Top Specialty Contractors of the Southwest

Subs Affirm Stellar Growth

by Scott Blair

Statistics gathered for Southwest Contractor's 2005 Top Specialty Contractors clearly demonstrate how busy subcontractors have been. The following pages contain analysis of the 2005 performance of leading subcontractors in the region, breaking down their revenue into categories such as concrete and steel, and ranking them by state.

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The Top 165 specialty contractors rose to nearly $4.5 billion in combined 2005 revenue. This reflects an almost 39 percent jump over last year. Since 2002, the revenue reported by the top subcontractors has nearly doubled.

"Certainly, we were pleased with 2005's results and benefiting from the strong construction market demand experienced by our clients," said Scott Schuff, president and CEO of Schuff Steel Company in Phoenix, Ariz. "Our employees' commitment to producing top results for our clients is the primary reason for our continued growth and success."

Schuff Steel ranked sixth in the Southwest, and second in the steel category.

Growth occurred to a higher degree in the largest firms - the top 10 subcontractors saw their revenue rise nearly 50 percent over the previous year. However, smaller firms had nothing to complain about as their revenue jumped an average of 33 percent.

"Great employees and a strong economy are key factors to our success," said Joe Cruz, president of Star Paving Corporation, an Albuquerque-based paving and concrete contractor. "I would also point out that our federal, state and local governments, working together, are providing a positive business atmosphere for New Mexico." The firm ranked 60th overall, and sixth in New Mexico.

New Mexico subcontractors as a whole reported 68 percent more revenue in 2005 than in 2004. Arizona increased 16 percent to just over $2.3 billion, while Nevada subcontractors soared up 78 percent to $1.87 billion in work.

Contractors could not just rely on market conditions for success. "The key to success in 2005 was surviving the previous years of economic drought and the highly competitive bidding environment," said Gordon Holladay, chief financial officer with SME Steel Contractors, Inc. "I credit SME's president, Craig Moyes, and the management team for navigating through some of the most complex business conditions in over 30 years."

Despite the abundance of available work, subcontractors needed to manage their workflows smoothly to succeed. "The improving economy has helped, but mostly we are pleased with our field productivity and our planning on the projects," said Kevin Yearout, president of Yearout Mechanical in Albuquerque. "Our goal setting is really proving to be beneficial."

As a group, mechanical contractors reported a total of $699 million in revenue for 2005, up over 23 percent.

Goal setting was also important to the Phoenix location of Walters & Wolf Construction Specialties, a glazing and curtain wall contractor. Craig Weltz, vice president and chief operating officer, attributed the firm's success to their employees who worked to achieve pre-determined goals.

"Our market takes hard work to be successful," he added.
Subcontractors face many challenges in order to sustain this level of growth. For example, steel contractors were hit hard with rising costs.

"Rising material costs and manpower are definite concerns," said Todd Leany, president with Century Steel, Inc., Las Vegas. "The only way to avoid material escalations throughout the course of a project is to purchase and stockpile the raw materials on the front end, and then fabricate and deliver as you go."

Schuff tries to ensure that material prices won't derail their projects before construction even starts. "We're attempting to lessen that impact to our clients through innovative design-assist input for the project that results in optimizing the material selected and reducing installation costs on the project," Schuff said.

Though Yearout Mechanical has overcome their materials cost challenges and expects additional growth next year, other challenges loom ahead. "The biggest problem we face is qualified manpower and supervision resources," Yearout said.

One of the largest private construction projects in history, Project CityCenter, is just getting underway in Las Vegas. As a result, manpower shortages could reach epic proportions. "We have to raise the performance level of all our existing employees, while simultaneously training people that are virgin to the industry on a rapid basis," Leany said.

Despite these challenges, subcontractors are prepared to ride this current economic wave as long as it lasts. "In 2006, I am expecting our business to be 50 percent better than in 2005, and I anticipate 2007 will be just as successful," Cruz said. "I'm very optimistic about the future in this industry, and growth in population and the economy continues to drive the market."

"Our primary markets are benefiting from increasing population and employment growth which results in office, hospitality, industrial and retail expansions," Schuff said. "The population growth trends forecasted for our markets leads us to be optimistic for the future of the region."

All rankings are based upon surveys sent to specialty contractors throughout the region. Only those firms who responded with their 2005 revenue were included in the rankings. Every effort was made to contact each company at least once, but we regret any oversights.

Special thanks to Tom McClure for administering and compiling the data. Please contact him at 602-631-3080 if you wish to be included in next year's ranking.

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