...in information technology, training and human resources."

This investment reflects the change in the business of general contracting. "Ten years ago, we were a blue-collar industry. But with the increasing emphasis on management and information technology, we are rapidly becoming a white-collar business," Fish says.

Part of the emphasis on management has been the result of tougher insurance and bonding requirement. "This is a healthy trend," says Fish. "Too often, contractors have worked on a shoestring. The surety industry actually has done us a service by forcing us to pay more attention to the bottom line rather than the top line," he says.

Some firms are working harder to manage costs and risk. "We are trying to reinvent ourselves in terms of self-performance capabilities," says Ron Albright, senior vice president of construction and procurement for Fluor Corp. "The major E&C players have drifted away from self-performance toward subcontracting. But self-performing is a way to manage risk." Fluor is rebuilding that capability domestically and internationally, says Albright. "We're attempting to provide options depending on the risk of each project. We want to self-perform on the ground, we want the best slate of subs who work to Fluor's standards and we're building our modulation capability." Fluor is using it a lot on upstream oil and gas projects, he says.

The sharp spike in steel prices has many contractors concerned. "Steel prices have had a broad impact," says Kennedy of Duke. "But we have been paying historically low prices for steel, and this may be an overreaction."

Many contractors are philosophical about the price spike. "I've seen these things happen with material prices in the past," says Hunt. "I think you'll see a softening of steel prices in another six months to a year. But I don't think we'll see prices back to where they were two years ago."

Some contractors worry that other materials prices may be on the rise. "We are hearing reports of cement rationing in Florida," says Fish. "We haven't had any reports like that in California and New England." Fish isn't alone. "We are also hearing of localized cement shortages, although that isn't high on our radar screens at the moment. We are seeing some increases in copper, aluminum and gypsum," Kennedy says.

Internationally, the biggest regional jump in revenue has been in the Middle East. After major combat operations in Iraq ended, the region began to shake loose projects. "There is about $150 billion in work under way or in the planning stages in the gas and petroleum market in the Middle East," says Glenn of CB&I. "And we can probably look forward to new markets in Libya now that the boycott is being lifted, and Iraq will be a big market once it becomes more stable." Click here to view graph

Iraq continues to attract and intimidate contractors, with its huge contracts and seemingly random terrorism. But many firms are doing well there. "We are working in Iraq refurbishing an Iraqi army base and rebuilding schools. It is part of an indefinite delivery/indefinite quantity contract with the Air Force Center for Environmental Excellence," says Schmerber of Washington Group International. "That contract is much like a hunting license. It grants us the ability to compete with other prequalified contractors for work," he says. But there are many bidders and drafting proposals is fast-paced and very intense.

Some firms have taken a low profile in Iraq. "Our work in Iraq has stayed below the radar screen," says Albright of Fluor. "With our partner AMEC, we have provided in excess of 400 MW of power in Iraq" that will go on line in June, he says. Fluor also is working on a new water infrastructure program.

On the other hand, Bechtel has had a high profile in Iraq. "The press has made a lot of our presence in Iraq, but it amounts to less than 5% of our booked revenue," says Laspa. He notes that the firm has had even bigger wins in the Middle East outside of Iraq, including a contract to develop the $2.5-billion New Doha International Airport in Qatar.

For contractors, China is a market of huge potential, but great caution. That nation's recent proposed regulations for foreign contractor capitalization, along with limits on the size of foreign contractor project participation, licensing requirements, and the like, have given some firms pause. "China is intensely challenging from a bureaucracy perspective," says Albright. "A company can't come in as a major player and then leave. We have to stay to develop the local resources and we won't be successful unless we do develop the indigenous resources."

But some see these recent proposed regulations as temporary. "China is trying to modernize its regulatory system," says Laspa of Bechtel. "It is under pressure from the World Trade Organization to maintain open markets, but it is not used to the idea. So the recent regulations are a means of testing ideas." He says that China...