Representatives of the state’s construction industry are criticizing standards being imposed on subcontractors for the Facebook data center project in Los Lunas, with one leading organization saying it is “shocked and dismayed” by requirements it says will disqualify most New Mexico companies.
At a meeting last week for potential subcontractors and vendors, Fortis Construction, the data center’s Portland, Ore.-based general contractor, said it would hold businesses that subcontract with it directly to a “high standard.” In addition to an excellent safety record and experience working on large projects, primary subcontractors will need to have no more than 20 percent of their annual revenue committed to the data center project.
The first phase of the project is expected to take two years to complete and cost $250 million. Over seven years and multiple phases, the data center is expected to generate up to 500 construction jobs.
Roxanne Rivera-Wiest, president of the industry group Associated Builders and Contractors of New Mexico, said in a letter to the Journal that she was “shocked and dismayed” by the conditions, and during an interview estimated that only 10 to 15 percent of New Mexico contractors would be eligible to bid on primary subcontractor packages under Fortis’ guidelines.
“New Mexico contractors, quite frankly, have been struggling,” Rivera-Wiest said. “To me, it seems unfair that their ability to work on the project would be compromised because they don’t have enough of a backlog (to allow them to meet the 20 percent revenue requirement).”
The post-recession recovery of the state’s construction industry has lagged behind much of the country. In October, New Mexico’s construction unemployment rate was 8.6 percent, the second-worst in the nation, after Alaska’s 10.1 percent.
Fortis spokesman Shane Kucera referred the Journal to the company’s website, which says that subcontractors who don’t meet Fortis’ requirements might still have the opportunity to participate by partnering with organizations that do and becoming sub-tier subcontractors.
And on Tuesday, Fortis issued a statement saying it is flexible on the 20 percent requirement and that it is committed to hiring locally.
Rivera-Wiest said Monday that she was concerned Fortis will simply turn to out-of-state businesses if they can’t find the necessary contractors in New Mexico.
Downey & Co.’s Chris Downey, who specializes in contract bonds and insurance for commercial contractors, called the 20 percent requirement “preposterous.”
“Surety bonds are a complicated process, but we only talk about (annual revenue) when a project would comprise 100 percent or more, because then the question is, can the contractor really handle this?” Downey said. “We have so many bondable, qualified, and highly technical contractors here. Imposing a 20 percent requirement is simply elitist.”
Rivera-Wiest said that even if the data center project does employ a significant number of sub-tier subcontractors, the issue goes far beyond the Facebook data center.
To incentivize the social media giant to choose New Mexico for its new data center, Facebook was offered $10 million in Local Economic Development Act funding in addition to a gross-receipts tax reimbursement of up to $1.6 million annually and $30 billion in industrial revenue bonds that act as a property tax break. Rivera-Wiest said she would like to see legislation that creates guidelines for construction projects that receive LEDA money – including guarantees that only New Mexico contractors will be used.
Currently, LEDA legislation does not contain such a provision.
“I’m sure our taxpayers would like to see that, as well,” she said. “Many of them are contractors themselves.”