Despite challenges, many bright spots shine in North Dakota’s construction industry
A conversation with Russ Hanson of Associated General Contractors of North Dakota.
Russ Hanson says despite the challenges of the construction industry – everything from rising material costs and supply chain delays to workforce shortages – there are many bright spots in the industry.
One of them is the bipartisan five-year infrastructure bill that was enacted earlier this year, which goes a long way to help North Dakota projects. Another bright spot is that construction remains a good career choice with decent pay and benefits.
Hanson is executive vice president of Associated General Contractors of North Dakota, a chapter of the National Associated General Contractors of America in Washington, DC. The AGC chapter helps promote the industry in the Peace Garden State, as it has done since 1951. It also works with architecture and engineering firms.
“In short, we are the state's largest commercial construction industry association,” he said. It represents the interests of the commercial contracting industry legislatively and regulatorily, keeping them informed of the latest trends, and represents the many different facets of the industry: bridges, commercial construction, excavation, hospital, schools, mall, roads – just about everything but residential.
“We don't represent home builders,” Hanson said. “Our national motto – and we take it seriously – is skill, integrity and responsibility. We want to bring as much professionalism to the industry and build with skill, integrity and responsibility.”
Hanson said the current times are tough, but the construction industry is up to the challenge.
“It is very resilient,” he said. “There are things that need to be looked at and adjusted, of course, but it has quality people and builds quality projects. The economy will benefit.”
Hanson answered additional questions from Prairie Business about the construction industry, giving his insight and perspective about where it is at today and where it might be going in the future:
Q: In a snapshot, what does the construction industry look like in North Dakota right now?
It is the pulse. This discussion is very timely. What we seem to be witnessing here in North Dakota, really, is similar to the national scene. There are AGC chapters throughout all of the 50 states, and collectively we, as executives, have been talking about this very issue – of supply chain and inflation – and how they are impacting the industry. We are all similarly impacted, and not only by the supply chain, which is an issue; but the bigger issue is the cost, the construction inflation.
Since September of 2020 through March of 2022, our national AGC economist said the inputs have increased on an average of 21.5%. That is real and when you are signing contracts and having to account for material and supplies, and having increases like that, it lends to interesting discussions with owners of whom you have bids with.
Q: Yes, pocket books only go so deep. How are companies meeting these challenges?
Invariably prices have gone up, which is reflected in the bid awards. However,
while the national supply price inputs have gone up 21%, the bids have only gone up on average, nationally, about 17%. The prices have gone up and anybody, any owner, will certainly recognize that.
I think one of the things that we've been talking about in the industry is the owners who are bidding the projects and those that are receiving them are having conversations to take into account that it's taking longer for some materials to arrive.
They’re taking a look at the flexibility and the completion deadlines and in the contracts and things like that, looking at all avenues to try to still complete projects while taking into account that there is some pretty severe inflation in the market.
Q: No one knows, of course, but when do you foresee the situation getting better?
I'm not certain how quickly it will ease, but I do believe it's going to be around for a while. The fact of the matter is, we've got a real trucking and trucker shortage, and so when there is product, there is a limited amount of availability to get it out. I can't see exactly how long it's going to be around, but I think it's going to be here for a while and certainly throughout this season.
Q: Is your industry challenged by workforce needs these days?
Like every other industry, absolutely. Everybody asks, “Where have the people gone?” Workforce is definitely a challenge; construction is not alone. That is definitely an issue and one that I think will continue to be an issue. We have an unemployment rate in North Dakota at about 3%, so there are not a lot of people available and it is very competitive for the various industries who are seeking those (potential workers) that are available.
Q: What impact does the construction industry have on North Dakota?
Construction, despite some of the images that people have of construction, is really a very good career choice and we need to do a better job as an industry of promoting that. We have a significant impact on the economy.
There's about 27,000 construction employees that are contributing to the economy, building and repairing the infrastructure. The jobs pay well, they have benefits and retirement. They're not minimum wage jobs. They're very good paying jobs and there's almost 30,000 of them that are working here in North Dakota.
Q: What do you foresee for the industry over the next couple of years? What are some bright spots?
I don't want to come across as all doom and gloom. Congress has passed the bipartisan infrastructure bill, so there is a five-year infrastructure bill that was enacted earlier this year – it's a five-year bill that was fully funded.
There's some certainty for the highway and the bridge and there's some broadband money in there for the next five years from our federal programs. So that certainly is a very good thing, a very good thing. If we can get the inflation to moderate, that would be better, because there were increased resources in that. We were very happy with that from the previous program, and so that certainly is a good thing.
Our state legislature, as our economy has done well over the past 10 years when they've met, has committed a significant amount of resources toward all types of infrastructure – flood protection, highways, roads and bridges, vertical commercial. During the 2021 session they passed a very large bonding bill, which allowed the state to finish its financial obligations for the Fargo-Moorhead diversion and the Minot flood control projects, two very important things for two of our bigger populated areas.
The legislature over the past 10 years has literally invested billions of dollars to infrastructure construction, primarily for roads and bridges, and those monies were really needed particularly during the oil boom in the mid 2000s when a lot of the roads in the West were in very, very bad shape. So there certainly are things that are positive in the industry despite the challenges.
Q: What are you most excited about for the industry? What helps you get up in the mornings?
Personally, just everything. When you look at the construction that has been built, maintained or repaired in North Dakota, and being a very small part of that process, whether it's representing them at the legislature or at the regulatory agency, (it’s very gratifying).
By and large our roads are good. We're going to have historic flood protection in a few years in Fargo-Moorhead and in Minot. When you look at the vertical buildings on the campuses that are helping to educate, those are all built by the industry I represent. It makes it very easy for me to get up and go to work when I see what construction can do for the economy – not only today but well into the future.