Construction industry still suffering from recession Building a new Foundation

April 03, 1994|By Timothy J. Mullaney | Timothy J. Mullaney,Sun Staff Writer

After all these years, the last place Bertero L. Basignani thought he would be going was back to school.

After all, Lawrence Construction Co. Inc. of Baltimore hadn't worked on government jobs since the Carter administration, so flush was the company in private-sector work during the 1980s. But with revenue down, the company losing money for the first time ever in 1991, and employment falling to 25 from 150, the 45-year old company is back in the running for jobs such as building schools and jails.

"Since 1949 we hadn't lost a cent," said Mr. Basignani, who took over as president of Lawrence from his father last year. "We didn't even lose money when we got stiffed [on a million-dollar bill in 1988]. But 1991 was just awful. We just couldn't do it."

Even with the economy moving into strong growth, construction is still all but flat on its back. There's much less work out there, so little that Lawrence was still laying off workers last year.

"It's not brain surgery, unfortunately," said Alton J. Scavo, senior vice president of the Rouse Co. of Columbia. "The reason we're not building a great deal is because companies and businesses are still not expanding their operations. . . . For such a simple problem, there should be a simple solution. But I don't see it."

The continuing woes of construction are especially bad news for Maryland. Nearly 6 percent of the state's jobs come directly from construction, one of the highest percentages in the nation (a 1992 survey put Maryland second to Nevada in reliance on construction for jobs).

The state has lost about 40,000 construction jobs since 1989, a fall of about 25 percent. More than a quarter of the workers who took advantage of Maryland's leading job retraining program in fiscal 1993 used to be construction workers, said Marilyn Corbett, spokeswoman for the state Department of Economic and Employment Development.

And for good reason. There are no hotels under construction anywhere in metropolitan Baltimore, no speculative office buildings, no regional shopping malls.

Half the money for projects that won building permits last year is to be spent on two government projects -- a new wing of University Hospital in Baltimore and a new office complex for the U.S. Health Care Financing Administration in Woodlawn.

The other sea change is that what work there is comes from the public sector and nonprofit institutions, like the elementary school Lawrence is renovating in Towson for Baltimore County, much more than the office, retail and hotel developers who set the market's pace between 1983 and 1990.

The construction business is getting better. Baltimore developers took out building permits for $266 million worth of nonresidential new construction in 1993, according to figures from the Baltimore Metropolitan Council. That's up 37 percent from 1992.

But it hasn't gotten that much better.

"Our upturn of last year is still 46 percent below the average for the 1988-1990 period," said Josef Nathanson, economist for the Baltimore Metropolitan Council. "We still have a long way to go."

Dan Scott's story is as much like Bert Basignani's as his company, Gerald G. Scott & Sons Inc. of Kingsville, is different from the substantially larger Lawrence Construction.

Like Lawrence, Scott & Sons lost money during the recession, and relied on corporate savings to survive.

Both companies laid off workers; Scott & Sons went to 10 employees from 15. Both are taking on government work at a pace they never would have considered five years ago. Mr. Scott said 60 percent of his current work is government-related, up from 15 percent. And both say much the same thing about their work lives.

"I personally am probably working harder than ever for less," Mr. Scott said.

The 45-year-old Mr. Scott's specialty is -- or used to be -- smaller commercial projects. He's done a lot of Pizza Huts, he jokes, in the 15 years he, his now-retired father and brother have been in business. But what he remembers about the best years, around 1988 or 1989, is that he always had work waiting to be done, letting him know in advance where his company's next meal was coming from.

"What I think of is, we had a steady backlog of business," he said. "Now there is no backlog. You almost work day by day. You're constantly out there trying to pick up any work that you can, which tends to put you in the public bid [government] market, which tends to be a much tighter market."

Along the way, Mr. Scott's company shed many of the perks and the small conveniences that helped him compete. The company cut back on its cellular phones and sold paid-off trucks to save on insurance, cut its contribution to its workers' 401K plan and trimmed company contributions to health coverage. Mr. Scott temporarily cut his own salary 60 percent, and laid people off as recently as last year, two years after the national recession officially ended.

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