Will Hawaii profit from the boom?
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From a contractor’s perspective, the most obvious feature of Guam is its remoteness. At 5,900 miles from California, and nearly 3,800 miles from Hawaii, Guam lies at the end of a long and tenuous supply chain. “Most of this work is ‘Buy American,’” says Peters. This means construction material can’t be quickly shipped from nearby Asian suppliers, making it critical to understand materials logistics. It takes a ship three weeks to get from the West Coast to Guam. “So, you’ve got to be self-sufficient,” Peters says. “When something breaks, you better have a spare part, or you better be able to get a replacement quickly – probably by airfreight.”
Even before buildup for the Marines,
Even within Guam itself, logistics will be challenging. Port facilities will need tens of millions of dollars in improvements to handle shipping volumes, which are expected to quadruple. Roads and bridges will have to be hardened and widened to accommodate the trucks needed to haul material. There’s not enough electricity or fresh water to supply the anticipated needs. And there’s nowhere near enough warehouse space from which to stage the enormous construction projects. Once it gets started, the great Guam buildup might turn into a quagmire.
Despite the challenges, Guam still represents a tremendous opportunity for large Hawaii companies. For smaller Hawaii subcontractors, the labor issue presents a major hurdle. “They’ve never had to go out and hire foreign workers,” Denny Watts points out. “And yet, by definition, these are the guys who would have to provide 75 percent to 80 percent of the manpower on any given job.”
“I know there are several sub-contractors interested in coming to Guam,” Peters says, but he doubts they’re prepared to work with an inexperienced workforce. “When you need 30 electricians, you can’t just go down to the union hall.” Maybe more important, he points out that not knowing the productivity of your workforce makes it impossible to budget accurately. “Productivity drives your construction costs,” he says. “And understanding productivity determines what you bid.” In short, it’s almost impossible for small companies to plan adequately for Guam.
And planning is essential. Lance Wilhelm, senior vice president of Kiewit, points out that his own company, a major U.S. contractor, is still grappling with the implications of going to Guam. “Businesses need to formulate a Guam strategy, whether you’re big or small,” he says. But small companies in particular have to look at what it means to do business so far away. “How are you going to manage your people? Do you even have the people who are willing to go down there? How will you handle the logistics? Do you understand the tax issues, union issues, legal issues … ” Small companies need to consider all this before they talk with the larger contractors. “You need to formulate a strategy,” Wilhelm says, “so, if you should be asked to go down there, it isn’t the first time you’ve thought about those things.”
Wilhelm also points out that, for many small companies, management is already stretched thin. “Can you commute to Guam and still keep a going concern here in Hawaii?” he asks. “We’ve had to think about that, too. We’re not going to jeopardize what we have here in Hawaii; so, part of our Guam strategy is that we have to be able to do both.”
Notwithstanding the complications, small Hawaii companies will almost certainly be drawn to Guam. Many of them already have experience there. Steven Baldridge, president of Baldridge and Associates Structural Engineering, points out, “We’ve actually done work in Guam for about 10 years; we’ve just done it from Honolulu.” Most of BASE’s work in Guam has been for the military, which can often be done from a distance. But, like many observers, Baldridge expects the buildup to also generate work “outside the fence.” That may be where small Hawaii companies, particularly technical companies and vendors that are less burdened by labor issues, will find their place in Guam. “There’s other infrastructure work that we can get involved in,” he says. “It might be housing, upgrading the local schools or building bridges. But the first step is to have a more solid and continuous presence.” For BASE, the Guam office is about becoming part of the territory’s business community.
Steven Baldridge, president of Baldridge
That process is made easier by having Hawaii service providers already working there. It’s possible, for example, for a Hawaii company to open an office in Guam and still use the same bank, accounting firm and law firm as the home office. Many of these companies are important members of Guam’s business community. First Hawaiian Bank, for example, is the largest bank in Guam. Carlsmith Ball has had law offices there for more than three decades. Because of this experience, they offer more than just banking and legal services; they provide inside knowledge of the community and vital introductions.
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