Business in the West
If You Want to Fill Out Your Backlog, Go West!
Don Procter / October 2018
From California to Idaho, wall and ceiling contractors are in high gear with little, if anything, to slow them down in 2019 and beyond. The usual suspects—labor shortages and soaring materials prices—are among their concerns, but many contractors are finding ways to overcome these hurdles and soldier on. Here’s a peak at what six contractors are doing.
The San Francisco Bay area continues to be fast-paced in most sectors, says Greg Eckstrom, vice president of California Drywall, based in San Jose. While Apple, Google, Facebook and Linkedin are not in major expansion mode, they continue to grow and health care, education and public sector work are active. “Large-scale condo and apartment projects are going all over the place because we’re suffering severe housing shortages,” Eckstrom says.
Busy times see California Drywall already booking work into 2020. Managing backlog can be a challenge, Eckstrom says, adding that since 2015 the company has been trying to pare down its field staff to peak at 900 or so, from a maximum of 1,100. “The challenge is to not overcommit to projects that we can’t put in place to satisfy the owners, GCs and make us money,” he says.
Meanwhile, labor scarcities persist, and Eckstrom says much of the building industry in the region lost “many productive” Hispanic workers through audits several years ago. “There are significant numbers of people who have historically worked in this industry who aren’t here and can’t be anymore,” he says. “I know someone who has lost 20 percent of their workforce.”
To make up for the smaller labor pool, production efficiencies are paramount. The contractor’s 50,000-square-foot prefabrication facility goes a long way to meet that end, providing “prototypes” or “prefab firsts” for client needs. Examples include multiples of framed soffit units and bathroom kits for large hotels. Clients approve of the approach because it helps keep project sites clean and allows for just-in-time deliveries, he says.
Keeping workers satisfied is another key to meeting production schedules, Eckstrom points out, noting that often the biggest carrot is to simply provide employees with steady work.
Ranked the sixth largest drywall contractor in the United States last year, California Drywall takes education and training seriously. All of its foremen require OHSA 30 training, and superintendents need FST (SST) training.
Automated software includes Critical Field Orders that allows for embedded photographs to be integrated into PlanGrid which is used by other subs and GCs. “It really helps because we don’t have to fill out change orders,” Eckstrom says.
All Wall Contracting Inc.
The last half 2018 and next year are forecast to be “extremely busy” in the inland northwest—a region covering central and eastern Washington, parts of Idaho, Oregon and Montana, says Dan Ratza, senior operations manager, All Wall Contracting Inc. based in Post Falls, Idaho. But while business is brisk, margins remain tight in an area dotted with smaller cities and towns.
With a staff of about 150, All Wall does about $20 million in business annually. Health care and federal government projects—the lion’s share of its business—are often “the most challenging,” Ratza says, because of paperwork, rules and regulations.
Ratza says the company has developed an in-house apprenticeship program to tackle the growing demand for skilled labor. “We’re targeting kids right out of high school,” he says. He advertises through social media and believes it is easier to draw young people to the field because of the blue collar demographics of the region. “Many of their fathers and their families have grown up doing hard skilled labor (logging and mining, for example) here,” he notes.
Competitive wages, incentives and benefits packages plus opportunities for advancement are enticements for young workers. The next big challenge is to get a new generation of workers up to speed to replace many crew leaders and superintendents retiring in the next five years, he says.
In the meantime, the contractor has taken to prefabrication—headers, combination stud packs and other things are prepared in shop—to improve efficiencies on site.
Ratza says steel tariffs have affected a number of his contracts. It is not just hikes in steel stud prices, but also metal lath and finishing details such as metal reveals and corner beads that are up in price.
All Wall Contracting operates a satellite office in Anchorage. Many of its projects—schools and community service buildings—are in the bush. “A lot of equipment (materials) has to go in on barges so that is a major challenge around logistics,” Ratza says.
Delta Dry Wall, Inc.
One of the hottest construction markets in the United States is Denver where Rusty Plowman, co-owner of Delta Dry Wall, Inc., says, “If you are not busy here, there is something wrong with you.” The fast pace is expected to continue well past 2019, buoyed partly by large public works projects, including the Denver International Airport and a multiyear upgrade at the National Western Center’s Stock Show campus.
Backlogs at Delta Dry Wall are solid through the year, says Plowman, noting that he could fill in about $1 million work. The company does between $10 million and $10.5 million annually, primarily in the commercial sector, but it also does residential work and other sector projects.
One of the side effects to boom times is the scarcity of good workers. Delta Dry Wall has a corps of about 100 good workers but when times get busy that number can top 150. The only resource is temporary labor suppliers, he says, but the skills of those workers are often inadequate. “For every 10 guys you probably get three that you can use,” Plowman says.
Having well-established relationships with GCs, Delta can be selective about what jobs it takes to ensure it doesn’t get over its head—without ample labor to meet project demands. Using a large corps of temporary workers can “cost you money,” Plowman says. “There is definitely some of that (problem) for everyone in this town right now.”
Plowman he has partaken in recruitment drives to high schools but convincing students that the trade is a good career, offering a good salary and long-term employment can be “an uphill battle,” he says. He suggests that the local AWCI chapter could promote the industry and possibly develop a program for young people to get into the field. “As an industry we all need it,” he says.
Qualified lead people are his biggest need—“most of our guys have worked their way up the ladder,” he says.
Delta Dry Wall takes new technology seriously. The company recently purchased software (Foundation construction accounting) for daily job costing. “We keep up-to-date,” Plowman says. “My guys are pretty proactive about looking at what’s new (and useful).”
R.F.J. Meiswinkel Company
Margins are inching up for R.F.J. Meiswinkel Company in San Francisco. “There is so much work to bid on that everyone’s backlog is full, so everyone is able to raise their margins a bit,” says Kristen Meiswinkel, managing director. Still, margins are a far cry from a decade or more ago, and obtaining money from GCs for change orders can be time-consuming. “It affects your cash flow,” she says.
The wall and ceiling contractor works primarily in the San Francisco Bay area and has 100 to 120 people in the field. When work is hectic and labor is short, the contractor “works with its competitors” to fill labor gaps. “We might say, ‘Hey, I need five tapers,’ and then when our guys get slow we lend them people,” Meiswinkel says.
Swapping workers is hardly a panacea, however. “We recently had to pull out of (bidding on) a really nice looking job because we didn’t have enough people to man it,” she says.
A project manager or assistant project manager tops the contractor’s priority needs, and while Meiswinkel typically promotes from within, she says, “It is hard to get guys from the field into the office.” The contractor places help wanted ads online through Indeed.com.
Like other contractors, Meiswinkel says unpredictable materials prices—partly because of “the trade (tariff) wars”—are confounding.
But Meiswinkel says the future looks bright (it has a backlog through to 2020), and the contractor has a young, forward-looking management team that won’t be caught unprepared by a downturn as it experienced in 2008–2009 when staffing went from 183 to 12. “It was a tough time,” she says.
Commercial Enterprises, Inc.
Margins continue to be tight in New Mexico where “you are bidding just a bit over overhead” to be competitive, says Barry Escher, president of Commercial Enterprises, Inc., the largest comprehensive wall and ceiling contractor in the state. “There is always somebody out there really bidding cheap,” he says. “We haven’t seen any increases over the last several years.”
Originally based in San Diego, the company opened its doors in New Mexico in 1994 with Escher and partner Roger Pryor as co-owners. Today the contractor does institutional and commercial work throughout New Mexico and also does many schools and hospitals in northern Arizona and parts of Colorado for the Navajo Nation.
“Schools (between $1 million and $3 million contracts) have kept us going,” says Escher, pointing out that the economy is flat in Albuquerque where house prices haven’t risen in about a decade.
Escher says his $25 million backlog—“as big as we have ever had”—will carry through 2019 with an $8 million federal office building contract in Albuquerque. The contractor doesn’t worry about soaring materials prices because it gets price protection at bid time through its supplier, Chaparral Materials. “They are great to work with,” he says.
Escher says the shift by some contractors to prefabrication is impractical at Commercial because many of its jobs are on “wide open land” spread across the state and into Arizona and Colorado. “We can build stuff in place faster,” Escher says.
Asked about new technology to improve efficiency, Escher says he is “old school. We do not use computer systems. Even our estimating is done longhand.”
He says on a hospital job where BIM was employed, “it seemed like everybody needed a computer but nobody was putting the drywall up. It turned into a nightmare. I have said for years that the only way to make money is to put it on the wall.”
Commercial runs a field crew of up to 250, but it hasn’t had a labor shortage in years. High wages are one reason. “Most of our jobs are prevailing wage (under state legislation), so we pay $32/hour and the union pays $22/hour. As soon as we need people, everybody jumps ship to work for us.”
Another reason labor is never scarce at Commercial is that it operates a state-approved apprenticeship training program, similar in framework to the union’s apprenticeship system. “We have job superintendents that started out as apprentices here and worked their way through the trades,” he says.
Escher says if there is one person he would hire today, they would have the managerial skill sets to replace him. “I’ve been at retirement age for several years,” says the 74-year-old, adding he sticks around because he enjoys the work. “I still feel like I am about 40.”
Precise Drywall, Inc.
This Phoenix-based wall and ceiling contractor has had a good year to date. “Right now we’re at capacity—any busier and we’d be over-capacity,” says president Jeremy Barbosa, noting that backlog is solid and the construction outlook is positive for the next two or so years. “Better times are ahead than we just left behind,” he adds.
Skilled labor scarcities remain the biggest issue for most contractors in Phoenix, however, Barbosa says. A medium-size contractor, Precise Drywall could use more estimators, journeymen and foremen.
He says that while contractors don’t “share manpower” to help each other during busy times like they did 20 years or so ago in Phoenix, there might be potential for the development of such an initiative through the Association of the Wall and Ceiling Industry.
Most training in the open shop state is done in-house, but that could change. Barbosa, who is the president of Arizona’s AWCI chapter, says the chapter and the community college district are developing an apprenticeship program that could be operating in a year or so.
A sizable underground workforce continues to hurt the industry—particularly the residential sector. Twenty years ago Precise was a luxury residential contractor, but cash-only competition has pushed it into the commercial arena. “The bleed-over (into commercial) is definitely here now, and if you give it long enough in a booming economy, it will become worse,” he says.
Barbosa calls himself “a big tech geek,” noting that Precise operates an integrated system that includes ERP, estimating, plans and other applications. “Integrating our office … has taken a couple of years to polish and build the database,” he says. “We’re probably 30 to 40 percent through the process in the field.”
Prefabrication is also important, and Precise is in conversation with a large EIFS contractor on a partnering arrangement. “We could probably put something together in terms of panelization in the next 12 months, year-and-a-half or two years,” Barbosa says.
He says while materials prices continue to rise, contract proposals must clearly state that prices are based on “when the materials are shipped and dropped,” not on when they were ordered. “A lot of guys are getting stuck because they bid it and didn’t clarify those things.”
Don Procter is a freelance writer in Ontario, Canada.