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del.icio.usFor the past year, construction firms have been searching for signs that the recession, which began over two years ago, was abating. Those signs continue to be few and far between. So the largest U.S. contractors now are settling into a waiting game, scrambling to increase their market shares, moving into new markets and taking a good look at how they do business to make sure that, when the market does rebound, they are ready.
The depth of the downturn can be seen in the survey data supplied by the ENR Top 400 Contractors. The Top 400, as a group, generated $290.63 billion in revenue in 2009, down 14.1%, from $338.38 billion, in 2008. While international contracting revenue fell only 2.5%, to $55.58 billion, for the group in 2009, domestic contracting revenue was off by 16.5%, to $235.05 billion.
The falloff in revenue was not limited to a few large firms. Of the 374 contractors on this year’s Top 400 that also sent in surveys last year, 291 suffered declining revenue, while only 80 had revenue increases. Of last year’s Top 100, nine contractors saw revenue increases, 88 had lower revenue, and three did not participate in the survey.
In some cases, the revenue increases this year were not organic. For example, in 2009, three Balfour Beatty subsidiaries were ranked on the Top 400: Balfour Beatty Construction, Balfour Beatty Infrastructure and Heery International. This year, the three companies’ revenue has been combined under the parent, Balfour Beatty US.
Unlike among the large design firms, there are fewer mergers and acquisitions among the large contractors. However, there are a few exceptions. In November, Primoris Corp. acquired Baton Rouge-based heavy contractor James Construction Group for $135 million in cash and stock. James, which had been affiliated with Warren, Mich.-based Angelo Iafrate Construction, had $410 million in revenue in 2008, according to Primoris.
Insituform Technologies is another contractor that has been active. In 2009, it acquired the Bayou Cos., a New Iberia, La.-based contractor specializing in onshore and offshore oil-and-gas pipe coating and lining, followed by its acquisition of Corrpro Cos., a Houston-based corrosion protection and pipeline maintenance contractor. “We found we had a steady but limited growth potential in the municipal [cured-in-place pipe] market,” says John Huhn, Insituform’s director of corporate development. He says the acquisition of Bayou and Corrpro gives the firm a major presence in the energy and mining sectors. “These acquisitions allow us to play in the private-sector markets.”
More recently, Anderson Cos. acquired Birmingham, Ala.-based Brice Building Co. “While we do some work in the health-care market, they have a lot of health-care work, which helps us,” says Tom Baird, vice president for gaming and hospitality for Roy Anderson Construction. He also notes that Brice has a big presence in the New Orleans market, extending Anderson’s geographic reach.
Building Bust
While most domestic markets suffered this past year, the general building market was the big loser, off by more than $35 billion in 2008 revenue from U.S.-based projects to $129.61 billion in 2009.
The depth of the general building market downturn can be seen in the data from Turner Construction. “Our markets peaked in 2007, when we estimated the overall potential size of the markets we are in at $240 billion. That number has fallen to $160 billion in 2009 and 2010,” says Nick Makes, senior vice president.
Makes says that, while Turner’s revenue has fallen off and its employee count is down 15% from its peak, the firm continues to seek out talented young people. “We hired 230 college graduates last year. We do not want to stray from our policy of keeping the talent pipeline open,” Makes says. In addition, because many fewer contractors are actively recruiting in a down market, Turner had its pick of top students, he adds.
For many firms, the boom years provided a substantial cushion going into the recession. “We were fortunate that we went into 2008 with a record backlog, so 2009 was a record year for us,” says Shaun Yancey, senior vice president at PCL. But, he says, looking out from here, times are going to be tougher. “Most contractors had seen their backlogs shrink by 30%, if not more, and we are definitely completing jobs faster than we are able to acquire new work,” adds Baird.
Most contractors have felt the impact of the recession, particularly those working primarily in the private-sector commercial markets. “We saw $3 billion in backlog stop overnight,” says Andy Ball, CEO of Webcor Builders, where projects were put on hold.
But Webcor has found some major wins in the public market, including the 277,000-sq-ft San Francisco Public Utilities Commission building, the San Francisco General Hospital and phase one of the $4-billion Transbay Transit Center in...
