Military construction may drain local labor

By Dan Nakaso
Advertiser Staff Writer

The labor needed to build and renovate 7,700 Army, Navy, Air Force and Marine housing units on O'ahu in the next several years could drain workers from the island's expanding construction industry, the head of the company selected for the $1.7 billion project said yesterday.

O'ahu's construction boom of the past two to three years has been one of the forces pushing Hawai'i's economic recovery, but the industry may see a defection of construction workers to the military projects, said Peter Koziol, CEO of Napa, Calif.-based Actus Lend Lease LLC.

For an Army housing project the company built at Fort Hood, Texas, "we came in and used so many local laborers that the building community, the home builders, said, 'You're using up all of our laborers,' " Koziol said. "You're paying them very good wages, so it actually goes the other way, where the community says, 'Don't use up all of our laborers because you're paying them so well and detracting from our other labor.' "

Koziol came to Honolulu for today's signing ceremony marking a 50-year agreement between Actus Lend Lease and the Army — the first of three massive projects to overhaul military housing on O'ahu. Actus Lend Lease remains in the running for both the Navy and Air Force projects.

For its three other so-called "privatized" military housing projects on the Mainland, Actus Lend Lease hired about 86 percent of its workforce from local and small businesses, Koziol said. But he expects the number to be around 90 percent for the O'ahu Army project.

"For us to import labor here would be very, very expensive," Koziol said.

His comments meant good news to Hawai'i small businesses and workers, who have worried for months that Mainland construction crews would take jobs they want to fill.

But economist Leroy Laney said it was unclear what effect a shift in the construction workforce from civilian to military housing projects would have on Hawai'i's economy.

In the past few years, the construction industry has been driven by pent-up housing demand suddenly let loose by low interest rates, Laney said. And with interest rates creeping up this summer, the military projects could begin just as civilian construction slows down.

"Construction, especially in Hawai'i, is a cyclical, volatile industry," Laney said. "You can't predict construction out over time to any degree of accuracy."

Karen Nakamura, executive vice president of the Building Industry Association-Hawai'i, has no doubt civilian construction projects will lose laborers to the military ones.

Hawai'i has 26,700 construction workers, about 4.7 percent of the population, she said. Nationally, construction workers make up 8.6 percent of the population.

So Hawai'i will need to train workers in a hurry to fill the sudden demand, Nakamura said.

"Yes, there is going to be a shortage," she said. "There is going to be a huge deficit. We estimate that there are going to be about 40,000 jobs that will be available in the sector, almost double what we have currently."

Gov. Linda Lingle met with Koziol Thursday and noted his point "about drying up the labor pool," she said yesterday.

"We'll see if that happens. If it happens, it happens. But let's hire the people that are here, and secondly let's train up and get people up to speed, as many as we can, so they don't have to hire from outside," Lingle said.

Administration officials have been talking about the need for more vocational training to meet the privatized military construction demand, possibly through Honolulu Community College, Lingle said.

The administration likely will introduce legislation "to address this issue," she said. "People are making the point that jobs are going to be created, but there's a need for more vocational training in construction."

Lingle said she wasn't worried that a shift in construction work would slow the economy.

But she is concerned that a shortage of workers will allow other developers to charge premium rates for government construction, as they did when Lingle was Maui's mayor.

While several large hotel projects were under way on Maui in the 1980s, Lingle said, county officials needed their own projects built.

"Contractors said, 'I don't want to do it because I have all of this other work. So I'll charge you double for this fire station,' " Lingle said. "We were getting bids that were ridiculously high. ... When the private sector is doing well, we'll tend to stick with the high-priority projects."

Lingle characterized her discussion with Koziol as "a very candid meeting."

"I take them at their word for saying they will hire local people," she said. "It's not your word, but your actions that matter most."

Reach Dan Nakaso at dnakaso@honoluluadvertiser.com or 525-8085.