2009 Top General Contractors of Intermountain Region

Editor’s Note: The 2009 rankings of Intermountain Contractor’s Top General Contractors in the Intermountain region are based on revenues from 2008. There are several different rankings, including a regional list, and lists  of worldwide revenues from firms with headquarters in Utah or Idaho, top Utah GC’s, top Idaho GC’s, top general building contractors and top transportation contractors.

Every effort was made to verify accuracy of each firm’s submission. We apologize for any errors or omissions and encourage general contracting firms in this region to consider submitting surveys next year.

Firms working in the construction industry nationwide—including those in the Intermountain region—are caught in the throes of one of the worst economic climates in recent memory.

The recession happening right now in the U.S. has virtually every firm’s leadership taking a cold, hard, calculated look at how their businesses functions and how they can streamline operations to maintain profitability, or at the very least, stay afloat until the economy turns around.

The reality most general contractors face right now is that the rest of 2009, and likely all of 2010, are going to be challenging years in terms of acquiring and maintaining a healthy backlog of construction projects, as well as keeping key office and field personnel gainfully employed.

Going back to the beginning of the final quarter of 2008, many firms saw the writing on the wall and started bracing for a sharp economic downturn. Many firms were forced to lay off employees – some by as much as 50% during the last six-eight months.

“We’ve reduced our forces across the board,” says Clegg Mabey, senior vice president of Bountiful, Utah-based Sahara Inc., who estimates a 20% reduction in his firm’s staff the past six months. “We’ve kept in place key project managers and people in the field who can actually do the work, and we’ve downsized in management for the most part. We’re trying to be lean without crippling ourselves. Sometimes you lose good people. It’s not a pleasant time to do it.”

Carl Tippets, CEO of Pentalon Construction of Draper, Utah, estimates he’s had to lay off 50% of his employees since September. “It’s gut-wrenching,” he says. “I guess there is a cautious optimism that things will turn around, but we don’t have any great expectations in the short term.”

David Layton, president/CEO of The Layton Cos. in Sandy, Utah, says reducing staff through layoffs is a difficult-yet-necessary strategic move GC firms have to make in the face of slumping economic times.

“In the general contracting world, most of the expense is in labor,” Layton adds. “Therefore, if the business isn’t there, the only way to cut expenses is to cut labor. As executives we have to stand tall to that responsibility. I hope I never have to do it again. It’s heartbreaking in some circumstances.”

Of the nearly 50 firms with headquarters in Utah or Idaho who participated in our Top General Contractors survey this year, 15 reported worldwide revenues of $100 million or more, up from 13 last year.

Okland Construction Co. of Salt Lake City ranked No. 1 in 2008 worldwide revenues with just over $931 million. The Layton Cos. was close behind with $922 million, while Big-D Construction of Salt Lake City came in third at $680 million.

Rounding out the Top 10 in ’09 worldwide revenues were: MWH Global, Sandy, $413 million; Jacobsen Construction Co., Salt Lake City, $398 million; Oldcastle Materials Group, Ogden, $337 million; Clyde Cos., Orem, $283 million; R&O Construction, Ogden, $275 million; Engineered Structures Inc., Boise, $224 million; Wadman Corp., Ogden, $202 million.

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Okland, Layton and Big-D continue their recent trend of consistently increasing annual revenues. Okland’s 2008 total represents a substantial 25% jump from the $699 million it claimed in 2007. Layton, No. 1 last year with $748 million in worldwide revenues, came in with a nearly 19% increase.

Big-D, which had $472 million in 2007 revenues, saw a healthy 30% gain last year.

“Overall, we’re optimistic for ’09 because of big, longer-term projects like City Creek Center and St. Regis Hotel,” says Bret Okland, vice president of Okland Construction. “I think the tail end of ’09 or the beginning of ’10 is where the challenge lies. We’re not seeing much in the private sector.

“In ’07 and ’08 we had big years and now have over 1,000 employees. Our commitment is to keep gainful employment to those people. That’s what is driving us to keep our volume at this level.”

Cory Moore, vice president of business development and marketing for Big-D Construction, says his firm is cautious about the future, but “we have enough of a buffer where we can see (tough times) and prepare for them. A lot of firms don’t have that buffer.”

Lean and Mean

Besides cutting staff, many general contractors have been fine-turning their operations, looking for innovative and strategic ways to save even a few dollars.

“We’ve looked at every area of our business and have implemented some cost-cutting measures, some things that will help us from losing too much,” says Al Schellenberg, president of Geneva Rock Products of Orem. He adds that his firm has laid off 36% of its staff since September, although some of that was due to typical winter attrition.

“In past years, we’ve kept a much larger percentage of our people busy,” Schellenberg says.

Scott Parson, president of Ogden-based Staker Parson Cos., says his firm is braced for a tough 2009. “We’re taking every action we can to limit our costs and do whatever we can to be efficient and lean,” he adds.

Kip Wadsworth, president of Ralph L. Wadsworth Construction of Draper, says, “We’re trying to take some positives out of it and look at things we can do to make our company more efficient. We’ve looked at ways to increase efficiencies in the field and office. It’s definitely a different atmosphere than six months ago.”

Terry Hayden, an owner and treasurer with Wright Bros., The Building Co. of Eagle, Idaho, says his company has trimmed its staff by 15-20%. “We watch travel expenses and have initiated pay cuts,” Hayden says. “With the economic pressure, there is more emphasis on value. We are strengthening our delivery methods to accommodate our client’s needs with the changing times.”

Doug Watts, president of Watts Construction of St. George, Utah, says, “We’ve had internal struggles about when to cut back. It’s going to be responsible cutbacks with an eye toward good business development, not just shutting everything down.”

For GC’s who have a healthy backlog and expect to stay busy throughout 2009, employee layoffs by other companies has given them a chance to fine-tune their own staffs by getting rid of poor performers and adding skilled, experienced people.

“We have not had to lay off any core people or any staff – we’ve been fortunate,” says Lonnie Bullard, chairman/CEO of Jacobsen Construction. “We don’t anticipate having any general layoffs; we’ll use this opportunity to weed out people who are not performing and hire talented new people in their place.”

Guy Wadsworth, president of Wadsworth Bros. Construction, says, “We’ve made a couple of key additions to our company and are still looking for more people. It’s a good time to attract the human resources we need to be competitive and keep pushing ahead.”

Neil Nelson, vice president with Boise-based Engineered Structures Inc., says “there have been some positive elements to this economic downturn. We have been able to recruit and hire top-notch employees that our competitors could not retain.

Rick Whitaker, president of Whitaker Construction of Brigham City, Utah, agrees. “In ‘07 and ‘08 it was hard to find people – you picked up basically anybody that was breathing,” he adds. “Now we’re getting good people from other firms. ’09 looks like a pretty good year for us.”

Tough Bid Markets

Regardless if a general contractor is large and well-established or small and relatively new, bidding and negotiating on projects – both public and private – has become dicier in terms of maintaining profitability.

As recent as 18 months ago, general contractors had the luxury of picking and choosing which jobs to bid. Projects often attracted only a handful of bidders, which meant less competition and the chance for healthier margins. Those halcyon days are gone.
 

“It’s competitive – that’s the nicest way I can put it,” says Mark Wheeler, president of Wheeler Construction, who founded his company in January 2006 after more than a dozen years working for another GC in Utah. “I’ve seen times when things have slowed down, but mixed with banks not lending money, it’s a unique situation.”

Torry McAlvain, president/CEO of the McAlvain Group of Cos. in Boise, says, “We’re just seeing unusual things that we’ve never seen before – the number of bidders, what these companies are willing to drop it down to just to get the work. We’ve seen 30 GC’s on one bid list for a $1.5 million (airport) terminal project in Colorado. (Some firms) are buying the job.”

Bullard says it’s riskier for both GCs and subcontractors when they’re competing against 20 or more other firms who might be desperate to land a job.

“It’s clear that in the private markets the workload is way down,” the Jacobsen CEO says. “The number of bidders on jobs is up considerably, and the number of mistakes on bids is up considerably. The risk in the smaller end of the market is greater now because our people have to determine who can perform. There is more risk of subcontractor default.”

Pentalon’s Tippets says he has “no desire to compete against 15-20 bidders.”

Rich Thorn, president/CEO of the AGC of Utah, says the situation is “crazy. I saw a job last week that had 37 bidders. That shows that there are a lot of firms looking to get work.”

Wheeler tells of a recent bid he saw for a relatively modest project in a remote town in west-central Utah that drew five times more bidders than it likely would have in a healthy economy.

“We knew a physical therapist in Delta that wanted to build a 7,100-sq-ft office building,” he adds. “He had 30 companies from all over the state wanting to bid it. If anybody gets a lead, it’s like sharks trying to get on the bid list.

“Some firms are going in under cost. Even some subs are going in $20,000 to $30,000 under cost on certain projects. We keep crossing our fingers that we’ll see a pickup on the lending side of things.”

Tight Credit Markets = Dearth of Private Projects

For contractors who have made their mark in recent years working with owners on negotiated, private projects such as office buildings, retail stores and multi-family housing developments, the current ultra-tight lending practices being employed by the banking industry have left them at a standstill.

“A number of companies have told me they’ve had relationships with their bank for more than 20 years – they’ve never missed a payment, never been late, never had a problem with a line of credit – and they’re getting mail saying the bank has withdrawn their entire line of credit because they’re in the construction-related industry,” Thorn says. “In some cases, that could be the death knell for a contractor. It’s troubling.”

Guy Wadsworth, whose company has developed a niche building parking garage structures, says development probably will be dead for a few years. “I don’t see anything new coming up,” he adds. “Lenders are only giving 50% loan-to-value ratios. In the past it was 70-80%.”

Bullard says, “Banks don’t know how to place a value on assets, and until you see stabilization of asset values, I don’t see lending breaking loose. Anything based on asset value, primarily real estate, that’s difficult because those values are so uncertain. That’s going take a couple years to work through.” 

Tippets says “financing will never be the same. Lots of people, successful developers with proven track records, they can’t even get money.”

Unsure About Future, GC’s Retain ‘Cautious Optimism’

No matter how economists try and spin the outlook for construction over the next 12-18 months, the reality is no one knows what’s going to happen in the short term. Most GC’s seem resigned to remain positive, while trying to ride out the storm.

Federal stimulus funds, coupled with money that is slated to be doled out from state legislatures, provide some hope for a faster economic turnaround, specifically for contractors working in the heavy/highway and civil/infrastructure markets.

“We want to be optimistic – the only way we have to go at this point is up,” Geneva Rock’s Schellenberg says. “It may not happen as fast as we want, but we’re really happy some money has been made available. For every billion dollars that goes into infrastructure, 28,000 jobs are created.”

Engineered Structures’ Nelson, whose firm has established a niche throughout the western U.S. building big-box commercial projects, says 2009 will be rough on contractors. “I am discouraged about the lack of work in the private sector, but that could change, or at least stabilize, and make 2010 a good year,” he adds. “I am cautiously optimistic for 2010 in the commercial market.”

Wright Bros.’ Hayden agrees. “Depending on how long it takes for the stimulus package to trickle down to the state, I would say most of 2009 will be slow,” he says. “However, we are more optimistic about late 2009, early 2010.”

One positive aspect of the construction industry that most GCs agree on is that the Intermountain region is in far better shape economically than virtually any other region in the entire country.

 “In the Southwest and Denver metro areas, they started to downturn one to three years before the Intermountain region,” Layton says. “So we’re fortunate, particularly in Utah, Idaho and Wyoming, that we had a strong economy in ’06 and ’07.

“The outlook is murky. I don’t think anybody can tell you what the bottom is. We’ve blown through some historical bases in the economy, and now we’re looking at levels of the early 90s. If you know when the bottom is, let me know.”

Watts, whose firm is looking at work in Northern Arizona to help generate more revenues, says he’s more optimistic than he should be. “I like the philosophy ‘you either make dust, or eat dust,’” he says. “I’m going to continue down that road and see where it gets me.”

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