The construction industry is at work full throttle and will continue to be the bulwark of the economy in Guam. After years of delay and re-awards, work for companies in Guam is dominated by the surge of construction for Marine Corps Camp Blaz and throughout military holdings on-island, to include Naval Base Guam and Andersen Air Force Base. Polaris Point will additionally be the site of a submarine repair facility by 2025.
In the Northern Mariana Islands, the Tinian divert airfield continues a pace, as does U.S. military installation of radar systems in Palau.
By Oyaol Ngirairikl and Maureen N. Maratita
With $1 billion to $2 billion in construction projects either ongoing or expected to start in the next couple of years, the industry has become the economic driver for Guam and the region and plays a large role in employment.
While not often discussed, there’s a trickle-down effect to various subcontractors along the way. That means that not only do companies like Black Construction Corp., and CoreTech, help keep thousands of their own employees gainfully employed, they also rely on dozens of other smaller businesses and their employees.
Leonard K. Kaae, senior vice president and general manager of Black Construction Corp., says he’s seen the industry go through a lot over the course of his 52 years in the industry, but these past few years have been tough. Construction companies weren’t closed during the COVID-19 pandemic because they were deemed “essential” by government policy but were hit by delays in the supply chain. Transformers, switch gear and other major components used to take 24 to 40 weeks, now Black is waiting anywhere from 80 to 100 weeks for them to arrive on-island.
Nevertheless, the construction industry, through the pandemic and even now as we wait for tourism numbers to rise closer to pre-pandemic levels, provides “economic stability for Guam,” Kaae says. “And I believe it will continue to be a driver for … up to the next 10 years, because of the emphasis on Guam as a national defense (location), or as the government puts it, as the tip of the spear.”
Black Construction Corp. has seven major programs underway. The group’s subsidiary – Black Micro Corp. — secured “the work up in the CNMI — consisting of the first phase of the Tinian divert project – and that project was awarded at $161 million. We’re fortunate to get awarded the second phase a little over a month ago at $221 million,” Kaae says.
Work in Tinian on Phase 2 will include Construction of a cargo pad with taxiway extension, the fuel tanks and pipeline, roads and construction of a maintenance support facility under the Asia Pacific Stability Initiative.
Ongoing projects include four at Marine Corps Base Camp Blaz. Among those are a $98 million bachelor’s officer’s quarters awarded in 2021, with a second BOQ for $106 million awarded in 2022. Black was also awarded the $122 million machine gun range at Northwest Field. And for all these projects, the group relies on its work force of approximately 1,100 employees and H2-B workers, but also subcontractors and their teams to complete a project.
“Depending on the scope of work, it can range from five to 15 subcontractors,” Kaae says. Andersen Air Force Base housing phases 1, 2, and 3, involves about a dozen subcontractors. Phase 1 was completed in January. “On the housing jobs, we had … the asphalt paving, painting, different coatings, insulation, landscaping, termite control, pest control, environmental mitigation… so all told 10 to 12 subcontractors contributed to the success of the job.”
At the ongoing machine gun range project he says Black has already called on a Munitions and Explosions of Concern, or MEC subcontractor, as well as an environmental subcontractor. “And we’ll probably have another three to four throughout the course of the job. So maybe we’ll have six to seven subcontractors,” Kaae says.
“We employ a lot of people. And we have a large population of H2-Bs necessary for us to actually execute our work. Adding the subcontractors, it’s a huge work force overall that we support,” he says. “Our payroll per week, for Black alone, depending on overtime, could be over $1 million, so you can see we support a lot of families. We send a lot of kids to school; there’s a tremendous amount of people who rely on their positions within the company.”
Ho S. Eun, chairman of Core Tech International; is confident in his group’s ability to manage several varied projects for the Guam military buildup.
What is on his mind is what will happen when the buildup is completed.
“And then the total volume of construction projects will plummet – will drop tremendously. We need to figure out how we can support that,” Eun says.
Facilities and other maintenance will still offer considerable construction work. The total volume of such contracts will not reach military construction levels, he says. “Construction numbers are much higher. The type of work is different. You need different workers,” he says.
While supply chain problems are part and parcel of the industry, Eun says this is an ongoing issue in the islands.
“All the contractors are used to this issue. I think we are well-trained to manage the supply difficulties,” he says.
The Biden Administration has announced future funding for infrastructure, to include the territories.
While additional work for the industry is a plus, Eun says the timing is not ideal. “That overlaps with the military buildup. Either way it’s good news, but the other perspective is it aggravates the manpower shortage.”
If those additional opportunities had followed the buildup surge, it would be a blessing, he says. “But that’s not the case at this moment.”
Companies drawn to Guam by the buildup will inevitably leave, he says. “From a business perspective it makes sense for them to focus on other areas where they have enough volume.”
And Eun says Core Tech has a perspective that makes the group’s involvement a personal one. “We don’t think of Guam as a branch; we think of Guam as our home — so the depth of our commitment is different.”
He says the group’s role in the community is different from those companies who are taking advantage of the need for varied construction services related to the military construction taking place. “We have extensive investments in Guam. We can talk about our staging area, our huge warehouse, humongous equipment fleet; we have a batch plant, a pre-cast yard, a pre-tensioning pre-cast yard,” Ho says.
Core Tech has one concrete batch plant at Andersen Air Force Base. “The other one is at Ukudu,” he says. Aggregate comes from Smithbridge Guam, he says. “Usually, we use our batch plants for our projects, but some contractors ask, so we provide concrete for their projects.”
Core Tech has several hundred local employees, plus about 1,100 H-2 workers it is keeping busy. “On the construction side we have around 1,700,” he says. The company can expand further, he says. “We have a huge barracks. We can accommodate 2,000,” he says. With the addition of a further building, Core Tech could increase housing by several hundred more.
“That doesn’t mean [anything] comes easy or free,” Ho says. “Maintaining those facilities costs a lot of money.”
For an off-island company doing business on Guam for five or ten years of the buildup, he says, “It doesn’t make any sense to invest that much money.”
But when Core Tech takes on a project, the company self-performs a great deal of the work. While it works with some sub-contractors, Ho says, “Our self-perform percentage is much higher than other contractors. That’s why we can be a little bit more flexible in our pricing,” he says.
Also, Ho says Core Tech is fortunate in its joint venture. “We have a good partner in Hawaiian Dredging (owned by Kajima). That also helps us — to work together.” While the intent is to be profitable, a joint venture, he says, “also helps us to hedge our exposure and risk. Construction is not easy, because you have a lot of contingencies for unforeseen situations,” he says.
Under the mamizu MAC or Japan-funded multiple award construction contract, the Core Tech-HDCC-Kajima LLC JV was awarded a $546 million, firm fixed-price contract for five [of eight] multistory bachelor enlisted quarters buildings at Marine Corps Camp Blaz and a $33.5 million contract for the fire station there.
The JV was also awarded a $150 million project for the Urban Combat Training Facility in Yigo and an almost $107 million contract for the embarkation facility at Naval Base Guam at the beginning of May.
Additional work included Andersen Air Force Base’s $128 million 36th Wing Strike Aircraft Fuel Systems Repair Hangar, a $128 million project, and the $134.3 million Tanker General Purpose Maintenance Hangar, a $134.3 million project, completed last year.
Core Tech is also bidding on work in the Northern Mariana Islands, and has received indications it will also be awarded work, but Eun declined to share further details at this time.
Smithbridge Guam, a construction contractor that provides a variety of services including civil, structural and mechanical engineering and construction capabilities, is working on several projects, both military construction and private sector.
William Best, vice president and general manager of Smithbridge Guam, says the company has 360 employees and is growing.
The team is working on the Alupang Data Center for GTA, which includes the building structure and all underground utility piping. In addition, Smithbridge is working on Department of Defense projects P-312 & P-804 at Naval Base Guam Telecommunications Site. The work there includes construction of a distribution warehouse, and a central issue facility. The company is also working on pre-cast concrete production and transportation of pieces to the project site at Camp Blaz, and site erection of the precast concrete structure.
“Our other projects range from dredging work at the naval base, and underground fuel storage tank restoration projects,” Best says. The average crew size for various projects ranges from 25 to 45 people, he says.
Smithbridge works with almost all the prime contractors in Guam to include Black Construction, Pacific Rim, Core Tech-Hawaiian Dredging-Kajima, Core Tech, Granite, Hensel Phelps, HDCC, and Caddell Nan JV.
Famous for supplying the construction industry from its quarry in Yigo, Smithbridge has a team about to start the structural steel roof erection on CHK’s five BEQ buildings at Camp Blaz. Smithbridge will provide all transportation of the steel from the Port of Guam to the project site, as well as preassemble and erect the steel using cranes and erection crews.
Best says from Smithbridge’s standpoint the current challenge for the construction industry in Guam is finding qualified personnel to help execute projects. The company is trying to find ways around that while also making a positive impact on the community.
“To assist with that effort of developing skill, Smithbridge has been active in the (GCA) Trade Academy and supports that organization by participating on the board, as well by providing students and people to teach classes,” West says. He says it’s important for the company to build a local capacity. “Smithbridge works hard to employee as many people as we can that are permanent Guam residents. In this way we believe that the Guam community benefits, and the monies earned stay here in Guam to support Guam families and communities.”
Kaae says despite these challenges, construction work will continue to drive the economy. He says there will be no shortage of projects to bid on for contractors and subcontractors alike as Guam and region sees more work from the missile defense and the Pacific Deterrence Initiative.
“All of those programs are starting to unfold,” he says.
At Camp Blaz, bachelors officer’s quarters A and B are right around the halfway mark. “We’re about 50% complete on A and 40% on B,” Kaae says. Black is also constructing the dining facilities for marine personnel and officers, and the P305 4th Marine Regiment facilities for maintenance shops for electronics and communications, as well as vehicles and other supporting offices.
Black is also working on the new aviation facility at Andersen for the Marines. “That’s another major program for us on Guam,” Kaae says, adding they’re also “completing the tail end of P491 at Naval Station,” which is a $49.6 million project for explosive ordnance compound facility. Black is also making good progress on Xray Wharf where a sheet pile bulkhead wall constructed of steel is being installed, Kaae says.
“We’re very busy, as you can imagine. And we still have a few projects that are pending award. All good for Black and for the industry in Guam and the region,” Kaae says.