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Firms Muddle Through Low-Growth Market

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Three years into the economic downturn, many specialty contractors aren't sure what to make of today's market, much less where it is headed. Although the construction industry has weathered its fair share of cycles over the years, top brass at the region's largest firms have never been through a down period that lasted quite this long. This is new territory, even for the industry's most-seasoned executives.

Photo courtesy TDIndustries
TDIndustries' largest 2010 start was a $20-million contract at Scott White Hospital in College Station, Texas.
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With private dollars still squeezed and public money running low, there is no clear path to long-term recovery, says Harold MacDowell, CEO of TDIndustries, Dallas.

“It's a muddle-through economy,” he says. “It's going to be a long slow climb out of this thing.”

And that's from an executive who saw his company's regional revenue grow to $290 million in 2010 from $275 million in 2009. In fact, the company increased its work force by 10% in the last six months and is now at historically high staffing of around 1,650. Still, MacDowell and others are nervous about the fundamentals.

TDIndustries has seen its fair share of big projects. In 2010 the health-care sector provided the firm a shot in the arm. That year it completed a $19-million contract on the Blue Cross Blue Shield Corporate Headquarters project in Richardson, Texas, and it started a $20-million job at the Scott & White Hospital project in College Station, Texas.

But other sectors are less encouraging, especially in the private market. “You talk to banks and it doesn't sound like anything new is getting financed,” he says. “The equity requirements are high.”

Instead, MacDowell sees clients making do with what they have. The company runs an operations and maintenance division that he says is doing well. Work on existing buildings that need systems upgrades is also available. But the big dollar greenfield projects remain elusive.

Market Correction

Despite the current concern, many of the region's top firms saw revenue bounce back in 2010. The top 10 firms that responded to ENR Texas & Louisiana's surveys for both the 2009 and 2010 fiscal years saw revenue rise, collectively, to $2.4 billion in 2010 from $1.94 billion in 2009.

Still, finding stability is a precarious process, especially for firms that worked heavily with private sector clients prior to the recession. Michael Vickery, vice president of business development at Baker Triangle, Dallas, says the move by specialty contractors from private work to public projects is the most dramatic shift he has seen during his 35 years in the business.

“If the makeup of your company was well-suited for the marketplace in 2006 and 2007, then clearly the makeup of your company cannot look the same today if you want survive,” he says. “We've had to restructure in a lot of ways to be successful in this marketplace.”

While the drywall and ceiling contractor took minimal work in the public sectors prior to the recession, Vickery estimates that 80% of the firm's revenue now comes from state, local or federal projects. The shift was evident in 2010, when Baker Triangle completed a $14.6-million contract at the W Hotel & Condominium project in Austin and started an $18.3-million contract at the federally funded San Antonio Military Medical Center project in San Antonio.

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