PCCA Journal 2nd Quarter 2014 - page 13

PCCA Journal|2
nd
Quarter 2014
13
T
he overhead and underground utility construc-
tion market and particularly the distribution
and transmission pipeline construction mar-
kets are exceptionally healthy, and the overall
mood and perspective of contractors is one of
great optimism.
Executive Summary
In the immortal words of Led Zeppelin, the overall utility
construction market has seen both good and bad times. The
current market is perhaps the best in 60 years, and many util-
ity contractors are expressing their optimism that this market
will continue for some time. The optimism is particularly
strong in the distribution and transmission pipeline construc-
tion markets, which are exceptionally healthy, while electric
distribution is also expected to yield growth. Water and sewer
are least attractive, and telecom, while positive, is not as
robust as other markets. As a side note, Continuum is more
bullish in the 2- to 4-year prospects of the telecom market.
Utility Construction Index
Periodically, Continuum Advisory Group tests utility con-
struction firm perspectives to develop a Utility Construction
Index (UCI). This index is designed to test perspectives of
infrastructure and utility construction industry firms and
establish the degree of optimism or pessimism prevalent. The
index is made up of a confidence level, backlog projections,
cost and productivity factors, and business outlook for all of
the utility sectors, including electric power T&D, telecom, gas
and liquid T&D, and water and sewer. Nine factors feed into
the summary and were tested through three recent nation-
wide surveys of utility contractors. The results demonstrate
seven factors as optimistic, and improving and two factors
rated as pessimistic or worsening
(Exhibit 1).
Of greatest optimism are expected
improvements in backlog, continued
improvements in their firm’s perfor-
mance, and continued improvement in
the utility construction markets where they do business. The
least optimistic area is the overall economy, where the level
of optimism has fallen since 3rd quarter 2013. The concerns
that have slowed the level of optimism revolve around federal
monetary policy, deficit spending, the national debt, execu-
tive branch leadership, and a dysfunctional Congress. Expec-
tations of rising costs in construction materials and labor are
the two factors where pessimism rules.
Historic Perspective
Perspectives on the utility markets have moved up and
down dramatically since the financial and economic crisis in
2008/2009. Utility construction spend-
ing has performed better than any other
type of construction, exhibiting the
smallest amount of shrinking in 2009,
2010, and 2011. The electric and gas
sectors performed the absolute best,
exhibiting steady spending from 2008 through 2010 and only
very modest shrinking in 2011. Growth has and will continue
“Good Times, Bad Times,
You Know I’ve Had My Share...”
Mark Bridgers and Nate Scott
Overall Economy
Overall Economy WhereWe Do Business
Our Construction Business
Residential Building
Construction Market WhereWe Do Business
Utility Construction Market WhereWe Do Business
Our Expected Backlog
Cost of Construction Materials
Cost of Labor
Productivity
Exhibit 1
Utility Construction Index Summary
1st Quarter 2014
“[We are] very bullish about our business
[and see] lots of opportunity out there.”
– Overhead/Underground Utility Contractor
Continued on page 14
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