Can The Construction Industry Absorb Capital Intensive Fabricator Failures?

The recent defaults and plant shut downs by curtain wall fabricators Trainor Glass of Farmers Branch, Texas on February 22, 2012, and ASI Ltd. of Whitestown, Indiana, just before last Christmas, raise the question whether fabricators and suppliers of cladding, structural steel, precast concrete and various piping products, all of whom have relatively large capital investments in plant and equipment, can survive in this market of shrinking orders for their products on major construction projects.

While a performance and payment bond surety may step forward to keep production flowing for a time, as apparently happened in the case of ASI Ltd’s. subcontract  for cladding on the Brooklyn, N.Y. Barclays Center, it is especially unclear where such financial assistance could come from on privately funded jobs without performance bonding protection. Besides the tragedy of hundreds of skilled tradespeople suddenly out of work, and general contractors scrambling to locate and mobilize alternative fabrication sources, the collapse of fabricator availability for such critical building systems bodes very poorly for any construction industry recovery to economic health in the long run. Specifying architects, construction managers, and general contractors bidding for work on future construction projects of any sort need to exercise extreme care in evaulating the economic viability of their fabricators of critical systems across the entire timeline of any project. Otherwise, the economic difficulties of one fabricator can spill across the entire project, and threaten the survival of every trade involved.

Stimulus Spending Challenges Agency and Industry Capacity

In a speech yesterday to employees at the Department of Transportation, President Obama announced that 200 federal construction projects funded by the stimulus legislation will break ground in the next few weeks. Nevertheless, FEMA's experience with gargantuan construction spending suggests that both the government agencies charged with spending this money, and the construction industry responsible for completing the funded projects, will have their capacity tested by this huge influx of cash.

At hearings Tuesday, House Homeland Security Chairman Bennie Thompson told the Emergency Preparedness Subcommittee that out of $10.4 billion appropriated for repairs after hurricanes Katrina and Rita, $4.7 billion still has not been spent. Thompson blamed Louisiana Governor Bobby Jindal and Mississippi Governor Haley Barbour for the delays. Without regard to who is at fault, these facts do not bode well for the pace of distribution of the stimulus appropriations which will have to be funneled through state agencies.