Associated General Contractors of Alaska look ahead: in Alaska, the forecast is promising.

• Author: Bohi, Heidi
• Position: BUILDING ALASKA

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At a time when cranes and scaffolds are becoming a less common sight across the country's landscapes and "calling the bottom" only leads to finding a new bottom the following month, the Alaska construction industry is justifiably content with a 2009 forecast that is characterized by having no significant rise or decline.

Construction is the third-largest industry in the state, pays the state's second-highest wages, employs nearly 21,000 workers with a payroll of more than $1 billion, accounts for 20 percent of Alaska's economy and currently contributes about $7 billion to the state's economy. During times like these when the only thing that is certain is uncertainty, steadfast is a position that any industry would envy.

FLAT SPENDING

"Spending is fiat," says John MacKinnon, executive director of Associated General Contractors (AGC) Alaska, of Alaska's construction industry, based on reviews of last year's construction activity and estimated projections for 2009. "Normally, you'd think, 'that's boring,' but in this economy, flat is good. There are a lot of states that would like to have a flat outlook in construction spending."

This matches what his gut instincts told him, he says: before the forecast he expected the industry to be down 3 percent to 5 percent. "I like to see a healthy industry, steady growth, but what we don't like are really big years followed by really slow years. That's not good for industry."

Surprises are also painful, but there are many factors that cannot be predicted or avoided and often end up having a teeter-totter effect on the construction industry. For example, when building work is down it means there will be an excess demand for materials and the resulting price drop will mean projects that were not viable before become affordable. Sudden spikes, on the other hand, can be debilitating. When the cost of oil, which is used to make asphalt, went up a year ago, the key road material doubled from $350 to $700 per ton. A major road project requires several thousand tons, so many in the industry were caught completely off-guard. Without escalator clauses in contracts allowing them to adjust prices, they were forced to simply absorb the loss.

The recession poses a major challenge for the construction industry Outside, as the residential market continues to deteriorate and nonresidential activity fares only slightly better. Nationally, economists and executives predict that recovery could be 12...