Building confidence.

• Author: Gerhart, Clifford
• Position: Construction Review & Forecast - Industry Overview

1992 promises to be a rock-solid year for Alaska's formerly crumbling construction industry.

Alaska's construction industry is one of the last preserves of eternal optimists. A business as volatile as this must attract people who can see silver linings in the darkest clouds for years. But the optimism finally may be rewarded. The industry, after being battered by the late-1980s recession that followed a crash in oil prices, has been making a slow comeback.

Mike Swalling, president of Swalling Construction Co. of Anchorage, a firm specializing in heavy industrial, dock and bridge work, says although 1991 was slower than he had hoped, things are looking up. "There should be some growth, but not a boom year," he explains.

One reason the outlook seems brighter for 1992 is that previous years have been so bad. Jerry Harman, president and founder of Eastwind Inc., an Anchorage heavy civil contractor bought by Veco International in 1991, says, "I'm optimistic things will start turning around. We had a slight increase in 1991, but anything would beat '89 and '90."

A barometer noting a rise in construction is the number of licensed contractors, which has increased from 3,349 in June 1991 to roughly 3,650 in March, according to Judy Weske of the state's Occupational Licensing Division in Juneau. She estimates that an equal number of unlicensed contractors are working in the state.

How a company fares depends a lot on which part of the state and which part of the construction industry it competes in. Some observers expect residential and commercial construction in the coming year to show small gains, especially in the Anchorage area. Also, the outlook for heavy-construction firms that build large industrial or public-infrastructure projects has improved as a result of increased federal highway funds.

More work is expected for Alaskan constructors as the oil companies seek to enhance production from existing North Slope oilfields through several large projects. Bob Schacht, manager of Alaska construction for Arco Alaska, says that he expects 1992 North Slope construction to total less than $75 million. But consolidated construction operations between Arco and BP Exploration (Alaska) should jump to more than $125 million in 1993 as the oil companies begin work on the GHX-2 gas-handling project and the installation of modules at the Point McIntyre field.

In 1994, North Slope construction is expected to drop to about $100 million. "After that, we have no new major projects planned, and the amount of construction probably will drop off rapidly," says Schacht.

A problem that keeps Alaska contractors looking over their shoulders when business picks up is competition from Lower 48 contractors. As yet, there has been no great migration to Alaska, and some in the industry think previous bad experience in Alaska and a lack of financing may keep Outsiders out.

Bob West, president and chief executive officer of Construction & Rigging Inc. of Anchorage, an industrial and marine construction contractor, notes, "We're seeing some Outside contractors and there will be more." But he says the environment has changed, and bonding will be difficult for out-of-state companies.

Alaska's construction leaders continue to chafe at increasing state and federal regulations. Leo Walsh, president of Walsh & Co. and a partner in Aleutian...