PCCA Journal 2nd Quarter 2014 - page 16

PCCA Journal|2
nd
Quarter 2014
16
troughs in perspective and optimism occurred prior to 3rd
Quarter 2009 and in 3rd Quarter 2012. Since 2012, the level of
optimism about the utility market and specifically the pipe-
line market has continued to exhibit both positive perspective
and very high optimism, with index figures well above 50.0
(Exhibit 4).
Among the various utility construction sectors, gas trans-
mission and distribution exhibit the highest optimism over
3-month, 1-year, and 3-year timelines, and electric distribu-
tion is viewed optimistically in a 3-year timeline (Exhibit 5).
Index scores above 50 indicate an improving market and level
of optimism. An index score of 100 is the maximum on the
scale, and these sectors exhibit scores of 80 or higher and far
exceed the level of optimism in any of the other segments.
Only the sewer sector falls below the 50 range, indicating
that this market is perceived as shrinking and defined by
pessimism. All other sectors are demonstrating varying levels
of optimism. Among the more moderate optimism sectors are
telecom and electric T&D where optimism is rising over the
next 3 years into ratings in the 70 range.
Scarcity and Constraint
The optimism in this sector is only tempered by scarcity that
is faced. The utility market sector is already experiencing
scarcity. Looking forward, these challenges will continue to
the point where only the most progressive and forward-think-
ing contractors will thrive.
Challenges to be faced include:
• Labor:
Low birth
rates, aging popu-
lation, and lower
workforce participa-
tion rate.
1
• Utility Internal
Workforce Older than 55
: 40 percent of inspectors, 25
percent of surveying and mapping specialists, 25 percent
of operating engineers, 25 percent petroleum engineers, 25
percent frontline supervisors.
2
• User Rate Increases:
Ratepayer and PUC fatigue due to
rates rising faster than inflation since 2005.
3
• Technology Innovation:
The pace of change in the con-
struction industry is glacial and must accelerate.
The obvious reaction to scarcity is to see challenges as
opposed to promise and opportunity. We believe successful
firms will embrace the growth and potential scarcity in these
markets for what they are—promise and opportunity.
Conclusion
“No matter how I try, I find my way into the same old jam.”
Don’t get caught in the same old jam; instead, embrace this
utility construction environment as one filled with the prom-
ise and opportunity. We offer three critical strategies to help
Exhibit 5
UCI Utility Index Detailed Results by Market Sector
1st Quarter 2014
Business Outlook
3 month 1 year
3 year
Interpretation
Electric Distribution
73.4
72.5
81.5
In nearly all cases, the
markets are perceived
as positive and
improving at a faster
rate over the 1 and 3
year timelines.
Electric Transmission
66.7
63.9
74.3
Telecom
65.3
71.9
71.0
Gas/Liquid Distribution 85.3
91.5
93.1
Gas/Liquid Transmission 85.9
92.7
92.4
Water
55.9
64.1
75.0
Sewer
48.6
57.9
66.2
“Our general outlook is positive with
expanding growth prospects.”
– Large National Pipeline Contractor
Exhibit 4
Historic Summary Utility Construction Index
3
rd
Quarter 2009 to 1
st
Quarter 2014
Interpretive Note:
A diffusion index is designed to establish whether
participants perceive a positive and optimistic business environment versus
a negative or pessimistic one. A reading above 50.0 indicates improving or
expansion, a rating at 50.0 indicates remaining the same, and below 50.0
indicates worse or contracting. Therefore, if a reading goes from 30.0 to 40.0,
then the result still implies a decline from the previous quarter because 40.0 is
below 50.0, but the decline is slowing because 40.0 is above 30.0. As another
example, if the diffusion index changes from 35.0 to 70.0, it implies a change
in direction and improvement over the previous quarter, not because 70.0 is
above 35.0, but because 70.0 is above 50.0.
Good Times, Bad Times
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