Building Industry Magazine - June 2012 - (Page 50)

According to the latest UHERO ((Economic Research Organization at the University of Hawaii) report, the state legislature has finalized an $11.2 billion budget for fiscal year 2013 “after a deadline extension and flurry of last minute activity.” Lawmakers added approximately $430 million in new bond financing for capital improvement projects. This addition brings the total for government construction projects in 2013 to $3 billion. The recently completed Bachelor Enlisted Quarters at Kaneohe Marine Corps Base Hawaii is an Aon client project. QUICK FACT: Sure and Steady “Severe downsizing or unfortunately, closing of many contractors, tends to multiply the effect on our economy. The federal government’s philosophy of preferring mega-construction contracts versus the smaller, individual projects, (as we enjoyed during the last large downturn) has kept many start-ups from the field.” “Although those contractors who have survived the past few years currently seem to be better off than they have been, we still are not out of the woods,” says Aloha Insurance Services’ Tad Nottage. “With the volatility of Wall Street and the uncertainty of the world economy, it seems that developers are moving forward ever so cautiously. The projects that seem to be proceeding have been retooled to offer better pricing to attract buyers and are limiting their exposure by controlling the amount of product available. Some of the projects are going to be offered at more than half the original amount. I do believe the future hinges on the November elections and hope that whomever is put into power will be able to ‘spearhead’ future growth.” In the midst of the current uncertain financial conditions, which continue to affect Hawaii’s development and construction community, there is a significant measure of stability in the surety sector. As Jack Wolfe’s Stubblefield explains, “Notwithstanding the seemingly ‘perfect storm’ in our industry, the surety markets have remained stable and supportive — perhaps a little more conservative as regards reviews of subcontractors, contracts, financing, etc., but this is generally normal at any time. To the extent that a contractor’s financial has downgraded somewhat, (still) an ability to present history, reputation, solid management and accurate bidding, will help our contractors to enjoy surety credit. “Insurance for construction firms has remained a bright spot,” Stubblefield affirms. “Liability rates, lowered over the past two years, have remained lower. The new workers’ compensation rate increase has been so small as to not be a factor. Property insurance rates were supposed to increase (so said the experts) but we have not seen this outcome. (However) looming on the horizon is a bill passed last year requiring insurance companies to somehow provide faulty workmanship claim coverage that the Immediate Court of Appeals already had rejected. “We continue to encourage close supervision of project progress as well as heightened diligence in managing the payment risk resulting from subcontractor cash strain.” Timothy Fanto, Zurich Insurance While most insurance carriers have changed their contract wording to comply and continue to insure faulty workmanship, several insurers of our largest projects, have not. This bill has not yet been tested. If it fails a court test, some of our largest contractors and their subcontractors will find themselves in a financial risk situation. Let’s hope for the best.” (Editor’s note: Also still a matter of hot debate in Hawaii and elsewhere is coverage for construction defects. The Federal District Court continues 50 | BUILDING INDUSTRY | JUNE 2012

Table of Contents for the Digital Edition of Building Industry Magazine - June 2012

Cover June 2012, Drilling for the first column
News Beat
BIA Gala Honors Renaissance Winners
Southeast Maui to Get Wind Power
LCC Breaks Ground for Education Building
REHAB Completes First Phase of Rebuild Campaign
GCA Salutes Build Hawaii Winners
Vitus Group Completes $3.1 Million Renovation
HSA Celebrates Milestone Year
Contracts Awarded
Spotlight on Success: Pearl Harbor Fitness Center
Best Practices
Low Bids
Concept to Completion: Hilton Hawaiian Village Renovations
New Products

Building Industry Magazine - June 2012