TerraTruth

Updating our previous post, we have learned that RMC has not only laid off up to ten employees in offices throughout California but has also reneged on job offers to several graduating students.  We understand the need for layoffs in a recession but it doesn't make very much sense (from both a business and ethical perspective) to make job offers to relatively inexpensive students and then pull them a few months later.

We apologize but all we have is bad news this time.  We will get right to the rundown...

ZweigWhite (via OH&S Magazine) - The subscription-only AEC research firm recently released a report that stated that 51% of AEC firms laid off approximately 8% of their employees in 2008. Expect the numbers to be worse this year...

RMC Water and Environment - A loyal reader recently sent us a tip that RMC has decimated their Sacramento office of their entire wastewater division.

Lake County, California (via the Record Bee) - Lake County in Northern California is laying off their Water Resouces Director.  This one sounds more like a political decision but a layoff is a layoff.

Layne Christensen - The publicly traded well drilling company has been laying off employees since the end of 2008.  The transcript of yesterdays Q1 2009 conference call is full of information on the state of the water industry.  Give the transcript a read if you are slow at work this week... 

City of Waltham, Massachusetts (via the Daily News Tribune) - The City of Waltham has recently decided to layoff a junior civil engineer in the Engineering Department.

San Luis Obispo County (via The Tribune) - The County is eliminating 28 positions, all through attrition, except for one Utility Department engineer who will be laid off.  That sucks.

Thats all we have today.  Keep the layoff tips coming...

A friend let us know about a website called a www.abetteroakland.com. The site, published by a group of articulate Oakland denizens, covers all topics related to government, infrastructure, and life in Oakland. The writing is sharp and straightforward.  We recommend checking out this post which describes the City and County expenses for personnel in an easily understandable format. 

There is an extensive array of information on this website - as webmaster novices, it is hard to imagine the amount of time and effort required to maintain a site like A Better Oakland.

The recession is hitting private consultants and water utilities equally hard. While the media seems to believe that the economy is picking up because of the recent stock market rally, the recent news on furloughs and layoffs tells a different story. 

-San Francisco Department of Public Works, San Francisco Public Utilities Commission, and San Francisco Recreation and Parks Department: 30 laborers.  (This is on top of over 400 layoffs in these same departments in January 2009) 

-Los Osos Community Services District: 10% across the board salary cuts (e.g. furloughs)

-Calaveras County Water District: 20 Golden Handshakes

-City of Haverhill, MA: Mandatory furloughs

-City of Daly City, CA: More mandatory furloughs

We will keep posting information on layoffs in the water and wastewater industry as we hear about them.  Help us out by emailing tips to us at admin@terratruth.com .

When are Bonds Used?

Demand for surety, or contract, bonds usually arises out of one of the following situations:

1.       Federal/State/Municipal statutes that mandate their use in public works projects

2.       A private owner/developer of a project or their lender (as a second interest) who requires their contractor to provide contract bonds

3.       A prime contractor requiring one from its subcontractors

Four Types of Surety Bonds

In general, there are four different types of contract bonds: bid bonds, performance bonds, payment bonds, and maintenance bonds.

Bid bonds guarantee that if the contractor is the lowest, responsible bidder, they will enter into the contract and provide the required performance and payment bonds. If the bidder fails to do so, then the owner is protected up to the amount of the bid bond for the difference between the low bid and the next higher bid.

Performance bonds guarantee that the contractor will fully and satisfactorily complete the work in accordance with the contract documents.  The owner/obligee (and any other dual obligees listed on the bond – such as a lender) has the right of recovery up to the penal sum of the bond if the contractor fails to fulfill their obligations under the contract.

Payment bonds guarantee that the contractor will rightfully pay the laborers, suppliers, and subcontractors that provided goods and services on the project. Mechanic’s liens cannot be placed on public property – so the payment bond is protection for legal claimants if they have not been paid for the goods and services they provided. The right of recovery under the payment bond extends to all unpaid claimants who are legally entitled to payment under the contract. Legal claimants are subcontractors with direct contact with the general contractor, or material suppliers and second-tier subcontractors. Any suppliers to these second tier subcontractors are not included. Payment bonds are also limited to the penal sum of the bond.

Maintenance bonds guarantee the workmanship and materials on the project for a specified period of time from successful completion of the project. This is generally a one year obligation.

Why are Surety Bonds Relevant?

There are many contractors in the marketplace competing for work. They all believe they are qualified to build the project. Some sort of prequalification process is clearly needed. The surety assumes the responsibility of prequalification for owners who require bonds on their projects. Sureties are responsible for underwriting the contractor, its financials, its experience, and the contracts it would like to pursue. If the surety’s underwriting proves the contractor is satisfactory, they will provide surety bonds for the contractor. Therefore, the surety protects the owner against a loss if a bonded contractor should default.

It is a common misconception that a surety bond is simply an insurance policy. Many surety bonding companies are often related to larger insurance companies – but the services provided are different. In my next post I’ll delve into the distinctions between the insurance and surety business.

We have an array of information to post today so we'll get right to it. 

Zweigwhite 2009 Architecture/Engineering/Construction (AEC) Industry Outlook

The first item we are presenting is a summary of the Zweigwhite 2009 AEC Industry Outlook by Building Design + Constuction Magazine.  Zweigwhite is a management consulting firm that provides information and services to architecture and engineering firms. The summary is a bit vague because the summary is basically an advertisement to purchase the full data report from Zweigwhite. However, there is some useful information in the report such as the expectations of industry CEO's on what business will be like in 2009. According to the summary, only 16% of AEC CEO's believe that business in 2009 will be outstanding or excellent.  46% 23%, and 15% think that business will be good, satisfactory, and poor, respectively.  Given that people seem to be bullish in general, these percentages do not invoke a lot of confidence. 

PriceWaterhouseCoopers Engineering and Construction Survey

Another CEO survey was completed by Big 4 accounting firm PriceWaterhouseCoopers. The information provided in this survey is also frusteratingly vague but it is worth a look through, if only to see an example of a technical report that is not helpful (e.g. don't send anything like this to your clients if you want repeat business from them). See this link for additional "data" from the survey.

Update on Clark County Layoffs

In March, we blogged about layoffs in Clark County.  Updating that story, on Thursday the Las Vegas Review Journal wrote that the County is laying off almost 50% of civil engineers in the Development Services department. The County is also leaving 33 of the remaining 56 positions vacant.  The laid off engineers are going into a tough Las Vegas job market. Gambling and housing starts in southern Nevada have been severely impacted by the recession. 

Paul Krugman's Outlook on Unemployment

Hopefully things will start to turn around soon but we don't have too much hope that things will change in the near future - apparently economist Paul Krugman doesn't think so either.  In a speech he gave Friday at the University of Cincinnati, Krugman stated that he believed unemployment would rise to 12% nationwide.  That is a 50% increase over the current unemployment rate of 8.1%. 

Scary.

As we did in our last post, we trying to continue the trend of presenting  good news with the bad news.  So in that spirit, we're going to write about layoffs first and then present some ideas/opinions on engineering firms that may be hiring in the near future.

The Bad News
Fluor Corp is laying off 17.5% of its staff at its offices in Irvine and Aliso Viejo in Southern California according to the Orange County Register.  350 people out of 2000 employees is a huge number - good luck to those unlucky employees in their job searches.

Proving that taxpayer supported agencies are not immune either, Kansas City's Water Services Department is laying off 38 engineers and managers (courtesy of the Kansas City Star).

Green jobs are not looking so great either. These layoffs from OptiSolar and BP Solar seem to contradict the article we wrote about earlier this month.

The Good News
Money from the stimulus bill is finally making its way into state government coffers. Many people, including a reporter at ENR, have gone over the effects of the stimulus fund in more detail than we will here.

We figure that this is good news for transportation engineers. In general, transportation projects are easier to get designed quickly than more complex projects like bridges and wastewater treatment plants.  So if we were out-of-work civil engineers, we would look for jobs at the following companies, which perform a lot of transportation and heavy civil work.

-Moffatt & Nichol

-Louis Berger Group

-HNTB

-Bechtel Corporation

Good luck!

According to Employment Spectator, Jacobs Engineering is laying off 70 employees from their Lakeland, Florida office. Jacobs Engineering is a huge firm with over 55,000 employees according to their website, so this isn't a huge hit (except to those 70 employees).

On a brighter note, there are some places that are still hiring civil and environmental engineers.  While experienced engineers that have portable clients are always in demand, finding a job as an entry level engineer is a challenge during this recession. If you are searching for a good place to start or continue your career, check out these agencies and utilities that are somewhat immune to recessions. 

-Army Corps of Engineers

-Bureau of Reclamation

-Pacific Gas & Electric (search for "recent college graduate")

According to recent projections presented  to the San Francisco Municipal Transportation Agency (SFMTA - aka Muni) Board by Muni staff, the agency anticipates an operating deficit of $128.9 Million (M) for the next fiscal year. This is a staggering sum considering the total approved operating budget is $816.7 M.

In this post we will present a summary of the reasons for the deficit and some potential solutions.  Future posts will focus on details within the SF Muni Budget.  The source for the data cited in this discussion is derived from budget information provided on Muni's website and video of Muni Board meetings. 

The Immediate Problem
For the 2010 fiscal year (July 2009 to June 2010), Muni expenditures are expected to exceed budgeted allotments by $39.1 M while revenue is expected to miss estimates by $89.9 M. This results in a total operating deficit of $128.9 M. 

The majority of the expenditure increases are due to salary & benefit increases and billings from other City Departments. Overtime costs are $14 M over budget, retirement costs are $6.6 M above projections, and unemployment costs are up $4.5 M. In addition, other City Departments, such as the Police Department and San Francisco General Hospital, are billing Muni for an additional $11.8 M in services. This is above the $68.4 M that Muni previously estimated. This is a somewhat absurd accounting practice since all of these agencies, including Muni, are San Francisco City agencies, but we will leave that issue alone for now.

Revenues are down significantly in several areas:

-State and Regional funding ($54.8 M)

-City General Fund Reduction ($24.3 M)

-Advertising ($6.2 M)

-Parking Citations ($6.0 M)

-Miscellaneous Areas ($0.7 M): Includes parking meters, garage revenues, interest, cable car fares, etc. 

The Fundamental Problem

Muni's budget has exploded over the past several years. The chart below shows Muni's adopted budget for fiscal years 2004 to 2010. Also shown on the chart is Muni's 2004 budget adjusted for inflation (per the Consumer Price Index). 

The chart shows that Muni budget has grown by 76% over the last six years while a budget indexed to inflation would have increased by only 20%. The budget growth has been driven uncontrolled spending facilitated by fare increases. More information on this uncontrolled spending will be presented in future posts.

The Solution

Muni has proposed a myriad of short term solutions.  They are available in on Muni's website (see pages 10 and 11 in this presentation). Some of the solutions include furloughs/wage decreases and service reductions. While the wage reductions have some merit (a 4.6% wage reduction isn't much considering all employees are recieving a 3.5% wage increase in FY 2010), the service reductions make zero sense. Muni is proposing several levels of service reductions - the most extreme is an 8% reduction in service. However, this results in a 3% reduction in expenditures; hardly a good solution when the deficit is 16% of the operating budget. Increasing revenue is also challenging. Again, more details are available in the Muni presentation and do not need to be reiterated here.

The solution to the budget problem is to void the adopted fiscal year 2010 budget and readopt the fiscal year 2008 budget (resulting in a budget decrease of almost $130 M). While this is much easier said than done, re-adopting the 2008 budget will force sacrifices that will bring the operating budget in-line with current revenue. In addition, management must rein in overtime spending, retirement, and unemployment costs. Increases in the retirement age (perhaps from 30 years of service to 35 years), reductions in executive salaries, and halting capital projects (e.g. the Central Subway) need to be considered. 

Future posts will explore these solutions in more depth.  Look forward to more media coverage on Muni's budget woes in the next few days. The SFMTA Board of Directors meeting on April 7 is expected to shed more light on the budget problems and proposed solutions. 

Here is a good article we found on Semiconductor International's website. The author gives an overview of the types of green jobs that are available and the current state of the green job market.  One of the author's premises is that the stimulus bill will create green jobs but that the increase in debt (and taxes) will cause other jobs to be lost. In addition, green initiatives, such as cap and trade for carbon, will increase the cost of business and result in additional unemployment.

In one of our internet journeys, we also found a CNET post on H-1B visas. We are not going to touch on this complex issue in this post, but the link above is a good primer on the H-1B job debate. Look for more information on this topic here on terratruth in the near future.