Tunneling Industry Outlook 2021

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tunnel under construction

Each year, TBM: Tunnel Business Magazine takes a look at the coming year by polling a sampling of tunneling professionals. How is the year ahead shaping up? What are the emerging trends? The respondents represent a cross section of the industry, and this year includes:

Dave Harvanek, DSI TunnelingDave Harvanek, DSI Tunneling

Dave Harvanek is the senior manager at DSI Tunneling LLC. Harvanek’s team at DSI Tunneling design has a proven track record of designing and manufacture support systems for tunneling. Located in Louisville, Kentucky, DSI celebrates 100 years this year. Harvanek is a member of AGC, AREMA, DFI, and Water Environment Federation (WEF). Prior to joining DSI, Harvanek was the General Manager of Howden American Fan (HAF), in Fairfield, Ohio.

Gary Kramer, HatchGary Kramer, Hatch

Gary Kramer, P.E., is Hatch’s Global Practice Director for Tunneling working out of Hatch’s Los Angeles and Toronto offices. Kramer has spent the past 32 years with Hatch working on the design and construction management of large tunneling, transit, water and wastewater projects. In 1999, he was awarded the ASCE John O. Bickel Award for tunneling and the PEO Engineering Medal of Excellence in 2018.

Julian Prada, StantecJulian Prada, Stantec

Julian Prada is a Senior Principal and a Deputy Tunnel Practice Manager in Stantec’s Tunnel and Trenchless Practice based in South Burlington, Vermont. He has an extensive background in the design, management, and construction of tunnels for water, transportation, and utility applications. His experience includes design and construction of tunnels and shafts both in soil and rock, implementing tunnel boring machines, road headers, drill and blast, and sequential excavation methods.

Bob StierBob Stier, Drill Tech Drilling & Shoring

In 2018, Bob Stier joined Drill Tech Drilling & Shoring Inc (DTDS) and brought with him with over 35 years of tunneling and underground experience to oversee Drill Tech’s Maryland Region. Under his guidance Drill Tech procured their largest GC Design-Build Contract for National Parks Service and he is currently managing the project. Stier has overseen various tunneling operations including conventional drill-and-blast tunnels, pressurized face operations, and hard rock tunnel boring machine (TBM) and microtunnel projects.

workers inside a tunnel

What is your view on the current state of the tunneling market in your area? Growing? Stagnant?

HARVANEK – The current state of the DSI tunneling market in the United States, is like most other businesses, in that the market and our business is affected by COVID-19, and by the unknowns of the changes in the federal government. Going forward I have hope that the federal government will finally address the infrastructure in our country.

In 2020 we met our financial objectives but saw a slight decrease in the number of projects that we were involved in. I believe most of this was due to available funding, whether at the federal, state, or local level.

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KRAMER – In the United States, it is arguable that the tunneling market is somewhat stagnant or has slowed over the past few years (last year in particular) due to new opportunities being slow to manifest themselves likely due to election uncertainty, delays in infrastructure funding and COVID.

In Canada, the tunnel market has been a growing, vibrant market with major underground transportation/transit works (extensions and new lines) in all major urban centers – Montreal, Quebec, Ottawa, Toronto, Calgary, Vancouver. This has continued despite the COVID restrictions for work location. Toronto alone has at least five major underground transit projects in planning, design and procurement. We are also seeing a rise in demand for new water supply conveyance infrastructure, including tunnels, driven by urban densification, expanding development, renewal/expansion of existing and certainly essential systems, outfalls, CSOs, reducing environment risk and increasing system reliability and climate change driven resiliency.

PRADA – 2020 was a difficult year for everyone because of the pandemic. In tunneling, it has caused funding delays for some projects. Beyond that, though, I haven’t seen a significant slowdown in the future tunneling market. If short-term budget problems mean some owners keep existing infrastructure in a “state of good repair,” I expect projects long-term to bounce back along with funding as the economy recovers. Some of the critical infrastructure in the United States is old and in disrepair, so even delayed projects will eventually resurface, even if repackaged to address budget and schedule constraints created by the pandemic.

STIER – The past two years we have opened offices in Denver, Kansas City and Baltimore and have seen new opportunities for both Drill Tech Mining & Tunneling and Drill Tech Drilling & Shoring. Our mining and tunnel division has been able to acquire new contracts for tunnel construction and new contracts supporting the mining industry. Our Drilling & Shoring division has also acquired new contracts supporting tunnel contractors installing support of excavation, performing contract drilling and grouting.

Consequently, for Drill Tech we are seeing market growth across the United States.

Dr. Sauer

How has the pandemic impacted your business? The market at large? What are the potential near- and long-term implications?

HARVANEK – We operate as an essential business and therefore continued all operations through 2020, but we have had a few employees and their families affected by COVID-19. 2020 has driven home the need for cross training on our critical processes and equipment. I believe this is a lesson that many in the industry have experienced. Safety has always been a cornerstone here at DSI. Our investment on training in 2020 was significant. The pandemic has caused all of us involved in tunneling to add emphasis to our air quality and surface cleanliness programs.

Near term, most of us have gone back and reevaluated past job safety analyses (JSAs) with the added aspect of germs. This is an additional cost but in the long term it will increase safety. Updating JSAs also turned up a few more items that had not been identified in the past. Again, a good thing long term.

KRAMER – The pandemic has certainly impacted how we do business. We have been able to successfully transition to a “work from home” model relying upon Teams, ProjectWise and other software. We have also been implementing a platooning “return to office” approach. Despite this, I do think that the current situation is not sustainable due to challenges associated with the onboarding of new staff and projects that good old in-person interaction and interactive mentoring address. In terms of the market at large, we have seen slower progress in the United States and surprisingly less impact in Canada. In some cases, projects have been accelerated in Canada to take advantage of hoped for stimulus funding plans.

PRADA – Luckily, Stantec established a Pandemic Committee over 10 years ago, positioning the company to be better prepared in case something like this happened. As a result, we were ready from the outset to monitor the business through local gateways and remote licenses. In addition to protecting our business, that enables us to promote and sustain our safety culture across our projects.

For our employees, and the industry at large, the pandemic has accelerated the shift toward remote work. Although the technology has existed for years, and many engineers were already working remotely, the need for social distancing has made the practice commonplace. Despite the restrictions, we can still work efficiently and conference with partners to keep projects and other activities, like design workshops or procurement interviews, moving forward.

There are some downsides, of course. One is the lack of in-person contact when it comes to mentoring and helping graduate engineers learn the ropes of the industry. As useful as technology may be, it can’t fully replace the experience of personal interaction. Fortunately, this is a short-term problem that will disappear once the pandemic passes.

STIER – Drill Tech Mining & Tunneling did not experience an impact from the pandemic. Our crews remained working on critical infrastructure projects and the mining industry did not slow down either. The Drilling & Shoring work was impacted only on the private sector work for new building construction. We transitioned most crews from the impacted work to the non-impacted work.

For the market at large we are still seeing private building construction new starts slowing down, however the overall market at large continues to be strong. Consequently, near term implications have been minimal. As for long term implications we are cautiously optimistic understanding that some states will have large deficits which may cause them to reduce spending on infrastructure. However, we see other states with a growing population that will require new and expanding infrastructure needs.

What specific steps has the tunneling industry taken to deal with the pandemic in terms of design? Construction practices? Planning?

KRAMER – For design consultants, many owners have engaged their consultants to study and plan more robustly with longer engagement with their design teams – priorities have been readjusted – reprioritization of projects to take advantage of COVID-related conditions (reduced road traffic, transit ridership, etc.) that create opportunities for project advancement with less disruption and impact. Supply chain problems have occurred for contractors, designers not as much. This may be a result of consultants’ ability to work remotely. Many government agencies have mandated that many of their projects are essential work and hence construction work has continued albeit with COVID/PPE requirements forcing adjustments to construction site work practices. I can say this, I don’t think that I have seen the term “Force Majeure” used as often as I have in the past nine months.

The long-term impacts of COVID are difficult to predict. Will increased “work from home” (WFH) and reduced transit ridership and traffic to urban cores reduce the demand for underground solutions or shift infrastructure priorities? Personally, I think there will be an increase in the flexibility, on the part of employers, to accommodate WFH but eventually a “return to office” (perhaps smaller offices) will occur. I do think air travel for business will decrease in the longer term. This may impact airport connections and people mover work.

PRADA – From a design perspective, designers and owners had to learn how to keep projects within budget and on schedule even while working remotely. Procurement phase efforts required flexibility from all involved so that meetings and presentations stayed on schedule and remained productive even with occasional technology glitches or bad Internet connections. While the technology, again, can’t replace face-to-face interaction, it has worked suitably well given the circumstances.

From the construction side, the industry has adapted and overcome. Masks and as much distancing as possible and practical are enforced, both underground and on the surface. There are also measures to limit contact among crews between shifts. If exposure to the virus is suspected at any time, workers are sent home and kept from returning until they have a negative COVID test. We should also give due credit to all the hard work of the miners, who make tunnel construction real, especially in these difficult times.
Every tunnel project is different. And despite delays with some, other projects move forward without incident.

STIER – Most new contracts have COVID-19 specific requirements and we have seen owners and designers add bid items specifically for COVID-19 requirements to construct the work. Whether contracts have COVID-19 requirements or not, our most important role is to keep our workforce safe and healthy. Since our work continued at the start and through the pandemic, Drill Tech implemented health screenings prior to the start of each shift. If any employee showed signs of any illness, they were asked to see a doctor and quarantine until a negative COIVD-19 test could be produced. We have recently obtained instant COVID-19 test kits and can administer the tests on site so that we can be more proactive with the health of our employees.

Stantec

What are your thoughts on how a new administration and new congress may impact the tunneling market? Is infrastructure investment likely to change?

HARVANEK – I assume that the capital-expenditure plans from the federal government will put a little less burden on states and municipalities, but I don’t think the change will be significant. I would be very surprised if water projects did not receive more funding. Most likely, the EPA will gain strength with the new administration, in driving states and municipalities to address water system issues in the country.

As a nation I am not sure we can continue to underfund rail infrastructure, especially on the East Coast. The United States ranks 22nd in the world in length of high-speed rail lines. An increase in investment in rail infrastructure would be good for the tunneling market.

We do not have much exposure to airport construction which is good. With the decrease in ridership, there is the potential to reallocate airport infrastructure spending to other areas.

KRAMER – At Hatch, we are optimistic that stimulus spending discussions will be supported and adopted by the new administration and with an increased focus on transportation. This has to bode well for the tunneling market. In terms of water and wastewater, we feel that there will likely be renewed emphasis in addressing climate change as its related CSOs and storm resiliency, re-purposing of quarries for raw water storage which are areas that tunneling can address. With regards to pipelines work, we feel that it will likely continue to be up and down due fossil fuel market trends, climate change and environmental considerations.

PRADA – I am optimistic that the new administration will fund future infrastructure projects. Although bipartisan cooperation and compromises are always necessary for that to happen, our elected officials know that we need bills and funding to improve transportation, water, wastewater, utilities, and other infrastructure. Aside from fixing bottlenecks and other problems with existing infrastructure, these projects are essential for economic growth – both in terms of the business they represent for the parties involved in their design, construction, and maintenance, but also for the people, businesses, and owners who will benefit from them once completed.

STIER – The new administration has indicated that infrastructure investment will be a priority. However, with most federal government infrastructure spending politicians want to show their constituents what they have spent money on. Unless the new tunnel is for mass transit or highway it will not be seen and consequently the much-needed federal spending for water infrastructure may not happen.

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What changes are you seeing in the market? New technologies? Contract deliveries? Design or planning strategies? (BART extension large-bore, East Coast maglev, Las Vegas electric autonomous vehicles, Hyperloop come to mind as “non-traditional” projects being developed.)

KRAMER – The industry is seeing a need for ever larger tunnel diameters primarily for transit systems but also raw water supply systems and hydropower applications. Transit stations with platforms built into such tunnels can eliminate the impacts associated with in-street cut-and-cover structures. We at Hatch have been involved and advocating this technology strongly for some time and are optimistic that large bore TBMs will become more state-of-the-practice (and not just state-of-the-art). The “mega-bore” fears will subside as the feasibility and effectiveness of large bores are confirmed.

There has been a definite movement toward the use of Design Build (DB), Public-Private-Partnerships (P3) and other alternatives to traditional Design-Bid-Build (DBB) delivery methods. This has changed the traditional engineer-owner relationship significantly. Very often, the client is now a contractor and that can change the focus of the design effort. Marketing efforts now relate to multiple stages of a project thereby increasing that overhead cost. I often wonder about changes to the role of the owner’s engineer and a potential for a lack of opportunities for young engineers to get the requisite suite of experience in order to provide owners with robust buildable designs and concepts.

Insofar as hyperloop and maglev technologies are concerned, the question of will they be underground or above ground is still not established. Likely there will be a combination of both. In the context of their commercial viability in the context of air travel or traditional passenger rail, I think the jury is still out but they are intriguing.

PRADA – It is exciting to see projects like maglev being considered in the northeast, where a growing population needs new, efficient, and environmentally sound methods of transportation. Having worked throughout the Northeast myself for most of my career, I personally can attest to the desperate need for less traffic congestion, reduced travel times, lower emissions, and other improvements.

In addition to logistical and environmental benefits, better transportation infrastructure is necessary in competitive terms. Many European and Asian countries long ago built successful high-speed transportation networks and enjoy significant infrastructure and economic advantages as a result. The United States should follow suit. Tunnels can provide the real estate necessary to make it happen. Projects once considered unviable are now possible because of improvements in tunneling methods, equipment, and technology.

STIER – What we are seeing in the news is Elon Musk indicating he is revolutionizing the tunneling industry. If Elon can achieve more expeditious tunnel excavation methods in a safe manner, I do not think the industry will turn their back on such technology. So, while Elon is pushing for smaller tunnels for electric cars, we are seeing projects such as the BART extension in San Jose going to large diameter single bore tunnel for mass transit. At the end of say hopefully both technologies will help our industry grow.
Over the past 10 years or so we have seen the completion of tunnel projects in the United States delivered via P3 design-build in Miami, Florida, and Louisville, Kentucky, and Norfolk, Virginia. New P3 tunnel projects are being constructed in Virginia. It is good to see private investors wanting to engage in P3 projects that include tunnel construction.

I am genuinely concerned about the Gateway Tunnel and the East Coast maglev projects. We have seen many people leaving New York City because they cannot find work in the city anymore. Forbes published an article in December 2020 with the headline “Wall Street Banks and Tech Companies Are Fleeing New York.” Both Bloomberg and the New York Post wrote articles in July and September 2020, respectively, that indicated Wall Street could leave New York City. If the population of New York declines, there may not be a need for such infrastructure improvements.

What do you see as the biggest drivers for the tunneling market in the near term? What are the biggest threats? Lack of funding is always a threat to the market.

HARVANEK – The biggest driver is the need to reduce the number of people in close proximity to each other. I believe contractors will be evaluating automation much closer. Again, I think in the near term we need to focus on cross training our work forces in order to continue safe operations during times of high absenteeism.

The biggest threat hasn’t changed in that as a nation we have a problem in funding infrastructure. I think too many people take it for granted and don’t understand that our infrastructure has a defined lifespan, and that we continue to use systems that are past their lifespan.

KRAMER – The need to address climate change will definitely increase the call for underground alternatives that can reduce dependency on fossil fuels and emissions and address climate change impacts. The implementation of new works for social needs is unchanged as a driver for underground construction but funding needs to be there.

The sensitivities to the disruptive impacts of construction are always increasing and underground work is by far and away the least disruptive form of construction particularly in urban areas.
Potential threats to the tunneling market could be government deficits due to emergency spending and reduced traffic and transit ridership. I do think that such trends, if they manifest themselves, would be short term.

PRADA – Aside from funding, the biggest driver for the tunneling market is the poor state of existing infrastructure. Most people in this industry know that, per ASCE’s grading, our infrastructure is in a state of crisis. Significant investment is required and should be a priority. New tunnel systems are needed across the board – from new transportation networks to water conveyance to wastewater treatment and disposal to utilities. New and better tunnels can also help us address many of our existing environmental challenges, including climate change.

As for threats, we need more engineers. There continues to be a lack of students in engineering. Many young people are unsure of career opportunities for engineers and they worry about low salaries. Also, many skilled students who do study engineering are then poached by analytical firms and the financial sector, where their skills are often rewarded with higher salaries. The UCA is doing a good job recruiting university students, but we should find ways to attract and retain more talent overall.

STIER – The biggest drivers in the tunneling market are still clean water and mass transit, while the biggest threat is funding. As a nation we must continue to make sure we fund areas that require clean water. The local governments will make sure the clean water infrastructure needs are met, however they may need assistance from the federal government since the local revenues have declined during the COVID-19 pandemic.

We will need federal funding for mass transit infrastructure work also. However, as a nation we must be smart about these investments to ensure the funding is spent in areas of growth that will be able to pay off the investment.

Concluding thoughts.

HARVANEK – It is not over yet, but we have managed our businesses through an unprecedented time. In the past we were often spending a significant portion of our time managing costs related to materials and equipment. We still focus on material and equipment but there is an added focus on personnel. We must focus on cross training our existing personnel. As an industry there must be an even greater effort on bringing a younger generation into tunneling. This is a fulfilling industry to be part of. We need to attract, motivate, train, and then cross train a younger generation in our industry.

KRAMER – In conclusion, our industry brings good solutions to social needs, so I think that the tunneling industry will only continue to increase in significance and grow. There will always be up and down trends, but the over-all trend will be up.

PRADA – Despite the pandemic, ongoing budget problems, and a continued lack of young tunnel engineers, I remain optimistic for the tunneling market. Tunnel projects remain essential for our infrastructure and are vital enablers of economic growth. Elected officials should provide the funding needed to design and build the infrastructure our country and economy needs. Meanwhile, we as an industry should find ways to attract more young engineering talent into tunneling.

STIER – While we strive to improve tunnel advance rates and build larger more powerful tunnel machines, we must also strive to improve worker and public safety and maintain the owner’s quality requirements. Our industry’s reputation is not measured by how quickly we excavate the tunnels rather by the useful life span of the tunnels. If we construct tunnels that last for over 100 years our industry will be remembered for utilizing our resources for a positive impact in our lifetime and future generations.

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