Electrical professionals roll up for the new millenium

What will tomorrow bring for electrical industry professionals? For the past few years, the road has been straight and true for many electrical construction and maintenance businesses. The economy is booming, new markets are blooming, and new technology is offering challenges and opportunities. Now many see a bend in the road ahead, what with technology, labor supply, and deregulation changes looming.For

What will tomorrow bring for electrical industry professionals? For the past few years, the road has been straight and true for many electrical construction and maintenance businesses. The economy is booming, new markets are blooming, and new technology is offering challenges and opportunities. Now many see a bend in the road ahead, what with technology, labor supply, and deregulation changes looming.

For this issue's special report, CEE News asked a group of industry leaders-- electrical contractors, association officers, and others--to give us their take on where the electrical industry is headed. The resulting outlooks examine principal trends and issues--namely electrical utility deregulation, power quality, voice/data wiring, design/build construction, and the skilled-worker shortage.

All in all, the future looks bright for both plant engineers and electrical contractors, according to what our experts see for the next five years. "Opportunities abound for contractors," says NECA's John Grau. "There's more maintenance, building modernization, and more tenant improvement work." Next five years: where we're heading, where we ve been

Most of us have experienced a period of sustained growth, and many have suffered due to a shortage of skilled labor. We're all aware of the cyclical nature of our business and have been looking for the market to simmer down for some time now. There is no firm indication that we're there yet, but we have experienced some slowing of sales. I'm writing this shortly before the holidays, and we always experience some slowing this time of the year.

Our robust economy is, by and large, a product of interest rates, which have remained low for a protracted period, and it's impossible to accurately predict where they're going given the economic unrest in many parts of the world. There are, however, two issues that will dominate our industry for the next few years, if not longer. They are utility deregulation and power quality.

Although deregulation seems to dominate every trade publication we see, the fact is that few people actually know what's going to happen...at least not yet. We read about the potential competition from the newly deregulated utilities acting as, or in concert with, contractors; about the prospect of power-quality problems due to the potentially large number of new generators being connected to the grid; and many other circumstances that may, or may not, have an effect on the way we conduct business. Regardless of what happens on the line side of the meter, what happens on the load side isn't going to change much, save for the prospect of competition from utilities, which, by virtue of their regulated status, have never had to compete for business! Opportunities for metering changes (including the installation of power-quality metering devices) and medium-voltage work will present themselves to us, and we should be prepared.

We are experiencing an increase in power-quality-related problems due to the proliferation of nonlinear loads such as variable speed drives, PLCs, personal computers, electronic ballasts, and other devices with switch-mode power supplies.

I read recently that there are four levels of learning: awareness, familiarity, knowledge, and expertise. In the power-quality field, most of us are probably at the second level (familiarity) and feel bad that we haven't taken the time to learn more. As contractors, we're required to wear many hats, and none of us has the time to become thoroughly familiar with the operating characteristics of all of the types of equipment we install. I believe we should all strive to gain knowledge (level three) about power-quality-related problems and form alliances with power quality specialists, calling upon them for solutions once we recognize that a power-quality related problem exists.

Whenever I have recognized a potential problem at a customer's site and offered a solution, the customer thinks I'm merely trying to drum up business for my employers. (By the way, drumming up business is my job!) When I've called in specialists and presented their reports (along with the related costs to perform the work), I've met with success.

Contracting today-and where we'll be tomorrow

In the next five years Tri-City projects more design/build techniques and more partnering. This negotiated work has general contractors and owners teaming with known major subcontractors. The concept is taking hold for a design/build, GMP partnership of trust. Tri-City hopes to raise its industry profits from 2% to 3% to 4% to 5% by negotiating more of its work.

Tri-City sees partnering and teaming as the future of the business. Now, the company negotiates about 30% of its work and is aiming to increase the figure to 50%. The benefits to the owner and general contractor are many. However, changing perceptions takes time, and some legal issues need to be worked out regarding who is responsible for the job. With responsibilities shifting as projects become design/build or partnered, a bit of concern is natural.

The biggest challenge electrical contractors face in Florida is the labor shortage. There is only so much productive labor available, so companies will have to become very selective in the projects they take on. Recruitment problems stem from labor rates remaining low. With unemployment statewide at 2%, rates have to rise to attract skilled electricians, project managers, and estimators from other parts of the country.

Tri-City has raised its pay rate 23% in the last year alone. Consequently, we have been able to attract some labor from other parts of the country. Rates will continue to rise at least 6% annually. The pay rates are only raising up to a normal standard for the Southeast. Benefits are expected to rise with the continued competition for skilled labor.

To combat recruitment problems, Tri-City is actively going to high schools to educate students about the varying career paths and salaries available in construction. With this program, the company is targeting an estimated 75% of high school students that do not go to college. Additionally, Tri-City is attempting to attract the so-called, "Generation Xers" by creating a more welcoming and supportive attitude on job sites. Superintendents are being schooled how to mentor and train new recruits in a supportive and nurturing manner. This is contrary to what has historically happened to green help on a construction site. By recognizing and correcting this attitude, Tri-City is hoping to retain new workers longer and cut down on new-hire turnover.

Tri-City Electrical Contractors, one of the largest commercial electrical contractors in Florida, has offices in Altamonte Springs (near Orlando), Tampa, Fort Myers and Pompano Beach (near Miami). The company, which bills between $64- and $70-million annually, works exclusively in Florida.

Trends and issues as we leave the 20th century

As we move into the 21st century, utility deregulation is emerging as one of the industry's greatest concerns and potential threats in what has been a relatively stable market. The sale of electrical generating units may cause a short-term decline in new power plant construction as utilities compete for revenues on a national level. As open competition phases in, utilities will increasingly offer turnkey services including contracting, maintenance, and service in addition to traditional power supply. Many utilities have already formed subsidiaries, referred to as Energy Service Companies (ESCOs), that provide services similar to those historically offered by electrical and mechanical contractors.

Electrical contractors will be faced with being hired to perform utility projects as out-sourced contractors, competing with captive ESCOs, or possibly being acquired by one of these new entities. To encourage outsourcing rather than in-house staffing, networks are being formed to market to the new subsidiaries and power brokers. We believe that improved processes and long-established efficiency will enable electrical contractors, like ourselves, to provide outsourced contracting, service, and maintenance better and more cost-effectively than the emerging competitors. We are currently involved in a corporate re-engineering effort that will streamline our internal processes and eliminate a substantial amount of waste from our production and support systems.

This in turn should allow our company to strengthen its reputation as a high-quality, cost-efficient organization in the face of this new competition.

Rapid change in the power industry has also produced the need for increased retrofit, upgrade, and service contracts. We believe that retrofits, renovations, and upgrades will become more widespread as technological advances and Energy Policy Act of 1992 (EPACT) mandates for more efficient and environmentally conscience electrical and instrumentation systems are implemented. These same needs are also surfacing in the educational, health care, and commercial sectors. President Clinton's goal to provide every student with Internet access has created a boon in telecommunication systems design, installation, and integration. Sachs Electric was one of the industry's first to address that need and provide these services by establishing a sister company, Sachs Systems Inc., in 1990. In addition to the $18.2 billion spent in educational construction in 1996, upgrades, expansions, and network enhancements will produce greater opportunities for our Systems group.

Widespread regional trends include a growth in water and wastewater treatment facilities. We are currently experiencing a rapid growth in this market on the West Coast. Sachs Electric's acquisition of Brown Automation, an instrumentation and process control contractor, is enabling us to provide turnkey electric and instrumentation services in that market. The Midwest has experienced a recent growth in retail and commercial projects as real estate investment trusts and tax increment financing generate more development. Although these markets had not provided Sachs good opportunities for some time, recent successes with coordinating multiple disciplines, providing design assistance, and performing maintenance contracts once construction is complete, have been beneficial to developers and owners, as well as profitable for us.

The global market will continue to increase imports and exports between trading blocks. The need for transportation and distribution companies should give rise to the construction of facilities with new or expanded communication and electrical services.

In contrast with the past, we consider one of our largest problems to be a potential shortage of trained craftsmen and management personnel. At present, we do not believe the trained workforce is large enough to service the amount of work that will be available. According to the National Electrical Contractors Association report on employment, of the 379,000 construction workers added to the U.S. workforce since July 1995, 16% were in the electrical trade. Sachs Electric's commitment to safety, training, and exceptional performance will enable us to find a job site for many of these new workers.

In summary, we are encouraged about the future and believe that these new markets will provide substantial opportunities for our company. We have made a commitment to personnel recruitment, training, and investment in new technology that we believe will provide increased opportunities for us.

Sachs Electric is an international company with 72 years of experience and more than $120 million in annual revenue. The Sachs family of companies offers multiple in-house contracting disciplines, and provides engineering and management skills to ensure superior solutions to construction challenges.

Industry competition will continue to be fierce

Competition will continue to be fierce. Engineers, manufacturers, and contractors compete intensely, causing profitability to remain razor thin. Technology permits buyers to know the priceof goods or services anywhere in the world, and advanced software permits in-depth analysis of every detail of the pricing structure as well as negotiation of each of those details. Profit will be derived by adding value through customer service, an integrated service approach to the clients' needs, and a change in doing business.

Impending electricity deregulation offers potential for the industry. Offerings by design, build, own, and manage teams provide owners with the facilities they require while reducing effort and schedule. They also remove cost from the balance sheet and will continue to grow as a method of providing value-added service.

Interoperability, the technique of compiling a single body of understandable electronic information defining the design intent of a system, will enhance the project process by creating a seamless flow of complete system information through the life cycle of the project usable by the engineer, manufacturer, contractor, commissioning agent, operator and owner.

NECA trends and issues for electrical contractors

Electrical contractors enjoyed perhaps their best year ever in 1997! Our industry had 550,700 field employees working in July (Bureau of Labor Statistics data). In July 1994, we had only 456,600 field workers. We put 94,100 people to work, with a 20.6% growth, in three years.

Opportunities abound for contractors. There is more maintenance, building modernization, and more "tenant improvement work" every year. Economists say there will be more new office building construction in 1998. This creates work in existing buildings-as their owners upgrade to compete with amenities offered by newer structures.

Future prospects seem brighter still. NECA members tell me that the voice-data market is likely to stay in a "boom" mode for some time. Electrical contractors can provide a more comprehensive service to building owners and managers getting closer to their customers.

What is NECA doing about the future? We're anticipating where hurdles to continued growth might occur.

Field worker quality: NECA and IBEW have worked on training for more than 50 years. Our joint efforts turn apprentices into journeymen and provide in-service training that broadens the knowledge base of our workforce. More than 50,000 journeymen took extended in-service classes last year compared with 8000 in 1991. Educational offerings include fiber optics, LAN installation training, and much more.

As part of this, our NECA-IBEW training arm, the National Joint Apprenticeship and Training Committee, started a week-long summer training meeting, the National Training Institute. That meeting has grown from 200 participants in 1991 to more than 1500 this past August.

Inspections: Electrical inspection is the customer's only assurance that the National Electrical Code is enforced. Together with industry allies, we've founded the Electrical Inspection Initiative, housed at NECA, to fight for local electrical inspection resources. Toll-free hotline (for reporting areas where inspection is under attack): 800-647-3156.

Installation quality: The NE Code says nothing about it, so we're creating National Electrical Installation Standards-to help customers determine what a quality installation is. NECA is involved in a cooperative effort to write NEIS standards. Thus far, we're working with the Aluminum Association, the Illuminating Engineering Society of North America, and the Fiber Optics Association.

Voice/data: We've recently agreed with IBEW on steps to help our industry grow faster in voice-data work, including a new apprenticeship program and other cooperative efforts. At our summer National Training Institute, more than half of courses for trainers were on voice-data.

Deregulation: Here's a case where, on behalf of the industry, NECA is working in two directions. In one area we have the Contractor-Utility Partnership Program, which puts NECA contractors and electric utilities together. We also keep an eye on utilities for possible unfair competition with contractors through our active participation in the National Alliance for Fair Competition. Adapting to a changing marketplace

The more things change, the more they stay the same-a tried-and-mostly-true observation. But today's business environment may represent a magnificent exception. We are now undergoing major mutations in how business is conducted, changes that can be directly attributed to the advent of electronic commerce, global competition, and a growing skilled-labor shortage.

Electronic commerce represents a seminal change in the way we transact our business. With its emergence, supply and distribution channels will be forever affected as more companies incorporate this technology into their operating processes. In the next few years, virtual ordering could drive many distribution centers out of business. What will emerge are partnerships among manufacturers and suppliers with express distribution centers operated by overnight mail shipment companies such as Federal Express and UPS.

Contractors and end-users will be able to order their products and have them shipped directly to their front door without ever leaving their offices or homes. In addition, the cost of doing business will be reduced as manufacturers convert to on-time, on-demand inventories.

This year NEMA, working closely with National Association of Electrical Distributors (NAED), has developed a new fielded database standard that will allow manufacturers to configure their product information to a uniform format. This will greatly facilitate the exchange of product information between manufacturers and their channel partners.

Another change in the way we do business is directly attributable to the emergence of a global marketplace. NEMA's proud tradition of producing nationally recognized electrical standards will be transformed as we accelerate initiatives for harmonization of standards regionally and internationally. With the global marketplace expanding and becoming more interdependent, we're working to advance the acceptance of our members' products on a global scale. As trade barriers and tariffs are lifted, competition will intensify, directly impacting electrical manufacturers. As an indicator of this trend, we need only look to the increase of European-owned companies with manufacturing facilities in the

Untied States that have become members of NEMA. Deregulation of utilities also represents startling, irrevocable changes. As utilities expand their services to include Energy Service Companies (ESCOs), they will directly compete for business with contractors. If utilities are able to offer installation services at a lower cost, they may drive many small contractors out of business. They will have to adapt or dissolve. The increasing demand for "smart" products equipped with computer chips that can communicate with each other is also driving pivotal changes in our business processes. Electronic systems that can either be programmed at home or from a remote location to control electronic equipment, lights, and other appliances will continue to gain popularity. Lessons some businesses learned early are spreading to the entire community.

Who's doing the work? Regardless of the industry, this question will resonate throughout America's workforce. With the aging baby boomers, critical shortages of skilled people are becoming a serious concern. Companies are struggling to find highly skilled, knowledgeable workers. To remain competitive, employers will be forced to pay higher salaries because of the shortage of qualified candidates, as well as invest in training for existing employees from the first to the last day of employment.

Finally, economics have changed; we are on a relatively new frontier. No longer can we assume that we can call the tune of economic progress. Our own success should not lull us into complacency. We need to stay focused on expanding free trade and continually improving our business processes. The international consumers will continue to look for innovative products; competition will continue to intensify; and electronic commerce will make it easier for those with less capital to compete in the world marketplace. In short, those who fail to recognize change and adapt to changes will soon become extinct in the marketplace.

Diversity in the construction workforce

Some would argue that the most critical issue for the construction industry is where the future workforce will come from. The future of construction firms will depend on how effectively the industry invests in the women and minorities that are recruited, trained, and retained in the construction workforce. According to Workforce 2020, women made up 46% of the total workforce in 1994. In 2005, 62% of all new entrants will be women (less than eight years away). The percentage of minorities in the construction industry has also increased. In 1994, 23% of the total workforce was minority. By 2005, 51% of the net new entrants will be minority.

As a result of the workforce need, potential opportunities, and growth impact on the industry, membership organizations like the National Association of Women in Construction and National Association of Minority Contractors have partnered with the NCCER. This extends an excellent opportunity to young women and minorities. Unfortunately, there is little research to suggest an increase in the number of young women or minorities entering high school vocational programs relating to the construction industry. Seldom is the construction industry offered as an option for young women, and female role models in construction are few.

Women make up less than 5% of the total construction workforce. The good news is this is changing. Even though numbers of women construction workers are growing, the percentages are still not acceptable. The NCCER, with its partners, is working to expose more women to the opportunities in the industry. Showing them crafts and management careers, as well as related careers like architects, financial analyst, and engineers.

In the recent Careers In Construction Teleconference, the National Center For Construction Education & Research attempted to spotlight three female role models. The hour-long teleconference included two young women on a panel of five who were both in training programs that have been traditionally male-dominated. Pat Rodgers, of Rodgers Builders in Durham, N.C., served on a panel of professionals who have been successful in the construction industry. She is the CEO of a multi-million-dollar construction firm.

We must take advantage of activities like the teleconference, shadowing, internships, and youth apprenticeships to expose all young people to the industry. During the national teleconference that reached almost 300,000 middle, high school, and college students, successful minority executives and trainees were videotaped at various sites taking leadership roles and advancing in their careers. Employers have a responsibility locally to get involved in recruiting young women and minorities. When an employer brings a young person into the workplace, he/she has the opportunity to shape the life of a future adult. The employer has the opportunity to share its ethics, goals, and philosophy with the next generation of construction workers.

Just as society changes so does the workplace. It's critical that employees and educators work together with the National Center to promote careers in construction to all young people. Opportunities await young men and women of all racial, cultural, and national backgrounds. We must develop ways to show these young people these opportunities. Give them the materials, and let them build their future.

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