Contractors See Big Jump in Revenue During Past Year
California's top contractors experienced a robust 2012 and anticipate an even stronger 2013, according to an annual survey conducted by McGraw Hill Research & Analytics and ENR California.
Contracting revenue for the top 70 survey respondents rose 21% in 2012, with seven of the top 10 firms posting increases.
McCarthy Building Cos., Newport Beach, remained the top-ranked firm, recording $1.57 billion in work during 2012, a gain of more than $200 million from 2011.
One of the biggest movers was Costa Mesa-based Clark Construction Group - California, which leaped to No. 3 on this year's list from No. 8 last year. Clark's California revenue soared 56%, thanks to strength in the health care and transportation sectors.
Clark and McCarthy are poised for further gains in 2013 and beyond; earlier this year the companies launched a four-year joint venture to construct the $2-billion Stanford Hospital.
The state's improving construction climate was broad-based in 2012, and the outlook for most market sectors is positive. "We don't see any decline in the strength of markets such as health care, aviation and education, which is great to see," says Cuyler McGinley, vice president and district manager with Hensel Phelps Construction Co. in Irvine. The company also is seeing a surge in private projects, such as hospitality and mixed-use developments.
R.D. Olson Development, Irvine, expects the majority of upcoming hospitality work to include renovations of outdated facilities. Robert D. Olson, president and CEO, says materials and labor prices will climb as increased construction activity causes more shortages. "It's history repeating itself," he adds.
Many firms anticipate they will increase hiring in the coming year, including Gilbane Building Co.'s San Jose office and Lawrenceville, N.J.-based Jingoli-DCO, which is seeking acquisitions in the energy field in California. "Demand for top talent in every sector of our industry will continue to expand," says Michael Jingoli, chief financial officer. "In the energy sector, success is due to project execution, and top talent is paramount to execute effectively."
Despite the improving economy, most contractors expect the competitive bidding climate prevalent during the downturn to remain unchanged for the near term. "Owners will continue to receive great value for construction services, a by-product of industry conditioning from a long, tough recession," says Brian Cahill, president of Balfour Beatty Construction's Southwest division, located in San Diego.
Many contractors are looking for ways to ease the impact of future recessions. It "seems that a lot of contractors, including us, are diversifying their business sectors so as to protect revenue against further slumps in the economy," says Eric Scheidlinger, director of project development and energy services for Reno Contracting, San Diego.
As design-build, construction manager at-risk and other contracting methods become more common, firms are seeing a broader allocation of risk in project delivery, says Patrick Hastie, senior vice president and regional manager of Panattoni Construction, Sacramento. "Contractors are being challenged with accepting, managing and mitigating a greater portion of project delivery risk," he says. "This requires the contractor to develop a greater understanding of the client or end user's needs." Builders must think more creatively and use a disciplined project delivery approach through the entire project life cycle to deliver cost effective solutions as part of their overall service to their clients, he adds.
Advanced contracting technologies have been adopted by field staff at most large firms responding to the survey. "Moving to the cloud for many of our computing needs has given our company great resources and the ability to mobilize anywhere we need on quick notice," Olson says.
Balfour Beatty is concentrating on what Cahill calls the next level of innovation and collaboration. That includes off-site manufacturing and modular construction, facilities information modeling and developing new smartphone applications to track safety in the field.