2015 CII Annual Conference August 3–5 Boston, Massachusetts Is There a North America Craft Labor Cliff That Will Affect Project Performance? RT 318

2015 CII Annual Conference August 3–5 • Boston, Massachusetts

Is There a North America Craft Labor Cliff That Will Affect Project Performance?

RT 318

• Mitch Lee

• Chris Maxson

• James MacDonald

• Jennifer Sulak Brown

• Jon Tate

• Tim Taylor

• Paul Goodrum

• Mohammed Albattah

• Hossein Karimi

• Kevin Blair

• Scean Cherry

• Kimberly Corley

• Brandon Davis

• Marco Giron

• Steve Greene

• Daniel Groves

• Shaddy Hanna

• Dean Hamrick

• Don Jones

RT 318 MembersIntr

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Do you think there is a craft labor cliff?

a. Yes

b. No

YesNo

0%0%

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The Story

• The demographic craft labor cliff is here, and it is impacting project performance

• The cliff varies by trade and region

• There are significant declines in real wages and widespread use of per diem to attract the needed craft

• There is a lot of work to rebuild our nation’s craft and the pride in their work.

• There is an implementation resource to help you start to address the shortage

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Data Sources• Secondary (Raw) Data

1. National Opinion Research Center, University of Chicago, General Social Survey on Craft Job Satisfaction• 2,251 Craft Workers

2. U.S. Bureau of Labor Statistics • Current Population Survey (CPS), 705,321 Craft

Workers

3. Statistics Canada (Gov’t)• 79,022 Craft Workers

4. National Craft Assessment and Certification Program• 381,729 Craft Workers

5. Associated Builders & Contractors Craft Championships Registrations• 156 Craft Workers

6. CII Benchmarking and Metrics Data• 68 projects

• Other Secondary (Aggregated)

7. U.S. Bureau of Labor Statistics • Current Employment Statistics (CES)

8. Build Force Canada Data• 858,260 Craft Workers

9. Alpha Resources• ~20,000 Craft Workers (estimated)

10. Industrial Projects Report• 864 job advertisements (12 months)

11. U.S. Department of Education, • High School Transcript Study• Digest of Education Statistics

12. Construction Users Roundtable• Construction Labor Market Analyzer

• Primary Data

13. CII RT-318 Survey• 29 projects

• 13 different data sources• Over 2 million data points

CC: Jpatokal

THE IMPACT OF CRAFT AVAILABILITY ON PROJECT PERFORMANCE

2015 Annual Conference

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RT-318 Sampled Project Data Base

• 97 Total Projects (87% U.S. 13% Canada)

• Projects were performed between 2001 and 2014

Average (Median)

Min; Max

Actual construction phase cost ($M)

$231.3 (40.8)

$0.5; $8,549

Actual project duration (Days)

913.2 (622.5)

46; 3,131

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Performance of Projects Impacted by Craft Labor Shortage

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Why is this important?

If we accept higher costs and longer schedules to mitigate the shortage,

there will be more injuries, but it doesn’t have to be like this.

CC: Jpatokal

WHAT IS THE SHORT TERM CLIFF?


1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 20140

5

10

15

20

25

United States

Electricians (U.S.)

Pipelayers, plumbers, pipefitters, and steam-fitters (U.S.)U

nem

ploy

men

t R

ate

(%)

The Great Recession

Natural Unemployment Rate

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SOURCE: Data Ferret – Current Population Survey, U.S. Bureau of Labor Statistics.

Actual Annual Unemployment Rate [Craft workers only]

Considering the recent drop in oil prices, do you think the availability of skilled workers is increasing or decreasing?

a. Increasing

b. Decreasing

Increasin

g

Decreas

ing

0%0%

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Actual Monthly Unemployment Rate [Craft workers only] Jan 2013 - May 2015

Jan-13

Feb-13

Mar-

13

Apr-13

May

-13Jun-13

Jul-13

Aug-13

Sep-13

Oct-13

Nov-13

Dec-13

Jan-14

Feb-14

Mar-

14

Apr-14

May

-14Jun-14

Jul-14

Aug-14

Sep-14

Oct-14

Nov-14

Dec-14

Jan-15

Feb-15

Mar-

15

Apr-15

May

-150

2

4

6

8

10

12

14

16

18

20

Cons

truc

tion

Une

mpl

oym

ent R

ate

(%)

Natural Unemployment Rate


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The CLMA® Database

• More than 4M projects

• Value of projects ≈ $4.2T

• About 77% of U.S. non-residential construction

– About 79% Industrial construction

– About 76% Non-Industrial construction

• Tracks 49 craft disciplines www.myCLMA.com

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Future Labor Deficit/Surplus for ElectriciansRegions Level [Peak Quarters] – First Quarter 2018

SOURCE FOR ESTIMATED LABOR DEMAND: Construction Labor Market Analyzer (CLMA)

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Future Labor Deficit/Surplus for PipefittersRegions Level [Peak Quarters] – First Quarter 2018


Over the next couple of years, does your company plan to hire any welders for your capital facilities projects?

a. Yes

b. No

YesNo

0%0%

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Future Labor Deficit/Surplus for WeldersRegions Level [Peak Quarters] – First Quarter 2018


266%

477%

236%

280%

470%

527%

328%

420%

211%

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Future Labor Deficit for WeldersNational Level in 2018

• 181,390 additional welders will be needed

• Enough to fill Fenway Park almost five times

• More than enough welders holding hand to hand to stretch from Houston to Austin

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The short term cliff is concentrated among

the pipefitting, electrical, and welding crafts

In the U.S. Gulf Coast

CC: Jpatokal

SIGNIFICANT DROPS IN REAL WAGES AND CURRENT WIDE SPREAD PER DIEM


SOURCE: Current Employment Statistics (CES), U.S. Bureau of Labor Statistics.INFLATION ADJUSTMENT SOURCE: Consumer Price Index – All Urban (CPI – U), U.S. Bureau of Labor Statistics

1974

1976

1978

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

2010

2012

2014

17

19

21

23

25

27

29

31

Total Private

Construction

Ave

rage

Hou

rly I

ncom

e (2

014

$ A

mou

nt)

19.7%

42.0%

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Real Wages ($2014 Amount – Inflation Adjusted)

[Construction vs. Total Private] Craft Trades Only

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Real Wages ($2014 Amount – Inflation Adjusted)Construction Trades & Construction Types

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

18

19

20

21

22

23

24

25

26

27

28

Construction

Heavy and civil engineering construction

Electrical contractors

Plumbing and HVAC contractors

Oil and gas pipeline construction

Total Private

Aver

age

Hour

ly In

com

e (2

014

$ Am

ount

)

SOURCE: Current Employment Statistics (CES), U.S. Bureau of Labor Statistics.

Is your company experiencing an increased use of per diem on your projects?

a. Yes

b. No

YesNo

0%0%

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"Per Diem" Percentage

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There has been significant long-term

declines in real wages

And current

widespread use of per diem

“The investigations are part of an ongoing, multiyear initiative aimed at ending an illegal and alarming trend of employers labeling part of employee wages as per diem payments, often to avoid overtime, payroll taxes and other costs.”

CC: Jpatokal

REBUILDING THE CRAFT INFRASTRUCTURE


1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 201436

37

38

39

40

41

42

43

Construction Industry All Other Industries

Aver

age

Age

Average Aging Rate = 0.405 years/year



Average Age[Construction vs. All Other Industries]


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Age Distribution: All Trades

15

19

23

27

31

35

39

43

47

51

55

59

63

67

71

75

79

0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0

2014

1994

Probability Distribution

Age

1994

2014

1994: Average Age = 36.3

2014: Average Age = 40.8


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Construction vs. All Other IndustriesGrowth in the Hispanic workforce

1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 20148

10

12

14

16

18

20

22

24

26

28

All Other Industries (Hispanic) Construction Industry (Hispanic)

His

pa

nic

Ra

te (

%)


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Hispanics in Construction Trades

19941995

19961997

19981999

20002001

20022003

20042005

20062007

20082009

20102011

20122013

20140

10

20

30

40

50

60

RoofersDrywall installers, concrete and terrazzo finishers, and plasterersPainters, construction and maintenanceCarpet, floor, and tile installers and finishersConstruction laborers and helpersBrickmasons, blockmasons, and stonemasonsAll TradesCarpenters Pipelayers, plumbers, pipefitters, and steamfitters Electricians Construction Equipment Operators (Except Crane)

Hisp

anic

Rate

(%)


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High School Graduation Rates[United States]

1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 20140

10

20

30

40

50

60

70

80

90

100

HispanicNon-Hispanic

Hig

h Sc

hool

Gra

duat

es (%

)

35.3%

37%


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High School Graduation Rates[Canada]

1991 1996 2001 2006 201130

40

50

60

70

80

90

Canada, by birth Canada, by naturalization Not a Canadian citizen

Pe

rce

nta

ge

(%

)

SOURCE: Statistics Canada.

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US Rural and Urban Population [1900 – 2010]

1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 20100

10

20

30

40

50

60

70

80

90

Rural Urban

Po

pu

lati

on

(%

)

SOURCE: U.S. Census Bureau, Decennial Censuses

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Career and Technical Education (CTE) by School Location [2000 - 2009]

2000 2005 20090

1

2

3

4

5

6

7

8

CitySuburbTownRural

Ave

rage

Num

ber o

f Cre

dits

Ear

ned

SOURCE: U.S. Department of Education, Institute of Education Sciences, National Center for Education Statistics, National Assessment of Educational Progress (NAEP), 1990, 2000, 2005 and 2009 High School Transcript Study (HSTS).

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Our craft infrastructure is aging and the existing education and training system

will not close the gap.Poor high school graduation rates.

Inconsistent development of apprentices and helpers.

Pushing students to universities.

CC: Jpatokal


CRAFT RISK AVAILABILITY FORECAST TOOL (CRAFT)

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CRAFT Development

• Historic Project Database– 97 Complete Projects (U.S. and Canada) (2001-2014)

– Majority Industrial Projects

– Average Cost: $231M; Average Schedule 623 Days

• CRAFT Statistical Development– Cost : Linear Regression (p < 0.0001)

– Schedule: Linear Regression (p = 0.015)

– Safety: Poisson Regression (p = 0.0044)

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What CRAFT Is and Is Not

• CRAFT Is….– Risk analysis tool

– Decision-making aid

– Based on historical project data with a heavy industrial focus

• CRAFT is not….– Estimating tool

– Used to set contingencies

– Trade specific

– Workforce cliff solution

– Used outside of the U.S. and Canada

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Craft Risk Availability Forecast Tool (CRAFT)

The Craft Risk Availability Forecasting Tool (CRAFT) provides project managers, estimators, and site management teams a five-step process to model the risk that craft labor availability poses to a specific project’s safety, cost, and schedule performance.

Craft Labor Shortage Level Definition

Moderate/SevereStaffing difficulties would lead to activities

delays or project milestone delays

SlightStaffing difficulties would be expected to

lead to a consumption of activity float

No difficultyThere is no labor shortage anticipated for

the project

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Craft Labor Staffing Difficulty

Average Cost Change (%)

(95% Confidence Interval)

Average Schedule Change (%)

(95% Confidence Interval)

OHSA Number of Recordable Incident Cases per 200,000 work hours (95%

Confidence Interval)

Moderate-Severe

17.3%(8.4%, 26.2%)

22.5%(11.5%, 33.4%)

0.94(0, 2.84)

Slight3.2%

(-0.9%, 7.3%)12.8%

(7.7%, 17.9%)0.43

(0, 1.72)

No Difficulty-6.2%

(-10.7%, -1.8%)6.4%

(1%, 11.8%)0.26

(0, 1.25)

*Costs are Total Installed Cost (TIC)**Schedule is in Calendar Days

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CRAFT five-step process:

1) Develop a cost and duration estimate for the project.

2) Analyze the labor market conditions for the specific project area and identify the anticipated

level of staffing difficulty as defined by Table 1.

3) Quantify the potential project safety, cost, and schedule performance based on the

expected values and ranges described in Table 2.

4) Use the performance risk quantifications calculated in step 3 to inform the project decision

making process in regards to craft labor risks

5) Repeat steps 1-4 as necessary as the project is refined throughout the planning phase

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Example: • Based on the preliminary conceptual design, the project is expected to cost $40 million

and require 600 calendar days to complete.

• Based on a market analysis of the project region, the project is expected to experience a “moderate” level of craft staffing difficulty.

Project Performance

Preliminary Estimated

Performance

Moderate Staffing Difficulty Impact

(95% CI)

Expected Performance

(95% CI)

Project Cost ($M)

40+17.3%

(8.4%, 26.2%) $46.9M ($43.4M –

$50.48M)

Project Duration (Day)

600+22.5%

(10.6%, 27.9%)735 calendar days

(669-800)

TRIR -0.94

(0, 2.84)0.94 (0 – 2.84)

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CRAFT is a start for a company to address their own shortages..

…but much more work is needed on a societal scale.

Do you think there is a labor cliff?

a. Yes

b. No

YesNo

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Conclusion [short-term]• Is there a cliff? Yes, but it is….

– Focused in U.S. Southeast and Gulf Coast.

– Focused among Welders, Electricians, and Pipefitters

• CRAFT is a tool to help companies make informed decisions regarding alternative project labor strategies.– Modularization?

– Prefabrication?

– Schedule changes?

– Etc.

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Conclusion [long-term]• There are several long term trends that point to a farther

reaching cliff:– Aging workforce

– Changing worker preferences

– Declines in vocational and craft worker training

• Projects with more severe craft shortages are reporting more injuries– But we can’t accept this!!

• Industry needs leadership and management action to climb our way out.

2015 CII Annual Conference August 3–5 • Boston, Massachusetts

Questions

Documents

2015 CII Annual Conference August 3–5 Boston, Massachusetts Is There a North America Craft Labor Cliff That Will Affect Project Performance? RT 318