Firm Reinvents Itself, Time and Again
Retooling prefab operation helps Atlantic Constructors Inc., ENR MidAtlantic’s Specialty Contractor of the Year, achieve a 17% revenue increase
Arthur M. Hungerford III isn’t afraid to start fresh. The Atlantic Constructors Inc. CEO bought and sold his father’s small plumbing and air-conditioning company only to buy it again about four years later, after the firm had gone bankrupt. Then, after acquiring a firm with a subpar safety record, Hungerford cleaned house and launched a successful new safety program.
Hungerford also helped a minority contractor start a plumbing and HVAC business after growing tired of “pass-through” companies used to comply with project goals. Most recently, Hungerford, 61, reevaluated every process at his speciality contracting firm, from time sheets to mechanical prefabrication. “Nothing is sacred,” he says. “Just because we used to do it ‘that way,’ that really means we need to do it a different way.”
That never-stand-still mentality has paid off for the Richmond-based firm, which saw its revenue rise 17% last year, to $96.13 million. The No. 6-ranked firm in the 2016 ENR MidAtlantic Specialty Contractor survey is on track for another 20% increase this year, Hungerford says.
Atlantic Constructors, which has three satellite offices in Virginia and one in eastern North Carolina, specializes in design-assist and design-build projects as well as modular, prefabricated skids that save weeks in construction schedules. It also provides process piping, HVAC and plumbing, fire protection and airport services. ACI’s business plan is equally divided between industrial and commercial work. Construction and service each account for about half of each sector’s business.
A mechanical engineer by training, Hungerford worked for his father’s small plumbing and air-conditioning company, Hungerford Mechanical Corp., for about nine years before purchasing it in 1988. Eleven years later, Hungerford Mechanical was sold to Group Maintenance America Corp., which created a newly combined firm called Encompass Services Corp.
In 2003, Hungerford, along with two partners, bought Encompass out of bankruptcy. The trio also added Atlantic Industrial Corp. in a separate acquisition and merged the two firms to create Atlantic Constructors.
To improve Atlantic Industrial’s safety record, Hungerford instituted daily hazard assessments, which each crew on each job reviews and signs every morning. The assessment identifies jobsite hazards, such as open holes, and ensures crews have proper safety equipment and training for daily tasks.
Hungerford says the effort boosted the firm’s safety record “overnight.” Today, it has a 0.9 experience-modification rate. The firm won the Associated Builders and Contractors’ Paragon Award for excellence in safety for four straight years from 2010 to 2014.
Atlantic Constructors struggled to win jobs in the period just after it was launched, but DPR Construction eventually hired it to perform mechanical work for the Library of Congress’s National Audio Visual Conservation Center in Culpeper, Va.
The project included light gauge aluminum ductwork that is difficult to weld because of its low melting temperature. To deal with that challenge, Hungerford says the firm developed a “welding procedure with a specific fill wire deposition rate and heat input to accomplish the desired result” before training and certifying its welders.
Hungerford says the Library of Congress project “provided the spark we needed to ignite our subsequent success.” DPR has since hired Atlantic Constructors for nearly 40 other projects. Lisa Lingerfelt, DPR Mid-Atlantic region business unit leader, says the firm never pushes change orders but “has a good balance of fighting for what they deserve and making sure they maintain a relationship with clients.”
Atlantic Constructors refuses to take part in the practice of pass-through companies, which are sometimes used to satisfy a project’s goals for minority contractor participation. In 2009, Hungerford reached out to Al Bowers, owner of BFE Construction Inc., a minority-owned, Richmond-based general contractor to offer assistance in opening a mechanical contracting business. Hungerford gave Bowers and his three sons full access to Atlantic Constructors so they could learn the business, from estimating to sheet metal fabrication.
Hungerford invested in the new company, the Hyperion Group, but sold his stock back at cost after a few years. Hungerford says he made no profit on the sale. “I just helped him get started,” he adds. Hungerford doesn’t dictate which firms Hyperion can do business with and has even worked for it. “The protégée was leading the mentor, and I think [Atlantic Constructors] was extremely happy about that,” Bowers says.
Hyperion started with three employees and $300,000 to $400,000 in annual revenue. It now has nine workers and is on track to finish the year with $6 million in revenue, he adds.
Bowers, 69, is also the president of the Central Virginia Business and Construction Association, which represents minority construction companies. He said that although a lot of firms talk about diversity, Atlantic Constructors is “the truth—they are the real deal.”
In 2014, Hungerford launched a five-year plan to apply lean principles to safety, quality and productivity in an effort to improve consistency and standards. He enlisted every employee in developing best business practices.
Evan Shriver, Atlantic Constructors executive vice president, says the major difference at the firm is constant change. He says that means “let’s find the best way for everybody to do it and do it that way, but constantly have the ability to change and improve the standard.”
Part of the plan was implementing a new tracking system so that project managers know their project’s production rate in real time and can make quick adjustments to stay on schedule and budget. Then, the company optimized its warehouses and fabrication shops to focus on materials movement.
Atlantic Constructors also designated two full-time quality control workers and hired a full-time Lean Six-Sigma Champion to monitor the efficiency of the new processes.
The modernized shop has doubled Atlantic Constructors’ prefabrication output and allows it to be more competitive on jobs that require more technical welds and exotic alloys. It has also won over skeptics within company ranks, who, according to Shriver, now say, “Why didn’t we do this 30 years ago?”
The best example of the company’s lean initiative is the recently completed central utility plant at the $65-million Virginia Commonwealth University Community Memorial Hospital project. Using prefabrication and modular skids, Atlantic Constructors shaved eight weeks off the schedule by performing 85% of the 1,400 worker hours off site. According to Shriver, it typically takes 3,000 hours to build a central plant in the field.
Using a crane, Atlantic Constructors lifted three skids containing chilled-water pumps and hot-water boilers into the building and installed them in one day. Holding three boilers and their pipe supports, the largest skid measured 11 ft wide by 19 ft tall and weighed 28,000 lb.
“It was pretty impressive,” says Casey Ewald, project manager at Atlantic Constructors. “The skids showed up in the morning, and when the crane left, [the boilers] were all sitting exactly where they needed to be.”
All in all, Hungerford says Atlantic Constructors’ five-year plan is broadening the contractor’s business mix sufficiently to withstand another recession. For example, he says that losing out to a competitor recently on a 20-story office tower in Richmond was “disappointing” but “manageable” for the firm’s bottom line. “Most of our competitors only compete with us in one area,” Hungerford points out. “We are so lucky, so fortunate.”
The 550-person company has also moved to return some of its profits to the communities within which it works, contributing more than $62,000 to some 30 local charities in the last two years and donating to the Chesterfield Food Bank. Atlantic Constructors also is sponsoring three families this holiday season, with employees donating cash and other gifts.