SPECIALTY CONTRACTORS MARKET FOCUS


Specialty Contractors See Strong Year Ahead – But Challenges Still Plentiful


By Carol Eaton California’s specialty contractors are


hitting 2015 strong, and many are optimis- tic about near-term growth as they contin- ue to regain ground lost in the most recent recession. An improved economy and the resurgence of certain markets, including private sector work, has translated into in- creasing job opportunities and generally improving bottom lines, according to the AGC-member specialty contractors that California Constructor spoke with for this specialty market focus. Despite the upturn, however, there are


plenty of challenges facing the specialty sector – and few quick fixes. Extended pay- ment cycles are putting extra pressure on cash-strapped subs, especially smaller to medium-sized firms. A shrinking skilled labor pool cuts across virtually every trade. Profit margins are still tight and out of sync with project risk. And an increasingly complex regulatory environment adds to the hurdles facing today’s specialty firms. California


Constructor talked with


several leading AGC specialty contractor members about what they see as their key challenges, potential solutions, impacts


Levi’s Stadium was completed in July 2014 for the San Francisco 49ers and is touted as one of the most technologically advanced stadiums in the world. Cupertino Electric, Inc. performed the electrical contract. Photo courtesy of Hawkeye Aerial Photography


of technology on the industry, and their outlook for the year ahead, among other things.


Specialty Contractors Confront Unique Challenges When it comes to the biggest challenges


confronting the specialty market, timely payment, still tight profit margins, and skilled workforce shortage all rank high on many contractors’ lists.


“Although there


are more and more project opportunities available to bid, there remains much com- petitive


pressure,”


said Jim Hawk, Exec- utive Vice President of Rosendin Elec- tric, Inc., San Jose. “Margins


are still


very tight and not yet reflective of risk that will be taken on. To make profit expecta- tions,


teams must


ways to manage costs, and maintain or in- crease rates of production.” Slow payment presents a real issue for


many specialty contractors who are oper- ating on thin reserves in the wake of the great recession. In fact, a recent survey by Engineering News-Record (ENR) of the Top 600 Specialty Contractors (October 20/27, 2014 issue) found that of the 489 Top 600 firms that provided numbers, 114 said the average late payment period was 60 days or more. “It seems like owners are taking 60,


sometimes 90 days to make progress pay- ments,” said Bob Cowan, President of Marina Landscape, Inc., Anaheim. “In ad- dition, some now want to do one change order at the end of the job for all your extra work that you’ve already paid out for mate- rial and labor.” Ted Polich, President of Bali Construc-


construction spend


a great deal of time planning out work, looking for creative


tion, Inc., South El Monte, CA, agrees. “[We see] negative cash flow and resources devoted to compiling and collecting extra work,” he commented. “It often takes six to nine months to collect.” Dina Kimble, Partner at Royal Electric said contractors’ and


Co., Sacramento,


owners’ still cautious approach to the mar- ketplace in the wake of the recession has also created some uncertainty, which pres-


Giroux Glass is pictured at work on the New Madera Courthouse, a replacement, 4-story municipal building based in Madera, CA, scheduled for completion this spring. Photo courtesy Giroux Glass


6 March/April 2015 California Constructor


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