time weather radar and national weather updates to address severe weather conditions. Crystal Broadband Networks, $704,600 to provide broadband, video, and voice services to Lambric and Rousseau.
PCCA Journal|4th Quarter 2013 23 This project will enable these communities to have access to real-time weather radar and national weather updates to address severe weather conditions. The project will give residents free broadband service at a community center for at least two years. Nevada Arizona Nevada Tower Corporation, $442,468 to provide broadband service to increase educational opportunities and strengthen economic development. The project will focus on educational, economic, and entertainment opportunities by offering 5 Mbps broadband service at a reasonable cost. North Dakota BEK Communications Cooperative, $3 million to connect the Northern Rural Barnes County service area to the cooperative’s existing network and bring high-speed broadband capabilities to customers in unserved areas. The proposed fiber network will introduce new capabilities, including voice and video, for educational, health care, and public safety institutions. BEK Communications Cooperative, $3 million to serve a rural and sparsely populated area in the southern portion of Barnes County that has suffered from out-migration. The project will bring high-speed broadband, including voice and video, to unserved areas. The proposed fiber network will benefit the community’s educational, health care, and public safety institutions. Oklahoma Medicine Park Telephone Company, $933,000 to deploy broadband to the Acme area, located in the Rush Springs Sandstone Mountains in southwestern Oklahoma. The service will offer residential customers speeds of up to 100 Mbps and business customers speeds up to 1 gigabyte. The project will deploy voice and video service to the entire service area and will offer discounted service to eligible lowincome subscribers. The project will provide free service to critical community facilities, including a fire station, sheriff’s office, and school. Medicine Park Telephone Company, $833,000 to deploy wireless broadband service to the Agawam area. This service will offer residential customers speeds of up to 20 Mbps and business customers speeds up to 100 Mbps. The project will deploy voice service to the entire area. Medicine Park Telephone will also offer discounted broadband service to eligible low-income subscribers. Medicine Park Telephone Company, $867,000 to deploy advanced fiber-to-the-home service to the Cookietown area, located in the southern portion of the Wichita Mountains in Southwestern Oklahoma. Residential customers will receive service with speeds up to 100 Mbps, and businesses speeds up to 1 gigabyte. The project will provide voice and cable TV service and discounted service to eligible low-income subscribers. The project will provide free broadband for two years to critical community facilities. Medicine Park Telephone Company, $1.6 million to deploy advanced fiber-to-the-home service. Residential customers will be able to receive service with speeds up to 100 Mbps, while business customers will have speeds up to 1 gigabyte. The project will provide voice service and cable TV service. The grantee will offer discounted broadband service to eligible low-income subscribers. South Carolina County of Orangeburg, $1,009,565 to provide a broadband system to residents and businesses in the Pleasant Branch community. The project will offer 5 Mbps to residents and businesses and provide free service to critical community facilities for at least two years. Tennessee Scott County Telephone Cooperative, $2,607,000 to construct a broadband network throughout Stanley Valley. The project includes the establishment of a community center that will offer free broadband service to residents for two years. Critical community facilities will receive free service for two years. Texas Texhoma Fiber, LLC, $863,000 to provide broadband service to Sunset in southern Montague County and serve homes around the Lyndon B. Johnson National Grassland area. Residential customers will have access to service with speeds of up to 20 Mbps, and businesses will have service with speeds up to 100 Mbps. The project will provide a community center with free service for at least two years. Free service will be provided to critical community facilities for at least two years. Texhoma Fiber, LLC, $978,000 to provide broadband service to the community of Ringgold. Customers will be able to receive broadband, voice, and cable television service. Residential customers will have access to speeds up to 100 Mbps, while speeds up to 1 gigabyte will be available for business customers. Discounted broadband service will be offered to eligible low-income subscribers. The project will provide free broadband service to critical community facilities and a community center for residents for at least two years. Save the Date PCCA Project Manager Academy January 13-16, 2014 Atlanta, Ga. Details at www.pccaweb.org
RkJQdWJsaXNoZXIy MjE3MDU=