Building Guam

Will Hawaii profit from the boom?

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Denny Watts, president of Watts Contructors Photo: Rae Huo

When the U.S. and Japanese governments announced plans in 2006 to move nearly 8,000 U.S. Marines and 9,000 dependents from Okinawa to Guam, they set in motion what may become one of the largest building booms of this era. Big Hawaii construction companies are already planning for this enormous buildup, which is expected to take more than five years. Smaller Hawaii contractors can also get a lucrative piece of the action, but only if they are willing to take on risks and a learning curve.

The military realignment will make the island of Guam, America’s westernmost territory, the vanguard of U.S. forces in Asia. The undertaking is enormous. Simply accommodating the arrival of the Marines, for example, will require the construction of everything from enlisted and officers quarters, to support and training facilities, to gyms and recreation centers, to infrastructure like roads, sewers, potable water plants and communications facilities.

The relocation of the Marines is only part of the story. Military development in Guam will also include missile defenses, docks and support facilities for an aircraft carrier, and substantial increases in Air Force and Coast Guard operations. In all, NAVFAC Marianas — the entity coordinating all the work — expects to spend at least $14 billion, nearly a third of which will be paid by Japan.

Strategic Partnerships

In Hawaii, the most likely beneficiaries will be the large military contractors – dck pacific, Actus Lend/Lease, Kiewit Building Group, Watts Constructors, et al. – many of which already have experience in Guam. But even these companies will be dwarfed by the work. Getting it done will require unprecedented partnerships. Because of the scale, most contractors expect NAVFAC to use a form of procurement know as Multiple Award Construction Contracts. Under the MACC process, probably only four or five teams of contractors will even qualify to bid. Given the size and variety of the projects – NAVFAC says they’ll range from $15 million to $300 million – successful teams will need to demonstrate many skills.

According to Denny Watts, president of Watts Constructors, and perhaps the dean of Hawaii-based contractors in Guam, finding the right strategic partners is key. “We’ve been going through that for the last year,” he says. “We’ve talked to maybe 25 of the best organizations in the world to determine who we want to be partners with for the long term.

“We’re looking for partners with competencies in things that maybe we aren’t as strong at. That’s because these contracts will vary between sophisticated marine projects, to technically complicated infrastructure, to basic living quarters. Your team has to show expertise in all those capabilities.”

To complicate matters further, the bidding process has to be precise. “These are all hard-bid, hard-number contracts,” Watts says. “It’s not like in the Middle East where they were cost reimbursable. You’re at risk here. It’s not for the faint of heart.”

Labor Pains

Many of the most nettlesome problems facing contractors revolve around workforce management. “There are only 2,000 to 3,000 construction workers on the island presently,” says Roger Peters, general manager of dck pacific. “At peak, they feel there will be the need for 25,000 to 30,000 construction workers. So, the challenge is: Where do you get that many skilled workers?” Of course, with a population of about 170,000, labor shortages have long been a problem for Guam. “Traditionally, what’s been done is they bring in labor from the Philippines,” Peters says. At this scale, though, he notes that may not be adequate. “I think you’re looking at a global supply: Filipinos, Indians, even Mexicans.”

Perhaps more critical than finding skilled labor is identifying the foremen and supervisory staff to manage them. Companies like dck pacific and Watts Constructors, which have been working in Guam for years, already have trained crews and experienced supervisors, though not nearly enough to handle all the new work. Other teams will likely have to bring in most of their foremen and supervisors from off-island. Recruiting these positions for Guam has always been difficult. Even Hawaii workers have historically been reluctant to relocate to Guam. But companies like dck pacific will have to persuade them. “That’s not just Hawaii, either,” says Peters. “We’re offering these opportunities to people in our home office in Pittsburgh, to people in Atlanta, even to people in the Caribbean.”

Finding the workers is just the beginning. The MACC bidding process also requires the contractor to plan for their accommodation. “You have to explain how you’re going to house them, feed them, entertain them and care for their health,” Peters says.

 

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