Firms Muddle Through Low-Growth Market
“That W project was probably the last of its kind for a while,” he adds.
Naturally, the increased focus on public projects increased competition in those sectors, and, with public dollars starting to run low, many are concerned that bidding will become even more intense. Funding for the Dept. of Defense's Base Realignment and Closure Act projects, which funded the military hospital projects and numerous others in the region, is nearly spent. And bond money for school construction, which was flowing two years ago, is also nearly non-existent, Vickery says. “That's been a strong part of our business, but the bond money just isn't there now,” he adds.
Still, some specialty contractors see bright spots. Tom Ward, director of business development at Keystone Concrete Placement, Houston, says major BRAC work, such as the San Antonio military medical center, could create an echo of development. “The new [DOD] facilities in San Antonio added 12,000 jobs to that area in one fell swoop,” he says.
“Those people have families, so you need schools, infrastructure and commercial buildings to support that growth. It's as if they added a small city to an existing city.”
Likewise, Ward sees strength in the oil market, which could spur more development in Houston as firms build support facilities. Current Keystone projects include a project for Halliburton in Lafayette, La., with David E. Harvey Builders, Houston. Keystone is also working on an Exxon-Mobil project with Gilbane in Houston. “Projects like that will run Houston for the next four years,” he adds.
Beyond pockets of growth, many specialty contractors are playing it safe and preparing for the possibility that today's market conditions are the new normal. Mark Mitchell, division manager at Facility Solutions Group, Dallas, says the firm sees strength in sectors like industrial, but continued weakness in others.
“[Project] diversification is important to us,” he says. “Our business has changed, especially here in Dallas, because we have a larger ratio of industrial versus commercial work. Next year we're concerned because there doesn't appear to be a significant change coming.”
With competition high for the limited projects available, specialty firms are feeling the squeeze on their profit margins. Baker Triangle's Vickery says he hopes that current pricing is a cycle that will soon pass, but just in case it isn't, the firm is preparing for the worst.
“There's been a huge paradigm shift in this business,” he adds. “You'd better figure out how to make money or survive with 30% less in revenue and 50% less in profit.”