July 2009 RMSCA Newsletter - Rocky Mountain Steel Construction ...
July 2009 RMSCA Newsletter - Rocky Mountain Steel Construction ...
July 2009 RMSCA Newsletter - Rocky Mountain Steel Construction ...
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<strong>Rocky</strong><br />
<strong>Mountain</strong><br />
<strong>Steel</strong><br />
<strong>Construction</strong><br />
Association<br />
Inside this issue:<br />
The President’s<br />
Corner<br />
1<br />
<strong>Steel</strong> Detailing 1<br />
AISC Design Guide 3<br />
The Adverse<br />
Impact of<br />
Reduced<br />
Engineering<br />
6<br />
Rough Seas 8<br />
<strong>Steel</strong>Day<br />
Bonding Beware 12<br />
Hosting A <strong>Steel</strong>Day<br />
Event<br />
11<br />
14<br />
<strong>RMSCA</strong><br />
3575 South Sherman St<br />
Suite 3<br />
Englewood, CO 80113<br />
Phone 303.991.2637<br />
Fax 303.759.8286<br />
LFoster@<strong>RMSCA</strong>.org<br />
www.<strong>RMSCA</strong>.org<br />
<strong>July</strong> <strong>2009</strong> ~ <strong>RMSCA</strong> Semi Annual <strong>Newsletter</strong><br />
The President’s Corner ~ Rob Wilson<br />
Many times subcontractors<br />
must pre-qualify for projects<br />
before they may submit a<br />
proposal. The prequalification<br />
process that many owners<br />
and general contractors<br />
require is a necessary tool to<br />
minimize their risk for the<br />
construction project, by insuring<br />
that only experienced<br />
and competent subcontractors<br />
with the necessary financial<br />
capability and resources<br />
are chosen to participate<br />
on the construction<br />
team.<br />
But, how many subcontractors<br />
minimize their risk by<br />
pre-qualifying the general<br />
contractors and owners that<br />
they work for? According to<br />
a study conducted by the<br />
<strong>Construction</strong> Financial Management<br />
Association, subcontractors<br />
assume the<br />
greatest risks, and receive<br />
the smallest rewards, of all<br />
‘Advancing <strong>Steel</strong><br />
<strong>Construction</strong> In the<br />
<strong>Rocky</strong> <strong>Mountain</strong> Region’<br />
participants in the construction<br />
project. Knowing that,<br />
isn’t it wise to take the necessary<br />
steps to insure that<br />
you reduce your risk? Isn’t<br />
it reasonable to pre-qualify<br />
clients with whom you do<br />
business?<br />
<strong>Steel</strong> Detailing ~ Shad Drohman, FRCC Student/KL&A, Inc.<br />
<strong>Steel</strong> Detailing is an essential<br />
aspect to the <strong>Steel</strong> <strong>Construction</strong><br />
Industry. A detailer<br />
must be precise, clear, and<br />
to the point. When first introduced<br />
to <strong>Steel</strong> Detailing, I<br />
was quick to realize that<br />
constancy and clarity are<br />
essential to the project<br />
team. My employer, KL&A<br />
Structural Engineers and<br />
Builders of Loveland Colorado,<br />
approached me with<br />
the opportunity to be one of<br />
the first students to attend<br />
a new <strong>Steel</strong> Detailing program<br />
at Front Range Community<br />
College Campus located<br />
in Westminster Colorado.<br />
The course outlined<br />
everything from technical<br />
terminology, the AISC manual,<br />
methods of developing<br />
details, and professional presentations.<br />
The course was<br />
taught by Jerry James of<br />
Structural Services. While<br />
attending class, I was able to<br />
take on projects as a whole<br />
While contractual terms are<br />
generally considered to be the<br />
most significant source of risk<br />
that subcontractors assume,<br />
the primary driver of success<br />
or failure on a project depends<br />
on how all parties to<br />
the contract conduct themselves<br />
in their day-to-day operations.<br />
So a careful selection<br />
of those companies we<br />
conduct business with, by using<br />
a well planned evaluation<br />
tool, is critical to success<br />
The Foundation of the American<br />
Subcontractors Association<br />
(FASA) has published an<br />
excellent resource, The General<br />
Contractor Factor which is a<br />
(continued page 2)<br />
finished product. This was<br />
an important part in bridging<br />
the gap between my training<br />
in the office and real life solutions<br />
in the shop and field.<br />
I have learned that time is<br />
valuable, and every step of<br />
the project is critical to<br />
meeting budget requirements.<br />
The knowledge and<br />
experience I have gained<br />
while attending this program<br />
will help me succeed and<br />
further my career in the<br />
<strong>RMSCA</strong> 2875 and West oversee Oxford all Ave., aspects #3, Englewood, of a CO steel 80127 industry.<br />
303.991.2637 fax 303.759.8286 Email Membership@<strong>RMSCA</strong>.org Website www.<strong>RMSCA</strong>.org
2<br />
August 14, <strong>2009</strong><br />
<strong>RMSCA</strong> Annual Golf<br />
Tournament<br />
1:00 p.m. shotgun<br />
Thorncreek Golf Course<br />
13355 N Washington<br />
Thornton, CO<br />
President’s Corner ~ cont’d<br />
guide to analyzing the contractual<br />
and business practices<br />
of general contractors.<br />
This guide is available<br />
to all members of the<br />
American Subcontractors<br />
Association through the<br />
members section at<br />
www.asaonline.com. This<br />
guide can show you how<br />
to develop risk criteria<br />
resulting in a rating system<br />
and evaluation form for<br />
general contractor’s business<br />
practices.<br />
The FASA guide starts<br />
with a discussion of characteristics<br />
that are important<br />
to defining a quality<br />
contractor business organization.<br />
These include:<br />
♦ Reasonableness. Does<br />
the contractor consistently<br />
strive to reach reasonable<br />
resolution of<br />
questions or issues, or<br />
does the contractor<br />
merely impose unilateral<br />
will on subcontractors?<br />
♦ Honesty and Trustworthiness.<br />
Does the<br />
contractor honor agreements<br />
and commitments?<br />
♦ Fairness. Does the<br />
contractor seek to treat<br />
all parties fairly and equitably,<br />
or rather exercise<br />
leverage without regard to<br />
its impact on subcontractors?<br />
♦ Pertinent Experience.<br />
Has the contractor<br />
successfully performed the<br />
kind of construction work<br />
involved in this project?<br />
♦ Technical Competence.<br />
Does the contrac-<br />
tor have the technical experience<br />
and expertise to<br />
successfully manage the<br />
project and integrate the<br />
subcontractors’ work?<br />
♦ Financial Capability.<br />
Does the contractor have<br />
the financial capability to<br />
fulfill its obligations to subcontractors?<br />
♦ Capable Central and<br />
Project Management.<br />
Does the contractor have<br />
the necessary people skills<br />
and management experience<br />
in both its home office<br />
and at the jobsite?<br />
♦ Sufficiency of Available<br />
Resources. Can the<br />
contractor coordinate and<br />
marshal the equipment and<br />
facilities required by the<br />
project?<br />
♦ Team Spirit. Does the<br />
contractor approach project<br />
management as a team<br />
effort involving all team<br />
members including subcontractors<br />
and suppliers?<br />
♦ Professionalism. Does<br />
the contractor have a<br />
reputation for approaching<br />
each project as a professional?<br />
Contractors with favorable<br />
characteristics provide for<br />
a relationship that will reduce<br />
a subcontractor’s risk<br />
through lower costs due<br />
to 1) effective project management<br />
and efficient coordination<br />
and scheduling, 2)<br />
prompt payments because<br />
disputes that waste valuable<br />
project management<br />
and supervisory resources<br />
are minimized, 3) improved<br />
bonding capability and financial<br />
capacity, and 4) absence<br />
of litigation. We all prefer to<br />
be associated with a successful<br />
project rather than suffer<br />
the damages to our reputation<br />
resulting from association<br />
with a failed project. A<br />
strong relationship with a<br />
quality contractor greatly<br />
enhances the chances of a<br />
successful project.<br />
<strong>Construction</strong> is hard enough<br />
without having to sustain the<br />
damages that can result from<br />
working with poor quality<br />
contractors. Smart subcontractors<br />
assess the risks and<br />
determine if pricing needs to<br />
be adjusted to address those<br />
risks; negotiate for subcontract<br />
terms and conditions<br />
that reduce those risks; and /<br />
or determine whether to<br />
submit the bid or walk away.<br />
Food for thought: how do<br />
you handle your relationships<br />
with your suppliers?
3<br />
AISC Design Guide No. 23, Constructability of Structural<br />
<strong>Steel</strong> Buildings, Now Available<br />
Design professionals now have a<br />
valuable new resource on constructability:<br />
AISC Design Guide<br />
No. 23, Constructability of Structural<br />
<strong>Steel</strong> Buildings by David Ruby, P.E.,<br />
chairman of Ruby + Associates.<br />
This publication from the American<br />
Institute of <strong>Steel</strong> <strong>Construction</strong> addresses<br />
constructability as a design<br />
concept that takes advantage of<br />
steel materials, fabrication and installation<br />
expertise early in the design<br />
phase.<br />
"I consider this Design Guide to be<br />
both the culmination of past lessons<br />
learned and the catapult to<br />
the future relevance of our profession,"<br />
said Ruby. "The Design<br />
Guide details what we have learned<br />
over the past several decades in all<br />
aspects of design and construction.<br />
It is a guide that brings together<br />
voices of the steel industry and<br />
identifies the different disciplines,<br />
tradespeople and skill sets required<br />
to make a project succeed with<br />
this philosophy. I am an ardent believer<br />
in the value of constructability<br />
- the integration of the design<br />
and construction processes aimed<br />
at maximizing simplicity, economy<br />
and speed of construction.<br />
"With the design community and<br />
construction industry facing intense<br />
economic pressure, the focus will<br />
be on the bottom line,” continued<br />
Ruby. All members of the construction<br />
team will be under increased<br />
pressure to complete projects<br />
faster and more efficiently.<br />
We’ll be called upon to thoroughly<br />
understand holistic project issues<br />
and ask the right questions that<br />
positively impact overall project<br />
objectives. By focusing on constructability,<br />
our clients can count<br />
on us to make their projects not<br />
only possible, but more economical."<br />
The Design Guide highlights constructability<br />
as a design philosophy<br />
that helps position the structural<br />
engineering profession as an evolutionary<br />
asset to the client and construction<br />
community. It encourages<br />
the streamlining of the planning,<br />
design and construction sequence<br />
using concept development, design/BIM<br />
and construction processes.<br />
The publication covers specific<br />
areas such as: early involvement,<br />
the design process, issues<br />
related to the structural steel framing,<br />
detailing and fabrication, steel<br />
erection, and special constructability<br />
issues (e.g., anchorage to concrete,<br />
camber, and tolerances).<br />
“This Design Guide explores an<br />
approach that will help all parties to<br />
a contract – owners, designers, constructors,<br />
everybody,” said Charles<br />
J. Carter, AISC vice president and<br />
chief structural engineer. “It highlights<br />
the benefits of early involve-<br />
ment and a team-based approach,<br />
where the constructability of the project<br />
is the guiding motivation for design<br />
and construction decisions. It<br />
shows how constructability can result<br />
in more creative and relevant solutions<br />
that bring enhanced value to clients.”<br />
Design Guide No. 23 is available as a<br />
free download to AISC members from<br />
www.aisc.org/ePubs and at a price of<br />
$60 for nonmembers. An ePubs subscription<br />
is part of AISC's member<br />
benefits packages and includes access<br />
to more than 10,000 pages of AISC<br />
publications in electronic format. AISC<br />
also provides freePubs for all of its<br />
website visitors. The freePubs section<br />
comprises AISC’s technical resources<br />
such as specifications and codes, and<br />
Modern <strong>Steel</strong> <strong>Construction</strong> magazine<br />
articles.<br />
For more information contact:<br />
Tasha O'Berski<br />
Communications Department<br />
(312) 670-5439<br />
oberski@aisc.org
4<br />
Welding Taken for Granted ~ Ralph Seeley, <strong>Mountain</strong> <strong>Steel</strong><br />
Welding processes have come a<br />
long way since forge welding<br />
was performed in a blacksmith<br />
shop where the metals were<br />
pounded together until they<br />
bonded. The electric arc was<br />
discovered by accident in 1801<br />
while experimenting with electricity.<br />
It was not until just<br />
prior to 1900 that arc welding<br />
was developed and used in a<br />
few industrial applications several<br />
years later. The first all<br />
welded bridge was erected in<br />
Canada in 1925 and the first all<br />
welded merchant ship was built<br />
in 1930. Submerged-arc welding<br />
using a continuously fed electrode<br />
was developed in 1935<br />
and being used industrially by<br />
around 1940. MIG welding<br />
(GMAW) was first introduced<br />
in 1948 with flux cored arcwelding<br />
(FCAW) following close<br />
behind in 1958.<br />
By the 1960’s, arc welding had<br />
achieved a relatively high level of<br />
development. But, there were<br />
questions as to whether or not<br />
the quality of the weld would be<br />
sufficient to support the particular<br />
applications for which it was<br />
being used. It was during this<br />
time that considerable attention<br />
was given to non-destructive<br />
testing to assure quality requirements.<br />
During World War II, President<br />
Roosevelt sent a letter to Prime<br />
Minister Winston Churchill,<br />
stating that we had developed a<br />
welding technique which enables<br />
us to “construct standard merchant<br />
ships with a speed unequaled<br />
in the history of merchant<br />
shipping." The technique<br />
the President was referring to<br />
was submerged arc welding,<br />
which was capable of joining<br />
steel plate as much as 20 times<br />
faster than any other welding<br />
process at that time.<br />
In 1943, no fewer than 17 shipyards<br />
in the United States were<br />
building Liberty ships for the war<br />
effort. In June of 1943, California<br />
Shipbuilding Corporation broke<br />
the U.S. record that month by<br />
delivering 20 Liberty ships. During<br />
this time an alarming number<br />
of Liberty ships were lost due to<br />
a problem called brittle fracture.<br />
The ships literally broke in half.<br />
At first, many blamed welding,<br />
but history would later prove<br />
that the real cause was because<br />
steel was found to have high sulfur<br />
and phosphorus content the<br />
caused fractures under a combination<br />
of low air temperature<br />
and heavy seas.<br />
This and other instances were<br />
raising doubts as to the reliability<br />
of welds used in applications<br />
where strength was crucial. The<br />
American Welding Society<br />
(AWS) was founded in 1919 as a<br />
nonprofit organization with a<br />
goal to advance the science,<br />
technology and application of<br />
welding. The official publication<br />
of the American Welding Society<br />
has disseminated the latest in technical<br />
knowledge on the state of<br />
welding since 1922. Since this time<br />
AWS has brought together volunteers<br />
from throughout the steel<br />
community to serve on committees<br />
to provide the standard to<br />
which all welding in the U.S. should<br />
be performed in order to maintain<br />
metallurgical and structurally sound<br />
welds.<br />
Today some fabricators and even<br />
some engineers still do not totally<br />
understand the ramifications and<br />
liability assumed from not following<br />
the standards set up by AWS.<br />
Some still live in the pre World<br />
War II era where all you have to<br />
do is pour weld into the joint and<br />
it will hold. The industry standard<br />
today requires compliance with the<br />
appropriate code under AWS. Literally<br />
all project specifications require<br />
compliance to this code.<br />
Even if the requirement was not<br />
specified, the standard should be<br />
followed to assure sound welding<br />
procedures. The penalties from<br />
weld failure could be catastrophic.<br />
From lost of life to the loss of a<br />
business, the list is endless.<br />
AWS requires all manufacturers of<br />
electrodes to perform a test that<br />
provides results for the performance<br />
of the as welded electrode.<br />
Only those manufacturers can<br />
state that their electrode complies<br />
with AWS requirements for ultimate<br />
tensile strength, yield<br />
Cont’d next page
5<br />
Welding ~ cont’d from previous page<br />
strength, elongation, modulus<br />
of elasticity, compressive<br />
strength, shear strength, fatigue<br />
strength, impact strength and<br />
hardness. It is often misunderstood<br />
that the structural code<br />
of AWS, D1.1 allows the use of<br />
the manufacturers recommended<br />
parameters for performing<br />
a weld. This is different<br />
than ASME and D1.5 codes<br />
which require individual testing<br />
(PQR) to establish weld quality.<br />
The manufacturers recommend<br />
the parameters that were used<br />
to establish the quality properties<br />
noted above. By following<br />
these parameters using calibrated<br />
meters on<br />
the welding equipment, the operator<br />
can duplicate an already<br />
established sound weld proced-<br />
ure. In case a failure is encountered,<br />
generally speaking,<br />
compliance with these industry<br />
standards should provide<br />
protection from liability issues.<br />
Compliance with these requirements<br />
does not cost additional<br />
time to perform or an<br />
increase in cost of consumables,<br />
as some believe. In fact,<br />
the most efficient weld parameters<br />
have already been<br />
tested and recommended;<br />
therefore following these requirements<br />
actually reduces the cost of<br />
labor and consumables.<br />
Make no mistake, you cannot<br />
always see issues that may<br />
lead to a weld failure.<br />
Under bead cracks and center<br />
bead cracks cannot always<br />
be identified by normal<br />
visual testing.<br />
Residual stresses from<br />
welding exists in all joints<br />
and if improperly performed,<br />
a weld can fail due<br />
to fatigue that increases the<br />
risk of crack propagation<br />
which in turn compromises<br />
the integrity of welded<br />
structures. Improper heat<br />
input can cause imbrittlement<br />
in the heat effect<br />
zone. These issues are only<br />
a few of the many issues<br />
that can cause weld failure.<br />
Reduce waste, enhance<br />
quality, diminish risk, comply<br />
with the code, you cannot<br />
afford not to.
6<br />
Sept 17, <strong>2009</strong><br />
<strong>RMSCA</strong>/SEAC<br />
Joint Breakfast<br />
Meeting<br />
7:30 a.m.<br />
Renaissance Hotel<br />
3801 Quebec Street<br />
Denver, CO<br />
The Adverse Impact of Reduced<br />
Engineering ~ Patrick S. McManus, S.E., Rex I. Lewis<br />
The worldwide economic<br />
downturn places greater<br />
demands on the design<br />
and construction industries<br />
as banks and other<br />
lending institutions require<br />
enhanced price definition<br />
and cost control.<br />
Financing will distribute to<br />
projects that provide the<br />
greatest value for the lowest<br />
associated risk. Consequently,<br />
little tolerance<br />
for waste and inefficiency<br />
can be expected in the<br />
foreseeable future.<br />
While productivity in<br />
non-farm industries has<br />
more than doubled in the<br />
U.S. since 1964, labor<br />
productivity in the construction<br />
industry has<br />
actually declined – despite<br />
tremendous technological<br />
advances. For<br />
the structural steel industry,<br />
one major culprit<br />
is the inefficiency created<br />
by poor or incomplete<br />
connection design practice.<br />
In 1995, William<br />
Thornton, then Chief<br />
Engineer with Cives <strong>Steel</strong><br />
Company, lectured at the<br />
AISC National <strong>Steel</strong> <strong>Construction</strong><br />
Conference outlining<br />
many costly shortcomings<br />
with steel connection<br />
design. Areas of<br />
concern included poorly<br />
defined load criteria for<br />
the design of simple shear,<br />
moment, and bracing connections,<br />
as well as the<br />
use (or abuse) of stiffener<br />
and doubler plates in columns.<br />
It can easily be argued<br />
that nearly all of<br />
Thornton’s concerns remain<br />
present fourteen<br />
years later.<br />
Figure 1. Labor productivity index for US construction industry and all non-farm industries<br />
(Source: Paul Teicholz, founding director of the Center for Integrated Facility Engineering at<br />
Stanford University)<br />
Continued next page
7<br />
Impact of Reduced Engineering ~ cont’d from previous page<br />
As an illustration, a peer review<br />
was recently performed on a<br />
group of three similar 180 foot tall<br />
stair towers for an industrial project.<br />
Connection design work was<br />
delegated to the fabricator using<br />
bracing forces in terms of a percentage<br />
of brace capacity, and<br />
gravity beam end reactions in<br />
terms of 60% of the total uniform<br />
load carrying capacity of the<br />
beams. Seismic design provisions<br />
and detailing did not apply.<br />
It was determined that the worstcase<br />
brace sizes, and thus connection<br />
forces, were used throughout<br />
the structures, resulting in overdesigned<br />
lateral systems. The use<br />
of 60% of the total uniform load<br />
capacity for the gravity beams resulted<br />
in some reactions approximately<br />
650% of those determined<br />
from the actual analysis. This<br />
placed great limitations on connection<br />
type, and any coping of the<br />
beams necessitated doubler plates<br />
to meet all necessary limit states.<br />
Redesign allowed for significant<br />
cost savings and vast simplification<br />
of the connection details. Altering<br />
the brace types and configurations<br />
eliminated 22% of the braces and<br />
approximately 170 associated connections.<br />
Six hours of engineering<br />
time resulted in potential savings<br />
of nearly half a million dollars!<br />
Uneconomical or incomplete connection<br />
design information is predominantly<br />
the result of the outdated<br />
design-bid-build business<br />
model, which nearly guarantees a<br />
lack of communication between<br />
the design and construction teams<br />
until design is substantially com-<br />
pleted. Without fabrication and<br />
erection preferences from the construction<br />
team, engineers are forced<br />
to produce “one size fits all” designs<br />
or design criteria. Many structural<br />
engineers today typically expend the<br />
fewest number of engineering hours<br />
possible on each project, both to<br />
maximize profitability and out of<br />
necessity. Though other criteria<br />
may come into play, engineers are<br />
evaluated to some extent by fee.<br />
Unfortunately, many of the entities<br />
hiring engineers have little understanding<br />
of the insignificance of the<br />
engineering fee when compared to<br />
the cost savings associated with a<br />
complete and economical structural<br />
design. Consequently, the segregation<br />
between design and construction<br />
eliminates an effective check<br />
and balance between design decisions<br />
and true cost.<br />
In addition to the negative impact<br />
reduced engineering effort has on<br />
project economics, the potential<br />
development of a dependence on<br />
the typical details produced is an<br />
inherent concern for engineering<br />
firms. As design manuals and codes<br />
continue to thicken with each edition,<br />
it becomes increasingly difficult,<br />
if not impossible, for an individual to<br />
be an expert on all structural engineering<br />
topics. An increased tendency<br />
towards less flexible, typical<br />
details, as well as an associated resistance<br />
to deviating from those details<br />
is understandable. However, the<br />
competency to perform, or even<br />
review, connection designs that fall<br />
outside of a firm’s typical standards<br />
is ultimately lessened. Thus, steel<br />
connection design appears to slowly<br />
be developing into a lost art in consulting<br />
engineering.<br />
The steel industry should not tolerate<br />
decreased market share simply because<br />
of poor structural design. Early<br />
fabricator involvement in projects and<br />
increased engineering time and fee<br />
with feedback from the fabricator are<br />
feasible solutions to the problem.<br />
Design-build and design-assist construction<br />
delivery are just two effective<br />
methods of facilitating these solutions.<br />
Both have the potential to reduce<br />
project costs and add overall<br />
project value.<br />
This is a call to arms for the structural<br />
engineering community - be the<br />
frontrunners in an effort to educate<br />
owners, developers, architects, and<br />
construction managers. Eliminate<br />
those who do not understand or appreciate<br />
the value an integrated, quality<br />
structural design brings to every<br />
project. Those who fail to work towards<br />
enhanced value could find<br />
themselves among those eliminated.<br />
Patrick S. McManus, S.E. was formally a<br />
consulting engineer with Martin/Martin, Inc.<br />
He is currently the head of the engineering<br />
and detailing department at Puma <strong>Steel</strong>,<br />
Cheyenne, WY<br />
(patrick.mcmanus@pumasteel.com)<br />
Rex I. Lewis is President of Puma <strong>Steel</strong><br />
(rex.lewis@pumasteel.com). Both individuals<br />
have served terms as the Wyoming Director-<br />
At-Large for the Design-Build Institute of<br />
America
8<br />
A short while ago, the<br />
American Recovery<br />
and Reinvestment Act<br />
of <strong>2009</strong> made its<br />
debut among much<br />
pomp and circumstance.<br />
Right off the<br />
bat, the sheer size of<br />
the $787 billion bill<br />
caused concern.<br />
"The legacy that this<br />
generation will leave<br />
for the next generation<br />
is a grave concern.”<br />
Robert Levey<br />
General Manager<br />
Commercial,<br />
Gallatin <strong>Steel</strong><br />
Rough Seas ~ Dave Henley, Vulcraft<br />
In the May <strong>2009</strong> edition of<br />
Modern Metals Magazine, the<br />
Article “Staring Down Adversity”,<br />
by Lauren Duensing gathers<br />
several executives from<br />
steel mills and steel service<br />
centers to comment on the<br />
current outlook for the steel<br />
business. While none of the<br />
members of this Editorial Advisory<br />
Board Roundtable are<br />
structural steel fabricators,<br />
their comments are interesting<br />
and relevant. I referred to the<br />
article for this writing and incorporated<br />
several of their<br />
comments here.<br />
We are right in the middle of<br />
the worst recession many of us<br />
have ever known. Much of the<br />
bad news and statistics follow<br />
with “worst since 1982, or<br />
1946, etc.<br />
The entire U.S. economy is<br />
singing the blues--a song filled<br />
with recession, decline, slipping<br />
stocks and unemployment.<br />
From every news outlet, headlines<br />
are filled with negative<br />
language and images that are<br />
contributing to unease among<br />
consumers. Skyrocketing unemployment<br />
numbers are fueling<br />
the fire.<br />
The early 80’s were bad, too.<br />
Looking back on them at this<br />
time, they do not seem quite as<br />
bad to me as they did at the<br />
time since I know in hindsight<br />
that we did recover and begin<br />
some very good economic<br />
times. With the future always<br />
being unknown, it’s difficult to<br />
figure out just exactly what<br />
it will be that will bring us<br />
out of the current condition<br />
and when it will occur.<br />
Many theories are being<br />
put forth and political economic<br />
plans are being implemented.<br />
Time will tell<br />
whether any of them help,<br />
or just make things that<br />
much tougher down the<br />
road.<br />
For now, consumer confidence<br />
has stopped it’s free<br />
fall however most expect<br />
the dismal times to continue<br />
through the end of<br />
the year. This causes us<br />
consumers to stop spending<br />
and start saving for the<br />
tough times we anticipate<br />
ahead.<br />
As a result, "there’s a lot<br />
of money out there and a<br />
lot of people waiting to do<br />
business," says Dave Hannah,<br />
chairman and CEO,<br />
Reliance <strong>Steel</strong> & Aluminum<br />
Co., Los Angeles. "The real<br />
catalyst that needs to occur<br />
is confidence. People in<br />
this country need to gain<br />
some confidence in the<br />
economy and feel good<br />
about spending money, as<br />
opposed to feeling threatened<br />
that they’re going to<br />
lose their jobs or that<br />
money isn’t going to be<br />
available to them, and they<br />
can stop losing value in<br />
their homes and 401(k)s.<br />
All of that has destroyed<br />
confidence in our economy.<br />
The article does not point<br />
it out directly, but we know<br />
that our structural steel construction<br />
business is dependent<br />
on the rest of the businesses<br />
in our economy to<br />
fuel demand for us.<br />
Hannah says there’s an indirect<br />
impact for those that<br />
aren’t so involved. The automotive<br />
industry "consumes a<br />
tremendous amount of metal<br />
and creates a tremendous<br />
amount of jobs, which gives<br />
people the ability to spend<br />
money on other things.”<br />
Per Michael Hoffman, President<br />
and CEO, Macsteel Service<br />
Centers USA the housing<br />
market is in the tank, as<br />
we all know, and it’s having<br />
an effect on washing machines,<br />
dryers, HVAC and a<br />
host of other supporting industries.<br />
The automotive<br />
industry is also going through<br />
a difficult time, and naturally,<br />
that’s having a domino effect.<br />
We need an economic recovery<br />
to herald a recovery<br />
in the manufacturing industrial<br />
sectors."<br />
All this reduced demand in<br />
other industries creates the<br />
large unemployment numbers<br />
we hear week after<br />
week. As we heard from<br />
Peter Wright of Gerdau<br />
Ameristeel, we need to see<br />
significant reduction in the<br />
weekly new unemployment<br />
filings before the downfall<br />
will stop.<br />
Continued next page
9<br />
Rough Seas ~ cont’d from previous page<br />
Dan DiMicco, chairman, president<br />
and CEO, Nucor Corp., Charlotte,<br />
N.C. points out that the real unemployment<br />
numbers are higher than<br />
the current statistics. "Today,<br />
[unemployment is] not 8.5 percent;<br />
it’s more like 16 percent because<br />
they’re not counting all the people<br />
who have given up looking for work,<br />
and they’re not counting all the people<br />
who are underemployed."<br />
We all know talented colleagues<br />
within this very organization of ours<br />
who now find themselves seeking<br />
new employment due to lack of<br />
work at their former place of employment.<br />
We all hope that in the<br />
end they can look back and see that<br />
it was a good turning point in their<br />
careers as so many times happens.<br />
The strategies of steel fabricators to<br />
get through the recession vary<br />
greatly. Some intend to keep their<br />
shop going and retain as many employees<br />
as possible. Others do not<br />
see any reason to work for no gain<br />
and would rather do something else<br />
more fun for the same pay. Other<br />
plans are somewhere between these<br />
two.<br />
Another issue is inventory depreciation.<br />
This is an especially large concern<br />
for operations that have large<br />
inventories or for those whose business<br />
it is to have inventories like our<br />
service centers.<br />
"That’s a bigger issue than even the<br />
reduction in demand," says Hannah.<br />
"All of us in the service center industry<br />
have taken a tremendous<br />
amount of value out of our inventories,"<br />
Those wild swings in price are making<br />
it tough to manage inventories.<br />
Frank Kevane, President and CEO,<br />
ThyssenKrupp Materials NA Copper<br />
& Brass Sales Division says, "During a<br />
time like this, you’ve really got to<br />
manage your inventories. You really<br />
have to manage your assets. Our real<br />
investment is in inventory. It takes a<br />
lot of diligence."<br />
Lonnie Terry, president and CEO of<br />
the North American <strong>Steel</strong> Alliance,<br />
Laguna Hills, Calif., says the members<br />
of the alliance are facing a "lack of<br />
consistency and predictability that<br />
has resulted in severe inventory devaluations.<br />
Every time they turn<br />
around, the price decreases."<br />
The result is that steel service centers<br />
are holding their inventories to<br />
a very low level.<br />
Stimulating demand—maybe<br />
The federal government has decided<br />
to spend a large amount of money to<br />
stimulate the economy. Some of the<br />
money will go to construction, however<br />
little will go toward building<br />
construction, so not much for us.<br />
Regardless of that, if the money actually<br />
does stimulate the economy as<br />
the administration hopes, it may<br />
eventually increase demand for building<br />
construction.<br />
A short while ago, the American Recovery<br />
and Reinvestment Act of<br />
<strong>2009</strong> made its debut among much<br />
pomp and circumstance. Right off<br />
the bat, the sheer size of the $787<br />
billion bill caused concern. "The legacy<br />
that this generation will leave for<br />
the next generation is a grave concern,"<br />
says Robert Levey, General<br />
Manager, Commercial, Gallatin <strong>Steel</strong><br />
Co.<br />
"The much-ballyhooed stimulus package<br />
really provides miniscule support<br />
for infrastructure programs when<br />
compared to the need that the U.S.<br />
infrastructure requires," says Di-<br />
Micco. "The U.S. civil engineering<br />
society said that there’s an immediate<br />
need for a $2 trillion spend over<br />
the next five to 10 years with respect<br />
to infrastructure needs. Roads,<br />
bridges, water systems, utility systems<br />
and the transmission grid are<br />
falling apart." He points out that the<br />
current amount covers just the basics<br />
of infrastructure replacement<br />
and doesn’t touch on needs such as<br />
air traffic control. "So the $60 billion<br />
that we’re spending is disappointing."<br />
Will the plan help stimulate demand?<br />
Hannah thinks so. "It’s got to help.<br />
Maybe it doesn’t help as much as<br />
we’d all like it to, but if confidence<br />
gets restored and the government<br />
starts spending money, maybe that<br />
gives people more confidence to<br />
start spending private money. The<br />
only thing is the timing. When is this<br />
really going to be felt? In the past,<br />
it’s always taken quite a long time to<br />
get spending started after bills have<br />
been approved. Hopefully, this time,<br />
it’ll be different."<br />
A plan for survival<br />
An end to the loss of manufacturing<br />
in this country would be a very good<br />
start to recovery. "People have finally<br />
started talking about what<br />
we’ve been talking about in the<br />
manufacturing sector for the last<br />
eight years. Somebody’s going to<br />
build cars in this country. There<br />
should be the opportunity for the<br />
American car companies to be successful.<br />
It’s important for our economy,<br />
and it’s important for the nation<br />
not to lose that manufacturing<br />
Continued page 15
10<br />
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11<br />
Structural <strong>Steel</strong> Industry to Open its Doors <strong>Steel</strong>Day<br />
On September 18, <strong>2009</strong>, architects,<br />
engineers, contractors and<br />
others involved in the AEC<br />
community will have the opportunity<br />
to visit steel fabricators, mills,<br />
service centers and other facilities<br />
throughout the country. Currently,<br />
more than 100 <strong>Steel</strong>Day<br />
events are scheduled in 43 states<br />
for the AEC community to tour<br />
facilities and jobsites, attend educational<br />
seminars, network, and<br />
see how the structural steel industry<br />
is contributing to build America.<br />
<strong>Steel</strong>Day <strong>2009</strong>, hosted by the<br />
American Institute of <strong>Steel</strong> <strong>Construction</strong><br />
(AISC), is the first<br />
planned annual national event<br />
dedicated to providing the AEC<br />
community with accessibility to<br />
the latest happenings in the<br />
structural steel industry. To announce<br />
<strong>Steel</strong>Day <strong>2009</strong>, AISC recently<br />
launched a new web site<br />
and portal, www.<strong>Steel</strong>Day.org,<br />
which features information and<br />
resources on where all of the action<br />
is taking place, including a map<br />
of the event locations and how to<br />
attend or host an event.<br />
"<strong>Steel</strong>Day is a unique chance for<br />
participants to receive hands-on<br />
education about the latest ad-<br />
vances in the structural steel industry<br />
and witness new technologies<br />
first hand," commented Chris Moor,<br />
AISC industry mobilization director.<br />
"AISC holds tours and seminars<br />
throughout the year in specific locations,<br />
but we wanted to do something<br />
on a grand scale where more<br />
people could get these types of<br />
learning experiences without having<br />
to travel very far."<br />
AISC member Lyman Zolvinski,<br />
president of structural engineering<br />
consulting firm, Zolvinski Engineering<br />
in Michigan City, IN, attended an<br />
AISC seminar at a service center last<br />
year and hoped to see more<br />
fabricator and mill tours become<br />
available in his local area. "A wealth<br />
of information can be obtained by<br />
visiting service centers, fabricators,<br />
and mills that can't be put into literature,"<br />
said Zolvinski. "It also keeps<br />
one up to date on the latest supply<br />
and fabrication techniques and availability."<br />
Zolvinski plans to attend a<br />
steel mill tour in Indiana on<br />
<strong>Steel</strong>Day.<br />
During <strong>Steel</strong>Day, participants will<br />
gain hands-on knowledge about<br />
structural steel's key benefits and<br />
features such as sustainability, availability,<br />
speed and cost. They can also<br />
observe how design affects<br />
production and efficiency, advances<br />
which have resulted in highperformance<br />
projects that minimize<br />
construction's impact on our planet<br />
while also saving time and money.<br />
About the American Institute<br />
of <strong>Steel</strong> <strong>Construction</strong><br />
The American Institute of <strong>Steel</strong><br />
<strong>Construction</strong>, headquartered in Chicago,<br />
is a not-for-profit technical<br />
institute and trade association estab-<br />
lished in 1921 to serve the structural<br />
steel design community and<br />
construction industry. AISC's mission<br />
is to make structural steel the material<br />
of choice by being the leader<br />
in structural steel-related technical<br />
and market-building activities, including:<br />
specification and code<br />
development, research, education,<br />
technical assistance, quality certification,<br />
standardization, and market<br />
development. AISC has a long tradition<br />
of service to the steel construction<br />
industry of providing timely and<br />
reliable information.<br />
Contact:<br />
Tasha O'Berski<br />
Public Relations Specialist<br />
American Institute of <strong>Steel</strong><br />
<strong>Construction</strong><br />
One East Wacker Dr., Suite 700<br />
Chicago, IL 60601<br />
P: 312.670.5439<br />
oberski@aisc.org
12<br />
Sept 18, <strong>2009</strong><br />
AISC <strong>Steel</strong>Day<br />
www.<strong>Steel</strong>Day.org<br />
Bonding Beware ~<br />
Traditionally, whenever<br />
the construction industry<br />
experiences a significant<br />
downturn, such as the<br />
one we are currently facing,<br />
demand for surety<br />
bonds increases. The reasons<br />
for such are obvious.<br />
Significant reductions in<br />
available capital put tremendous<br />
strains on all<br />
construction related businesses;<br />
whether for financing<br />
new construction<br />
or for financing subcontractors’<br />
(subs’) operating<br />
lines.<br />
The traditional criteria<br />
used for allocating and<br />
obtaining surety bond<br />
credit are: CASH; Character;<br />
and, Capacity. An<br />
emphasis is placed here<br />
on cash since not only is it<br />
the “oil” that enables the<br />
entire “engine” to operate<br />
smoothly and reliably, but<br />
also because it is the first<br />
item that surety bond underwriters<br />
typically consider.<br />
No construction firm can<br />
function efficiently without<br />
predictable cash flow.<br />
This is especially true for<br />
subs since they carry all of<br />
the labor (paid out<br />
weekly) and materials<br />
(paid in 30 days) used in<br />
Richard Forsberg, Forsberg Engerman Company<br />
the actual construction<br />
(i.e., they are the first<br />
members of the “team”<br />
to finance the actual construction<br />
work). And<br />
the fact that subs are the<br />
last to receive payment<br />
in the cash flow stream<br />
makes them especially<br />
vulnerable to “glitches”<br />
caused by other parties<br />
in the process. This fact<br />
becomes even more<br />
threatening during times<br />
when not only are prices<br />
for their work much<br />
lower, but banks also<br />
become less reliable and<br />
more reluctant to issue<br />
operating lines of credit.<br />
Subs become more dependent<br />
on quick receivables<br />
turnaround time in<br />
order to simply survive<br />
the downturn.<br />
In such an environment<br />
bonding companies keep<br />
a much closer eye on<br />
their clients and the market.<br />
Bonding can become<br />
harder to obtain<br />
while at the same time<br />
more of it is being demanded.<br />
What is the proper and<br />
quickest solution to help<br />
mitigate this situation?<br />
Demand PROMPT, 30pay<br />
of monthly billing,<br />
and PROMPT, early release<br />
of any withheld<br />
earned revenues (monies<br />
erroneously referred to<br />
as “retainage”).<br />
Of special concern to<br />
subs being asked to provide<br />
bonds during the present<br />
financial crisis is the<br />
problem of “condition<br />
precedent” payment<br />
clauses such as “paidwhen-paid”<br />
and/or “paidif-paid”<br />
language in their<br />
contracts. In effect, such<br />
language can be used to<br />
force subs to continue<br />
working when, through<br />
no fault of their own, they<br />
are not being paid for<br />
their work. Such language<br />
casts doubt as to whether<br />
any party should ever attach<br />
a bond obligation to<br />
any contract involving<br />
such onerous payment<br />
exposures. This is especially<br />
true in the present<br />
financial environment.<br />
Any sub signing a paidwhen/paid-if<br />
contract, that<br />
also requires the sub to<br />
post a performance and<br />
payment bond, can be assuming<br />
responsibility for<br />
performance of the work<br />
whether or not funds for<br />
Continued next page
13<br />
Bonding Beware cont’d from previous page<br />
that work are in-place, available,<br />
or flowing. Over the years subs<br />
have suffered immensely due to<br />
this flaw in the construction design<br />
and financing process. Work<br />
that goes unpaid can create nightmare<br />
situations for those unpaid<br />
parties, and especially so when<br />
bond obligations are added to the<br />
mix.<br />
The lesson here is simple:<br />
NEVER provide a bond guaranty<br />
without first seriously examining<br />
all of the parties having an impact<br />
on all aspects of your work as<br />
well as the rest of the project.<br />
Issues that happen elsewhere on<br />
the project can sometimes have<br />
major ramifications on payment<br />
for your work.<br />
In times like theses BE VERY<br />
CAREFUL about making commitments<br />
that include surety bond<br />
guarantees.<br />
Unless you can trust their professionalism<br />
and integrity to the extent<br />
of allowing them to have<br />
some control over your assets<br />
and bank operating line, you<br />
should never provide a surety<br />
bond.<br />
If you do decide to provide a<br />
bond, alter your contract to reflect<br />
the seriousness of that obligation.<br />
Insist on monthly pay,<br />
with a right-of-remedy if terms<br />
are not being met. Insist on less<br />
or no “retainage” since your<br />
bond is a fully indemnified, thirdparty<br />
guaranty of your performance.<br />
A Partnership<br />
‘Building the Workforce<br />
For The<br />
<strong>Steel</strong> <strong>Construction</strong> Industry’
14<br />
Hosting A <strong>Steel</strong>Day Event<br />
Planning your activities for<br />
<strong>Steel</strong>Day <strong>2009</strong><br />
September 18, <strong>2009</strong><br />
What does hosting a <strong>Steel</strong>Day event<br />
involve?<br />
<strong>Steel</strong>Day is all about interaction. It's<br />
about building relationships with local<br />
architects, engineers, contractors,<br />
developers, owners and even<br />
schools/community colleges.<br />
• An event can be as simple as inviting<br />
local architects to your facility, providing<br />
coffee and snacks and showing<br />
them your processes while inviting<br />
questions.<br />
• Some of our members are arranging<br />
far more sophisticated events, partnering<br />
up with other companies and<br />
moving people from one facility in the<br />
supply chain to the next.<br />
•Those who can't host events have<br />
offered their support for <strong>Steel</strong>Day by<br />
calling local architects and engineers<br />
to promote the industry personally.<br />
Don’t over-think it! – <strong>Steel</strong>Day is<br />
purely about facilitating relationships.<br />
The point is for people to become<br />
more aware of the steel industry in<br />
their community and have a place to<br />
go when they have questions.<br />
Here are some ideas and examples of<br />
various types of events:<br />
Facility Tour<br />
• The easiest type of event to plan!<br />
• Set up a time to provide a tour of<br />
your facility and free up a meeting<br />
room prior to and after the tour for<br />
questions, coffee, snacks or even<br />
lunch.<br />
Open House<br />
• Offer your facility as ‘open to the<br />
public’ all day so that people can take a<br />
tour, network and ask questions at<br />
their convenience.<br />
• Another option to help add structure<br />
is to offer official tour times<br />
throughout the day to provide attendees<br />
with some guidance and interaction.<br />
Multiple Facility Tour<br />
• Collaborate with other industry facilities<br />
in your area so that attendees<br />
can visit multiple types of facilities in<br />
one day. Even offer transportation<br />
between them.<br />
• For example, offer a tour of your<br />
fabrication company, followed by a<br />
tour at a local galvanizing plant.<br />
Jobsite Tour<br />
• Arrange with the owners/<br />
contractors/architects of a local steel<br />
framed project for a tour of the job<br />
site under construction.<br />
Local Building Tour<br />
• Is there an interesting local building<br />
(steel framed of course!) where a<br />
‘behind the scenes’ tour could be arranged?<br />
An architecturally interesting<br />
library, office building or LEED rated<br />
structure? Or perhaps your own building<br />
is architecturally significant?<br />
Equipment Tour<br />
• Do you own or use some interesting<br />
equipment or machinery that would<br />
be of interest? For example many<br />
erection companies own and store<br />
cranes and other equipment that is of<br />
interest to visitors. Offer an equipment<br />
tour, followed by a<br />
presentation.<br />
Presentation/Seminar/<strong>Steel</strong>Talk<br />
• Sponsor and arrange a seminar or<br />
presentation about structural steel<br />
for architects, engineers or contractors,<br />
or even local universities. We<br />
can help arrange speakers and logistics.<br />
The bottom line? Keep it simple or<br />
be as creative as you want. The<br />
theme for <strong>Steel</strong>Day is interaction. If<br />
your event provides interaction and<br />
networking opportunities, it is already<br />
a success!<br />
What now?<br />
• If you have any further questions<br />
about hosting an event, don’t hesitate<br />
to contact AISC:<br />
o Chris Moor<br />
moor@aisc.org 813.401.1594<br />
o Amanda Holik<br />
holik@aisc.org 312.670.5433<br />
•AISC would like to promote your<br />
event as unique – we’ll provide an<br />
individual flyer for each host outlining<br />
your event details specifically.<br />
•In order to get that flyer completed<br />
the first step is to fill in<br />
the ‘Event Details’ form at<br />
www.<strong>Steel</strong>Day.org/EventDetails.aspx.<br />
• We will then provide a flyer for<br />
your approval to be posted at<br />
www.<strong>Steel</strong>Day.org and wherever you<br />
wish to post it/use it.
15<br />
Rough Seas ~ cont’d from page 9<br />
strength, innovation, and research<br />
and development that<br />
goes along with it."<br />
According to Hoffman, we need<br />
an economic recovery to herald a<br />
recovery in the manufacturing<br />
industrial sectors."<br />
We have all heard many times of<br />
how the economy will turn<br />
around – it always has, and I do<br />
believe that it will. We of course<br />
need to keep living until it does,<br />
so the real question is “When?”<br />
Many of us heard Peter Wright<br />
say that although it may stop getting<br />
worse at some point, it will<br />
be the fall of 2011 before we<br />
start heading up again.<br />
"We’ve seen some more activity<br />
with quotes, inquiries and actual<br />
business over the last month,"<br />
Scott Kelley, President and CEO,<br />
Service Center Metals notes.<br />
"It’s been pretty moderate, and<br />
it’s too early to tell if it’s a trend.<br />
When we look at the end uses<br />
for our products, it’s certainly<br />
hard to tell what’s driving it because<br />
there aren’t any indicators<br />
that those particular industries<br />
have bounced back."<br />
"The longer the recovery takes<br />
to evidence itself, the more likely<br />
it is that the rebound will be substantial,"<br />
says Hoffman. "Those<br />
are inversely proportionate to<br />
one another. I’ve heard a lot of<br />
political pundits talk about the<br />
fact that we may have seen the<br />
end of this recession, we might<br />
have bottomed, and we can see<br />
some gradual up-creep between<br />
now and the end of the year with<br />
a more substantial rebounding.<br />
I’m a little bit more conservative<br />
and I don’t expect that we will<br />
see a rebound as quickly as some,<br />
but I do agree that the longer it<br />
takes to recover, the quicker the<br />
recovery will be."<br />
"As most people today believe,<br />
it’ll be years or a decade before<br />
we get back to the same kind of<br />
economic consumption and GDP<br />
levels that we were at in 2006,<br />
2007 and 2008," DiMicco says.<br />
"It’s going to be a long haul out,<br />
credit’s not going to be readily<br />
available and a lot of people who<br />
were consumers in the bubble<br />
will no longer be consumers in a<br />
credit-constrained world. Then<br />
you’re going to see the need for<br />
some potential massive restructuring<br />
in a number of industries,<br />
and steel may be one of them.<br />
<strong>Steel</strong> consumption could be<br />
strong if we get serious about<br />
rebuilding our infrastructure so<br />
we can provide a stronger future<br />
for our children and grandchildren."<br />
DiMicco says, "We’re in a<br />
tough situation. It’s going to take<br />
people rolling up their sleeves,<br />
going back to basics and doing<br />
the right things with respect to<br />
how they spend and what drives<br />
their spending. We need to get<br />
back to making things in this<br />
country again."<br />
Go to the website for Modern<br />
Metals Magazine to read the full<br />
article. Here is the link: http://<br />
www.modernmetals.com/common/<br />
articlelink.asp?currentpage=8118<br />
Getting back to the title of this<br />
article, with one last thought:<br />
“Smooth seas do not make<br />
skillful sailors”
16<br />
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K L & A, Inc.<br />
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Vulcraft Sales Corp<br />
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LPR <strong>Construction</strong><br />
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Metro <strong>Steel</strong> Fabricating, Inc.<br />
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KL & A, Inc.<br />
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Puma <strong>Steel</strong> – Engineering Liaison<br />
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Norfolk Iron & Metal<br />
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Zimkor, LLC<br />
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