Here’s the good news on commercial real estate: loan activity is reviving and credit standards are loosening, according to industry data and experts.
Say you’re a contractor. You’re used to building subdivisions or maybe commercial buildings. Maybe there aren’t as many projects available as you’d like. You want your business to survive – so you’re thinking about expanding your repertoire into the public sector.
“A lot of contractors, whether they be in residential, commercial or heavy highway construction – they’re moving into different markets,” says Stephen Stone, president of the Associated Builders & Contractors of Wisconsin, Inc. based in Madison. “They’re all trying to learn the nuances of those markets, and mistakes are made when they’re not familiar with working in that market.”
There’s a lot of paperwork, for one thing. And certifications and other requirements. So much so that many contractors will avoid public projects unless the private market is going dry, Stone says. But in the last three years or so, there’s been a shift.
That’s where organizations and agencies such as ABC of Wisconsin and the Tribal Procurement Technical Assistance Center (FACC-PTAC) in Oneida can help. They can provide the information that contractors need to gain an edge and make the transition from private to public projects. Such entities also can provide resources that will help make survival in a tough economy easier.
ABC, for example, has partnerships with insurance agencies and cell phone companies and can provide group buying discounts, which helps contractors save overhead costs, according to Stone.
But often contractors are simply looking for advice.
“If somebody calls here and says, ‘I got my first federal job, how do I comply?’ we can help with the resources we have on staff, or find the experts for them,” Stone says. “We know where they are, so they’re saving a huge amount of time.”
Of the 800 or so ABC members statewide, including in the New North region, about half worked in the public sector before the economy took a turn, Stone says. Now, another quarter (or half the ones who were solely working in the private sector) are taking on public projects.
But it’s a whole new ball game – or can of worms – depending on your perspective.
For instance, there is a special certification needed just to build hospitals. There are other requirements for government work such as the Davis-Bacon Act, which says that contractors must pay workers a certain rate. Finding those things out after the fact can be disastrous.
“To enter the government sector, you have to be prepared,” says Gwen Carr, program manager for FACC-PTAC. “You can’t just say, ‘Oh, I’m going to bid on government contracts.’ Depending on what it is you are getting into, if you’re talking about government construction there are specific certifications you have to have, whether it’s federal, state or county.”
Additional certifications, or qualifying as a minority-owned or disadvantaged business can help gain an edge in a particularly competitive market (see sidebar).
The agency also looks at old bids and examines why some were successful and others weren’t, to give people as much information going into the process as possible. The whole process is designed to force contractors to examine various parts of their business and be prepared for new opportunities.
The Builders Exchange of Wisconsin, which is a clearinghouse for information on construction projects statewide, reported 381 private projects and 3,067 public projects in 2007. In 2011, it had 295 private projects and 3,763 public projects.
As ABC has seen the market shifting, it has worked to educate members through newsletters, publications, educational seminars and workshops. The organization has encouraged contractors to cut back on expenses and to look for new ways to use their talents.
“Look for the markets that are still needed and still being built,” Stone suggests. “Health care is huge, transportation is huge, wastewater – the public still needs all that.”
But as contractors are switching from the private to the public sector as private projects have dried up, at the same time, a dwindling private tax base has caused public projects to disappear as well.
“So there’s a lot of change,” Stone says. “Some would say turmoil. The pressure is absolutely incredible on these businesses who have a number of employees they want to take care of, and keep families fed. It gets pretty stressful.”
That’s not to say the market is all doom-and-gloom. There are plenty of signs that the market is starting to come back. In fact, one of ABC’s largest members says that 2011 was the best year they had in 30 years of business. But they did have to move into different states, Stone says, and did university work that they’d never done before. It’s an example of a company that saw the downturn coming and leaned out early. It’s an example of how adaptability can make or break a company. Stone has seen others close their doors, too, either because they weren’t able to or wouldn’t move into new markets.
“Construction is a wonderful industry and it’s provided so much for so many people,” Stone says.