Like a physician with her stethoscope at the outset of a check-up, astute shareholders and directors should use the level and trend of a utility’s market-to-book ratio (MtB) as one of the first...
The Big Build
Utility infrastructure projects face high costs, labor shortages and global competition for resources.
solutions in the resurgence of interest in combined cycle and “peaker” projects, as well as solar, wind and alternative fuels such as ethanol. While the industry is trying to develop and solve sustainable solutions, the answers are not as yet available to support the growing demand for base-load generation.
Fortnightly: The costs of building utility infrastructure projects are increasing. What role does Black & Veatch have in keeping those costs under control?
Smith: Black & Veatch is leveraging its global base of professionals along with its established relationships with proven partners around the world to address the labor issues, while also expanding the level of performance and partnering more actively with suppliers at an earlier stage. Where viable, we look for new approaches and opportunities to implement cross-functional promotions and increase training but to a more individualized need.
No system or process is a substitute for experience and making timely, cost effective decisions. Active and timely communications also are a key factor to implementation and marshalling resources globally to function as a united entity. Common tools and information technology are certainly key contributors to solving the issues, but effective communication and comprehension are the most important elements.
Fortnightly: Increases in costs for skilled and craft labor are a problem and some expect a lack of skilled workers going forward. How is Black & Veatch dealing with these issues?
Smith: We believe we understand the magnitude of the problem. Black & Veatch works closely with the international unions, various contractor and industry councils and draws upon our global experience to understand the issue of construction labor. In the United States, we chair the Building Trades Midwest Manpower Committee and have jointly developed a Midwest Manpower Demand Survey along with the building trades and McGraw-Hill.
That particular survey reflects the demand by craft for the coming five years by state. We also use the SE Study developed by the building trades and construction users for that region. We share information and data with our joint venture partners as well. What this tells us is that there will be a million-worker shortfall over the next five years. This is particularly relevant to skilled labor for power plants—boilermakers, pipe fitters, tube welders, pipe welders, electricians and carpenters. These shortages occur in the union and non-union sectors alike.
The U.S. Congress needs to help address this by way of immigration issues. Guest worker programs being proposed do not address skilled labor. The current laws on the books restrict technical, highly skilled labor to inadequate H1B levels, and more visas could help solve many demands. (See Sidebar, “Help Wanted: Construction Labor Shortages.”)
Fortnightly: How deep is Black & Veatch’s backlog of utility infrastructure projects or construction contracts in general?
Smith: Our current backlog varies but extends through 2012 for some current projects. While we have a mix of short (six months) and longer term projects (18 to 60 months), the mix is reflective of the high demands in all of our markets. While coal cancellations and postponements have occurred, combined cycle and early nuclear work are on