Momentum Builder

According to Kiewit Building Group's Lance Wilhelm, the current building boom is the most active and stable in memory

September, 2006

Lance Wilhelm readily admits that he’s not the smartest or most experienced guy at his company, the Kiewit Building Group. The 17-year veteran of the Hawaii construction industry isn’t an engineer, nor did he work in the trades. However, Wilhelm knows Hawaii, he knows how to do business and he knows how to build. Wilhelm, 41, is a senior vice president and Hawaii area manager for the Omaha-based construction company and is responsible for all business operations within the state regarding vertical construction.

Wilhelm joined Kiewit in 1989 after earning a bachelor’s degree in communication from the University of Hawaii at Manoa. While he did have a passing interest in construction, Wilhelm said that he had applied for the position of office manager trainee, because he desperately needed a job. He also says that he got the job, because no one else applied. However, the office administrator quickly became fascinated by how things got built, and he learned how to read plans, estimate jobs and supervise projects.

Over the course of his career, Wilhelm has seen some of the construction industry’s highest highs and lowest lows. He took over Kiewit’s top Hawaii position last December after the company reorganized.

Wilhelm took time out from his busy day to discuss the current boom in construction and the nature of doing business in Hawaii.

What are you building now?
We serve three specific markets: health care, hospitality, including retail and public works, and the military. Currently, we are building Kaiser Moanalua’s tower in joint venture and we’re also upgrading Kuakini’s emergency room. We’re also building the Lahaina Gateway Center, a retail project, on Maui, as well as the Pacific Aviation Museum on Ford Island. We have a project with the Army Corps of Engineers to construct facilities for the Stryker Brigade at Schofield Barracks. Finally, we are pursuing some major high-rises, which I’m probably not supposed to talk about with you.

Which sector is leading the way?
It is hard to ignore the impact of the military. If you take C-17 [military cargo aircraft] work at Hickam [Air Force Base] Stryker Brigade work, privatized housing and what they have coming up yet, you are talking about significant dollars. It’s hard to believe that the current conflict with North Korea won’t put a little more focus on Hawaii. Hawaii and Guam are just that much more important than they were a year ago. That doesn’t include the potential carrier group. The numbers they are talking about are huge, but we have a lot to do even without that.

How much longer can this boom last?
Just given the work that is in the pipeline, it is hard to imagine that there will be a significant drop off in the next several years. There are just too many big jobs in town. Just look at all the tower cranes around. Those things [high-rise condominiums] take a couple of years to build. If we get mass transit and if the aircraft carrier comes to town, then all bets are off. Things would be even bigger, if that is possible. Kiewit has been involved in a number of mass-transit projects on the Mainland, including the T-REX project in Denver. Where you put rail in, development follows. Where every station comes up, someone wants to put in a 7-Eleven and then housing. It is not merely what mass transit can do for transportation and all those positive things. But it can also spur great economic development. Most contractors would really like for this activity to level off and spread out a little bit. If we could get things to even out that would be great, but it never seems to work out that way.

What are the biggest obstacles to growth in the construction industry?
Shortages. They’re not things that we can ignore. We are fortunate, because of the size of our organization, we can take advantage of our critical mass. We have people whose job it is to keep track of what is going on globally. Specifically, what to do about labor shortages and commodity pricing. Prices are volatile. Aluminum, steel have increased from 30 percent to 40 percent within this year, unbelievable. Copper is up 89 percent since October 2005, nickel is up 108 percent since November 2005, etc., etc., etc. Is it because it is busy all over? That’s part of it. Is it because of China? That’s part of it. Is it because fuel prices are so high? That’s part of it, too. We believe that the price increases also have to do with speculation, people trying to take advantage of the uncertainty out there and make some money. And there is a lot of uncertainty out there.

As far as labor is concerned, we have pressures on both the skilled craft side and the project management side. There just aren’t enough people out there. We haven’t seen an influx from out of state for two reasons: The markets on the Mainland are still doing well, so there is no real good reason to leave where you are. Plus, the cost of living in Hawaii is very high, so the people who are relocating to Hawaii are motivated by things other than money. Mostly, people moving back for family. The extra labor force will have to be built on our own, both white collar and blue collar.

How is this boom different than the last one during the Japanese bubble economy?
I started with the company in 1989, during that time when there was a lot of infrastructure and housing development being built. Things are different now, because we have so many different things popping up. Back then it primarily was H-3 [Freeway] and Japanese money and that was about it. Now, we have all this military work. The tourist industry is having record occupancy and there is an aging infrastructure in Waikiki. Owners who have been waiting to upgrade their facilities now can justify the expense. The freeway infrastructure is aging, too, and interest rates are still relatively low, so it is affordable to build. All these things are coming together at this one time. It seems to me that there are so many things helping us this time around that they couldn’t all go bad at once. However, I guess if the stars can align in your favor they can also align badly, too. Contractors are a worrisome bunch. Whenever things are great, we are always wondering when the other shoe is going to fall.

Has the red-hot market changed the way you do business?
Last year, Kiewit split in two, Kiewit Building Group, which I run, is a separate entity. We do vertical construction. The rest is heavy civil work, roads, building bridges and infrastructure. There is a good deal of that work, too. We separated primarily because the vertical construction side of our business is very much relationship-based. More private than public sector. We wanted to make sure that we could focus our monies and energies and have our clients realize that this is all we do. We are totally focused on them and not distracted by a freeway job. We had been planning to reorganize a while ago, previous to the increase of the market, but the upswing has been a real benefit to us. The move was more of a recognition that our business is all about relationships and Hawaii is a relationship place. We’re not very big, so you’re always running into friends everyday. There are more connections because we are a smaller place and we tend to connect on a personal level whether you want to or not, just because of the smallness of the place. It’s not always a numbers game here. We are no less sophisticated or smart than people on the Mainland, but before we get to the bottom line, we have to talk about the UH game, or AYSO, or Song Contest, or Kamehameha versus St. Louis. Of course, there is always bringing manapua or pork hash to a meeting.

The power of pork hash.
It’s pretty important.

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