The Largest General Contractors in California
The majority of general contractors surveyed reported an
increase in revenue for 2004. And many expect gains in 2005.
But a growing shortage of skilled labor and qualified field
and office personnel--many of whom moved to Nevada and Arizona
to follow construction growth earlier in the decade--is
a huge concern for GCs.
More than $1 billion worth of health care and school projects
that reached the construction phase, as well as an expanding
economy, helped reverse the fortunes for a majority of the
general contractors doing business in California in 2004,
according to a survey by California Construction magazine.
Even so, a number of issues may thwart any cause for celebration.
GCs are facing a shrinking skilled-labor pool due to the improving
economy, significant financial losses during a record-breaking
wet winter and difficulties finding qualified field and office
personnel to staff the increase in the number of projects
in the pipeline.
Forty-five of the 70 GCs that responded to the annual survey
reported more total revenue last year compared to 2003. Twenty-two
firms reported less revenue in '04; two GCs did not report
revenue for '03. And of the 33 firms that submitted a revenue
forecast for 2005, 30 expect to increase revenue from '04.
Phoenix-based Perini Building Co., ranked No. 12 on this
year's list, completed a number of large Indian gaming casino
and resort projects in '04, and is optimistic that some new
deals will come this year.
"We've been very conservative about our 2005 forecast
because, although we're working on an equivalent amount of
work that we normally annualize in the past few years, we
haven't inked [the project contracts] yet," said Perini
chairman Dick Rizzo.
Rizzo said the pending projects are located throughout California-he
declined to mention actual names, citing client confidentiality-and
consist of entirely new construction or expansions of existing
casinos and resorts.
Scott Kaats, president of San Diego-based Bycor General Contractors
Inc., said his firm's revenue gains in '04 came because "we've
been selected more in the last year or so for the larger shell
No. 62-ranked Bycor had $63 million of revenue for '04 compared
to $60.1 million in '03 and $48.4 million in '02.
Kaats credited his clients' larger projects and their request
for "a higher-quality product" for his firm's increase
in revenue. Multi-story, Class A office buildings under construction
at developer Corky McMillin's Liberty Station mega-project
in Point Loma is a prime example of bigger and flashier projects,
Ironically, corporate consolidation at some of Bycor's clients
is another major factor in the firm's increased work.
"Because so many companies have been downsizing, we've
been doing a lot more renovation work," said Penny Lawlor,
Bycor's marketing manager. "That has allowed our marketing
dollars to focus on new objectives such as new market sectors
or expanding in the shell and build-to-suit market sectors."
Other San Diego general contractors such as No. 30 Lusardi
Construction Co. and No. 14 Barnhart Inc. have grown by expanding
outside their home turf.
For Lusardi, high-end car dealerships in Arizona-the firm
completed a $65 million showroom in Scottsdale-filled the
revenue void created by California's recession earlier in
"That ain't peanuts," Bill Tirschfield, Lusardi's
operations manager, said of the Scottsdale project. The general
contractor continues to build dealerships in Arizona and Northern
Petaluma-based North Bay Builders, No. 53 with $82 million
in revenue, has steadily increased its business every year
by focusing on private-sector work.
"We're not having to go out and beat our heads on the
open-bid market as much because we do so much negotiated work,"
said Steve Geney, the firm's president.
Vacaville-based Hearn Construction, No. 65, forecasts $65
million in revenue in '05, which would nearly double the $33
million of revenue in '03. A good chunk of the huge increase
will come from Hearn's recent acquisition of Nolan Construction,
a St. Helena-based general contractor with a strong following
in the residential sector.
"Solano County is one of the fastest growing counties
in the state, and the high-end residential market is also
experiencing substantial growth," CEO Fred Hearn said
of the Nolan purchase.
Douglas E. Barnhart, CEO of the firm bearing his name, attributes
a red-hot school construction market-particularly in inland
areas, where enrollments are expected to experience double-digit
growth rates in the next decade-as the main reason why his
firm more than doubled its revenue in just two years.
In the last few years, Barnhart Inc. has opened offices in
Ventura and Orange counties, Palm Desert, Riverside and Stockton,
areas where it has more than a dozen major K-12 and higher-education
projects under construction.
"We're planning to continue to grow the branch offices
to have a major presence in those areas," Barnhart said.
"We think private-work opportunities-office buildings
and stuff like that-will follow."
The Southern California division of No. 9 McCarthy Building
Cos. Inc. ramped up its recruiting in the last three years
in a major effort to staff its massive medical center replacement
projects that reached the construction phase in the last 24
"There are obviously very qualified individuals in the
marketplace that we can provide some training to," said
Carter Chappell, McCarthy's division president. "Based
on our experience with OSHPD, we can get them acclimated pretty
quickly to [OSHPD's] way of doing business."
"OSHPD," the State Office of Health Planning and
Development, is the agency that manages the approval process
for health facility construction in California.
The increase in the number of projects for Lusardi has put
a strain on recruiting efforts. The GC had 35-40 projects
in '04 with an average construction cost between $6 million
and $7 million.
"We have a hard time getting both field and office personnel,"
operations manager Tirschfield said. "This year, we sent
150 recruiting packages to colleges. But the level of quality
for the project managers we want is not there."
One executive said good people are being pilfered in Northern
"One contractor will steal from the next guy to take
PMs, supers, whatever," said Mark Alessio, director of
marketing of Redwood City-based W.L. Butler Construction,
No. 28, with $202 million in '04 revenue.
"When the bottom dropped out the economy, a lot of workers
left and have not returned," Alessio added. "So,
as things heat up again, there is a limited amount of [skilled]
Many of those workers headed east earlier in the decade,
when business was booming in Nevada and Arizona.
"When the California market had been active [in the
1990s], the Nevada market had been down, so we were able to
draw qualified trades people from Nevada," said McCarthy's
Chappell. "We're not seeing that phenomenon right now."
Chappell is concerned with escalating prices for steel and
petroleum-related products such as roofing and flooring.
"They are probably the three biggest categories in price
increases in the last 12 months," he said. "We are
expecting prices in the next 12 months to escalate in the
6 to 8 percent range, which is roughly double what we've seen
in the past five years."
Record-setting rainfall in Southern California-Los Angeles
received 33.91 inches between July 1 and March 1, the third
highest total since the late 1800s-has caused its share of
headaches, from damaged drywall and the cost of de-watering
jobsites to unexpected time off for salaried employees. Los
Angeles County recorded $500 million in property damage during
the rainy season.
"There's no telling how much this wet winter has cost
the construction industry," Barnhart said. It's astounding."
Despite the soggy season, Jeff Jenco, a Lusardi vice president,
said 2005 might be his firm's best year ever.
"We're starting the year with a backlog that leads us
to believe that," he added.
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