May 2002: In Downtown Kansas City, there is no Sprint Center, no Power & Light District, no new headquarters buildings for H&R Block or J.E. Dunn Construction, no Kauffman Center for the Performing Arts. To the west, there is little to suggest that the Village West retail and entertainment district and Livestrong Sporting Park will rise from the pastureland in Wyandotte County. There is no Kit Bond Bridge over the Missouri River, there are no upgrades to the Kansas City Convention Center or either of the stadiums at the Truman Sports Complex.
For the past 10 years, many Kansas City construction companies, engineering firms and architectural firms were able to benefit from those large-scale projects, which have changed the face of Kansas City. This, even though fully half of that decade included the horrendous construction downturn that followed the housing-sector collapse and onset of recession in 2007.
Because of those projects, there was considerable work available in this region—but still not enough to ensure that development-sector market leaders would hold their positions. A look at the 10 biggest firms in each of those three disciplines reveals the extent of change in market shares, in ways that have local, regional—and in some cases, even national or international—impacts.
Construction
Despite the loss of some key names over the decade, contractors in Kansas City bolstered their combined throw-weight as measured by firm-wide billings for local companies and area billings for national companies with operations here. The 10 largest firms in 2002 billed a combined $1.42 billion, or roughly $1.71 billion in today’s dollars. By comparison, even in 2010—at the depths of the current downturn in construction—the 10 largest firms combined for $2.97 billion. That’s an increase of more than 70 percent in real dollars.
Much of that aggregate total was driven by one company: J.E. Dunn Construction soared from $727 million in billings near the onset of the decade to nearly $2 billion in 2010. Company officials attributed that remarkable growth to several factors, not the least of which was its broad construction expertise.
“Prior to the recession, we were very fortunate to have had the opportunity to construct a wide variety of commercial projects and develop a diverse book of business,” said Dirk Schafer, Dunn’s chief operating officer. “As the economy slowed, only certain types of buildings were continuing to see activity, projects such as hospitals and government and military facilities. Our diverse portfolio gave us expertise in these building types, which allowed us to keep building during the recession.”
Client relationships came into play during that period, as well, he said, and the company’s focus turned inward. “Times demanded that we build smarter, leaner and more efficiently,” he said.
“We made an investment in advanced technology and in our employees through our extensive training programs. This is all with the goal of building more efficiently utilizing lean principles and computer technologies like virtual design, which allow us to build the project in the computer before we start in the field.”
Labor-saving technology, he said, combined with integrated project delivery methods and collaboration with building partners helped increase efficiency and productivity, and the ability to perform masonry, carpentry and concrete work also added value to Dunn’s work, he said. “We knew we had to provide more for less and give the best value to our clients, or we would never succeed in an increasingly competitive marketplace.”
But far smaller contractors, too, were able to find fertile ground in the regional market. A.L. Huber Construction, based in Overland Park, didn’t even appear on Ingram’s list of the 25 largest construction companies in 2002; by the end of the decade, it had climbed to No. 10 on that list, with $28.9 million in firm-wide billings. One factor driving that, said company president Phil Thomas, was a broad skill set.
“We’ve always had a diverse portfolio,” Thomas said. That allowed the company to shift from construction of 50 banks in five years before the downturn. “Now, we only have one going on because there’s no bank construction. Fortunately, we’re able to move from market segment to market segment when they’re ready to build.”
The lessons of recent years, he said, come back to your ability to compete.
“The competition has been super intense, to the point where it has driven down fees to unsustainable levels,” Thomas said. But things are improving, he said. “We definitely see some opportunities; we’re seeing the environment become more stable.”
J.E. Dunn’s Schafer also pointed to increased levels of competition—and the darker side of it. “We are seeing some of our competitors take on projects that don’t have the proper balance of risk and reward,” he said.
“Our surety partners, who provide project bonding, tell us that just over half of all construction companies (subcontractors and general contractors) in the United States were profitable last year. Unfortunately, I don’t think we’ve seen the end of fall-out in the construction market due to the recession.”
Thomas also noted the imbalance in current risk-reward dynamics, but is crossing his fingers. “I love the construction industry,” he said, “but if you sat back and looked at where it is today, it wouldn’t make sense to invest your time or your money in it. But it’s going back in the right direction.”
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