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Ecmweb 5737 809ecmcsfig2
Ecmweb 5737 809ecmcsfig2

The Future Is Now

Sept. 1, 2008
Despite a collapsed housing market and sluggish general economy, 2007 offered ample opportunity for sales and growth through projects in the non-residential sector

Despite a collapsed housing market and sluggish general economy, 2007 offered ample opportunity for sales and growth through projects in the non-residential sector for the firms on this year's Top 50 electrical contractors list (click here to see the Top 50 List). Forty firms on the list experienced gains in revenue for electrical and datacom services from 2006 to 2007, with 16 firms reporting increases of more than 20%. The overall average year-over-year gain for the Top 50 electrical contractors measures 17.4%, with total sales for electrical and datacom services for 2007 weighing in at $13.1 billion.

Nevertheless, revenue forecasts for 2008 are tempered. Only eight firms are predicting more than a 10% increase, and 16 are expecting decreases (click here to see Fig. 1). “We had a huge year last year, so it's bound to be smaller,” says Lanny Thomas, president of Allison Smith (No. 17) in Atlanta. “In general, I'm hearing that things aren't going to be quite as good as they were. But we're not seeing that yet. I can't say there's less work. We're still bidding stuff. So I think it's coming, but it hasn't shown up yet.”

Lead performer Wausau, Wis.-based Van Ert Electric Co. (No. 46) revealed an extraordinary 75.9% jump in sales for electrical and datacom services, followed closely by Seattle's Cochran, Inc. (No. 32) with a 66.1% upswing, Houston-based Fisk Corp. (No. 8) with a 64.9% hike, and San Jose, Calif.-based Rosendin Electric (No. 4) with a 48.1% rise.

Of the 50 firms on the list, 47 reported meeting or exceeding their sales goals for 2007 (Fig. 2). In fact, 37 firms described the 2007 business climate as “strong,” with only one firm characterizing it as “weak” (Fig. 3). Nevertheless, 2007 wasn't without its challenges (List on page 54).

As a boom year for the majority of non-residential construction sectors, many firms were forced to carefully manage growth, and struggled to recruit and retain qualified personnel in the face of the continued labor shortage. In addition, the year was marred by gas prices looming in the range of $90 to $100 per barrel and fluctuations in both the supply and price of ubiquitous construction materials such as copper and steel. As a result, many of the firms on this year's Top 50 list implemented innovative strategies/new technologies to save time, budgets, and, in some cases, the environment (List on page 60). Many Top 50 electrical firms reported that lean construction practices, such as Building Information Management (BIM) and prefabrication, are a natural partner for the increased use of energy-efficient products and a wider interest in renewable energy systems.

The python and the elephant

Although five firms with less than 500 employees made it onto this year's Top 50 list (Table), most firms were busy adding workers to their rosters. Among the greatest challenges faced in 2007 were the recruitment and retention of qualified field employees and project managers. Only 13 firms reported not hiring additional staff in 2007 (Fig. 4). To overcome any labor shortages, some firms resorted to alternative strategies. For example, Allison Smith LLC (No. 17) increased its number of field employees by 170%, although most weren't permanent hires. “It wasn't like I doubled the company,” Thomas says. “We got some large jobs, so we hired electricians out of the union hall or wherever we could get them. Most were field employees, people in the trade.”

Not all firms were able to increase head count to such an extent. RailWorks Corp., New York, (No. 44) maintained its 300 employees from 2006 to 2007. However, the firm expects a slow and steady increase for 2008. Currently, RailWorks employs around 360 staff members. “In our transit system's business, employment is up,” says Jeff Levy, president and CEO. “We're seeing the increase in both supervision and in our union field forces in New York, which went up by 25%. It basically follows the work.”

Because municipal transportation projects take several years to move down the pipeline, RailWorks is able to commit to the employees for stretches up to four years. “We have very steady commitments for resources going forward,” Levy says.

However, along with the dilemma of too much work and not enough qualified personnel, RailWorks was also caught in a different paradox in 2007 — that of fuel costs and the rising cost of commodities. Although the price of fuel was a setback to its rail-laying business, which uses heavy equipment, the price hikes have put added pressure on state and city municipalities to increase their mass transit funding. “It's basically putting more money to transit,” Levy says. “New York City ridership is up. The public wants more transit capacity, so there's more political will for funding transit because of the fuel increases.”

However, the three- or four-year lag time between passing the budgets for more transportation projects and starting the construction phase can be difficult. “It's the gap between when the budget was prepared and when the job came to market,” Levy says. “If we have a four-year contract, we try to avoid buying materials later in the contract. The escalation can hurt us. So in addition to material escalation, we have to allow for fuel cost escalation. But the cost of fuel in the New York market is helpful because it creates a better environment for funding.”

Despite these additional costs, RailWorks is predicting significant growth in 2008. “What we forecast for this year is a much more significant growth in our revenue from where we were last year,” Levy says. “This year we're looking at doing about $185 million, maybe a little less than that. So that's a pretty significant increase, and what that reflects is large projects that are moving through the system, much like an elephant through a python.”

What Levy is referring to are the large transit projects that are beginning to come to fruition, including a combination of upgrades and improvements of the New York transit system that may represent as much as 40% to 50% of the installed transportation system in the country, as far as commuter and passenger transit are concerned. “The system's old, so the projects are restoring, upgrading, and adding new technology to improve the system,” he says.

Those improvements include passenger information, such as PA systems and signage, but also computer-based train control to improve capacity. “They're looking for ways to put more trains on the same tracks, and the communication train control allows you to run more trains on the same track by running them closer together because you know exactly where the train is,” Levy says. “If you know exactly where the first train is, you can let the second train go more quickly because you're monitoring the distance between them rather than just having somebody let them go through the gate. It's all about capacity expansion, which is principally electrical and technology.”

Although RailWorks is not alone in its projects for upgrading an existing system, in 2007, upgrades and improvements were not the majority of projects for the electrical contractors in the Top 50 list. More than half the firms claim that more than 50% of their company's projects consisted of new construction versus retrofit (Fig. 5).

BIM bam boom

Norwalk, Conn.-based EMCOR Group, Inc. (No. 1) — which reported more than $1.4 billion in total sales for electrical and datacom services in 2007, an 11.6% increase over its 2006 revenue — adopted BIM as early as seven years ago. But it wasn't until approximately three years ago that it began using it with clients in earnest. Only recently has the technology become more of an industry-wide practice. “We began implementing BIM for our own internal benefit,” says David Morris, director of virtual construction for EMCOR Construction Services. “[External] acceptance at first was rather tenuous.”

The tipping point for acceptance, according to Morris, occurred in mid-2007. “There was a shift from BIM and 3D modeling being an option to it being a requirement,” he says. “Over time, it's evolved into an industry-wide acceptance.”

Involving a preconstruction team early in the design process has been a uniquely differentiating factor for Los Angeles-based Bergelectric Corp. (No. 5), which reported an 8.5% increase in sales over 2006 by accruing $454.8 million in total sales for electrical and datacom services in 2007. According to the company, clients have recognized the value that services such as 3D modeling and detailed coordination drawings bring — more precise cost estimates and better design decisions. Berg now has a stable of talent in offices throughout the country performing services that were once reserved for a “SWAT” team of specialists located at corporate headquarters who were available to support projects nationwide.

Generally, BIM is reserved for industrial, institutional, and heavy commercial projects. Most of the markets in which the firms in the 2008 Top 50 electrical contractors list work would qualify for BIM use (see List at right). “In almost any project of any reasonable size, it's now required,” Morris says. “Really, the only place we don't see it is in very simple projects, such as an office shell and core or a strip mall. But even there, there's a push toward it.”

For example, after experiencing the benefits of the technology, retailer Crate&Barrel adopted a 100% BIM requirement for all the construction related to its new stores. Currently, EMCOR uses the technology at 26 of its operating companies and boasts more than 250 BIM projects to date. “We've noticed increases in field productivity and reductions in field changes, purely by moving up the planning process and by building the job virtually ahead of construction,” Morris says. “We iron out a lot of the pitfalls that would have occurred had we just gone out there and pursued the work in a more traditional fashion.”

The company describes the BIM process as the use of software to create a complete 3D digital representation of all stages of the building process. Participating companies are interconnected through a common platform that enables them to aggregate and deploy the technology and information anywhere, as needed.

Other technologies are often used to augment the process as well. To facilitate further communication internally and with its clients, Bergelectric installed videoconferencing capabilities in its offices with an independent nationwide video LAN system. “The system we chose connects our 12 regional offices and select project offices, allowing scheduling of face-to-face meetings or mustering expertise to solve job-site challenges in real time,” says Keith Thompson, Bergelectric's on-staff electrical engineer and lighting designer. Dedicated T-1 lines in every office eliminate the need to schedule or rent bandwidth through a third party, and portable cameras located on project sites will provide a birds-eye view of issues targeted for virtual problem-solving. With a dual-screen capability, the system offers videoconferencing on one screen and the opportunity to make real-time changes on documents during the virtual meeting on another.

Because the process requires bringing together everyone involved in the design, planning, and construction of the project — the architecture and engineering professionals, general contractors and construction managers, and specialty contractors such as mechanical, electrical, plumbing, and fire protection — at the beginning and throughout the lifecycle of a project, it has created a shift in the dynamics of the construction industry.

The firms in the Top 50 report using the design-assist and design-bid-build project delivery methods more often than others in 2007 (see List above), but according to Morris, this may soon change. He believes BIM will shift the current models of contracting from design-bid-build to a request-for-qualifications-based and alliance-based method. The selection process will no longer be based on the lowest bid. “The industry at large, owners on down, has realized that by engaging the key subcontractors (mechanical, electrical, plumbing) early in the process, they have a more successful outcome. In order to do that, the current contracting methods need to be revised,” Morris says. “It will have to shift to selecting on a qualifications-based method with a guaranteed maximum price and then working toward the project's budget through design and engineering. We're actually seeing a kinder, more gentle construction process — and one that makes sense.”

BIM benefits

As a result of this shift in dynamics in its BIM projects, EMCOR has not experienced the same degree of litigation it has seen in the past. “It appears that the projects are completing successfully and people aren't suing each other at the end of the process, which is tremendous,” Morris says. “In a very litigious environment, which construction has always been, that's a huge shift.”

Instead, Morris says that through BIM, time is being spent on cultivating partnerships and building relationships. “It's resulting in shifts that you wouldn't have thought possible from a technology.”

Another benefit to BIM is that job-site supervisors are now able to focus on their primary role, instead of preconstruction issues, estimating, and material take-offs. “Their primary focus can be shifted to the actual installation of the work,” Morris says. “It hasn't lightened their workload, but it has allowed them to be more focused on what they're best at.”

Another added benefit of BIM is its natural compatibility with prefabrication. Each of Bergelectric's offices has a self-sustaining prefabrication department. To speed things up even further, the company issued catalogs, complete with tools and preferred materials, that local superintendents can acquire in order to improve productivity in the field. “We've moved a great deal of our construction from the job site into a controlled shop setting,” Morris says. “It's allowed very accurate builds of materials and quantity take-offs, which has tremendously reduced waste and over-purchasing. There used to be a great deal of material thrown away at the end of a project. By moving these systems into a shop setting, there's very little waste by comparison.”

This also makes BIM a perfect match for green building practices. “I honestly believe that in order to be successful with lean project delivery and green project delivery, it's imperative to use the 3D tools and, to a large extent, the information from the model or BIM,” Morris says. “It's such a wasteful process to do it manually in a 2D environment that by its very nature doesn't lend itself to being lean by any means.”

At EMCOR, the mechanical and electrical branches initially pushed for the technology. Ironically, it's the mechanical and electrical applications for the BIM software that are most often reported as the Achilles' heel of most software systems. This hasn't stopped EMCOR from continuing to use the technology. “The technology is still lacking, but like any other new thing, those who choose to implement and adopt will find ways to be efficient at it, and those who are reluctant will find excuses why it's not ready,” Morris says. “The EMCOR companies have taken the mindset that this is a very beneficial tool for us, from the standpoint of risk management and lean construction practices, so we have tried to figure out how to do it. The most exciting part of BIM and our approach is that, while accomplishing so much on behalf of our clients over the last three years, it's really just the beginning — the use of BIM technology in facility contracting is in its infancy; our capacity to utilize it is increasing all the time.”

In the three years EMCOR has been using the software with clients, Morris says he's seen a major transformation. “I think there have been some pretty major improvements over the last three years, but I am not optimistic that all of the interoperability issues will ever be ironed out,” he says. “That just puts us in the same position we've always been in, which is to try to select the best technologies that fit our business practice.”


Sidebar: Does Your Firm Have What It Takes?

Have you crunched your numbers to find out how you match up with the firm's on this year's Top 50 electrical contractors list? The information used to generate EC&M's list was obtained through a proprietary survey. If you would like your firm added to our survey mailing list, please contact Staff Writer Beck Ireland at [email protected].


Sidebar: Beyond Wind and Solar: Other Alternative Energy Sources

In 2007, the Energy Services (EES) subsidiary of Norwalk, Conn.-based EMCOR Group, Inc. (No. 1) saw a surge in projects relating to alternative and renewable energy. “We're seeing significant interest in the growth of alternative energies, especially as it relates to the West Coast markets and the Northeast,” says Art Strenkert, president, EMCOR Energy Services.

The projects span all markets, with particular interest from pharmaceutical, health care, and municipalities. “Some states have requirements that certain percentages of their total power pool be met by renewable energy,” Strenkert says.

Colleges and universities are also interested in powering their campuses with renewable energy. “That's not unusual because that's where a lot of the green movement comes from in terms of research,” Strenkert says. “They're looking to green their institutions.”

So it makes sense for a university to want to push the envelope in terms of alternate sources for energy. He says that solar is of particular interest to manufacturing plants and health-care communities with large roof areas. A second popular option for large-scale generation is wind power. Biomass is burning organic material — wood chips, construction debris, sludge from a sewage treatment plant — to produce electricity. Strenkert has also noticed a resurgence in interest in nuclear energy as an alternate energy source, particularly the pebble bed and smaller plant designs, although any new construction would have to pass the U.S. Nuclear Regulatory Commission, Washington, D.C., meaning this option may be a few years in coming to the United States. But the most requested alternative energy source, according to Strenkert, is generation through harnessing methane gas from landfills. “It's considered a renewable resource,” he says.

Recently, EES was awarded a series of contracts for work at the University of New Hampshire (UNH), Durham, N.H. The new contracts build upon a relationship between EES and UNH established in May 2004 when EES designed, constructed, and began to maintain a cogeneration plant that is able to run on natural gas and liquid fuel and chilled water facilities at the university's main campus to maximize its energy efficiency and ensure continuity of its energy requirements.

Under the newly awarded installation contracts, EES will provide the design, engineering, procurement, construction management, construction installation, and commissioning support associated with a turbine generator, fuel gas compressor, and all ancillary equipment, as well as modification of existing plant equipment to operate on processed landfill gas. The turbine generator installed by EES will burn processed landfill gas and will be connected to the local electric utility, entitling UNH to receive renewable energy “green” credits.

“The university has chosen to convert the operation of this plant and build an 8-mile pipeline from a local landfill to supply it with landfill gas,” Strenkert says. “We've also just received a contract from the university to install the second landfill gas electric-producing turbine at the facility.”

Even with these systems, the university is not 100% self-sufficient. “They do still import some from the electrical grid, but the second turbine we're installing is actually a merchant turbine, so they will be supplying green power to the grid,” he says. “But they have elected to always be able to import a little bit of power just to have the utility as a standby, rather than to operate in an island mode.”


Sidebar: Top 50 Year in Review

Norwalk, Conn.-based EMCOR Group, Inc. (No. 1) acquired Performance Mechanical, Inc., a Pittsburg, Calif.-based privately held industrial mechanical construction and maintenance company. The company also completed its acquisition of Ohmstede, Ltd., Beaumont, Texas, for a purchase price of approximately $455 million in cash. In addition, in its annual ranking, Fortune magazine named EMCOR one of the most admired companies in the engineering and construction industry. The journal's “Most Admired Company” ranking is based on a survey of more than 600 companies in 68 industries. The survey participants rate companies based on a list of attributes: innovation, financial soundness, expert talent, quality of management, use of corporate assets, investment value, social responsibility, and quality of products and services. In addition, the International Association of Outsourcing Professionals (IAOP) has named EMCOR for the second consecutive year to its “Global Outsourcing 100” list, which recognizes reputation and achievement in service delivery. Finally, Michael W. Shelton, P.E., president of EMCOR government services, was named co-chairman of the newly expanded Professional Services Council (PSC). The memberships of the PSC and the Contract Services Association of America (CSA) merged into a unified organization to represent the interests of, and advocate for, the federal government services industry. Shelton was previously chairman of the executive board of CSA.

Tom Anderson, executive vice president of Los Angeles-based Bergelectric Corp. (No. 5), served as the 2007 president of The Associated General Contractors (AGC) San Diego chapter. In addition, the firm was a key player in the electrical construction of several major hospitals in Southern California. Working in concert with electrical designers BR+A Engineers, New York, Philadelphia, and Los Angeles, the firm was able to take the 70%-complete plans for the Beckman Cancer Center at Los Angeles' City of Hope to final design. The design-assist team, under the leadership of general contractor DPR Construction, conducted constructability reviews, and was able to overlap the design, coordination, and construction tasks. Through the use of 3D modeling, Bergelectric's detailing department contributed significantly in cost-saving recommendations critical to the project's completion within budgets. At Saint John's Health Center Diagnostic and Treatment Building, Santa Monica, Calif., Bergelectric's use of 3D design will significantly reduce field installation time and help get the $185-million construction cost back on track. Bergelectric is coordinating closely with general contractor McCarthy Building Cos., St. Louis, and electrical engineer Arup, London, to ensure the accuracy of construction documents for the 268,250-square-foot facility that requires specialty lighting and electrical rooms, as well as new electrical service to feed a variety of power needs — from HVAC and daily operations to emergency backup. Construction of Children's Hospital Los Angeles New Patient Tower, Hollywood, Calif., required the demolition of existing facilities on the circa-1901 campus to provide enough space for the more than a half-million square feet of new structures. Operations of the Smith Research Tower (SRT) had to be maintained while rerouting its entire electrical, voice/data, and fire-alarm systems around the demolition and under Sunset Boulevard. In addition to providing a complete electrical network buildout for the New Patient Tower and all the specialized communication systems required for a high-tech medical facility — security, fire-alarm, nurse-call, paging, wireless and multimedia — Bergelectric was also charged with handling the facility backup power. Bergelectric is coordinating closely with electrical engineer Randall Lamb to provide power, lighting and voice/data, nurse-call, ultra sensitive patient-monitoring, and security systems for the Acute Care Pavilion at Rady Children's Center, San Diego. In addition, Bergelectric will be responsible for the inner workings of a new generator building, installing infrastructure that will tie to the existing plant and provide power to the Pavilion and the $550-million Palomar Medical Center West.

San Diego-based Helix Electric, (No. 10) was awarded an electrical contract for the Ronald McDonald House Charities new $12.8-million Ronald McDonald House of San Diego. Helix employees, along with other members of the construction project team, volunteered their services on Saturdays as an in-kind donation to the non-profit organization. The company was awarded a “Construction Safety Excellence Award” from the Associated General Contractors of America (AGC) San Diego chapter in the specialty division: 700,001-1,000,000 work hours for its work on the multi-use Smart Corner building in San Diego.

Jim Robertson joined Houston-based IES (No. 2) as group vice president, IES Industrial. Robertson replaces Glenn Schaefer, who will remain with IES in a senior business development role within the industrial group. Several IES subsidiaries received safety awards in 2007. The IES Industrial Baton Rouge branch was awarded the 2007 “National Safety Excellence Award” in the Specialty Contractors category from Associated Builders and Contractors (ABC). To qualify for the award, IES Industrial first achieved platinum status in ABC's Safety Training and Evaluation Process (STEP) program. Additional criteria for consideration of final winners included self-evaluation scores, lost workday case rates, total recordable rates, and interviews conducted by members of ABC's National Environment, Health & Safety (EH&S) Committee. Bexar Electric Co., an IES division located in San Antonio, was awarded the top AGC “Safety Award” for its exceptional safety record in lost work days during 2006. Bexar was one of only nine general contractors to receive this award based on 2006 safety performance and was the top company in its classification with no incidents and zero loss days at its job sites. Another IES division, New Tech Electric, Portland, Ore., won the 2007 Independent Electrical Contractors (IEC) “National Safety Excellence Award” and also received a second place “AGC/Willis Construction Safety Excellence Award.” Applicants had to undergo a thorough screening process to ensure that the company has a successful safety training program in place and is committed to a safe work site at every level of employment. Primo Electric, Baltimore, received the “ABC STEP Platinum Award” for each of its offices in the Baltimore/Washington D.C./ Delaware region in recognition of its efforts and achievements in the development of a quality safety program for 2007; the ABC Virginia Chapter Certificate of Commendation for achieving an incident rate below the national average for 2006; the “ABC of Metro Washington 2006 Chapter Safety Award” for Superior Safety Efforts in the area of Specialty Trade Contractor with more than 320,000 man-hours; and the American Society of Safety Engineers (ASSE) National Capital Chapter Commitment to Safety Award in recognition of achieving an incidence rate below the national average in the specialty contracting industry. Rodgers Electric, Everett, Wash., also received the “ABC STEP Gold Award” in recognition of its achievements and ongoing efforts in the development of a quality safety program for 2007.

San Jose, Calif.-based Rosendin Electric (No. 4) was named a recipient of Intel Corp.'s 2007 “Preferred Quality Supplier (PQS) Award” for outstanding performance in providing products and services deemed essential to Intel's success. The company was awarded for its efforts supplying Intel with electrical construction services. Rosendin was selected by the Employee Stock Ownership Plan (ESOP) Association as the runner-up of the 2007 “Young ESOP” Annual Award for Communications Excellence (AACE). The AACE Awards are sponsored each year by the association to recognize the outstanding communications and educational programs of its members. The firm was also ranked as the 25th best place to work in the Bay Area in www.bizjournals.com's list of companies with 101-500 employees working in the Greater Bay Area.

About the Author

Beck Ireland | Staff Writer

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