We are in the midst of a classic good-news-bad-news situation. Yes, the economy has largely recovered from the Great Recession, but the rebound has bumped up prices across all market segments. Construction is feeling the pinch as tightly as any industry.
Unfortunately, public school districts are not immune to cost increases. This is true not just in the Northern California districts with which we work; it’s a reality throughout California and across the entire country. One of our responsibilities as construction and program managers is to help our clients – school districts and others – deal with rising costs and do what we can to accommodate and contain them. The first step is understanding what’s occurring in the marketplace to drive prices upward.
Here is a quick overview from our perspective:
When public entities (such as school districts) endeavor to fund their construction through sources such as general obligation bonds, they must determine an amount for that bond that can be realistically supported by the community. At the same time, they must plan to apply that funding to a scope of work that best addresses the needs defined in the district’s master plan. These scopes of work and budgets are sometimes built on cost estimates frozen in time. A bond measure passed in 2016, for example, might contain a master plan originally developed in 2014 for work scheduled to be completed in 2018. Without escalation calculations applied, these project cost estimates would no longer align with market realities. Even bond construction programs where escalation was applied early are feeling the pressure of rate influx occurring between the budgeting and construction phases. Frankly, the market has escalated at a rate that could not be foreseen in 2014, 2015 or 2016.
Cost escalation in the Bay Area market is the result of many factors, some of which are universal and others are specific to this region. The supply and labor shortage has affected all markets since the economy has improved. Recently, it has been exacerbated in our region due to a re-building effort following the 2017 wildfires.
Another dynamic is a rise in funding sources, allowing money to flood back into both public and private construction projects. The call for labor, supplies and consulting services has increased significantly in just the past few years. For example, 199 more California school districts passed general obligation bonds in 2016 than in 2014. Proposition 51 alone brought $9 billion to the statewide public school construction and renovation marketplace when it passed in 2016. All of this financial support is great for schools and communities, but it does create a ripple effect on supply and prices.
The Great Recession put many construction firms out of business. The market is only just now beginning to replenish what it lost in the lean years of 2007, 2008 and 2009. There are simply too few contractors, consultants and suppliers to meet the current demand, so labor costs have risen as a natural economic consequence.
Materials, too, are in short supply. In addition to the local spike in demand for concrete, steel and lumber following the recent fires, the overseas supply chain has been affected by market and climatic phenomena. We’ve received a variety of notifications from suppliers alerting us to shortages and delays due to typhoons in Japan, excessive rainfall in Northern California and other unprecedented weather events.
We know from basic economics that diminished supply leads to rising prices. According to the Terner Center for Housing Innovation at UC Berkeley, construction materials saw a 4.4 percent price increase in 2017 and construction worker wages rose 2.6 percent that same year.
California school districts that are feeling the price pinch can take solace in knowing that they are not alone. Districts throughout the state are busy re-evaluating their budgets and capital improvement project scopes in the midst of these rising costs. At VPCS, we strive to find solutions that accommodate current pricing realities while still meeting our clients’ goals. We revisit plans to find value engineering opportunities; we phase projects to maximize state matching funds; we apply appropriate cost escalation strategies to projects that are currently in design in order to anticipate cost impacts.
This price wave was unavoidable. VPCS works side-by-side with our clients not just to ride the wave but to help keep everybody productively and financially afloat.
It’s no exaggeration to say that Operations Manager Christine Diamond keeps us all connected here at VPCS. While most of us are out in the field each day, Christine is holding down the fort in Fairfield (in our great new expanded office space). Christine does countless things to keep us, our books and our home office in good working order and we sometimes marvel at how she does it all.
We asked Christine a few questions about how she works her magic.
Q: How many employees do you oversee?
A: We currently have 30 full-time employees and one part-time employee. We also have three or four consultants in the mix at any given time; those are the folks who work on our projects on a temporary contract basis.
Q: How would you describe the “employee management” part of your responsibilities at VPCS?
A: It’s mostly HR-related. The easiest way to describe that part of my job is that I make sure all the boxes get checked. All of our people – whether they’re employees or contractors, are busy focusing on the details of their projects. So it’s my job to “push the paper,” so to speak. I help new employees get all their tax documentation submitted and their direct deposits and 401Ks set up. For the people who have been here awhile, I remind them that these types of benefits are available to them. Then there’s the fun stuff – like making sure people know we have great company swag in the office that they can swing by and pick up!
Q: How many of the people you oversee are in the field?
A: Every single one of them, except myself and one other office-based employee. But the nature of this business means that people are scattered around on all our different job sites throughout Northern California.
Q: Does managing a remote workforce make your job more difficult?
A: Not really – it’s just the reality of what I do. I try not to interrupt our people while they’re doing what they need to do on the job site, so I mostly communicate by email and rely on UPS to deliver originals of any paperwork I need people to sign. But I use electronic methods whenever I can … I would never make one of our San Jose-based team members come all the way to the Fairfield office just to sign a piece of paper!
Q: What processes do you use to manage all the details you have to keep track of?
A: I’m a huge list maker. Each day, I just march through my list and check things off as I go. It’s a pretty basic system, but it works for me … and for the company.
Q: In what ways do you help maintain the “corporate culture” at VPCS?
A: Mostly, I just try to keep things running smoothly in the background so our team in the field can think about their projects rather than their employee paperwork. That helps them deliver a higher quality product to our clients, which is what we’re known for.
Q: What effects has moving to the new Fairfield office location had on you and the firm?
A: We have so much more space now, which means that people are popping in more frequently – which is exactly what we were aiming for. Mark and Mike felt strongly that the new office be a place where employees and clients alike could meet, visit or just relax. It also gives us a lot more breathing room. Our old office was pretty cramped with hard hats, safety vests and file boxes, but now we have the space to store those items and open the area up to people! There’s fresh air and even a grassy area right outside – it’s been a very positive move and we’re excited to show it off for anyone who wants to stop in.
Q: What’s your favorite part of your job?
A: I do so many different things around here, but I must admit to really loving the HR work. I enjoy staying on top of the legal and regulatory changes, and reading case studies that help me do that part of my job a little better. Back when we had just a few employees, things were much easier to manage. But now that we’ve grown – and continue to grow – the HR demands are getting increasingly complex. So it’s important that I stay ahead of the game so I can keep the VPCS machine running smoothly.
Let me introduce myself: I’m the new guy. Not just around VPCS, but around the construction industry. Until recently, I was one of those annoying Silicon Valley creatures who’d spent the entirety of his career in technology corporations. In the Valley, I was the go-to guy; the one who had to be in the meeting; the one whose opinions actually mattered. I was pretty damn sure of myself, partly because I had grown up inside and alongside the high-tech world and felt like I helped shape at least a tiny little part of it.
But things change and so did I. I found myself wanting something new … something that would take me out of my comfort zone. Boy oh boy, did I get what I asked for.
I’m now a Van Pelt Construction Services project engineer, working primarily on San Jose Unified School District sites. Despite how it sounds, this transition isn’t as absurd as you might think. I have a degree in electrical engineering and served as a project manager and program manager for the last 20 years of my high-tech career. I like to think that I’ve simply swapped out the type of engineering hat I wear at work.
Yes, it’s challenging to shift to a brand new industry and get up to speed on all that one needs to know in order to be effective. And yes, I typically work straight through lunch.
But guess what? I’ve never enjoyed a workplace more. Sure, my proverbial wings have been clipped but the people who surround me are helping me figure out how to soar again in new and different ways. I look up to EVERYBODY I work with – from my VPCS colleagues to the architects, school district staff and, of course, contractors who surround me. Everyone has something they can teach me. I routinely follow people around like a puppy dog. I watch, I listen and I take notes … lots and lots of notes. I’m not exaggerating when I say that my pen has actually run out of ink.
Somehow, I washed up on the shores of VPCS and it was one of the best professional moves I’ve ever made. The people here are just wonderful. It’s like they’re nurturing me. From day one, they’ve made me feel welcome and valued. It’s frequently made clear that this organization has my back, even when I make the kind of little mistakes newcomers sometimes make. I am reminded by everyone around me that I am adding value even as I learn the ropes. Even on the most harried days, time just flies by because I’m enjoying what I’m doing so much. I seldom miss those lazy lunch breaks.
Further evidence of the positive VPCS culture has been the way I’ve been allowed – encouraged, even – to maintain my volunteer extracurriculars. Late every Tuesday afternoon, I have to drop whatever I’m doing and hightail it over to Santa Cruz to work at the Santa Cruz RotaCare Free Medical Clinic where I am the volunteer coordinator. Needless to say, I am extremely grateful to the folks at VPCS (as are the clinic patients) for supporting me in this important work.
Transitioning to this industry has taken a lot of effort and I’m still learning. But things are definitely going up and to the right as I find my footing. Pretty soon, maybe I’ll be one of the seasoned veterans showing the newbies around. I’ll be able to reassure them that Team VPCS can help anybody turn a construction zone into a comfort zone.
I’ve been thinking a lot about change – both in our firm and in our industry.
Around here, we’ll soon be saying goodbye to our longest-serving employee, Pete Norgaard, who is gearing up for retirement. Pete joined Van Pelt Construction Services way back in 1999 and has been a trusted, loyal, valuable member of our professional family. We are so privileged to have had him on our team for nearly two decades and wish him all the best as he embarks on his next chapter.
Once Pete retires, the two people who will have been with VPCS longer than anyone else without interruption will be Christine Diamond, operations manager, and Mary Fitzpatrick, senior project manager.
Christine, who came on board in 2000, has been keeping the VPCS ship afloat since the day she arrived. Her formal responsibilities include human resources, accounting, contract management and insurance oversight. Informally, though, we always say that Christine does everything but build buildings. She’s the glue that holds us together.
Mary Fitzpatrick was recently promoted to senior project manager, having risen through the ranks since she first joined us in early 2002. Her curiosity, tenacity and commitment to quality make her an outstanding construction management professional and (as clients frequently remind us), we’re lucky to have her.
But this blog post is less about Christine and Mary than it is about the change they represent.
My brother, Mike, and I talk frequently about how we learned the fundamentals of this business from our dad. And all these years later, the principles he taught us about both construction and integrity are all still spot-on. But it’s also important to recognize how different the industry is today versus when Fred Van Pelt was toiling away at it … specifically, the fact that it is no longer run exclusively by men. I like to think that Dad would be pleasantly surprised to see how many women are in the top tiers here at VPCS – including Christine, Mary, and even his own granddaughter, Kelli Van Pelt Jurgenson, who serves as regional vice president.
I found an interesting document in my research for this post. In a 2016 report, the Bureau of Labor and Statistics (BLS) quantified the prevalence of women in management positions across a variety of industries. While medical and health services garnered the highest share of female managers (73.7 percent), guess which market segment had the smallest percentage (6.7 percent) of women in leadership roles? That’s right – construction management.
So the demographics of our industry leadership have definitely changed over the years, but at a disappointingly slower pace relative to most other market segments. VPCS certainly doesn’t claim to be the only gender-blind construction management firm in this field, but these BLS statistics prove that the industry as a whole has a long way to go to balance things out.
Meanwhile, VPCS will continue to hire, compensate and promote people according to their abilities alone. Because professional qualifications – not gender, race or other personal characteristics – are key to leadership potential. And that is something that will never change.
The Van Pelt Construction Services family extends its warmest wishes to our clients, colleagues, partners and friends during this holiday season. We are grateful for the many ways in which you enrich our professional lives and we look forward to building with you to even greater heights in 2018.
It’s that time of year again when people take a moment to reflect, express appreciation and give good old-fashioned thanks. Here at VPCS, we have a lot to be thankful for – individually and as an organization. In the spirit of the season, we asked our team to share a few words about the things they’re grateful for and have included some of those thoughts here. We wish all of our friends, families, clients and colleagues a joyful Thanksgiving, overflowing with all the things that matter the most.
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HOLLY MADDOX: I am grateful for the willingness to try for better things tomorrow. I am grateful that my blessings are bigger than my problems. And I am grateful for those, good and bad, past and present, who are a part of my journey, and those who invited me to play a part in theirs.
ANGELITA SANCHEZ: I am thankful for many things: I am alive, my kids and family are all healthy, I have a job and love the people I work with, and I have a five-minute commute. I am currently working on the VPCS project at the Terra Linda High School, which means I get to see my 15-year-old son every day – and sometimes twice a day!
THIDA CHHIT: This holiday season, there are many things that I am grateful and thankful for. I have been blessed to have supportive and loving family and friends, who have been my guiding light through life. I’m thankful for my wonderful daughter who has not only brought me so much joy and strength, but also new meaning as a mother. This year has also blessed me with positive changes in my career and I am so grateful for VPCS for the opportunity to begin a new chapter. I am especially thankful for my manager (Kelli) and my colleagues (Mony, Brian and Cesar) who have been instrumental in supporting me.
NIKKI UNGER: I am thankful to be able to work at a wonderful company and have such an amazing boss who has encouraged me not only to do my best with my team, but to pursue passions I never thought I could. Eric Berger is truly an inspiration and an A+ mentor.
KEVIN SMITH: I am thankful for my lifelong friends and my new friends. These are all people who have become part of my tribe, and who make me feel welcome and loved as part of their family. They are all responsible for keeping the holiday spirit alive in my heart, and I am thankful to them every day.
BRIAN CAMERON: This year, I am especially thankful for the support of my family and friends, including my VPCS family. I am also thankful because I feel I have grown as a person over the last year and I know I have great people in my life to support me when I need it the most.
ERIC VAN PELT: I am thankful that I work with such an impressive group of professionals who take our responsibility to the communities we build for as seriously as I do.
KELLI VAN PELT JURGENSON: From a work perspective, I am thankful for my male colleagues. In this day and age, that may seem strange, but the vast majority of the men I work with show me respect and treat me as an equal . . . from the job site to the office. It gives me hope that the tide can change. From a personal perspective, I am forever thankful to my family for being my anchor of love, as I work daily in very tough industry.
MIKE VAN PELT: In the last few years, VPCS has grown considerably. During that time we’ve had the opportunity to hire several new employees. I am thankful for all of our long-standing employees and their enduring loyalty, and for our new employees and their fresh attitudes. The VPCS family helps me to sleep well at night, knowing our projects are in good hands.
MARK VAN PELT: I’m thankful for our clients, new and long-standing, who put their trust in VPCS every day in this complex business. I’m also thankful for our employees who put in the long hours and dedication it takes to make this machine run. And a special thanks to their significant others who support their efforts.
