AGC: House Highway Bill Will Reform Federal Transport Program, Accelerate Projects, Boost Economy.

GM to construct $200 million stamping facility in Texas – World Construction Network.

In a surprising turn upward, the Architecture Billings Index (ABI), a leading indicator of nonresidential construction, rose sharply into growth mode in August following four months of decline in demand for architecture services.

The August index rebounded to 51.4 following a very weak score of 45.1 in July, according to the American Institute of Architects (AIA), which produces the monthly report. Any score above 50 indicates an increase in billings, reflecting increased demand for design services.

The index reflects a lag of about nine to 12 months between billings and actual construction spending. August’s score also showed an increase in inquiries about new projects, up sharply to 56.9 from 53.7 the previous month.

AIA Chief Economist Kermit Baker said the turnaround is a surprise based on the poor economic conditions of the last several months.

“Many firms are still struggling and continue to report that clients are having difficulty getting financing for viable projects, but it’s possible we’ve reached the bottom of the down cycle,” Baker said.

In July, the fourth straight month of demand decline, the score fell to 45.1, down from 46.3 in June in the steepest monthly drop in the billings index since February 2010.

A survey of Colorado’s commercial real estate, construction and architectural sectors released this week by the Everitt Real Estate Center at Colorado State University reflected a dearth of optimism about the future for new construction. The first-ever statewide survey found a high level of pessimism among real estate professionals and “wishful optimism” among architectural and construction leaders.

All three sectors saw dismal prospects for private funding for new development projects in 2012. Architects believe demand for residential-oriented projects are most likely to increase next year, and real estate respondents believe such property types will most likely see modest value appreciation.

Source

Global construction will outpace GDP growth over the next 10 years, with China and India accounting for 38 percent of the $4.8 trillion increase in output by 2020, PricewaterhouseCoopers (PwC) said on Thursday.

After overtaking the US as the biggest construction market in 2010, China’s construction sector will more than double in size to $2.5 trillion by 2020, accounting for a fifth of world construction, PwC said, citing a report it sponsored.

Emerging markets, with their fast-growing populations, accelerating urbanisation and robust economic growth, will account for 55 percent of global construction by 2020, up from 46 percent today, PwC said.

The study, conducted by market research firms Global Construction Perspectives and Oxford Economics, forecasts that $97.7 trillion will be spent on construction globally during the next decade and the sector will expand by 5.2 percent on average every year, outpacing global GDP growth.

The construction sector worldwide currently accounts for more than 11 percent of global GDP and the report predicts that it will account for 13.2 percent of world GDP by 2020.

Just seven countries — China, India, the United States, Indonesia, Canada, Russia and Australia — will account for 65 percent of the growth in global construction to 2020, PwC said.

Spending on construction in India will overtake Japan, which faces the lowest construction growth among developed nations, by 2018, when India will become the world’s third-largest construction market, PwC said.

US TO OUTPERFORM

Construction in most developed countries will be constrained by large public deficits, austerity programmes, slow population growth and limited economic expansion. The United States will be the exception thanks to its growing population, PwC said.

An estimated $14.5 trillion will be spent on construction in the U.S. by 2020, with growth averaging 7.8 percent per year over the next five years, driven by residential and non-residential markets, the PwC-sponsored report said.

But years of underinvestment in U.S. infrastructure are unlikely to come to an end soon given the swelling public sector deficits unless more private investment is used in procurement, the report added.

Canada and Australia will also lead construction growth in developed countries, boosted in particular by demand for natural resources and favourable demographics, PwC said.

The combined growth in construction in Canada and Australia will almost equal growth in the entire Latin American construction market, including Mexico, Brazil, Argentina, Chile and Colombia, indicating its less bright prospects, PwC said.

Natural resources will play a key role in the Middle East and North Africa, where $4.3 trillion will be spent on construction across the region over the next decade, representing growth of almost 80 percent to 2020, PwC said.

The outlook is less rosy for France, home of the world’s largest public works group Vinci and largest cement maker Lafarge, as well as other Western European countries, which are set to register little construction growth.

Infrastructure in Britain will grow by less than 10 percent by the end of the decade, compared with growth of almost 135 percent in Asian emerging markets, the report said.

Source

For years, the construction industry has struggled with what exactly is covered by commercial general liability policies on construction projects.

Since a general liability policy is the primary policy that protects construction participants from legal liability, the question is not just of academic interest to contractors and developers. If you do work on a construction project, this issue could mean the difference between referring the matter to your insurer and holding the bag yourself for legal liability and legal fees.

Many hoped that the Supreme Court of Canada would bring some clarity to this area in the recent case Progressive Homes v. Lombard General Insurance Company of Canada. Unfortunately, whether the Supreme Court succeeded in bringing that desired clarity is debatable.

You may recall from earlier articles of ours that the facts of this case involved four buildings constructed for BC Housing by Progressive Homes. After water leaks allegedly caused significant damage to all four buildings, BC Housing sued Progressive, who had a CGL policy from Lombard.

Lombard refused to cover Progressive on the grounds that the alleged damage was not covered by its policy. Progressive challenged Lombard’s coverage decision, eventually taking its case all the way to the Supreme Court of Canada. At the Supreme Court, Lombard had three arguments as to why the damage to the buildings was not covered by Progressive’s CGL policy.

First, Lombard argued that damage caused to one part of a building from another part of the same building does not meet the definition of “property damage” in their policy. Lombard said that “property damage” only applies to damage done to a third party’s property, not damage done to the insured’s own work.

Second, Lombard argued that the damage was not caused by an “accident” or “occurrence”. They said that where there are defects in the construction of a building, the result is a defective building, not accidental damage.

Finally, Lombard argued that the policy excluded the work of subcontractors who do work on behalf of general contractors.

The Supreme Court rejected all three arguments. In doing so, it confirmed once again that there only needs to be the “mere possibility” that damage alleged in a lawsuit is covered by a policy to trigger the insurer’s duty to defend the insured. Importantly, the Court emphasized that courts should approach the interpretation of insurance policies by giving the words in the policy their plain meaning.

With that in mind, the Court found that there was no reason to conclude that the words “property damage” in the Lombard policy could be narrowly interpreted as only meaning “damage to a third party’s property” as argued by Lombard. Since there was alleged damage to the buildings in question, that was sufficient to qualify as property damage under the policy.

Along the same lines, the Supreme Court rejected Lombard’s argument that faulty workmanship is never an accident.

The Supreme Court gave “accident” its plain meaning — that is, an event that the insured neither expects nor intends. Since Progressive did not intend or expect property damage, the damage was an accident for the purpose of the policy.

The Supreme Court also rejected the argument that the work of subcontractors was excluded by the “Work Performed” exclusion to the policy.

In its decision, the Supreme Court emphasized that each coverage case must be decided on its own facts and that there are no hard and fast rules about what the language in CGL policies means generally. Coverage will always depend on the exact words used in each insurance contract.

Since many insurers use similar policy language as the policy language analyzed in this decision, the finding by the Supreme Court that there was coverage may have significant repercussions for numerous other construction claims in Canada where insurers have, until now, denied coverage. Moving forward, we anticipate that this decision will likely provide a significant impetus for the insurance industry to tighten CGL policy language.

Source

Construction Claims Expert Witness

The U.S. Court of Appeals for the 5th Circuit has denied a government contractor sued by New Orleans residents for damages resulting from Hurricane Katrina the protection of government contractor immunity, holding that specifications approved by the government were not precise enough to qualify for the defense.

Government contractor immunity, first articulated by the U.S. Supreme Court in Boyle v. United Technologies Corp., 487 U.S. 500 (1987), protects government contractors against negligence claims by third parties when the contractor can show that 1) the government approved the contractor’s “reasonably precise” specifications (with knowledge of potential dangers) and 2) the contractor’s work conformed to those specifications. The defense rests on the concept that a contractor should not be liable to third parties for work sanctioned by and effectively directed by the federal government. >more

Assistance on Damages Quantification and Evaluation

Construction spending in the U.S. unexpectedly increased in June, boosted by gain in government programs that made up fordeclines in private residential and commercial projects.

The 0.1 percent increase in outlays followed a revised 1 percent drop in May that was larger than previously estimated, figures from the Commerce Department showed today in Washington. Spending by federal agencies rose to a record.

Homebuilding and sales are falling after the expiration of a government tax credit that boosted builder sentiment and brought starts to the highest level in more than a year in April. Demand will now depend on the state of the labor market and foreclosures.

“Support to construction spending via new homes should continue to remain dampened in the coming months,” Maxwell Clarke, chief U.S. economist at IDEAglobal Inc. in New York, said in a note to clients before the report. “Ongoing difficulty of accessing capital for speculative commercial real estate ventures will continue to act as a deadweight in the overall construction measure.”

Economists forecast construction spending would decline 0.5 percent, according to the medianof 52 projections in a Bloomberg News survey. Estimates ranged from a drop of 2.1 percent to a 0.5 percent gain.

Construction spending decreased 7.9 percent in the 12 months ended in June.

Private Construction

Private construction spending dropped 0.6 percent following a 1.4 percent decrease in May. Homebuilding outlays fell 0.8 percent. Private non-residential projects decreased 0.5 percent, reflecting declines in construction of factories, commercial dwellings and communications stations.

Spending on public construction increased 1.5 percent from the prior month, led by power, sewage and waste disposal and conservation plants. Federal building climbed 4.6 percent to $31.7 billion, the most on record.

New home sales reached a record low in May and were the second-lowest last month, according to Commerce Department data, reflecting diminishing demand after the government tax credit expired. June housing starts, reported July 20, fell 5 percent, after a 15 percent decline the prior month.

To qualify for the government tax credit of up to $8,000, purchasers had to sign a contract by April 30. While the government in July extended the deadline for closing on the contract to Sept. 30, from the original June 30, declines in housing starts and building permits suggest residential construction will continue to fall in coming months.

Single-Family Homes

Spending on single-family residential structures dropped 0.7 percent in June, the fist decline in a year, today’s report showed.

Employment gains are needed to boost demand and forestall foreclosures. Home seizuresjumped 38 percent in the second quarter from a year earlier, RealtyTrac Inc. said last month, putting lenders on pace to claim more than 1 million properties this year.

NVR Inc., based in Reston, Virginia, said last month the original June 30 closing deadline to qualify for the tax incentive resulted in a “surge in settlement activity” in the second quarter, with closings jumping 63 percent from the same time a year earlier. New orders fell six percent in the period.

The outlook for commercial projects is less dire should credit begin to flow as office vacancy rates ease. Office vacancies in U.S. central business areas fell in the second quarter from the prior three months, the first drop since 2007, commercial property broker Cushman & Wakefield Inc. said July 8.

In another signal that commercial construction may improve later this year, billings at U.S. architecture firms rose in June, the American Institute of Architects said July 21. Commercial building typically follows the building index by about six months.

Source

At a seasonally adjusted annual rate of $406.3 billion, new construction starts in May climbed 3% from the previous month, according to McGraw-Hill Construction, a division of The McGraw-Hill Companies.  Nonresidential building showed improvement after weak activity in April, and residential building edged upward.  However, nonbuilding construction retreated in May, following April’s elevated amount of new public works and electric utility projects.  For the first five months of 2010, total construction starts on an unadjusted basis came in at $162.0 billion, down 2% from the same period a year ago.

The May statistics lifted the Dodge Index to 86 (2000=100), up from a revised 83 for April.  The Dodge Index reached its most recent low at 82 back in February 2009, and since then it has hovered in the range of 83 to 94.  “The recent pattern of construction starts indicates that activity has stabilized at a low level, with ups-and-downs on a monthly basis, but the transition to sustained expansion has yet to occur,” stated Robert A. Murray, vice president of economic affairs for McGraw-Hill Construction.  “The good news with the May statistics is that nonresidential building rebounded after a very depressed April.  However, the volume of nonresidential building remains quite low, and is likely to stay that way through 2010.  Much of this year’s upward movement is expected to come from public works construction, which lost momentum in May after earlier gains.”

Nonresidential building in May jumped 19% to $145.6 billion (annual rate), following a 21% decline in April.  The May pace for nonresidential building can still be characterized as weak by recent standards – 12% below the monthly average for 2009 and a full 39% below the monthly average for the peak year of 2007.  On the institutional side of the nonresidential market, educational facilities advanced 31% in May.  Large education-related buildings that reached groundbreaking in May included a $229 million medical research building for the U.S. Army in Maryland, a $122 million university laboratory and science building in Massachusetts, and a $100 million university performing arts center in Chicago IL.  Healthcare facilities continued to strengthen, advancing 2% in May with the boost coming from a $159 million medical center expansion in California.  Amusement-related work soared 62% in May, aided by the $80 million renovation and expansion of the Pauley Pavilion in Los Angeles CA and $75 million for the Fantasyland expansion at Disney World in Orlando FL.  As for the other institutional categories in May, church construction increased 11%, but reduced contracting was reported for public buildings (courthouses and detention facilities), down 3%; and transportation terminals, down 30%.

Several commercial categories in May registered large percentage gains, relative to very low levels in April.  Office construction in May surged 44%, helped by the start of a $200 million renovation project at the United Nations Conference Building in New York NY.  Stores and warehouses in May posted gains of 26% and 28%, respectively.  However, hotels showed further weakness in May, dropping 11%.  The manufacturing plant category in May advanced 33%, reflecting the lift coming from $96 million for a semiconductor solar technology plant in Tennessee and $95 million for a lithium battery manufacturing plant in Florida.

Residential building, at $133.0 billion (annual rate), increased 1% in May.  The multifamily side of the housing market grew 9%, as this structure type has now shown improved contracting for four straight months.  The largest multifamily projects reported as May starts were the apartment portions of two mixed-use projects in St. Louis MO, with the apartment portions valued at $90 million and $81 million, respectively.  Other large multifamily projects that reached groundbreaking in May included a $70 million apartment building in the Bronx NY, the $64 million apartment portion of a mixed-use building in Honolulu HI, and a $58 million senior living facility in Elmhurst IL.  Single family housing in May slipped 1%, losing momentum for the second straight month after trending upward from early 2009 through March of this year.  By geography, single family housing in May showed declines in the Midwest (down 13%) and the Northeast (down 3%), while the West was steady and modest gains were reported in the South Atlantic and South Central regions (each up 3%).  Murray noted, “The upward trend for single family housing at the national level seems to have paused for now, but it’s likely to resume later in 2010, helped by what’s expected to be the continuation of very low mortgage rates into the second half of this year.”

Nonbuilding construction in May dropped 8% to $127.7 billion (annual rate).  Highway and bridge construction retreated from strength earlier in the year, sliding 22% in May, but on a year-to-date basis it was still able to maintain a 15% gain for the first five months of 2010 relative to last year.  After very strong activity in April, two of the environmental public works categories fell back in May, with sewers sliding 13% while water supply systems plunged 51%.  River/harbor development was the one environmental public works category able to register growth in May, rising 29% with the support of several hurricane-reconstruction projects in the New Orleans LA area, including $238 million for the Chalmette Loop Levee.  The “other” public works category (including such diverse project types as site work, pipelines, and mass transit) also showed growth in May, jumping 64% with the lift coming from $1.1 billion related to work on the Kansas and Oklahoma portions of the Keystone oil pipeline project.  Electric utility construction in May retreated 14% from its heightened April volume, although the pace in May was still high by recent standards – up 22% compared to the monthly average for this category in 2009.  Large electric utility projects that reached the construction start stage in May included the following – an $820 million gas-fired power plant in Tennessee, a $360 million wind farm in Illinois, and a $195 million wind farm in Oklahoma.

The 2% decline for total construction starts on an unadjusted basis during the first five months of 2010 was the result of varied behavior by sector.  Residential building climbed 30%, with the comparison to the early months of 2009 when the improvement for single family housing was just beginning to take hold.  Nonbuilding construction year-to-date decreased 8%, with public works down 4% while electric utilities fell 28%.  Nonresidential building year-to-date dropped 16%, due to this performance by major segment – commercial building, down 32%; manufacturing building, down 63%; and institutional building, down 4%.  By geography, total construction in the first five months of 2010 showed this pattern relative to last year – the Northeast, up 8%; the South Central, no change; the West, down 1%; the South Atlantic, down 2%; and the Midwest, down 12%.

Source

ABUJA — Nigeria and a Chinese state firm have signed a 23 billion dollar deal to build three refineries and a petrochemical complex in one of Africa’s biggest tie ups with China, officials said Friday.

Nigerian National Petroleum Corporation (NNPC) and China State Construction Engineering Corporation Limited (CSCEC) sealed the deal in Abuja on Thursday, an official statement said.

China is already the number one investor in Africa — ranging from oil in Algeria to mines in Zambia — and a senior NNPC official told AFP the new deal might be the biggest that China has made in the continent.

Nigeria is in turn Africa’s leading oil producer, but it has for more than a decade been importing refined petroleum products to meet local demand.

The two corporations will jointly seek financing and credits from the China Export & Credit Insurance Corporation and a consortium of Chinese banks for the projects in Nigeria, the NNPC statement said.

“NNPC aims to accelerate the construction of new refineries in Nigeria to stem the flood of imported refined products into the country, currently estimated at 10 billion dollars,” the statement said.

CSCEC wants to “expand its presence on the African continent and establish its footprint firmly in the Nigerian oil and gas landscape,” it added.

The new refineries are expected to add some 750,000 barrels per day capacity in Nigeria and position NNPC in the international trading of refined petroleum products, it said.

Nigeria’s four refineries — with total capacity of 445,000 barrels per day — are using less than 30 percent of their installed capacity, according to official figures. Corruption and poor maintenance have undermined their performance.

“We are very excited about the deal. We thought it is the biggest ever in Africa, although I do not have the details yet,” said the NNPC official who demanded anonymity.

President Goodluck Jonathan arrived Friday in Nigeria’s oil capital of Port Harcourt for an official visit to inaugurate gas and oil projects.

The construction of the new refineries “will reinforce the ongoing oil and gas reforms in Nigeria”, as envisaged in legislation which has been before the Nigerian parliament for almost a year and imminent deregulation of the downstream sector the country’s oil industry, the NNPC statement said.

Anglo-Dutch oil group Shell in February criticised the bill, saying mistakes in it, if passed into law, will take years to correct.

Shell’s vice president for Africa Ann Pickard has warned that the country could lose 50 billion dollars in investment in the next decade if the bill was passed in its current form.

Jonathan has promised to pursue government reforms of the oil sector to make it profitable and end corruption.

His nascent administration recently sacked some key oil industry officials and redeployed others as part of the promised reform.

He has promised to give new impetus to an unconditional amnesty granted last year to thousands of ex-militants in oil-rich Niger Delta in order to bring peace to the region.

The training of more than 20,000 militants who surrendered their arms under the amnest deal begins next month, officials said.

The president of the Lagos Chamber of Commerce and Industry, Olufemi Deru, told AFP the establishment of the new refineries in Nigeria “will provide jobs for thousands of Nigerians and give them technical knowledge.”

“It will save the country millions of dollars spent on importation of refined petroleum products as well as give the country a sense of national pride that Nigeria produces and refines its oil locally,” he stated.

Source

South Korean builders may exceed a $40 billion overseas order target for roads and refineries this year as oil prices recover and governments increase spending from stimulus packages to revive their economies.

Orders for industrial and infrastructure projects abroad in the second half may exceed $30 billion, compared with $13.1 billion in the January to June period, the Ministry of Land, Transport and Maritime Affairs said today. Contracts may exceed the full-year target as oil-producing nations resume bids for refineries, the ministry said.

Higher oil prices are encouraging companies globally to resume construction projects that were put on hold because of the credit crisis last year. Overseas orders may total more than $16 billion in July and August, the ministry said.

“Companies, especially in the Middle East, have restarted bids for construction projects because it may cost them more if they wait too long as raw material prices are recovering,” said Kim Suk Joon, an analyst at SK Securities Co. in Seoul. “We are definitely going to see more orders in the second half.”

Construction contracts from the Middle East may more than double to $17 billion in the second half from the first, while those Asia will probably more than triple to $13 billion, the ministry said.

“Orders are expected to increase in Asia in the second half as governments are expected to spend money to stimulate the economy,” the ministry said in a statement, without giving year-earlier numbers.

South Korean builders have announced orders won in Saudi Arabia, the United Arab Emirates and Algeria worth about $9.34 billion so far this month.

Source: Bloomberg