Karen Price hasn't seen a market like this since the late 1980s."I don't know how long it's going to last, but I'm going to enjoy it while it's here," said Price, the president of Walnut, Calif.-based Morrow-Meadows Corp.
Morrow-Meadows won a $30 million electrical contract for the Disney California Adventure theme park, sparking a $5 million increase in sales for 1999.
With more major projects on the horizon in 2000, Price expects sales to hop from $137 million in 1999 to $145 million for this fiscal year.
"I am very optimistic for the next two years," Price said. "After that, I refuse to predict. My crystal ball is rusty."
The 50 largest U.S. electrical contractors witnessed a year of rampant consolidation, a competitive marketplace and more work than anyone could handle.
"The active economy and high rate of employment is keeping everyone busy," said John Sargent, president of Pittsburgh, Pa.-based Sargent Electric, which pulled in $96.5 million for 1999.
The strong construction economy in St. Louis increased Sachs Electric's revenues by $16 million. Larry Plunkett, president, said he also forecasts a solid year in 2000 due to the completion of major, long-term projects, such as the Federal Courthouse in downtown St. Louis and new contracts for the Mastercard data center and the launchpad at Cape Canaveral.
"We're in a strong industry and we're very pleased to be in business right now," Plunkett said. "It's a good time to be an electrical contractor."
Contractors from coast to coast are enjoying growth and prosperity. If only the contractors could find enough skilled labor to staff all the projects.
"Labor is always an issue," said Jim Wise, vice chairman of the board for Integrated Electrical Services of Houston, a $1.3 billion consolidator. "If we had more men, we could do a lot more work. I think labor is uniformly an issue for everyone."
Sargent agreed that the lack of manpower was the most daunting challenge facing contractors.
"For our wireless group, people are saying that they'll give us the jobs if we have the ability to staff them," Sargent said. "We're limited by the ability to find outside electricians as well as inside electricians. Usually you're sales-bound not human resources-bound. It's a different kind of problem for the industry overall."
Finding project managers and field leaders, let alone electricians, has been a challenge for many contractors, said Samuel Angelich, president of Amelco Corp., Gardenia, Calif.
"We have vice presidents and presidents of our operations, and we easily get them from within, but getting good project managers is always difficult on our some large jobs."
Kenneth Aldridge, president of Aldridge Electric, Libertyville, Ill., said he sees the labor shortage only intensifying over the next five years.
"If you look at the industry averages, you see that over the next 10 years, there will be a 100,000 man shortage each year. So over 10 years you're looking at a million man shortage on skilled crafts. People are just not going into our industry. That's our biggest challenge."
With the labor shortage intensifying, contractors need to rethink their training programs and promote the advantages of going into the electrical industry, said Plunkett of Sachs Electric.
"To solve the manpower shortage, I think we're going to have to come up with some innovative ways to train people in a shorter time than has traditionally been the case," Plunkett said. "We're going to have to make our industry more appealing to people entering the workforce. We've done a very poor job of publicizing the positive aspects of construction."
The largest electrical contractors not only were challenged by a tight labor market, but they also felt the indirect or direct effects of industry consolidation. Large contractors, with annual revenues nearing $100 million, as well as small and medium-sized contractors, were acquired by consolidators such as GroupMAC and Building One (which merged and are now called Encompass Services Corp., Houston), Quanta Services and Bracknell Corp., Toronto, Ontario.
Consolidation will continue to shape the industry, said Jim Hewatt, chairman of Inglett and Stubbs, Atlanta.
"There's going to be a lot more consolidation going on," Hewatt said. Commonwealth Electric of Lincoln, Neb., has already experienced the effects of consolidation.
"Consolidators for one reason or another are aggressively bidding the work for what we think is at cost to get into the market," said Glenn Moss, chief financial officer for Commonwealth Electric.
The contractors who aren't part of the consolidation may feel increased competition from the bigger players in the marketplace. Meanwhile, contractors who are bought by consolidators will benefit from an economy of scale.
"They get the know-how of 85 companies," said Wise of IES. "They get exposed to prefab work that's state-of- the-art, their employees have better benefit plans, they give up personal liability, get better insurance rates and have opportunities to participate in national account work."
Three of the contractors on the CEE News' Top 50 list of electrical contractors, Continental Electrical Construction Co., Skokie, Ill.; Nationwide Electric Inc., Minneapolis, Minn. and Inglett and Stubbs, Houston, were acquired by consolidators, mirroring the trend in the industry.
Encompass acquired Continental Electric, a Chicago-based company with 1999 revenues of $82.5 million. Vice President Steven Witz said he's the fourth generation to work for Continental, which has been in business for 87 years.
"We were one of the first in Chicago to go ahead and go with a public company," said Steven Witz, vice president. "They have not brought in management and are leaving us to do what we've always done. It's been fairly invisible for us."
Encompass has been able to get Continental some national accounts, Witz said.
"We were strictly a Chicago company, and now we're seeing some contacts outside of the state," Witz said.
Another consolidator, Bracknell Corp., acquired Inglett and Stubbs of Mableton, Ga. Like Continental, Inglett and Stubbs still has the same management, Hewatt said.
"We're still operating as Inglett and Stubbs and they expect that to continue," he said. "The management here will still be the management."
Integrated Electrical Services, a consolidator that topped the CEE News list as the third largest contractor, grew by leaps and bounds due to 39 acquisitions in 1999. Wise expects IES to grow by 10% in 2000 due to internal growth.
"I doubt we'll do nearly as many acquisitions," Wise said. "I would say half a dozen to 10 for the entire year. We have built the critical mass that we feel we need. We're in the next phase, which is focused on operations and continuous improvement."
IES plans to acquire more datacom companies in 2000. The company currently has a voice/data/video division with six stand-alone companies. Wise estimated that IES has about $200 million in its datacom division.
"It has a much faster growth rate than the regular electrical contracting industry and we like that a lot. If we're going to serve our customers properly, then we need to be large in that business."
Growth of new market segments
New markets, such as datacom and data centers, swung open the door of opportunity for electrical contractors. "This is a very good time to be in the electrical business," said Plunkett of Sachs Electric. "We have a strong economy for traditional building, and we've got the growth markets of the teledata, high tech and providing services to the deregulated utilities. Not only do we have strong traditional markets, but we have new markets out there that we never had before."
Hewatt said over the last few decades, Inglett and Stubbs has been in everything from sports facilities to hospitals.
"We've been in a lot of different markets in the last 30, 40 years that I can remember," Hewatt said. "We're not in those markets that we were in 30 years ago. We are in very few of the markets that we were in 20 years ago other than hospitals. You wonder what the next thing is going to be."
Inglett and Stubbs has won contracts for almost all of the major sports facilities in Atlanta, including the Georgia Dome, Hawks Arena and Turner Stadium.
"We were heavily in sports, but there's no more to do here in Atlanta," Hewatt said. "Data centers are now our biggest volume." Hewatt said his company finished a data center for America Online, E-Trade and Global in 1999.
"Most of our data centers are huge jobs with a lot of standby power," he added.
Data centers became the major part of Inglett and Stubbs' business in 1999, but Hewatt doesn't know what's in store for the future.
"How long are data centers going to last?" Hewatt said. " I don't know. You may get the computers to where they don't need backup power eventually."
In California, data centers, also called "Internet hotels" are popping up as a new market. Morrow-Meadows, a company about 30 miles east of Los Angeles, has worked on several Internet hotels. Price, the company's president, said companies buy existing buildings, gut them and put in all new electrical systems, raised computer floor, triple redundant power, generators, battery backups and UPS systems.
"They fill it up full of network servers," Price said. "In some cases, they lease space out to smaller Internet Service Providers (ISPs) who maybe can't afford to build their own building. So someone else will build it and they'll lease 10 sq. ft. for their server."
While Internet hotels are hot in California, the datacom market is thriving in Chicago. Aldridge Electric, based in Libertyville, Ill, specializes in the outside portion of the telecom business.
"We bury fiber-optic, install fiber, splice and build switchrooms," Aldridge said. "We also locate and protect fiber-optic cables once they are in the ground for clients. We do mapping as well. That's fairly unique. A lot of people aren't doing that."
Along with datacom and Internet projects, some companies are also profiting from the increase in activity in the power plant industry as well as other segments.
"There's definitely an increase of activity in the wireless communications industry," Sargent Electric's John Sargent said. "Merchant power plants are going to be another strong revenue producer for us in 2000. Also, we're working on the new NFL Stadium for Pittsburgh. The sports arenas have been in over the last several years and they finally come here and we're able to capitalize on that."
Sargent Electric won the electrical bid for the new Steeler Stadium as a joint-venture project with ERMCO Inc. of Indianapolis.
"We're very up on joint ventures, unlike most contractors, especially some of the bigger ones," he said.
Sargent Electric is part owner of a franchising company called TED Corp. and belongs to Federated Electrical Contractors, a peer group of about 35 companies that get together, share ideas and do joint-venture project work.
"We have the resources to network with other large or medium-sized contractors across the country by participating in peer groups and exchanging ideas," Sargent said.
Sargent Electric, like many other large U.S. electrical contractors, is heavily involved in design-build work. The company acquired a 50% ownership in a local design-build contractor and has hired some additional engineers and employees from the general construction industry.
Morrow-Meadows' Price described the trend of increased design-build partnering as "one of the lights of my life." Other contractors, such as Inglett and Stubbs, couldn't agree more.
"We've had some real good experiences in that respect with owners and we've retained them as customers," Hewatt said. "I think design-build partnering is going to be hugely important to people."
Sachs Electric has been heavily involved in design-build projects throughout the St. Louis area, such as the St. Louis Union Station, Harrah's Casino and several health facilities such as the medical office building for the Missouri Baptist Hospital.
"We take the architect's concept and the owner's plan for the usage of the building and then develop the electrical system to support that," Plunkett said.
Along with individual contractors, the top consolidators, such as Integrated Electrical Services, are also turning to design-build to increase productivity.
"I think it's a critical part of our industry and is growing by the day," said Wise of IES. "We think that's the best way to serve our customers. The earlier we get involved in a project, the more money we can save our customers both in terms of the design and the timing of the project."
The electrical contracting field has enjoyed prosperity and endured challenges in 1999. Despite the labor shortage, contractors' annual revenues moved up the scale and new markets opened up before their eyes. Witz of Continental Electric said 1999 was a good year for electrical construction.
"It's still fun to go to work and still exciting," Witz said. "There's a lot of new things happening in the industry. We're right on the forefront of all that. It's still an interesting business. "With a strong market in Chicago, Witz is forecasting a healthy sales revenue for 2000.
"Our revenues increased pretty substantially going into 1999," Witz said. "We're having a just phenomenal first half in Chicago and I don't see it slowing down."
Being one of the 50 largest electrical contractors in the United States gave Continental an edge in the marketplace, Witz said.
"There's a need for contractors like us who have the horses and are able to keep up with these fast-paced schedules," Witz said.
Becoming one of the largest electrical contractors takes years of hard work, Witz said.
"It doesn't happen overnight," Witz said. "People rely on us and trust us so we get a lot of repeat business and referrals. We stay out of the hard bid, competitive situations and try to negotiate as much work as possible. I think it's exciting to be one of the top 50 electricals in the nation."
1 EMCOR Group Norwalk, Conn. 2,893,962,000 103% Sarah Barnes
2 Building One Services Corp. (*) Dulles, Va. 1,400,000 NA Joseph Ivey
3 Integrated Electrical Services Inc. Houston, Texas 1,300,000,000 1.8% Jim P. Wise
4 Quanta Services Inc. Houston, Texas $925,654,000 108% John R. Colson
5 MYR Group Inc. Rolling Meadows, Ill. NA NA Charles M. Brennan III
6 SASCO Group Cerritos, Calif. NA NA David Praklet
7 Mass. Electric Construction Co. Boston, Mass. 313,816,000 19.7% Francis G. Angino
8 Rosendin Electrical Inc. San Jose, Calif. 240,000,000 15.3% Raymond J. Rosendin
9 Cupertino Electric Inc. Sunnyvale, Calif. NA NA James Ryley
10 Fisk Electric Co. Houston, Texas 212,000,000 11% Larry C. Brookshire
11 Nationwide Electric Inc. (**) Minneapolis, Minn. NA NA Frederick C. Green IV
12 Motor City Electric Co. Detroit, Mich. NA NA Dale M. Wieczorek
13 Helix Electric Inc. San Diego, Calif. 164,000,000 18.8% Gary Shekhter
14 M.J. Electric Inc. Iron Mountain, Mich. 156,300,000 41.3% David J. Brule
15 Bergelectric Corp. Los Angeles, Calif. 150,000,000 1% Robert W. Drinkward
16 Inglett & Stubbs, Inc. (**) Mableton, Ga. 137,377,000 41% Jimmy Hewatt
17 Morrow-Meadows Corp. Walnut, Calif. 137,023,000 39.6% Karen V. Price
18 Sachs Electric Co. St. Louis, Mo. 135,000,000 12.9% Larry N. Plunkett
19 The Newtron Group Inc. Baton Rouge. La. NA NA Newton B. Thomas
20 Amelco Corp. Gardenia, Calif. 130,000,000 9% Samuel M. Angelich
21 Constar International Inc. Norwood, Mass. 125,000,000 11.8% Eli Florence
22 Red Simpson, Inc. Alexandria, La. 128,000,000 24.6% John C. Simpson
23 Guarantee Electrical Co. St Louis, Mo. 108,000,000 16% Richard L. Ledbetter
24 Aldridge Electric Inc. Libertyville, Ill. 105,000,000 47.8% Kenneth W. Aldridge
25 Sargent Electric Co. Pittsburgh, Pa. 96,500,000 -3.4% John D. Sargent
26 Oregon Electric Group Portland, Ore. 90,000,000 28.6% Glenn W. Patterson
27 Petrocelli Electric Co. Inc. Long Island City, N.Y. NA NA Santo Petrocelli
28 Capital Electric Construction Co. Inc. Leavenworth, Kan. 86,770,000 27.8% Robert E. Doran III
29 ElDeCo Inc. Greenville, S.C. 84,873,000 42.8% Larry A. McKinney
30 Group Maintenance America Corp. (*, ****) Houston, Texas 83,800,000 NA S. Patrick Millinor Jr.
31 Miller Electric Co. Jacksonville, Fla. NA NA Henry E. Autrey
32 Continental Electrical Construction Co. Skokie, Ill. 82,500,000 11% Steven Witz
33 Philip Services Corp. Hamilton, Ontario. NA NA Anthony Fernandes
34 Kelso-Burnett Co. Rolling Meadows, Ill. 78,000,000 -1% James R. Kostek
35 MMR Group Inc. Baton Rouge, La. NA NA James R. Rutland
36 Rex Moore Electrical Contractors and Engineers W. Sacramento, Ca. NA NA Steven R. Moore
37 E-J Electric Installation Co. Long Island City, N.Y. 75,400,000 9.7% J. Robert Mann Jr
38 Cache Valley Electric Co. Logan, Utah 69,817,000 30.4% Boyd A. Lewis
39 Commonwealth Electric Co. Lincoln, Neb. 67,669,000 14.4% Thomas M. Price
40 Aneco Inc. Clearwater, Fla. NA NA Bruce Medlin
41 ERMCO Inc. Indianapolis, Ind. 60,400,000 16.6% Darrell Gossett
42 Industrial Specialty Contractors Inc. Baton Rouge, La. 59,400,000 -1% Jerry Rispone
43 MONA Energy & Technology Clinton, Md. 58,200,000 3.3% Mark A. Mona
44 Setzer Corp. Dayton, Ohio NA NA Fred C. Setzer Jr.
45 Hatzel & Buehler Inc. Wilmington, Del. 56,626,000 11.9% William A. Goeller
46 Hunt Electric Corp. St. Paul, Minn. NA NA Robert F. Tipler
47 EEI Holding Corp. Springfield, Mo. NA NA Robert Egizii
48 O'Connell Electric Co. Victor, N.Y. 54,000,000 -8.7% Walter T. Parkes
49 Truland Systems Corp. Arlington, Va. NA NA Robert W. Truland
50 Traffic Control Devices Inc. Altamonte Springs, Fla. NA NA Greg Cockman
Footnotes: All sales figures from a CEE News May 2000 survey of these companies.
NA-Not Available. When sales figures were not provided, companies were ranked by using data from Engineering News Record magazine and Dun & Bradstreet.
*In 2000, Building One and GroupMAC merged. The new company, Encompass, has an estimated $1.2 billion in sales for its electrical division.
**Nationwide Electric and Inglett and Stubbs were purchased by Bracknell Corp., a Toronto-based building services conglomerate.
*** Encompass purchased Chicago-based Continental Electric.
**** Estimated electrical sales before merging with Building One.