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Backlogs float larger companies


Despite the weak economy, which has hit the construction industry particularly hard, large builders say they are still finding opportunities.

“Our clients for the most part have weathered the storm well,” said Geoffrey Hall, New York-based senior vp of the construction industry practice at ACE USA, a division of ACE Ltd.

“Backlogs have all begun to increase” at the biggest builders, said Tom Miller, senior vp at Lockton Cos. L.L.C. in Kansas City, Mo.

“We're doing well,” said Kosta Bitsis, project executive and vp of special projects at Dimeo Construction Co. in Providence, R.I. “Obviously there are less project opportunities and a lot of competition, but we had such a fantastic backlog of work that it allowed us to almost ride out the downturn,” he said.

Dimeo has been working in the academic and institutional markets and multifamily residential construction.

“We shrank a little, but for the most part we maintained our workforce, and we've actually started hiring again,” Mr. Bitsis said.

Dimeo's challenges include higher materials costs, just as financing has become more difficult and institutional clients have reduced or deferred capital investment as fundraising declined.

“Since 2004, Dimeo has been involved with over $1 billion in sustainable projects,” Mr. Bitsis said.

“We're seeing a clear movement of our clients and others to LEED-certified buildings,” said Mark Gryc, vp and chief engineer at Factory Mutual Insurance Co., which does business as FM Global, in Johnston, R.I. Dimeo built FM Global's new LEED-certified headquarters.

Green construction is “good for the local economies” because local suppliers are used, “so you're not transporting materials across the continent,” Mr. Gryc said.

“I wouldn't say the downturn in the economy has had a big effect on us,” said an executive at one of the five largest U.S. construction companies, who wished to remain unidentified. “We're a diverse contractor with a big backlog built before the economic troubles came along. We continued to maintain our revenues and backlog and profitability. I believe this is the case with all the big companies,” he said.

“We've done well, although it's a lot more competitive now,” said Warren Perkins, vp of risk management at Boh Bros. Construction Co. in New Orleans. Boh Bros. has been in “a unique situation” because of its involvement with recovery efforts in New Orleans after Katrina, funded with federal money.

“The bubble's going to burst” as federal funding ends, Mr. Perkins said, and Boh will again bid on infrastructure projects in other states, he said.

Joseph Jarboe, senior vp at Clark Construction Group L.L.C., said the Bethesda, Md.-based builder has done primarily publicly funded construction work in the past two years, including projects in Washington, on military bases and a Veterans Administration hospital in New Orleans.

“We're maintaining. We're certainly not growing,” Mr. Jarboe said.

But “there's a very big question mark about funding at the federal level” going forward, and private owners have put off building due to the uncertain economy, Mr. Jarboe said.

“A key element in turning the construction industry around is confidence,” said ACE USA's Mr. Hall.

Despite “competition getting increasingly fierce,” Clark “has a set of guidelines and standards we want to work within,” Mr. Jarboe said.

Successful builders have maintained their standards, sources said.

In a down economy, “there's a temptation to cut corners, which can be very dangerous,” said Jim Conroy, vp and chief underwriting officer of construction commercial markets at Liberty Mutual Group Inc. in Boston. “The successful, forward-thinking contractors have to understand that even though the profit margins are tight,” safety, quality materials and a high-quality workforce are important.

“In boom times there's no need for contractors to look for ways to reduce costs,” said Seth Hausman, Minneapolis-based head of operations and profit management for Zurich North America's construction business.

“Our customers who have been most successful (in the downturn) have been much more aggressive in risk management,” with “pretask planning” to avoid expensive rework; focusing on “supply chain risk” to ensure products will perform as intended; and integrated project delivery, which involves collaborating among engineers and contractors to find ways “to drive costs out of a project,” he said.