Cheryl Foley and Sarah Drinnan represented Florida Surety Bonds for the second year in a row. This year was better than ever! It was held at a beautiful location, there were over 70 exhibitors and we made some great connections! Florida Surety Bonds is proud to be a member of such a great association.

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Based on its monitoring of construction permits, the firm said $10.9 billion in projects started in the tri-county region, up from $10.6 billion in 2015. Residential construction starts were up 7 percent to $7.1 million while non-residential (commercial real estate, education, health care, and government) declined 4 percent to $3.8 billion.

That growth was even more impressive than in 2015, when construction starts increased 3 percent year-over-year.

Most experts forecast that fewer condo projects will break ground in 2017 as pre-construction sales have slowed. However, that’s a large pipeline of apartment projects in the works. On the commercial side, industrial and retail projects have been popping up across the region and that is expected to continue.

Florida added 22,300 construction jobs, for 5.1 percent growth, during 2016, according to the Labor Department.

A survey by the Associated General Contractors found that 30 percent of Florida construction firms expect a higher dollar volume of projects in 2017.”

Source Credit: Brian Bandell, South Florida Business Journal

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This week the Florida Transportation Builders’ Association “FTBA” had their Annual Construction Conference in Orlando. It was a very well attended event; there were over 500 attendees consisting of General Contractors, Subcontractors, Suppliers, Professional Services Companies, etc. There were several break out sessions that allowed companies to learn more about certain opportunities that could help them in business. One of the sessions was about Joint Ventures. Kim Niv partnered up with local attorney, Greg Martin, from Martin Hild, P.A. to speak to about Joint Ventures. Their presentation dove into what exactly a Joint Venture was and what to think about before partnering with someone to do a Joint Venture. Their two hour presentation was packed full of valuable information regarding the advantages and disadvantages, key things to consider when thinking about partnering with another company for a Joint Venture, putting together a plan and an agreement, and qualifying for bonds under the Joint Venture.

If you were not able to attend the FTBA Conference but are interested in learning more about Joint Venture, please give us a call. We are happy to visit with you to help answer any questions you may have.

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By now, you may have heard of the Orlando Round Building demolition contractor walking off the job.  Demolition of the old American Federal building downtown was to have been completed by November 2014, in time for the opening of the new Dr. Phillips Performing Arts Center.  Many deadlines have been missed over the course of the project.

The City has given the contractor seven days to return to the jobsite with a plan for completion or they face termination of the contract.   While it is never a good thing when a contractor is unable to complete a project (or more often, is unable to pay their bills), it is situations like this that underscore the importance of surety bonds for construction projects.

If the contract is terminated and the contractor is found to have been at fault, the bonding company will ensure that another contractor will finish the job at no additional cost to the City and taxpayers.  That is what bonding is all about.

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The sounds of construction have returned but the skilled construction workers have not. Construction industry advocates say there’s a severe shortage of skilled workers nationwide- including in Florida.

In Florida, construction employment is down about 40% and across the country there are $1.4 million less people employed in construction than there were in 2007. These numbers reflect the volume of projects now in progress across Florida, but they overlook the shortage of skilled labor challenging construction firms throughout the state.  According to the U.S. Labor Department, Florida’s construction sector is booming with 40,000 new jobs added in the past year alone – which is more than any other state. This shortage causes various challenges when it comes to hiring and retaining skilled workers and maintaining the high standards of safety and quality on a job site.

Obviously, most employers prefer to hire local workers, but unfortunately it’s becoming more common that their only option is to bring in talent from elsewhere; which could be costly. The Associated General Contractors of America want more funding for vocational education and more support for veterans to get training in construction related jobs. Local, state and federal governments could do more to increase the supply of qualified workers.

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Since the devastating 2004/2005  hurricane season, Floridians have had to pay an additional tax on their insurance policies to help pay off damage from strong storms. This tax percentage of 1.3% was included on Surety Bonds as well.

After nearly a decade, as of January 1st, Floridians are no longer  forced to pay the Florida Catastrophe Fund Emergency Assessment, known as Florida’s hurricane tax.

Nice way to start the New Year!

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Tampa’s cruise industry has a problem. The Sunshine Skyway Bridge is too low to accommodate the “mega” cruise ships of the future. The Florida Department of Transportation organized a pre-feasibility study to assess their options of either replacing the 27-year-old structure, or building a new port seaward of the bridge.

The 4.1 mile Sunshine Skyway Bridge has a vertical clearance of about 190 feet, which is too low to accommodate the ever growing cruise ships of the near future. Actually, it’s barely tall enough for the majority of existing cruise ships that are there today.

It was estimated it could cost up to $647 million to build a new port. The estimate was based on a four-berth facility with terminals measuring at least 100,000 sq. feet, a six-level parking garage, and other ground transportation areas. There are problems with this option. To start, the channels in the area are too narrow for safe two-way cruise traffic. Also, they found that there is a 965 foot limitation on a cruise vessel length due to the Sparkman channel and turning basin. There are obviously a few things that would need to be re-evaluated if this would be the solution they go with.

The options for replacing the existing bridge are more expensive. Estimates are ranging from $1.5 billion to $2 billion; the FDOT looked at a few alternatives:

1)     Build a new bridge and demolish the existing structure. Estimated Cost: $2 billion.

2)     Raise the deck’s vertical height by lifting the bridge section to 240 ft. Estimated Cost: $1.5 billion.

3)     Raise the deck’s vertical profile to 240 ft. by demolishing and replacing the impacted bridge section. Estimated Cost: $1.5 billion.

Or a forth option….do nothing. This option would come with negative consequences, such as a significant loss of cruise traffic which would, in turn, cause a negative economic impact in the Tampa Bay area.

The question is still  lingering….a new port or a new bridge?

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Despite how the Fed or the Congress spends our money, it is a real law of economics that every nation has a limited amount of money.  You may or may not be impressed at how much a country has, but for everyone, it is limited.  In beginning economics, we learned if a country spent more of their money on guns (defense and warfare), there would be less money for butter (domestic items) and vica versa.  A country had to choose.  This winter, we are facing something new.  With the severe cold up North and the major snowstorms rolling regularly across much of the country, the United States is having to spend an inordinate amount of cash on Salt (Snow removal and Management).   We’re pretty sure that Atlanta blew through their snow removal budget during that first storm and are now raiding other funds to handle this past week’s mess.  The other big fallout of all this snow fall is that it reduces consumer spending.  The economy was growing at a healthy rate of 3.2% in the fourth quarter of 2013.  Bring on the New Year’s snow, and our growth has stalled at something below 2%.  Even on-line spending slowed considerably possibly because people are spending more for home heating oil, and now have less to spend at Amazon.  It turns out, our economy is a complex and fragile system that can be affected even by the shift of a Polar Vortex.  Who would have thought?

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In case you haven’t heard, there are big things happening at the Panama Canal.  It is being made deeper and wider.  If you understand the country and the terrain, that is not as simple as it sounds.  Not surprisingly, it is taking the contractor longer than he first thought to complete the project.  Not surprisingly, the country of Panama has decided to make a number of changes throughout the project.  So, what do we end up with?  A dispute.  A very large dispute.  It doesn’t help that the contractor was one billion dollars lower than the second bidder on this $3.5 billion contract.  The contractor cannot continue working until he has more funds.  Panama has no more funds, but demands that the contractor completes the project as per his contract.  Panama, being an owner with no more money, is now blaming the contractor and expecting him to accept all responsibility.  Panama is threatening to place the contractor in default and call in the surety bond.  It is a big bond.

They appear to have reached a painful deal.  Zurich is to transfer its entire surety bond into debt as a financing mechanism to help cover a loan to complete the work.  As of today, work has been stopped for about 14 days while they await the funds to be received from Zurich.  The contractor is a consortium called Grup Unidos por el Canal (GUPC) led by the Spanish firm Sacyr.  It’s a pretty big problem.  Because there is a surety bond involved, as least the parties have options.

The project was awarded to GUPC for the third locks project in 2009.  The Panama Canal was designed in 1904 for ships with an 875 foot length and 92 foot beam, is too small for modern ships that are three times that big, making a third set of locks essential.

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You may desperately need work, but be careful to avoid bad work.  You don’t need to be kicked when you are down.  When margins are thin for all the contractors, it is very easy to pick up bad work.  It is also very easy to pick up bad work when the owners (public or private) are running out of money.  You have to bid smart.  Be wary of the low, low subcontractor.  Many General Contractors are bonding all major subcontractors because they just don’t know how much this economy might have hurt their subs.   Get all of your changes on the job in writing.  Disputes skyrocket in tough times as owners try to get additional work done for free.  Avoid litigation because it is a slow, life sucking distraction.  Those are some obvious tips. 

Here are some less commonly described problems.  When the owner (public or private) doesn’t have money, he doesn’t spend enough on design.  This owner, who used to be your friend before, now asks you for ideas on how to solve problems.  If you offer ideas, the owner can use that against you because you are now taking on the design liability.  It was your idea.  Furthermore, your best project managers probably have the best people skills.  Those people skill strengths, especially in difficult times, often lead to problems such as substance abuse, poor financial management, kick backs, and wheeling and dealing.  A bad project manager can take you to the cleaners.  Finally, we are seeing a large increase in the number of employee thefts by trusted bookkeepers in the State.  Give us a call if you would like to discuss how you can protect yourself.  

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