Foundation for the future: Specialty and small-business contracting is rising while Guam awaits release of MILCON dollars

By Joy White

While the Marines relocation to Guam and the surrounding military buildup brings with it the promise of construction and other opportunities, many of Guam’s construction leaders are looking outside of the buildup for opportunities and are diversifying their products and services.

“There are some construction companies who have military work now, or will have in the immediate future, who say they remain optimistic about the forward movement with the buildup, and there are those who still remain cautious with a wait-and-see attitude. Even with the current and upcoming military work, there are a lot of subcontracting opportunities and small-business outreach,” says James A. Martinez, president of the Guam Contractors Association.

A steady increase in the military construction sector is anticipated beginning early next year with exponential growth over the next 10 years, Martinez says.

The release of the Record of Decision in July brings reassurance that the buildup is moving forward.

“We anticipate there will be a lot of interest in Guam because of the ROD, and hopefully we’ll get a lot of request for proposals from military [as well as the] local and private side,” says Conchita Bathan, CEO of Core Tech International Corp.

It may be some time before the industry sees a clearer picture of all the opportunities that will be available, Bathan says, as contractors are given time to prepare the proposals and put together a team.

“We’ll see when they announce the RFP who’s going to be the players. We don’t know at this point in time,” Bathan says.

The military has been the largest customer for Black Construction Corp., which has been working with the military on Guam since 1958. “The ROD will allow for pent-up RFPs to finally hit the street,” says Leonard K. Kaae, senior vice president and general manager of Black Construction Corp.

“If the ROD moves forward, the outlook for next year is positive,” Kaae says. “We are looking forward to the potential release of RFPs that are tied to the ROD. […] After years of delay, we believe there is confidence that the buildup will finally move forward.”

Stevyn J. Radonich, vice president and general manager of Smithbridge Guam Inc., is cautiously optimistic when it comes to the buildup, as there have been some disappointments in the past.

“We’re just hoping to stay busy. There’s only a certain amount of work that you can do. So it does give you some opportunity for growth, but the growth generally [associated with] the buildup is short-lived, so the growth is going to be short-lived as well,” Radonich says. “I would prefer that the buildup gets spread — if it is going to happen — over 10 years, and there will be enough work for the local companies [and for] all the people that are here to have reasonably lucrative business for the next 10 years. […] There has been a lot of confidence undermined in the whole industry with what has happened since 2009.”

Finding work outside of the military buildup is important to Smithbridge. “We are looking harder at outside work in the outer islands, in particular Kwajalein, [the Northern Mariana Islands] and the other Micronesian islands,” Radonich says.

For Pernix Guam, which purchased assets of dck pacific guam LLC for approximately $2 million earlier this year, the buildup is only a small part of the business in the area.

“We are not here just for the buildup. We have a long history in the region. This is an expansion of our footprint in Guam, but it is not necessarily new to us. We have long-term employees that have always been on Guam, and we see great things coming,” says Peter Allen, president of Pernix Guam and vice president of operations of Pernix Pacific.

While there is a wait-and-see attitude toward the buildup, the construction industry is kept busy with local and federal government projects, as well as projects in the private and existing military sectors.

One major project outside of the buildup that is notable is the $100 million project to renovate Simon Sanchez High School. In addition, the Department of Public Works released a bid for renovations and repair for Guam Department of Education schools, Martinez says.

Core Tech is completing final change orders on one of its latest projects, the Gloria B. Nelson Public Service Building. In addition, the company is completing work on the Hagåtña bridges on Route 8. Summertown Estates in Dededo — 240 four-plex units for seniors — is targeted to be completed by the end of 2015, adding to its collection of affordable homes, which comprises Summer Green and Summerville.

Core Tech has ongoing two-year projects for the military, including the $44,533,566 Mamizu North Ramp Utilities and two hangar projects — the Tanker Hangar for $96 million and the fuel hangar for nearly $90 million. CoreTech is contracted along with Amec Foster Wheeler LLC on these projects.

Core Tech plans to slowly develop residential properties previously developed by Younex in Tamuning, Bathan says. “We’re going to build one building, rent it out, study it, and if it works, we’ll proceed with the next building and the next building,” she says.

Core Tech is also maintaining an interest in the NMI. While the company has not completed any projects in the NMI, it maintains a business license. “We’re ready anytime if there is any interesting or sizeable project,” Bathan says.

Opportunities in renewable energy also look promising. Core Tech was subcontracted by the Guam Power Authority in the Sunora project in the Layon area, which includes a component with NRG Solar for $9,676,967 and an electrical component for $2,915,449.

Black Construction Corp. has a list of projects in the government, private and military sectors to keep it busy, including the work related to the Ordot Dump closure and Dero Road sewer improvements from June 2013 to June 2014 totaling $40,536,977; change orders from the Department of Public Works for the Agfayan Bridge replacements from June 2013 to November 2014 totaling $4,658,533, from May 2014 to January 2015 for $74,587, and from June 2015 to December 2016 for $25,791; and change orders from the Layon landfill for $288,122.

Other projects included expansion of Guam’s commercial port facility; Phase I of the Whole House Revitalization, Lockwood Terrace; the repair of the taxi lane parking aprons on Andersen Air Force Base; a cold storage project for Luen Fung; and a loft expansion for Harvest Baptist Church.

The company has ongoing operations throughout the region, including Saipan, the Federated States of Micronesia and the Philippines. Black Construction Corp. is working on the Puerto Rico Dump closure on Saipan.

Outside of projects related to the military, Guam and the NMI are seeing more interest from the private sector, particularly in potential tourism-related construction, Kaae says.

“In the CNMI, the new casino should have a big impact on the construction community in Saipan, and hopefully regional construction companies will be given the opportunity to participate,” Kaae says.

Black Construction is also looking forward to an increase in the private sector market, and sees positive indications to an upswing in spending.

A noticeable trend in the construction industry, Kaae says, is the development of small-business contractors. “In Guam, we continuously see more specialty and small-business contractors entering the market. The expansion of the small-business contracting community will help the larger contractors meet the government-established small-business goals,” Kaae says.

Innovation and versatile combination solutions are the keys to Smithbridge’s success, Radonich says.

Smithbridge offers a wide variety of services and is involved with many projects in the various sectors in the region including the completion of the Apra Harbor dredging of the Sierra Tango and Romeo wharves; infrastructure utility connection for the space fence temporary housing in Kwajalein; and the demolition of more than 200 housing units on Andersen Air Force Base and in NCS.

One of Smithbridge’s recent projects was from the green field’s site, to construct a turn-key fuel terminal facility for IP&E, which included a new fuel terminal built from a green field site to a fully operational facility. The project includes two fuel tanks with a capacity of more than 4.7 million gallons.

The outlook for next year looks good for the company, Radonich says. The company submitted a bid for three demolition projects and hopes to win two and has four projects on Kwajalein to complete.

To assist with the forward work load, Smithbridge Guam has purchased a 275-ton trawler crane, which is scheduled to arrive on Guam in September.

Opportunities in renewable energy seem promising for Smithbridge, whose parent company in Australia has developed many wind turbines in the region.

“The wind turbine projects that are coming here, we definitely are going to be tracing… There are proposals right now, and I think there are five approximately two-megawatt units that are looking to come here. … Power generation will go on the grid and be sold to [Guam Power Authority],” Radonich says.

In the last year, Smithbridge drove 17,500 foundation piles for the 25-megawatt solar farm in Dan Dan, Radonich says. Solar fields are also a future energy possibility, he says, with some large companies considering Guam for projects.

When it comes to being competitive, Smithbridge offers a variety of services made possible through the sharing of resources with its branches in Australia, New Zealand, New Caledonia, Papua New Guinea and Guam. The group has a fleet of more than 330 cranes with lifting capacities over 650 tons and a vast array of specialized equipment.

“The sharing of resources is a valuable thing. Guam is little island in a small market and you can’t get everything here,” Radonich says. The service Smithbridge offers includes pre-cast and pre-stressed concrete through subsidiary Rocky Mountain Precast, heavy equipment rentals, quarry operation that supplies the island’s specialized aggregate requirements, heavy and specialized civil and marine expertise and the mechanical division, which includes coded pipe welding, fuel tank fabrication and boiler work and mechanical installation.

Pernix Guam plans to focus on its specialties in power generation, including building, building and operating, and operating and maintaining. The company will also use Guam as its regional hub for projects in the Pacific and possibly Asia.

Pernix Guam, while it had been in operation for several years, was not in Guam in a big way until the purchase of dck pacific’s assets in June.

“The buildup is, of course, something that we will go after because of our power capabilities. We will be looking at a multi-faceted approach to the business. I suspect we will, on a limited basis, be looking at the Philippines also, possibly Vietnam and other parts of Asia as opportunities arise,” Allen says.

With the purchase of dck pacific’s assets, Pernix acquired three major projects: a joint venture with Environmental Chemical Corp. with operations in Guam, which is currently executing a $53.6 million dollar contract for the Naval Facilities Engineering Command for the design and construction of an aircraft maintenance hangar to provide operational and maintenance facilities for the 1st Marine Aircraft Wing at Andersen Air Force Base in Guam; and a contract with Guam Power Authority to install a wind turbine.

“We are actively pursuing a number of projects right now. […] We expect to be competitive and take the assets purchased with dck pacific and the people that came along with it and do some good work,” he says.

Pernix is building and will maintain a power plant in Fiji and operates and maintains a concession in Vanuatu. In the past, Pernix, as Telesource, built, owned and operated the power plant on Tinian but had sold it to another local company.

“Business on Guam is increasing; I’ve been traveling over the past five years. There was a significant downturn of business I think everyone saw in 2009, 2010 and 2011. […] The buildup didn’t take hold like it was going to happen […] but over the past few years, each trip it became more and more evident that tourism was increasing, the hotel rooms were full and storefronts that had not been open were now open. There is an obvious vibrancy in the current economy from our view, and I think that bodes well for continuing growth. We’ve also seen opportunities start coming in the surrounding region, and we thought it was the right time to expand our footprint here,” Allen says.

Renewable energy is part of the company’s work. In Vanuatu 82% of the power was generated by hydropower, about 10% diesel and the balance in solar.

“We’re interested in solar. We bid solar here and intend to continue to pursue that here. We will pursue the combined cycle combustion turbine plan when that RFP comes out with the Guam Power Authority,” Allen says.

“We’re looking at a wind project in Fiji. We’re looking at a number of different aspects. The company also went after a biomass project OEM in Papua New Guinea. We believe we can operate a number of varieties of energy. It all depends on what’s the most economical and desired by the client,” he says. n

Construction companies are keeping busy with local and federal government projects as well as private sector projects while waiting for the Record of Decision to open the gate to bid on military construction projects. (Left) The Gloria B. Nelson GPA-GWA Public Service Facility, designed by RIM Architects LLC and built by Core Tech International Corp. at a cost of $34 million, opened on Jan. 28. (Right) Micronesia CSL Development LLC, a venture between Calvo Enterprises Inc. and Shangri-La Industries of Los Angeles, was contracted by the U.S. General Services Agency to open a new Immigration and Customs Enforcement/Federal Bureau of Investigation Joint Facility. Opened on Dec. 12 in Tamuning, the $15 million project was designed by RIM Architects LLC and was constructed by Webcor Builders of California with tenant improvements completed by Tutujan Hill Group Ltd.