August 2020 Trends
Engineering and Construction Costs Fall for First Time Since 2016, Key Index Shows
Engineering and construction costs fell in April 2020—the first decline in 41 consecutive months—according to a key index released by IHS Markit and the Procurement Executives Group.
The PEG Engineering and Construction Cost Index, which is calculated based on survey data from procurement executives in engineering, procurement and construction firms (EPC), indicates falling prices at any figure below 50. In April, the index registered at 34.9 overall, with the materials and equipment portion at 35.2 and the subcontractor portion at 34.3. On the materials side, prices for 11 of 12 components were reported to decline, particularly fabricated steel, alloy steel pipe and carbon steel pipe.
IHS Markit forecasts a 37-percent decline in GDP in the second quarter, per the monthly GDP index, with a 5.1-percent drop in March and a 7.4-percent decrease in April.
Report Examines Global Construction Disputes
The “2020 Arcadis Global Construction Disputes Report” (bit.ly/32JFufh) explores the vital role collaboration will play in the industry’s response to the COVID-19 pandemic. It recognizes the future uncertainty surrounding COVID-19 as well as the unique challenges that will be posed as projects restart. Whether the industry can respond cooperatively will play a large role in the quantity, duration, and value of construction disputes in 2020 and beyond.
This year’s report reveals that the global average value and length of disputes dropped slightly from 2019, but it remains to be seen if those trends can continue in a post-COVID-19 environment. Consistent with previous years, human factors and misunderstanding of contractual obligations continue to be a primary cause of disputes.
In North America, however, dispute values, durations and volume all increased. After continuously dropping since 2013, the average value of disputes rose from $16.3 million to $18.8 million. The average time taken to resolve construction disputes for North America increased from 15.2 months in 2018 to 17.6 months in 2019.
Overall, North America saw the volume of construction disputes increase compared to 2018, and the majority of survey participants expect this number to increase in 2020. According to the report, “it’s impossible to predict the full extent of COVID-19’s impact on construction, but ongoing project shutdowns are setting the stage for a continued increase in disputes.”
AGC Surveys Effects of Coronavirus
A new survey by the Associated General Contractors of America (AGC) taken from June 9-17, 2020, sought to learn the effects of the coronavirus on contracting work and employment. It found that less than one third of respondents didn’t have to halt or cancel work on current or upcoming projects.
The survey also found that 26 percent of respondents saw business volume match or exceed their year-ago level, but 30 percent don’t expect business volume to reach last year’s levels for more than six months.
Clean Energy Jobs Report Shows Residual Unemployment
As the U.S. economy began to reopen in June 2020, some employees returned to work in the clean energy sector, which had been reeling from three months of devastating job losses in the wake of the COVID-19 pandemic, according to the latest analysis of federal unemployment filings from E2, E4TheFuture and the American Council on Renewable Energy.
About 106,300 jobs were added back to the economy by clean energy companies in June, according to the analysis by BW Research, leaving more than half-a-million clean energy workers (514,200) out of work since March 2020. In all, clean energy employment is still down 15 percent from the start of the year, when nearly 3.4 million Americans worked in renewable energy, energy efficiency, clean vehicles and fuels, and other clean energy sectors.
Other troubling trends include a sharp increase in permanent job losses, rising initial weekly unemployment claims, and COVID-19 cases spiking in states with some of the largest clean energy workforces, according to the analysis.
Read the full report at bit.ly/2ZEqmgY.
FEMA Study: Tougher Building Codes Would Avert Major Losses
A study by the Federal Emergency Management Agency (FEMA) shows that modern building codes are averting $1 billion a year in structural damage in California and Florida, the nation’s most disaster-prone states, according to preliminary findings.
The study could be groundbreaking in the agency’s effort to convince states and localities to adopt up-to-date building codes and overcome opposition from builders, who have successfully argued in some areas that strengthened codes only increase construction costs.
“The combined [$1 billion] savings from these two states demonstrate the high value of adopting I-Codes for hazard mitigation as a return on investment,” FEMA wrote in a synopsis of the early findings (bit.ly/3jscK0q), referring to model construction codes published by the International Code Council.
FEMA’s study is part of the agency’s broader effort to reduce the growing cost of natural disasters by convincing states and municipalities to adopt post-2000 building codes.
Report Addresses Catastrophic Threats to U.S. Electric Grid
Rocky Mountain Institute’s Electricity Program released a report assessing the current approaches to grid resilience in the United States as well as providing recommendations for policymakers, regulators and industry participants.
According to the report, historical approaches to ensuring grid security in the United States are proving to be poorly suited to the emerging, catastrophic threats facing the grid. They’re also incongruous with the ongoing technological transition that’s rapidly reshaping the electric power industry. But by embracing the present era of energy transition as an opportunity, not a threat, the report lays out unique and timely strategies to reimagine and improve the resilience of the U.S. electric grid.
“At their current pace of capital investment, electric utilities will probably invest approximately $1 trillion in the U.S. power grid between 2020 and 2030,” noted Mark Dyson, a principal in Rocky Mountain Institute’s Electricity Practice and lead author of the report. “Given the magnitude of long-lived assets under consideration, there is a societal, economic, and national security imperative to invest in our grid in a way that promotes resilience by design, economically and from the bottom up, and not as a cost-adding afterthought years later.”
The full report can be viewed at bit.ly/39blYcD.
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Tools and Technology
• Bentley Systems Opens Up Full Access to ProjectWise 365 and Waives Subscription Fees through September 30