NECA TransmissionsNotes from the front lines of the electrical contracting industry
  • 'Tis the Season

    Posted on Nov 21, 2008 by John M Grau

    No. not that season. At least not quite yet.

    It’s the season for 2009 construction economic forecasts. The reports are coming across my desk, and they don’t paint a pretty picture.

    I mainly rely on the annual forecast produced by McGraw-Hill Construction. Other groups that try to crystal ball the construction economy are the U.S. Dept of Commerce, the Homebuilders association, the General Contractors, the Architects and the Portland Cement Association.

    I look most closely at the forecasts for non-residential markets because that’s where the bulk of NECA members earn their bread and butter. Those markets had been doing well the last few years — until now. Overall, non-residential building is predicted to decline by about 10 percent next year.

    The biggest decreases are predicted for office buildings, hotels, retail stores and manufacturing facilities. The more stable markets are power, transportation, and health care and educational buildings.

    One ominous note in all these forecasts is that they present a best-case scenario. In other words, they assume that the government efforts to unfreeze credit markets and stimulate the economy will work. It they don’t, all bets are off.

    An economist at a recent meeting of the Construction Users Roundtable predicts that after the current downturn runs its course, there will be a steep increase in construction and that workforce shortages will be greater than ever. That’s a warning to us that we can’t stop hiring and training apprentices even in a down economy.

    So my read on all this is that contractors will be burning through their backlog in 2009. The last half of next year and a good part of 2010 may be tough times. Bidding for projects will come back in 2010, with construction starts rebounding sharply in 2011.

    This all presumes, of course, that you believe economists know what they’re talking about.

  • An Open Letter to Our New Leaders

    Posted on Nov 07, 2008 by John M Grau

    Congratulations President-elect Barack Obama and Members of the Newly Elected 111th Congress.

    ECPAC didn’t support all of you in your election races.  Regardless, we do celebrate our democracy, and the fact that we freely and openly choose our leaders.

    Whether we supported you or not, you can expect to hear from us. We are the voice of the nation's electrical contracting industry. We are a significant segment of the construction industry, which is one of the largest employers of American citizens and represents a major portion of our nation's gross domestic product.

    We will offer you our thoughts, ideas, support when we can - and criticism when necessary. We look forward to a productive working relationship.

    We know you will have your hands full with a number of important issues. Here are a few things we would like Congress and the new Administration to place on your agenda.

    We need some help with our pension plans. It won't cost you anything, unlike the Wall Street bailout. Just give us some extra time to fund our obligations. We suspect that, in contrast to the last Administration, you won't have a bias against union multi-employer plans.

    We also suspect that we won't have to fight very hard to keep Davis-Bacon provisions intact. You're with us on that one. But please don't go so far with your promotion of union issues that you trample on the rights of small employers. We'll be watching you closely on that.

    We're encouraged that you will promote investment in infrastructure, energy conservation measures, and alternative sources of energy. That's right up our alley, and our members can help you rebuild, renew, and re-energize America.

    We most likely will part ways with you on some tax issues. Remember that, by and large, we are small, family-owned businesses. You claim that we are the engine for job growth in our country. Please don't stifle our ability to grow our businesses.

    Estate taxes, corporate tax rates, and marginal income tax rates do matter. As a matter of good faith, why not repeal the 3% withholding tax that Congress sneaked into some legislation a couple years ago? We all know it was a bad idea, so let's get rid of it.

    There's also the matter of regulation. We see the fallout from lax regulation in the financial markets. Don't use that as an excuse to swing the pendulum too far the other way. We see the need for regulations, and we will work with you to make any new regulations sensible and workable. We have a very productive coalition with OSHA that is advancing safety efforts in the line construction industry. Please don't destroy that.

    We know you will be busy setting up your offices, hiring your staff, and preparing to govern our country. So we won't bother you any more right now. We just wanted to introduce ourselves and let you know that you'll be seeing us down the road.

    Once again, congratulations, and good luck!

  • Pension Conundrum

    Posted on Nov 04, 2008 by John M Grau

    My last post generated some questions. What else can local areas do to lessen or eliminate pension liabilities, besides wait for the government to act? Why not shut down the defined benefit (db) plan or convert to a defined contribution plan?

    Terminating a db plan and replacing it with a 401(k) plan seems to be a simple solution. The problem is that the old db plan liability doesn’t go away. If a plan is unfunded, the gap will have to be made up before any insurer will take over the plan or convert the pensions to annuities. Instead of spreading the liability over many years, you are converting it to an amount due today. That’s not much help.

    Freezing a plan — halting future benefits — reduces the future liability, but any past unfunded amounts still have to be paid. It’s a viable long-range option, but it doesn’t provide immediate relief.

    This all presumes that the union members will agree to convert their pensions. A few years ago, it was an easier sell. In the late 1990s, many people felt they could do a better job investing their money on their own. They preferred quarterly 401(k) statements showing a tangible value to their growing nest egg, versus some complicated formula for long-range pension benefits.

    Today, instead of a growing balance, most 401(k) participants have seen their nest egg shrink by 30% or more. All of a sudden, being responsible for their own investments doesn’t seem so attractive anymore.

    The conundrum: Why would any employer want to continue to provide a defined benefit pension plan? Why would any employee want a 401(k) plan in lieu of a db plan?

    One reason unions might want to help solve this problem involves their future survival and growth. One way for an employer to shed his liability is to go out of business. If enough employers choose that route, union jobs will be lost as well. Also, consider how difficult it will be to convince a non-union employer to sign up when you offer him the prospect of helping to payoff an unfunded pension liability.

    Most employers I talk to aren’t against paying towards a retirement plan for their employees. But they also want assurances that whatever contribution they make is the sum total of their obligation. The long-term solution to the pension conundrum will have to include this provision.

    In the short run, we’ll have to bank on government action to relieve any immediate shortfall liability. In the long run, we have to come to grips with the pension conundrum.

  • Pension Perils

    Posted on Oct 27, 2008 by John M Grau

    I hate to add to the pile of bad financial news, but have you checked your local defined benefit pension plan lately? If it wasn’t underwater before this current stock market crisis, it is now. At least in terms of the funding standards under the new pension regulations established a couple years ago.

    Add private and public pension plans to the list of institutions that Congress needs to save from technical bankruptcy. I say “technical bankruptcy” because in most cases the plans themselves are not bankrupt. They just don’t meet the funding standards established by the government. While funding standards are good and necessary, in times like these strict interpretation of the regulations can lead to even more disastrous results.

    To my way of thinking the solution is fairly simple. Allow pension plans to spread their liabilities out over a longer period of time. That way, they work their way out of the hole as their investments recover over time.  (Right now, it looks like that might be a long time). 

    This isn’t a bailout.  It shouldn’t cost the government or the taxpayer anything. The alternative would. If plans ultimately fail, they fall back on the Pension Benefit Guaranty Corporation (PBGC) to pick up the pension liability and payments. Then it does become a bailout, and we all pay the tab.

    The problem is, Congress seldom does it the easy way. There is already talk of finding ways to make 401(k) participants whole for their losses. This has lead to more talk about re-engineering the whole pension system in our country, including a government take-over of all pension and 401(k) plans. Private pensions and savings plans would cease to exist.  A government-mandated plan, skewed toward lower-income participants, would be substituted.

    So far this it just talk. But some kind of Congressional action will be required in the months ahead, which opens the door to all kinds of ideas.

    NECA has already moved pension issues to the top of its government affairs agenda. We will not only be actively monitoring the situation, but proactively working with other like-minded organizations in coalitions to promote sensible solutions while fighting off harmful alternatives.

    Small businesses, like all citizens, have a big stake in how the government addresses our current financial mess. NECA won’t hesitate to jump into the fray to represent the interests of electrical contractors. Your support, advice, and guidance will be needed as with deal with some issues we have never had to confront before.

  • What I Brought Back From Chicago

    Posted on Oct 14, 2008 by John M Grau

    The just-completed NECA Convention in Chicago was my 31st. That doesn’t even come close to the record set by former NECA President Bob Colgan of Toledo, Ohio. This was his 57th!

    Bob Colgan, Sr. recognized as Founding Fellow of the Academy of Electrical Contracting
    Bob Colgan, Sr. recognized as Founding Fellow of the Academy of Electrical Contracting

    Bob was recognized at both the Convention Opening General Session and at a special Academy of Electrical Contracting Reception marking its 40th anniversary. Bob Colgan and Bob Higgins, my predecessor as NECA’s Executive Vice President, are the only founding members of the Academy still living.

    Colgan attended this year’s convention with most members of his family. The kids tagged along to NECA conventions when they were growing up. Although not all of them at the same time, says Bob’s wife Emily. So it was a special event for the Colgan family, the Academy, and NECA.

    Here are some of my take-aways from the Convention:

    Many of the members I talked to are still cautiously optimistic about their work backlog. They told me that the financing is in place for most of their projects and they expect the work to continue into 2009.

    A couple members told me that they called their bankers to see if they could get credit if they needed it. The answer was yes. Credit is still available for “credit worthy” customers.

    A lot of members are excited about the opportunities available in energy conservation and alternative energy markets. Many are reformulating their business plans accordingly.

    Most left the Special Labor Relations Session encouraged that the IBEW and NECA are working in the right direction. Progress can’t come fast enough, however.

    After attending the ELECTRI International Meeting, the Student Chapter Summit, the Future Leaders Reception, and the International Group Lunch, I couldn’t help walking away feeling proud of NECA and what we are accomplishing in these areas.

    How does Bob Costas remember all those facts? After his speech at the closing general session, I told him that the political campaign “truth squads” were going to check on his accuracy. He said he’s confident that his record is better than the candidates’.

    Before the closing concert, I was able to say hello to performers Bruce Hornsby and Ricky Skaggs. Hornsby said that they don’t just walk through their performance but work hard at being entertaining and fresh. He said we were in for a treat. He was right.

    Wall of Vodka
    Wall of Vodka

    I keep thinking about the ELECTRI International reception at the Chicago Illuminating Company and the 20-foot-high wall lined with shelves of Grey Goose vodka. I wonder if they would agree to be a NECA Preferred Sponsor.

    Did everyone see president-elect Rex Ferry up on stage playing an inflatable guitar during the Opening Reception at Navy Pier? I have pictures.

    President-elect Rex Ferry
    President-elect Rex Ferry

    No doubt this was one of NECA’s best Conventions ever. Take Bob Colgan’s word for it. In our 100 year history he’s been to over half of them, so he should know.

  • Get Real About Counterfeits

    Posted on Sep 22, 2008 by John M Grau

    I received a letter today from an old colleague who now serves as chief staff executive of the Paris-based International Federation for Safety of Electricity Users, also known as FISUEL. The letter was about counterfeit electrical products.

    My friend pointed out that counterfeit electrical products (defined as products non-compliant with standards) now account for 10% of world production, up from 7% in 2002. He noted that counterfeit goods can result in hazards to people and property, liability to contractors, distributors and inspection authorities, and unfair competition to legitimate manufacturers.

    FISUEL is taking a leadership role in combating these threats on a global basis. In 2006 NECA, along with ten other electrical organizations worldwide, signed a FISUEL-developed agreement stating that we would work cooperatively to stamp out counterfeiting of electrical products.

    I’m sure most NECA contractors aren’t that concerned about this issue. While they don’t condone counterfeiting, electrical contractors also don’t think this problem applies to them. After all, they buy materials and equipment through reputable distributors or direct from manufacturers. Even if the distributor sells them counterfeit goods, what can a legitimate electrical contractor do about it? Isn’t it someone else’s concern?

    Well, we’re finding out that counterfeit goods are finding their way into the normal supply chain. And electrical contractors could be open to liability, even if they unknowingly install non-compliant products. So maybe it isn’t such a remote problem after all.

    NECA’s role is to educate our members and other electrical contractors about the threat inherent in the purchase and installation of counterfeit products. We also will coordinate with other organizations in bringing this problem to the public’s attention.

    To that end, the NECA Board of Governors is being asked to adopt a resolution at their meeting next month establishing our policies regarding counterfeit electrical products. In addition, we are sponsoring a special workshop during the convention addressing this problem and the issue of contractor liability.

    It might all sound like motherhood and apple pie, but when you consider the implications, it’s a serious issue that deserves serious attention. Counterfeiting and piracy of all kinds cost the U.S. economy more than $200 billion per year. We need to do our part to put a stop to it.

  • Why don't they like me?

    Posted on Sep 16, 2008 by John M Grau

    Maybe I’m taking this too personally, but I don’t think either presidential campaign likes me very much. The media is against me, too. It may be self-centered to think so, but I keep imagining that they have a picture of me posted somewhere with the words “bad guy” underneath it.

    Why am I all of a sudden so undesirable to political campaigns and media pundits? Well, I’m the product of a small town (population: 500). The high school I attended was part of a consolidated school district, and my graduating class had less than 200 students. I went to church every Sunday (still do), and I owned shotguns (still do), hunted, and knew how to field dress small game (might have forgotten how to do that).

    My dad was a small businessman. He ran his own neighborhood grocery store and later opened up a one-man real estate brokerage. In addition, he served on the County Board of Supervisors. We received calls at home from his constituents whenever they had a problem with county services.

    Once he received an irate call from a lady who ended up being unhappy with his answer. She suggested that he was overpaid. My dad said he figured out that he cost her four and one-half cents per year in taxes. He said he would mail her back a nickel, and she could keep the change.

    At any rate, listening to condescending comments about small town ways and values – “clinging to guns and religion” – hits home to me. I can relate to Sarah Palin. The media thinks those of us who grew up in rural areas are naïve and amusing.

    On the other hand, it seems that Palin doesn’t like me that much either. Both campaigns have railed against special interest lobbyists and Washington insiders. Despite my small town roots, I now live in the Washington, D.C. area, and I work for a special interest group with a well-funded PAC. I feel like I need to sneak down back streets with sunglasses on, and my baseball cap pulled down low over my face. (For my views on special interests please see my April 30 posting on this blog).

    The interesting fact is that whoever gets elected will be looking to associations and association PACs like NECA for information and money. They can’t operate without us, and they shouldn’t. We have as much right to participate in our government as anyone, as well as a professional responsibility to our industry and public safety.

    I was concerned how NECA’s status as having one of the 50 largest PACs in the country might reflect on our members. One of our political consultants, Robert Raben, told me not to worry. Electrical contractors are small business people, and small business can do no wrong. Small business owners are your neighborhood grocers or real estate agents, like my dad. Both political parties recognize small businesses as the biggest source of economic and job growth, and they want to be associated with them.

    So it seems that in this election NECA contractors are golden. I, on the other hand, am left to bitterly cling to my guns, religion, and Gucci loafers.

  • Meet Drew Gibson

    Posted on Sep 09, 2008 by John M Grau

    Drew Gibson is NECA’s Executive Director for the Midwestern Region. His career has been intertwined with mine for more than 30 years.

    Drew joined NECA’s chapter manager training program in 1973, and the following year he took a position as assistant manager of the Milwaukee Chapter. In 1976, he was hired as manager of the Central New York Chapter in Syracuse. Yours truly was hired to replace Drew as assistant manager in Milwaukee. Nine years later, when I moved to the national organization, the board of the Milwaukee Chapter asked Drew to come back as their chapter manager, replacing me. He spent the next 16 years with that chapter until I asked him to come on board as the Midwestern Region Executive Director in 2001.

    So Drew and I have been following each other around in NECA for a long time, and I can’t think of a better guy to know and work with. Drew is rock steady, dedicated, and savvy. His analytical approach to problems allows him to see all sides of an issue from which he develops logical and unique solutions. His dry sense of humor diffuses tense situations. His calm demeanor doesn’t mask his passion for NECA and its mission.

    Drew is a native of Batavia, New York. He served for four years in the Air Force and earned both an undergraduate degree and an MBA from American University. His major was Labor Relations.

    Drew has been married to Paula Gibson for 38 years. She earned her PhD in Psychology not too many years ago and is a licensed psychologist in Wisconsin. The Gibsons have two sons. Patrick is a graphic designer at the Wall Street Journal and Benjamin is an art director at a publishing company. They both live in Brooklyn and work in Manhattan.

    I don’t know if Drew has another career move in mind, but if he does I have a feeling it will impact me somehow as well.

  • (Republic of ) Georgia On My Mind

    Posted on Aug 28, 2008 by John M Grau

    Things that appear to happen suddenly without a clearly defined cause are actually often rooted in long-standing reasons and long-ago conflicts. I was reminded of this fact when violence erupted recently between the Republic of Georgia and Russia.

    Four years ago, I was one of a group of eight association CEOs gathered in a private room at the Hotel Sacher in Vienna, Austria. We were there to meet with the U.S. Ambassador to the Organization for Security and Cooperation in Europe (OSCE) - an organization I didn’t know existed until then.

    Over the years, I’ve been invited to join several trade association international missions. A small group of trade association executives meet with foreign government officials and our counterpart associations to promote U.S trade and cooperation across borders. In most cases, we also meet with our United States ambassador in that country. I’ve been to the residences of our ambassadors in Italy, the Vatican, Ireland, Belgium and Austria. 

    The United States has three ambassadors in Vienna. One is to the OSCE, which was chartered by the United Nations during the Cold War to secure stability in the region and is concerned with early warning, conflict prevention and crisis management. It has 56 participating countries. 

    Our briefing that day in Vienna with Ambassador Stephan Minikes was one of the most spell-binding discussions I ever participated in. Minikes’s background prior to his appointment as ambassador included being legal counsel to the Chief of Naval Operations and 30 years in an international law practice. He brought a world map to our luncheon, mounted it on the wall, and began a lecture on the world political situation.

    Minikes focused on the former Soviet republics bordering Russia. Places that you can’t spell or pronounce, like Kyrgyzstan and Kazakhstan. He painted a picture that told us how dangerous these places were to world stability. And I won’t forget one point that he drove home to us that is relevant to today’s situation.

    Minikes told us that Russia was livid over the expansion of the European Union, NATO and democratic reforms in these former Soviet republics. The closer they came to Russia's border, the more aggressive Russia would become. The republics of Georgia and the Ukraine were especially sensitive to Russian interests. He said that Russia would use the slightest pretext to justify intervening militarily or otherwise in these neighboring countries. It would become the front of a renewed east-west conflict.

    So with the invasion of the Republic of Georgia, we see Minikes predictions coming true. He didn't predict the start of another world war. But his sobering assessment of this region of the world told us that we need to pay close attention to the events that happen there for many years to come.

  • Reaction to the Grass is Greener Post

    Posted on Aug 20, 2008 by John M Grau

    My last post drew more comments and responses than I’ve had for awhile. Some people commented on whether we should be optimistic or pessimistic. Others commented on the future of energy-efficiency markets.

    A thoughtful response came from Columbus, Ohio, member Greg Stewart who wrote:

    The "Good Old Days" are in reality always right now. Through challenge comes opportunity and through opportunity comes success, if we are wise enough to recognize it and act upon it. The way it was will never be again, yet the way it will be is very much up to what we make it.

    Oregon member Nathan Philips suggests a method for going after PV work:

    As you know, I'm from Oregon, which is a license state and we're struggling with our IBEW partners to clarify the scope of PV installation work that requires an electrical license. As you point out, we don't want to let this industry get away from us, so NECA has been advocating for rules that allow unlicensed workers to assemble racks intended for PV collectors, which is the standard in the non-union sector. Our approach is that once the licensing requirements are clarified, we can get the bargaining agreements to mirror them.

    Austin, Texas, member Mike Kanetzky is concerned that we don’t over-train our apprentices by adding a solar component.

    John, I agree there are many opportunities for the electrical contracting industry. However I see Red Flags all over your article fearing that there will be a push to add a Wind/Photovoltaic class to our apprenticeship program which has already gone astray.

    The biggest opportunity for NECA-IBEW contractors would be to remove all classification ratios across the country. Have a 12-month plan to overhaul the NJATC creating curriculum that will provide immediate Production/Quality/Safety results in the field for electric contractors. There is a core skill set that every electrician needs and we are missing the boat with our current training.

    (The NJATC is embarked on a core curriculum project which will address some of Mike’s concerns).

    My favorite response is from my pessimistic friend that I mentioned at the beginning of the last post. He sent me the following comment:

    I do lament the passing of the old days. In my opinion, you'd have to be an idiot NOT to.

    I can read a financial statement. So can you.

    The U.S. is bankrupt. People who even call this into question are loony (at a minimum). Those who aren't loony are self-deceivers. Those who are not loony or self-deceiving are … totally dishonest.

    Fact is, we didn't used to be. One of the reasons the 1970s and early 1980s were not worse was our economic strength. If Paul Volcker came in again and administered the same high-interest-rate shock "to the system" that he did in 1979-87 … our economy would COLLAPSE.

    There's no disputing that. We've allowed our economy to become fragile — by being, in part, self-indulgent spoiled idiots.

    I’ll let that be the last word.

About NECA Transmissions

NECA Transmissions is a collaborative effort from CEO John Grau and NECA staff to provide insight and feedback on key issues from the front lines of the electrical contracting industry.

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