1. CONSTRUCTION COST TRENDS Central Texas Conference – November 12, 2010

2. Construction Cost Trends 1. Where have we been? National Economy Central Texas Economy 2. Current Conditions 3. What Lies Ahead

3. Where have we been? National Slowdown began in 2007 Recession Began in 2008 Deeper and longer duration than any recession in the past 40 years Recession technically ended in early 2010

4. National Economy Chicago Federal Reserve – National Activity Index

5. Economic Factors High Unemployment Stimulus Package High Federal, State and Personal Debt Unstable Financial Markets Tightened Lending Foreclosures Higher Taxes? Uncertainty of Federal Government Policies Reduced Consumer Spending

6. Official US Bureau of Labor Reported Rate Official Rate + Short Term Discouraged Workers Official Rate + Short and Long Term Discouraged Workers Unemployment

7. Construction Spending Trends Source: Census Bureau construction spending reports $ in Billions

8. Stimulus Package $787 Billion

9. Stimulus Package

10. High Debt

11. What Lies Ahead

12. Central Texas Recession started 1 year later than nation Depth and Length will be shorter Forbes: Austin and Washington DC tied for top spot surviving the recession 1.7m population – up 6.9% What Texas didnt have - Housing Bubble / Bust Samsung will soon represent $9B foreign investment – largest in Texas history Central Texas School Bond Activity

13. Business Cycle

14. Commodity and Material Inventory Short Term Inventories Drying up Demand Low Dollar Value low in relation to foreign currency

15. Predictors of construction demand Architecture Billings Indexes (50=balance bet. higher and lower billings) Source: American Institute of Architects (billings), BLS (employment)

16. Lack of Confidence in US Government Policies Additional Federal Spending ? Tax / Policy Changes? Slowing Growth in China Currently a very high 9% – not a sustainable rate long term Rapid drop would affect US exports and manufacturing Instability of States Financial Situation Unfunded mandates (pensions, benefits, etc.) Will affect personal spending European Debt Crisis Austerity Programs have cut spending dramatically Bond defaults could trigger interest rate increases Source: Jim Haughey, Reed Construction Data Chief Economist Risks to Recovery in 2011-2012

17. Caution Ahead High Risk Environment Under pricing Work Hoping for turnaround GC and Subcontractor Failures Likely higher in 2011 Default Claims Profitable Backlog has been worked off Close doors and wait it out? Double Dip Recession??

18. ENR National Building Cost Index

19. When will costs begin to rise again – how much? AGC Materials costs: +3% to +8% Labor costs: +2.5% or less Reed Commodities +5% to 6% ABC Total Costs +3% to 6% Contingency Needed

20. Sources Anirban Basu, ABC Chief Economist Ken Simonson, AGC Chief Economist Jim Haughey, RCD Chief Economist www.abc.org www.agc.org www.reedconstructiondata.com

21. CONSTRUCTION COST TRENDS Central Texas North Conference – November 12, 2010 Presented by: Jimmy Disler, Executive Director of Capital Improvements, Leander ISD Jimmy.Disler@leanderisd.org Randy Baldwin, Assistant Director of Construction Management, Austin ISD RBaldwin@austinisd.org Marty Burger, American Constructors MBurger@acitexas.com Grant Hutton, American Constructors GHutton@acitexas.com