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Giants 2018: More money, more problems

Yes, the nation’s largest mechanical contractors are reaping the benefits of a booming economy, but they are also facing challenges that range from a tightening labor market to the ever-increasing pace of technological transformation

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It has been another strong year for the nation’s largest mechanical contractors. Combined, the companies on our Book of Giants listing made over $28 Billion last year, and most are optimistic about the year ahead.

And why wouldn’t they be? The U.S. economy has just experienced 16 consecutive quarters of growth (source: www.statista.com/statistics/188185/percent-chance-from-preceding-period-in-real-gdp-in-the-us/). The worst after-effects of the Great Recession seem to have worked their way out of the system. The federal government – despite sometimes sending mixed-messages – has recently put forward the kind of tax and regulatory policies that are seen as helpful to larger businesses. And the Feds have certainly been making all the right rhetoric about the kind of large-scale infrastructure investment that many big mechanical contractors are ideally positioned to benefit from (although an actual bill has yet to materialize).

Scroll to the end to download an e-book of CONTRACTOR's 2018 Book of Giants.

Yet headwinds persist, some of them a natural outgrowth of success. As I write this, unemployment is under 4 percent for the first time in 17 years. Great news for the economy, but bad news if you’re looking to hire. An additional complication to the lack of warm bodies is the lack of capable hands; an entire generation raised with the belief that the four-year college degree was the ticket to financial security has found itself struggling in the job market, while good-paying jobs in the skilled trades go begging.

In response large mechanical contractors (at least, the ones who want to keep growing) are fighting to gain efficiencies at every turn; to train, equip and prepare their people, to streamline their processes, so that each technician in the field has the impact that two, five, or ten used to.

And that means an investment in technology – which in turn creates its own set of challenges. If all the various trades on one project are working off the same BIM model, what do you do when the network goes down? If every one of your service techs is scheduled and dispatched via a mobile app, what do you do if that app gets hacked? If every single appliance you’ve installed over the past four years is sending twenty separate data points an hour back to headquarters, who has to sift through that mountain of data? Who decides how to use it to best deliver value for the company and its customers?

To try and get a handle on what it means to be a large mechanical contractor in 2018 we reached out to several companies in our Book of Giants to get their opinions on the Marketplace, the Workforce and how they are investing in and using Technology.

TDIndustries, Dallas, TX

Founded in 1946, TDIndustries is a construction and facility services company, serving clients from engineering and building through operations and maintenance. The company has worked in sectors as diverse as aviation, manufacturing, healthcare and educational institutions. The company is 100 percent partner-owned, and makes servant leadership – where leaders are first and foremost the servants of those they lead – the keystone of the company’s culture. TDIndustries ranks at #6 on our Book of Giants with $605M in revenue.

McKinstry, Seattle, WA

McKinstry has been in business since 1960. They are a full-service design, build, operate and maintain firm with over 1,800 employees. The company is noted for its work in healthcare, renewables and government/municipal sectors. The company makes no secret of it formula for success: developing and maintaining long-term relationships with its clients by making buildings that are good for their occupants, their owners and the environment. McKinstry ranks at #8 on our Book of Giants, with $550M in revenue.

Ivey Mechanical Co., Kosciusko, MS

Established in 1947, Ivey has more than 1,000 employees (over 90 of which have been with the company for more than 25 years). For much of the company’s existence, Ivey Mechanical was a family-run business, and it still clings strongly to the values of its founders: integrity, loyalty, experience, quality, reliability and safety. Ivey Mechanical ranks at #40 on our Book of Giants with $177.30M in revenue.

The Marketplace

While most of our Giants have similar opinions on the overall direction the economy is moving, each one sees the marketplace – naturally – through the lens of its own experience within its own operating region.

“For 2017 we finished slightly above our plan on the revenue side,” Mark Jonson, VP/General Manager for McKinstry says. “We’re in a very active market here, the Greater Seattle Region, so about 5 percent increase over our projections. For 2018 we’re projecting that we’ll hit on plan. It’s still early, so some of our projections may be a bit conservative. Because of the robust market, we’ve raised the bar a bit for this year.”

Nicholas Upchurch, Vice President of Business Development for Ivey Mechanical is also optimistic about 2018.

“2017 was about what we expected,” Upchurch says. “We expect 2018 to be a little bit higher. There are more large projects coming into the marketplace than we’ve ever seen as a company. There’s a lot of excitement going on in our market now; more large projects going on at one time in Mississippi than we’ve seen in the last ten years.”

Upchurch says that very active market segments, from Ivey Mechanical’s point of view, include healthcare, education and heavy industry.

TDIndustries saw steady, if not spectacular growth in 2017. “Results were on par with our expectations,” Hattie Peterson, Senior Vice President, Marketing and Communication for TD says.

“Construction still remains strong in Texas with the strongest growth occurring in North Texas (Dallas/Fort Worth and the surrounding areas). Austin and San Antonio have seen stable growth, while Houston remains flat.”

TDIndustries is expecting an uptick in the market to occur in the third and fourth quarter of 2018 that will hopefully continue into 2019. “While we don’t foresee as many ‘mega’ projects occurring like we’ve had in the past few years,” Peterson says, “TD still expects to see steady growth in commercial healthcare and mission-critical markets throughout the southwest region.”

The Workforce

While the dearth of skilled workers is hitting all the Giants to one degree or another, the workforce – like the marketplace – is highly dependent on where your company is located. Workforce development is a particularly acute problem for Ivey Mechanical.

“The hiring situation is terrible in Mississippi,” Upchurch says, “especially higher craft, skilled workers. And it’s definitely getting worse.”

Ivey Mechanical, like many other Giants, has been reaching out to the its local community, trying to cultivate its next generation of workers by offering training and employment opportunities.

“We’ve teamed up with the local community college and started a plumbing class,” Upchurch says. “It’s been a huge success. The first class of 18 recently graduated and we’ve placed all 18 into jobs, mostly at Ivey.”

Ivey Mechanical

TDIndustries is making a similar series of investments both to recruit and retain high-quality employees. “Our recruiting efforts are focused not only on hiring experienced tradespeople,” Peterson says, “but also new graduates from both high school and college, both women and veterans. Additionally, we believe in life-long careers. Training, both technically and in the soft skills such as management and leadership, is critical. We provide 100 percent educational reimbursement (which includes not only tuition, but also books and mileage as well has hands-on training). TD also offers full benefits after 30 days, including a more than 50 percent match to both our 401(k) and our employee stock ownership program.”

At McKinstry, one of the most difficult challenges of the tough labor market is maintaining high standards for potential employees. “We can be tempted to select someone who is ‘good enough,’ and not necessarily the best candidate. We have to guard ourselves against that,” Jonson says.

McKinstry has also adopted a “grow your own” ethos. This summer the company will take on approximately 20-30 interns, young people at the start of their contracting careers, and seed them throughout the company. “It’s an extended job interview,” Johnson explains. “Once they graduate we’re able to bring them on board. It sets them up for future career growth at McKinstry.”

McKinstry also participates in Camo2Commerce (http://pacmtn.org/job-seekers/military/camo-2-commerce). The program allows individuals in the military who are transitioning back to civilian life to work for the company several days out of the week. As with the interns, the veterans are seeded throughout the company for an extended period.

For all the Giants we were able to in-depth interview, the hardest positions to fill seem to be the more senior roles that combine experience, leadership, specialty education and technical know-how; roles such as business development, project management, engineering and superintending.

Technology

Investment in technology is seen as the possible solution to the productivity problem that bedevils the contracting and construction industries. “If you look at productivity across the construction market,” Jonson says, “it has not kept pace with other industries. We think technology is how we can make some gains in this area.”

McKinstry is investing both in software and in software-literate personnel in the hope of moving the productivity needle. They also have their eye on Big Data. “With the prevalence of the data being generated by smart buildings, we’re looking for technology that enables us to capture that data effectively and efficiently at a low cost, to understand what that data is telling us and to feed that back into the process we use to operate buildings,” Jonson says.

Ivey Mechanical has already seen some technology-driven gains in productivity thanks to investments in BIM (Building Information Modeling) and in fabrication. Accurate modelling means larger sections of a building’s mechanical systems can be created in the fabrication shop instead of on the job site, and working the in the shop is typically faster, more efficient and requires fewer workers.

“Our biggest focus right now is on productivity,” Upchurch says, “where you can go into fabrication or BIM drawings, track productivity through iPads and bring it all down to the field level.” Ivey Mechanical is also excited about cutting edge-technologies such as Augmented Reality. The hope is that, in the future, instead of looking at the BIM display on a tablet, technicians will be able to switch on their AR-goggles and actually perceive the job site as if they were inside the BIM display.

TDIndustries is taking a two-pronged approach to its technology investments. On the one hand, continuous, aggressive improvement to company processes, and on the other innovations that will transform how the company does business.

So yes, it’s a great time to be a Giant. But it’s no time to coast on past successes.

“For process improvements, TD practices Lean principles and uses Lean tools in all aspects of our work from design and construction to service to manufacturing,” Peterson says. “We are constantly training and implementing best practices to lower cost and improve schedules while maintaining quality.” Some of the technologies the company has invested in have been mentioned, including virtual design and construction, prefabrication/modularization and virtual and augmented reality.

For transformational innovation, the company is actively funding and pursuing new tools such as exobionics (wearable machines that can amplify the motions of their pilot), intelligent field communication systems, and various improvements to both software and equipment.

Key to their strategy is empowering their workforce to invest in those new innovations that they see as most potentially rewarding, instead of having all such decisions in the hands of a CTO or small technology committee. “We also created a TDBank to spur innovation and ideas from all areas of the company,” Peterson says. “These funds are available for small innovations to large investments in new market areas. Our partners are the best resource for improvement and growth, and we invest heavily in their development and in the ideas they bring.”

So yes, it’s a great time to be a Giant. But it’s no time to coast on past successes. Now more than ever the industry needs to reach out to its communities, to invest in its workforces, and make or find those tools that will help it work smarter.

To download a free e-book of our 2018 Book of Giants -- including our Top 100 listing and a break-out of our Top 50 by Type of Work -- please fill out the form below.

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