Contractors in the South Talk Business
Construction Is Healthy, but Backlogs Need Work
Don Procter / June 2018
From Texas to Florida, contractors in the southern United States are preparing for a busy year ahead. And while margins are trending up in some regions, in others contractors look to new ways to improve efficiencies to improve profitability. Here’s a snapshot of activity in seven states south of the Mason-Dixon Line.
Busier times in Tennessee, Texas and Florida and a decision by the company’s brain trust to avoid low-bid contract tenders have translated to better margins for F.L. Crane & Sons, Inc. “We still get a fair share of what we bid, and we also seek out more projects that might have some specialty work in it to set us aside from our competition,” says Mike Heering, president of F.L. Crane’s head office in Fulton, Miss.
Carryover is short of 2017’s backlog, but with a number of large projects planned this year in prospering states, the outlook is promising.
Mississippi, Tennessee, Alabama
But like many contractors across the south, F.L. Crane faces labor shortages and “I think they are here to stay,” says Heering. The company is counting on an innovative training initiative—Crane College—set up last year to lessen the impact. All new hires must achieve a basic level of proficiency to get a pay increase. Promising graduates can further their skills through additional training tiers, including one for foremen and superintendents. Good leaders are a top need at F.L. Crane and most companies, says Heering. The college is modelled after a training program implemented by Texas-based wall and ceiling contractor Marek.
Shortages are minimized by moving workers from slow offices to busy ones. “It helps us a lot,” Heering says, noting F.L. Crane has 12 branches in Mississippi, Tennessee and Alabama. The contractor also recruits graduates from a new basic construction skills program at a local community college.
Still, he says supplementing its labor force with crews from subcontractor labor companies will continue. The key is to find “competent companies” that sign contracts tying them back to the contracts F.L. Crane signs with its GCs, he explains. “They have to have the same insurance requirements that we have, and they have to work within the same parameters of the contract that we do,” Heering says. “If subcontractors like ourselves—your bigger players—push that message more … then I don’t think we’ll have to worry about the subcontracting labor forces that we’re using.”
Heering says contract language that passes liability from GCs to subs remains a problem. “We all have to work at trying to get these contracts worded in a way that it is at least equal when it comes to sharing in the risk on these projects.”
F.L. Crane “has made great strides” with BIM business, proving it can expedite jobs and eliminate rework. All layouts are done with total stations, and laser scanners have proven to be valuable.
Business has been trending up in and around Sarasota, Fla., since 2015 and Herb Loynd expects it will continue into 2019. “Every single person I have worked for says 2018 is going to be busier than 2017,” says Loynd, owner of HL Stucco & Drywall based in Myakka City, east of Sarasota. This spring, his main client—a custom home builder—had 17 starts, typically in the range of $2 million to $3 million each. “That’s huge.”
Busy times equal more labor scarcities—an issue plaguing the region for years. After the recession of 2008, many workers drifted away from the region and never returned, says Loynd whose work is mainly within 75 to 100 miles of Myakka City.
Incentives such as bonuses plus overtime and holiday pay are key to retaining good personnel. The contractor also gives a full day’s pay on Saturdays—“even if the job only takes a few hours.”
Also part of his formula to maintaining a skilled crew is by treating every worker with respect. “I don’t believe in talking down or yelling at my employees. Everybody gets frustrated sometimes, but there is no reason to yell at someone,” which, he says, leads to fights, low production and/or angry workers who quit.
Loynd is the company’s “faceman, the everything man,” but as the company grows, his top priority will be a superintendent who can take on some of his responsibilities. “Someone who can problem solve, manage crews and builders,” he says.
The contractor is open to new technology—new ways of doing things. He has been using a takeoff and estimating software since 2016 because it is user friendly, cuts time and saves money. But not all new products and technologies are practical—“or cheaper than doing it the old way.”
Chris Kirby, president of KirbyCo Builders, Inc. in Jacksonville, agrees. “You always want to work smarter, not harder. But you have to be careful because there is a gizmo for everything now. Do your research to see if the return is worth the investment.” Kirby says he is apt to spend more money on tools than labor to improve efficiency and productivity.
In and around Jacksonville, work looks “slightly busier” than 2017. One of the largest wall and ceiling contractors in the area, KirbyCo is focused on developing relationships with owners and developers “with a like mindset. If you work with companies that just want the bottom dollar, you are not going to go far,” Kirby says.
As in Sarasota, the Jacksonville area faces labor shortages that Kirby says were apparent even in recessionary times. “The quality of labor is more important than the shortage of it though. Training foremen is the most efficient way of handling your labor.”
Training in-house is serious business at KirbyCo and it includes “cross-training. We want them as ambidextrous (multi-skilled) as possible.”
The construction market in San Antonio is projected to be solid in 2018, according to Todd Thomas of MK Marlow Company. The wall and ceiling contractor has a number of high-profile jobs in that city’s downtown, including corporate offices at the new Frost Bank Tower plus work at a new Hampton Inn and Hilton hotel. It reaches south to Corpus Christi and west to cities along the Mexican border. The work has culminated in a “pretty strong” backlog this year.
Thomas says that President Donald Trump’s “pro-business policies” have helped reduce unemployment and improve the area’s economic fortunes. “You can drive around here and see something pretty much being built on most streets.”
But while MK Marlow’s margins are creeping up, they remain tight—unusually so for the busy times in the region. However, an increase in negotiated work and a drive by the company to rekindle old relationships with reputable contractors have bolstered profits. “And, there’s also a lot of hurricane repair work that tends to have higher profit margins,” Thomas says.
Securing enough managers, administration personnel and field crews continues to be a challenge though. “A highly competitive package” of wages and benefits plus structured in-house training are draws at MK Marlow.
MK Marlow has reduced materials by 50 percent through the use of a new rough opening system that replaces conventional box headers and built-up jams. He also employs prefabricated joints for head-of-wall fire systems to provide “excellent fire, smoke and acoustic ratings,” and the company has invested in total layout stations.
But the backlog is down a few percentage points from 2017 at Marek’s division in Coppell (Dallas and Ft. Worth). Margins are projected to slide slightly in 2018 at the company, which also has offices in Atlanta, Austin, Houston, Rio Grande Valley and San Antonio.
Marek has done more speciality work in the last year, and contract amounts have been smaller than commodity drywall and ceiling jobs, Bret Young says, pointing out the company needs more estimators. “Managing our manpower is what drives our needs for work. We vet projects that fit our time frame more so than just pricing every ITB that comes along.”
Young, the company’s sales manager, says a key labor challenge is the replacement of 30-year tenured employees nearing retirement. Promoting workers from within the company is the starting point, and “an accredited training program” that covers theory and hands-on lab modules to “set up career path training plans” for employees is seminal to meeting labor needs.
Young says BIM, total station electronic/optical layouts, iPads and cloud-sharing are “part of everyday business” at the Texas operation.
A large wall and ceiling contractor in Arkansas, Platinum Drywall, Inc., of Little Rock, projects sales this year on par with 2017. But a number of promising contracts have yet to be signed, says Anthony Brooks, the company’s president. “Owners are pushing GCs back further and further to get the projects on budget, so we have to massage those projects longer than we used to,” he says.
Construction activity is brisk, particularly in northwest Arkansas, buoyed by big industry, says Brooks. Still margins are only “OK” in the state. “We’re trying to improve them through production efficiencies,” he says. That involves monitoring labor (through project management software)—“a constant redo”—because labor is the source of most cost overruns. Crews are shuffled from site to site for production efficiency.
Labor shortages are “not as big an issue” for Platinum as many contractors in the region partly because the company does extensive training in house. Training will play a bigger role at Platinum when it opens its new facilities this summer in Little Rock. The building will include an 800 square foot training center (“Platinum Drywall University”) providing instruction for everyone from a new hire to a next-generation foreman or superintendent.
Brooks says worker turnover is low at Platinum largely because the company aims to create an atmosphere where people want to work. “A lot of our employees won’t leave us for a dollar more,” he says.
Prefabrication (fur downs, soffits and jigs, for example) is increasingly important at Platinum, and the company is preparing to invest in a total layout stations to improve production efficiencies. “It’s our intention to be around for a while so we want to stay on the leading edge of technology and be one of the better drywall companies in the region to work for,” says Brooks.
Construction in east Tennessee is increasing in both public and private sectors, according to Erin Wakefield, CFO of Knoxville-based contractor The Wakefield Corporation. Chalk up busy times to an ambitious construction schedule at the University of Tennessee campus, an active health care sector and construction of churches. “We haven’t slowed down on takeoffs,” Wakefield says.
A mid-size contractor, Wakefield has seen its volume increase in 2018 over last year, and its backlog is larger. While the impact of labor scarcities is not significant yet, Wakefield sees an aging workforce as a potential problem coming for east Tennessee. A state initiative, Go Build Tennessee, has helped direct young people to “increased training opportunities,” and the contractor offers on-site safety training and training “to help workers … and to deal with customers and clients,” Wakefield says.
She says “fast” detail-oriented finishers are a big demand. Word-of-mouth is often the best hiring method, but the contractor is pushed to sub out some work occasionally.
The company offers incentives for experienced workers to move up the ladder through leadership training that integrates automated management tools to improve production levels. “A lot (foremen) are getting used to carrying around iPads to check details, do punchlists—to fix it on the fly.”
The Carolinas and Georgia
Construction of new hotels, retail and multifamily have ramped up in South Carolina this year, partly because the state has drawn a number of major manufacturers to the area—Boeing, Volvo and BMW, for example, says Tim McCoin, project manager at Anchor Restoration Contractors in North Charleston. “I think toward the end of this year and into next, it will probably be better for us than the last few years.”
But the contractor, whose market covers North Carolina, South Carolina and Georgia, says competition is picking up. Public sector jobs are “particularly competitive,” which keeps prices low and “the jobs can take forever,” he says.
One of the largest hardcoat systems contractors in the region, Anchor Restoration opened a masonry division a couple of years ago to meet demand in the commercial (mainly hotel) sector. While Anchor’s high wages attract good people, “there are times labor gets thin,” says McCoin. Qualified superintendents able to manage crews and general contractors “to where we can be profitable” are rare and the right people “take time to train.”
Nearby in Savannah, Ga., Dan J. Sheehan Company has increased wages because of labor shortages, “but we expect our workers to be more productive for those higher wages,” says Leo Sheehan. His biggest needs are skilled tile setters, plasterers and painters with leadership skills.
While high on takeoff software, he says the company’s line of business hasn’t seen a lot of changes in the stucco and masonry world. Sheehan has installed GPS in its vehicle fleet to “make everyone more accountable for what they do” to help improve production efficiencies. Margins haven’t changed much over the past two years, and while government jobs have always been a segment of Sheehan’s work, so far this year the contractor, which mainly does hard tile, EIFS, stucco and painting within 70 miles of Savannah, has seen fewer public tenders called.
Don Procter is a freelance writer in Ontario, Canada.