Government agencies face construction labor shortage, rising costs and steep competition
In late March, Travis County commissioners unanimously approved a $26.15 million contract with J.T. Vaughn Construction—“the most highly qualified respondent,” according to the county’s purchasing office—to restore the historic federal courthouse downtown.
The courthouse was built in 1935 and is listed on the National Register of Historic Places. Travis County acquired the building in 2016 and plans to restore it to its intended use, as home to the probate courts and their offices.
Last fall, the county began soliciting bids for the restoration project. While 140 vendors viewed the county’s proposal, only one—J.T. Vaughn Construction—responded to it.
The county’s purchasing office reached out to 25 commercial construction firms locally and requested an explanation. Respondents cited full workloads, scheduling conflicts and disinterest as reasons for not bidding on the project, according to a brief prepared by county staff.
“I am concerned that we’ve only got one person when they are so many people that are in this industry,” Commissioner Gerald Daugherty said at a March 26 meeting.
Historical restorations are demanding and require specialized craftsmanship and materials that often cannot be sourced locally, said Jose Villarreal, a project manager at Vaughn Construction.
But as the Central Texas region continues to grow and area governments pass historic bond packages and invest in grander capital improvement projects, contractors and public officials said supply issues are likely to become more common.
“At some point, we’re going to [hit]a tipping point,” Villarreal said.
Decades of sustained population growth in the Central Texas region has led to a development boom.
Data from Austin’s Development Services Department shows the number of building permits issued in the city of Austin has increased 34% since 2010.
Local governing agencies—including Austin ISD, the city of Austin and Travis County—are scrambling to renovate and construct the roads, bridges, schools and buildings necessary for a region this size.
“Austin had a reputation of saying, ‘If we don’t build it, they won’t come,’” said Travis County Commissioner Jeff Travillion. “Well, they were wrong. Now the discussion is, ‘Where should we build it so it will be sustainable?’”
In the Austin metro, local, state and federal agencies are in the midst of projects totaling at least $16.5 billion, according to agency budgets. Major expenditures include the Texas Department of Transportation’s $8.1 billion Mobility35 project, which aims to relieve traffic congestion along I-35; Austin-Bergstrom International Airport’s $4.3 billion expansion; and Austin ISD’s $1.1 billion bond package, passed in 2017.
Surrounding counties—including Comal, Hays and Williamson—have their own projects underway.
“The volume of public work right now is bigger than it’s probably ever been,” Villarreal said.
Despite this high demand, contractors and construction firms face a labor shortage—in Austin and across the country.
Experts attribute this to various reasons: the rising cost of living coupled with stagnant wages, aging tradesmen and federal policies around tariffs and immigration.
“It’s a national problem, but [it]is more acute in Austin because of the affordability issue,” Villarreal said.
More than half of Texas construction workers received annual wages below the federal poverty line—$23,550 for a family of four—and 71% received no benefits, according to a 2013 report by the local nonprofit Workers Defense Project.
Texas has the largest construction labor workforce in the country, according to the Bureau of Labor Statistics. However, the median salary for construction workers in Austin—$28,150—is 16% lower than the median salary nationally, per a 2017 analysis by the Greater Austin Chamber of Commerce.
“Why are [construction]workers in such short supply in this booming industry? The simple answer is this sector has absolutely failed to invest in this workforce,” said WDP Executive Director Jose Garza.
While specialized trades offer higher pay and more protections, such as unionization, their ranks are shrinking—or aging out.
The median age of a master plumber in Texas in 2018 was 56 years, according to the Texas State Board of Plumbing Examiners.
“We are coming through a period that probably started in the ‘40s and ‘50s,” Travillion said. “We had a lot of people that were involved in trades and labor, and a lot of those people are retiring as we become more of an information-oriented society.”
With so many public projects ongoing and relatively few companies to perform the work, the Austin region is a contractor’s market.
“We’re dealing with a lot of competition right now,” said Rolando Fernandez, who oversees the city’s capital contracting office. “I would say that contractors have the ability to pick and choose where they want to go.”
Public or private?
Working with a public agency has its drawbacks: projects have inflexible budgets; there are stringent safety and wage requirements; and the bidding process requires firms to submit time-consuming proposals with no guarantee of a contract.
But there are advantages.
The city of Austin’s Small and Minority Business Resources Department encourages minority- and women-owned businesses to compete for bids. Travis County has a similar program.
While local governments cannot negotiate wage requirements—a minimum of $15 an hour for all workers—or safety training mandates, their staff is keen to provide support in other ways, such as by helping potential contractors develop their business plans.
“What we’re trying to do is, one, increase the pool of firms that can work on city projects, and then increase the capacity of those firms as well,” said Edward Campos, acting director of the city’s SMBR department.
Public contracts are also awarded through a transparent process, Villarreal said.
While private companies may have higher profit margins than local governments, they are more susceptible to market changes.
“Certainly, there’s other areas to get work,” Fernandez said. “But the city is always steady. If you get in there and understand the city process, … [then]you can sustain your business over the long haul by just pursuing city work.”
Developing these relationships can be pivotal.
Travis County selected Front Line Consulting, a veteran-owned business, to manage its 2017 bond program.
In the past, county staff have managed these efforts. But because of the scale of this program—60 projects in five years—the county felt it best to outsource the work to a firm with more experience.
“It’s huge because now we can say that such an established agency is now a client, and we’ve proven that we’ve been successful,” said co-owner and Chief Operating Officer Jessy Milner.
Local government agencies share a goal to get their projects done on time and under budget.
“We recognize that when there’s competition, there’s hopefully better pricing,” Fernandez said. “There’s better quality in the contractors we get.”
While area agencies face significant challenges, their staff remain hopeful.
“We have really tried to change our mindset in terms of looking at contractors as our partners,” Fernandez said. “[W]e want them to feel good about the work that they’re doing for … the community that they may live in or that their employees live in.”
Such adjustments are critical as the scale of public investment grows.
“That’s one of the reasons we’re here, to institutionalize new processes and streamline things,” Milner said of Front Line Consulting’s partnership with the county.
“This is the new normal,” Milner said.