Construction companies: There's a lot of work, but trouble finding workers

Vermont's construction industry reports a strong and successful year, with large projects being built by Vermont firms not only here, but in 12 other states as well.

Construction firms like Pizzagalli Construction Company in South Burlington, Engelberth Construction Inc in Colchester, John A Russell Corporation in Rutland and Bread Loaf Corporation in Middlebury are in Vermont Business Magazine 's list of Top 100, side by side with such well-know companies as Orvis, Bell Atlantic, C&S Wholesale Grocers, Inc and Ben & Jerry's Homemade, Inc.

"Compared to past years, it's been going well," said Thom Serrani, executive vice president of the Associated General Contractors of Vermont. "Everybody is still busy. What with the above-average temperatures and the pretty decent weather we've had this fall, and in general, I think our people are very happy with the way things have gone."

Many Vermont contractors, especially Pizzagalli ($228 million, 750 full-time employees) which builds all over the United States (see sidebar), have expanded to the point where a majority of their business is done out-of-state.

Kessel/Duff Corp ($15.1 million, 25 FT employees) of Williston, for example, estimates that 90 percent of its business is now done in New Hampshire, Massachusetts, Maine and Connecticut.

"I don't know if the construction industry in Vermont, except in the late '80s, has ever boomed," said Kessel/Duffs president; Brad J Carter. "So you have to look out of state to maintain a healthy workload." Most of the out-of-state work originates from in-state contacts, Carter said.

"It comes from people who are established customers who have decided to expand their business out of state," he said. "Another portion is the Hanover-Lebanon are which we consider local projects."

LACK OF SKILLED LABOR

Although business is booming, the labor force is smaller than it was during the last boom period, 1989, when there were 17,850 workers. That was a high water mark; now there are 13,200.

"I was aware we had shrunk," said Otto A Engelberth, CEO of Engelberth Construction ($95 million, FT 260). "But in 1989, we did not have normal circumstances. The total state was on a growth and development binge, primarily made possible by the availability of bank credit. That circumstance has not repeated itself."

Many tradespeople left the construction field after the real estate crash in 1989 and never returned.

"Nineteen eight-nine was not only extremely deep in the drop-off, it also was lengthy," said Maynard McLaughlin of Bread Loaf Corporation ($31.5 million, FT 100). "People were getting out of construction, saying. "That's enough for me, I'm going to go into something else." At this time, we are still carrying the baggage of that downturn, as far as our ability to attract people into the industry. We have to make an effort to let younger people to know this is a good profession and there is a good living in construction."

Serrani believes that since the 1960s, an emphasis on liberal arts education has drained the pool of skilled trades workers.

"It's a national problem that finds itself in a number of attitudinal and societal concepts," Serrani said. "We've brought our kids up to believe that everybody has to o to college. That's a national theme that we've trumpeted since the 1960s. Because of it, a lot of people just don't think of going into the trades. But back five or six years ago, during the recession, there were a lot of tradespeople making good money, and a lot of college graduates who were out of work."

An aging labor force is another problem, Serrani said. "As tradespeople who started in the 1940s and 1950s get into their 50s and 60s and 70s -- as they retire and die off there are not folks coming along to fill the spots," Serrani said. "We started seeing this 20 years ago with masons. People didn't go into it; it was heavy work lifting rocks and walls. To find a good mason today, you pay good dollars. Same thing is coming through with electricians. There's a nationwide shortage."

The labor shortage has forced some companies to be unusually creative in their recruitment techniques. For example, the John A Russell Corporation ($47 million, FT 170) of Rutland sent recruiters to Bangor, ME.

"There's not a lot of work in Maine, so we went up there and hired workers." said Mark Russell, director of marketing. "We got around 10 or 15 people. When they came down here, we had to put them up. That was the big one we tried, but we've tried a lot of things this year. We didn't know what the results were going to be, but we tried them because we had no other choice. We tried an incentive plan with our employees. They bring the name of someone to us, and if we hire them, the current employee gets allotments of money for six months and a year if the new employee stays with us."

Another way of handling the labor shortage is by scheduling. "We've had to deal with the increases in construction by utilizing our workforce in a different way," Engelberth said. "Generally, that means scheduling the work so you don't have peaks and valleys. But when you have circumstances where there are special crunches, you tend to work more hours."

To meet the coming need for trades workers, Serrani's organization has been working with the schools and a variety of organizations (see sidebar).

"The Vermont Construction Careers Council is a group of construction people from various trades and associations who are out there trying to educate young people in what the construction industry is all about, and train kids," Serrani said. "The American Association of General Contractors is promoting 'Build-Up." It gets into fifth grades across the country and teaches them what construction means."

Serrani's organization also tries to promote a new image of the industry.

"Contractors are business people," he said. "Tradesmen become company owners. There is a career ladder. There will always have to be someone to build something. There will always be roads and buildings and sewage plants. It's important we have the resources to do it in our own country."

ASSOCIATED INDUSTRIES DOING WELL

The boom in construction affects related industries, such as lumber, plumbing and electrical suppliers.

For example, at Rice Lumber (10.8 million, FT 30 of Shelburne, President James Carroll reports that from June on, "it has been going at a pace that kind of reminds me of the late 1980s. Every month keeps becoming a record month as far as volume of sales. Currently, we see no let up. We have jobs lined up through the winter."

Normally in December, Rice, which focuses on Chittenden County, would be doing 30- or 40 percent less business than it's doing right now, Carroll said, "and we don't see it letting up. People are still putting foundations in."

Keeping the builders supplied during a boom time is difficult, Carroll said. "Everybody's been taxed getting materials from the wholesaler to the retailer to the job sites," Carroll said. "We've been stressed at times, with too many commitments."

It's an especially busy season for Rice because Moore's Lumber in nearby Williston was bought by a Midwest chain which closed it. So Rice has picked up not only the extra business, but some of the employees. Even with the new employees, the pace of business has become intense, Carroll said.

"As far as business, it's been incredible, but a the same time it's been very difficult," he said. "We're trying to do too much with not enough personnel, and everyone's stress level is a little high. If you have inefficiencies in your business that might not show up when you're not so busy, they're showing up now."

FIELD LEADERS

Vermont Business Magazine interviewed several of Vermont's top construction companies to see what was happening in the field. Here are their reports:

* Engelberth Construction Inc of Colchester reports a busy season with a good mix of work, both geographically and by type -- industrial and institutional as well as in retail construction. Next year looks to be equally strong. The company also has an office in Bedford, NH.

"New Hampshire has bounced back significantly from where it was in the early 1990s," said owner Engelberth. "However, the construction market had essentially collapsed in the late 1980s, and it had a lot to overcome to get back to normal. But is has experienced quite a lot of growth."

Engelberth, who started in the construction business in 1972, said that he finds a great deal of personal satisfaction in his work. "I find it a fascinating business, and I particularly enjoy the people who are in it," he said. "By and large, they are hardworking, straightforward, honest people. Construction has a very strong human element to it. Each project is unique, and therefore has its own unique set of issues to be solved and dealt with. We also have the advantage that when we are done, generally, we can observe the results of our work over a period of time. I've also had the satisfaction of seeing people grow in their capabilities and responsibilities. The work has made it possible for them to have a quality of life that allows them to have families and become productive members of their communities."

* The John A Russell Corporation, of Rutland, reports a very busy season.

"There's a lot of work out there," said marketing director Mark Russell. He is the third generation of the Russell family working in the company, which was founded in 1934. "And we continue to stay busy. We're trying to hire people even now, and usually at this time of year. we're laying people off. But we haven't turned down work that we've wanted."

This year, the company is building Solitude Village at Okemo, which Russell said represents about $10 million worth of work. It has do a lot of work for OMYA in Florence, as well as the state office building in Newport and the Discovery Center and a restaurant at Mt Snow. Despite the boom, Russell's sales this year will be flat.

"We're at a plateau," Russell said. "Last year we had $50 million, and this year is the same. But the top line doesn't count. It's the bottom line that matters, and it's good." Russell estimates that his company does 35 percent of its work out of state.

"We're doing projects in Texas, Massachusetts and Ohio right now," Russell said. "We have good clients that we move around with. They do work all over the country, and we go around with them."

Next year is starting to shape up, Russell said, but he expects sales again to be flat.

"We're the type of company that's not looking to grow by leaps and bounds," Russell said. "We like to handle only so much work. We've never looked to grow this thing quickly. We like to be steady."

* Bread Loaf Corporation of Middlebury also reports a good year but flat sales.

"The economy in Vermont seems, at this point, to be holding up quite well," said President Maynard McLaughlin. "We have held steady the last two years by design. We were not looking to do any more this year than we did last year. First, because of some new processes we have instituted in the company, we wanted to make sure they were in place and being carried out before we expanded. And second, because it has been difficult to find qualified help on any level, and by that, I mean tradespeople and professionals."

Bread Loaf has turned away work in order to keep the quality of its work high, McLaughlin said.

"We're trying to keep our commitment to our clients to make sure the job is done properly and when it's supposed to be," he said. "It means we could not take advantage of all the opportunities that were out there. It's frustrating, and by our nature, we'd like to do more work. But it's not worth it. The damage we could do by trying to take on too much is worse than not taking the projects on."

Bread Loaf, which was founded in 1968, changed its name from Bread Loaf Construction this past August.

"We wanted to more define the services that we provide, which are planning, architecture and construction," McLaughlin said. "So, we do much more than construction." Among other projects, this year the company is putting a 215,000-square-foot addition on Mack Group in Arlington, finishing up construction of Orvis Corporate Headquarters in Sunderland, and building a new corporate headquarters and distribution center for Littleton Coin Company in Littleton, N.H.

The future looks good, McLaughlin said.

"If the psychology of people stays positive, and we don't talk ourselves into a recession or slowdown, I think things could remain good for the next year," he said.

* Kessel/Duff Corporation of Williston reports a very good year. "Our volume has increased by 30 percent or so," said president Brad J Carter. "We've got about a $15 million backlog, which is work we have under contract and in progress. The labor market is a little tight, but we're managing to staff the jobs and maintain our schedules." The company has turned down a few jobs, but that was because its management team had reached maximum volume, Carter said.

Among the projects Kessel/Duff completed this year are a 30,000-square-foot Alzheimer's facility in Chelmsford, MA, and a 30,000-square-foot Staples in West Lebanon. It is also the construction manager for the new IDX expansion, which will involve building a 230,000-square-foot office building and a 440-space parking garage. The project, which may start in the spring of 1999, is in the permitting process now, and "pushing $30 million," Carter said.

"We have about $10-15 million dollars in our business acquisition pool," Carter said. "Our hope is that we'll end up with some percentage of those contracts. A lot of our work is negotiated work, so the personality of our managers and the way we undertake our business is certainly a major part of our ability to get work."

HOME CONSTRUCTION

It's been a good year for home-building, especially in Chittenden County, said Kevin Dorn, executive officer of the Home Builders Association of Northern Vermont.

"We've had a very good year throughout," Dorn said. "But we have to remember that we have two Vermonts, Chittenden County and the rest of the state. So while it may be booming in some respects in Chittenden, in other parts of the states it's stronger than it has been in the past, but it's still lagging behind Chittenden."

The renovation and restoration business is also strong, Dorn said. "There's been lot of remodeling and additions going on, and that's a big component of our business," Dorn said.

The market has been especially good for $150,000 to $175,000 houses, Dorn said.

"There has been less activity in the more affordable levels because of the lack of availability of lots and the high costs of permitting," Dorn said. "But we see the markets above those levels doing well this year. Most affordable activity is in transferring ownership rather than creating net new units. So if that trend continues, it will slowly feed up farther and farther into the housing cost, and it will drive the cost of housing even higher in Vermont."

The lack of affordable home construction presents several interesting problems. One is that Burlington right now faces a lack of student housing, which pushes student tenants further away from downtown and deeper into residential neighborhoods.

Also, a lack of affordable homes may keep first-time home-buyers out of the market.

"People wishing to buy their first homes begin competing for a fixed quantity of affordable homes, and that drives the price up," Dorn said. "As it occurs, fewer people are able to buy their first home. We look at housing as a ladder. You typically have younger people buying more affordable homes, making improvements, selling those homes, and buying more expensive homes. But if the first rung of that ladder is not there, it spells problems in the years ahead."

The lack of skilled labor is an issue for home builders, Dorn said. "Builders aren't turning down contracts," Dorn said. "But instead of having a builder show up a week after you contract with him, he shows up a month or two later. There's a longer lead time."

All construction reflects the state of the economy, Dorn said, but as long as that remains strong and interest rates remain low, things look good.

Copyright Lake Iroquois Publishing, Inc. d/b/a Vermont Business Magazine Jan 01, 1999
Provided by ProQuest Information and Learning Company. All rights Reserved