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Cover Story - April 2006

The Largest General Contractors in California

No. 1 Granite is rock solid in 2005. Webcor and Swinerton again break the billion-dollar mark. DPR and Turner round out the top five.

A bumpy highway construction market in California has not detoured Granite Construction.

The Watsonville-based company again is the leader of the pack in California Construction's annual ranking of the largest general contractors in the state. The firm finished 2005 with total revenue of $2.641 billion.

After Granite in the top spot is San Francisco-based Swinerton Inc. with $1.830 billion, Webcor Builders Inc. of San Mateo ($1.563 billion), DPR Inc. ($900 million) and Turner Construction Co. Inc. ($890 million).

Despite California's budget problems in the last year, which led to a temporary postponement of many highway improvement projects in the state, Granite still stayed in the fast lane.

"Thanks to mild weather conditions in the West, many of our branches were able to work late into the season and capitalize on what I would characterize as one of the healthiest transportation markets in many years," said William G. Dorey, president and CEO of Granite while recently announcing the company's fourth quarter and full year 2005 national financial results.

Besides California, Granite has highway projects either just completed or under way in 20 other states.

Dorey said one of the keys to Granite's success is treating its employees right. "What you hear, and this is relevant to the fact that for three years running we've been included in Fortune Magazine's Top 100 Companies to work for, is that we have that 'small company' feel," he said. "We work hard to create the right culture and environment for all our people."

Dorey added that the company's "sound business model" through the past several years has prompted the company to develop the people it needs to take advantage when the economy improved.

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Talk about a family atmosphere: Dorey, who was raised in the Watsonville/Monterey area, started at Granite as a laborer at age 16.

Granite is currently at work on the Orange County Transit Authority's Garden Grove Freeway (SR 22) widening project, priced at $390 million; and will soon start construction on the $44.9 million Highway 14 widening project in Bakersfield and the $82 million reconstruction of Highway 149 in the Chico/Oroville area.

Swinerton, meanwhile, is finding that the office and healthcare markets will be shaping its future. Last year, the multi-unit residential market took in the most revenue ($445 million).

Jeffrey C. Hoopes

"We see a slowing of the multi-unit residential market in several markets," said Jeffrey C. Hoopes, executive vice president. "It's starting in San Diego, where owners are now not able to presale as much as they did a few years ago, and they are struggling with building costs. This slowing is moving up the coast."

Hoopes said Swinerton has 15 office projects either underway or about to, and 10 of those projects are speculative, which was unheard of five years ago.

Hoopes said the hospitality/timeshare market is also booming. "We just got a $300 million hotel/condo project at Lake Tahoe," he said. "This has been a good business for us."

Even though Webcor's revenues for 2005 increased $363 million over 2004, the company predicts even bigger rewards in 2006.

Andrew J. Ball, president and CEO, said he found it "surprising" that even though in the past year Webcor had secured lots of contracts for projects, many of those projects were delayed due to the "rapid and unexpected increased cost of materials pricing."

Andrew J. Ball

When delays were over, he said Webcor found itself involved with the consecutive starts of some very big and complicated projects, including the two highrise condo towers in San Francisco (300 Spear and 301 Mission) and the $150 million California Academy of Sciences.

"Now all these projects are going on at once." He said, "I think you can say our teams are relieved to be finally starting these projects."

Though residential projects are rife with potential liability issues, Ball said Webcor has found a niche and is sticking to it.

Webcor's highrise projects will "change the San Francisco skyline for the better," he said. "Vertical density brings a human element to the commercial environment, with residences near work, restaurants and shopping, eliminating the need to drive cars. Add to that the innovations of construction and energy, such as sustainable materials and solar, and you have an environmentally responsible project that you can be proud of."

Ball said the increase in materials costs tie in with the cost of energy (with a barrel of oil hovering around $60), which increased 20 percent for Webcor from January to December 2005.

In addition to the prohibitive cost of building materials, many construction companies are grappling with the shortage of skilled labor.

Mike O'Brien

Mike O'Brien, senior vice president/general manager for Turner Construction Co.'s regional office in Oakland, said the shortage of labor will affect Turner in California again in 2006; last year the firm hired 35 full-time staff.

O'Brien said he is more concerned with good subcontractors rather than management personnel at this point in time. "It's the trade side," he said. "Our hopes are that the unions will boost their recruitment, to go out and find more workers for these good paying jobs with good benefits. Without first-rate subcontractors, it's getting harder and harder to manage projects."

With Turner on pace for its biggest year ever in terms of projects and revenues (and seeing its revenues rise from $723 million in 2004 to $890 million in 2005), O'Brien said the company wants to control and manage growth to about 15 percent per year. He also said that materials costs have risen 15 percent for Turner last year, which put a lot of projects on hold because of budget constraints. "You're trying for cost containment based on supply and demand, which is not easy," he said.

He cites as an example the Mills Peninsula Hospital Replacement project in Burlingame, which has been put on hold many times (and is now priced at $300 million-plus). "We started pre-construction services in 2000," he said, "and we finally broke ground on the parking garage this past New Year's."

Though DPR Construction earned the same amount of revenue (of $900 million) for 2005 as 2004, the company is poised to see a healthy profit this year with the busier market, according to Eric Lamb, executive vice president of the Redwood City-based company.

Eric Lamb

"It's a cyclical business and we've had a couple of relatively flat years," he said. "This year our overhead will not change, but the volume will definitely increase -- probably by 30 percent, meaning that profitability will follow."

Echoing Turner and other firms, Lamb said the challenge in 2006 is finding good skilled employees, especially engineers and estimators.

He added that another challenge DPR faced last year and is again experiencing this year is keeping up with all the healthcare projects and their inherent increasing materials costs. Healthcare is one of DPR's four core markets, he said, and it has two projects in preconstruction (Sequoia Hospital in Redwood City and Sutter Santa Rosa) and one under construction (Camino Medical Group-Mountain View).

"We're seeing some hospital projects delayed or put off indefinitely, and some are even being canceled," Lamb said. "Everyone is keeping a close eye on the volatile costs of construction materials."


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