The impact of the recession came on quickly for specialty contractors, sending them into a slump as they cope with a combination of fewer jobs and thinner margins. Although revenues remain below pre-recession levels, many of the region's largest firms are landing enough work to hold steady.
The recession took its toll in 2009 as the combined revenue of the region's top 10 specialty contractors dropped 17% from the previous year to $2.32 billion. But revenue leveled off at $2.29 billion for the top-10 firms in 2010.
For specialty contractor Donaldson Interiors, Hauppauge, N.Y., revenue is down, but the corporate interiors specialty firm is pushing harder than ever to keep its 400 employees working, says Doug Parrish, vice president and director of operations.
“During this tumultuous time, we needed to keep the level of manpower at the ready for the client,” he says. “To keep jobs flowing, we've had to cut back on our return a bit and offer the general contractor some of the value that normally would go back in our pocket.”
Compared with its peers, Donaldson has stayed relatively steady, earning $137 million in 2008, $132 million in 2009 and $125 million in 2010.
Cutting prices “helps the GC get the job, which helps us get the job and keeps the men working,” Parrish says. “In the end, you work twice as hard to achieve the same amount of jobs, but you take in fewer dollars. It's what you have to do these days.”
The company completed a $20-million contract at 839 6th Avenue in Manhattan last year. The 54-story tower features a combination of retail, hotel and residential space. Donaldson also has a $30-million contract for interiors work at the Resorts World New York casino in Queens, which broke ground last year.
As in the past, top firms like Donaldson favor large and complex projects where the list of potential bidders is shorter. Even so, there aren't enough jobs to fill the pipeline, and the company often ends up competing with smaller contractors, Parrish says. “A lot of the work doesn't require some of the specialties that we offer and can turn a better buck on, but we need to keep busy,” he adds.
Landing big projects also helped W&W Glass, Nanuet, N.Y., keep revenue rolling in. In 2009 the curtain wall contractor reported $100 million in revenue, which jumped to $110 million in 2010. The firm completed a $26-million job at the Columbia University Northwest Corner Building in New York last year. It also won a $30-million job at 330 Madison Avenue, which is a 44-story reclad of the existing building.
Although big jobs equal big revenue, profits are still tight, says Jeff Haber, managing partner at W&W Glass. “I'd love to say these are great margin jobs, but they are nowhere near what it was like in 2007,” he adds.
Instead, the company is heavily focused on optimizing projects. “We have to get creative with things like the installation, the labor, the rigging and the logistics and make everything happen in just the right way to bring costs down 20% from where they were a few years ago,” he says.
Few firms have felt the impact of big projects in recent years like Durr Mechanical Construction, New York. Despite the market downturn, the firm has seen revenue climb from $41 million in 2008 to $76 million in 2009 and $142 million in 2010. The firm earns much of its revenue from power and process projects. Four years ago it was awarded a $108-million contract at the Croton Water Filtration Plant project, and it completed the heaviest portion of that work in 2010. Last year the company won a $35.5-million contract at the Bayonne Energy Center's new 512-MW Simple Cycle Power Plant in Bayonne, N.J. The company also completed a $24-million contract for a scrubber project at PSE&G's Hudson Generating Station in Jersey City, N.J.
Although executives knew the company could rely on several large long-term contracts, projects like the eight-month PSE&G job provided a bonus boost. “That's a surge we hadn't expected and put us in better shape than budgeted,” says Ken Durr, president of Durr Mechanical.
But Durr is not banking on similar levels of activity. As longer-term projects reach completion, the company is battling more than ever to land new work. “It's a buyer's market now,” he says. “New players come in and take less margin on jobs. In public works, the law is what it is, and they have to take low bids. In some cases, there's a 20% to 30% differential between the mid- and the low bid.”