2002 Giants: Firms brave new world

'May you live in interestingtimes," reads the old proverb that sounds like a bland blessing but is really more a subdued curse. With war abroad, homeland security concerns still pressing and now a crisis of confidence on Wall Street, it is hard to imagine how the times we live in could get much more "interesting" than they already are.

"High-profile acts of deception have shaken people's trust," intoned President Bush, speaking on Wall Street July 9 before signage emblazoned with the slogan Corporate Responsibility. Bush went to the heart of New York's financial district this month as much to soothe burned investors as he did to call business leaders to account. "By reasserting the best values of our country, we will reclaim the promise of our economy," he vowed.

The President then unveiled a slate of new reforms, including increased jail time for CEO fraud, a new oversight board for corporate accounting, required CEO pledges of accuracy for financial reports and "a financial crimes SWAT team" for rooting out corruption.

The markets initially yawned and returned to their lackluster ways, a malaise common since telecom giant WorldCom admitted last month to nearly $4 billion in unreported losses. And lest anyone think this news has little effect on design and construction, a quick check of Standard & Poor's latest list of the most active construction owners in the U.S. finds WorldCom at the top.

Fear and loathing at the helm

"There is a sense that the momentum of the economy's recovery from Sept. 11 has now been lost," concedes Daryl Delano, chief economist for Reed Business Information (RBI), Newton, Mass. RBI is the parent of Building Design & Construction. Markets are chilled, he says, by fear that the surprise implosion of another Enron or Vivendi may be just around the corner.

Shell-shocked Limbach Facilities Services, Houston, is hoping to turn that corner this summer, with its sale to an as-yet-unnamed owner. The still-solvent, 100-year-old mechanical sub is counting on its third owner to be charmed, after its harrowing ride as part of Enron, which declared bankruptcy in December.

In fact, Limbach, which was later declared a "non-debtor subsidiary" actually appeared under the name Enron Facilities Services on our GIANTS list last year (BD&C 7/01, p. 42). Ironically, Enron had acquired the specialty firm in 1998 from its previous owner, the now-reeling French giant Vivendi.

"This past year definitely gave me gray hair, but we can see the light at the end of the tunnel now," says Steve Wurzel, Limbach's chairman and CEO. Now backed by St. Paul Surety under a "picket fence agreement", Limbach has held on to its staff of 500-plus, reporting $672 million in 2001 revenues. But a new owner would still be nice. "I'll be ecstatic," admits Wurzel.

Worrying, borrowing, changing names

GIANTS siblings J.A. Jones Inc., Charlotte, N.C., and Lockwood Greene, Spartanburg, S.C., find themselves in similar straights, financially secure but hamstrung by a bankrupt owner. German parent Philipp Holzmann AG, Frankfurt, has been looking to sell both firms and this spring received a handful of closed-bid offers.

Late last month, German rival Hochtief AG, which owns Dallas-based Turner Corp., our largest 2002 GIANT, reportedly withdrew its name from the running. According to the German press, rival Bilfinger Berger AG has stayed in negotiations and could emerge when a new parent is expected to be named in late September. One mitigating factor in the delay may be Germany's own sputtering economy.

Less hopeful in the Carolinas is Miller Building Corp., Wilmington, N.C. Ranked No. 67 last year among our Contractor GIANTS, Miller filed for bankruptcy protection this spring.

Airport terminals are booming worldwide, like this tunnel-like shed in Paris.

On the opposite end of the map, thriving AECOM Technology Corp., Los Angeles, parent of both GIANTs McClier (see pp. 62, 84) and DMJM/H+N (see p. 67), at press time was preparing to put its stock up for an initial public offering (IPO) on July 17. The far-flung, international conglomerate is aiming to raise as much as $230 million to facilitate even more acquisitions.

Other changes to our scorecard are less dramatic, but potentially confusing. Aside from Limbach's dropping of the cursed Enron handle, glazing/curtain wall mainstay Harmon Ltd., Minneapolis, this spring changed its name to Enclos Corp. to avoid confusion with its cross-town former sibling Harmon Inc., which still operates under that name as a subsidiary of Apogee.

Among contractors, simplicity continues to win the day. Earlier this year, J.S. Alberici Construction Co. Inc., St. Louis, renamed itself Alberici Corp. (see p. 78). The change is akin to — but less drastic than — the recent trend that has seen venerable titles like Morse Diesel, Sverdrup and Huber, Hunt & Nichols become simply AMEC, Jacobs, and Hunt, respectively.

Putting our stars in proper alignment

A closer look at this year's GIANTS survey report, our 26th Annual Design/Construct 300 listing, will reveal a number of changes that we hope will make it an even more valuable and logical reference tool. Chief among the tweaks was our decision to remove subcontractors from our list. For continuity's sake, we still list the Top 20 responses this year (see table, lower right), akin to our break-out of design-builders (right). We hope to revisit both subjects later this year.

Their separation now, however, allows us to break our 300 GIANTS into 75 contractors, 50 architects, 50 A/Es, 50 E/As, 50 engineers and 25 construction managers. Together, the new grouping had surprisingly little effect on the overall volume of our collective 300. Without specialty contractors included, the group's 2001 total revenues are $102.6 billion, up 11.5% from the previous year. With subs put back in, that annual gain would have only inched up to 12%.

Revised outlooks seek more patience

With the world economy slumping and markets still jittery, it is hard to imagine that our GIANTS will be able to match that showing next year. This month the U.S. Commerce Dept. released its revised data on the economy's 2001 performance and they added to the gloom.

"What was striking was that the new figures dropped nonresidential work down to a no-growth year in 2001," notes RBI's Delano, a member of the elite Harvard Industrial Economists Group. Now, he doesn't see growth returning until mid-2003 (revised RBI data, at left).

For his part, former Portland Cement Association economist William Toal isn't worried. "It's hard to believe last year could be defined as a recession," he told Construction Specifications Institute members June 28 in Las Vegas. "I don't think so, despite what the eggheads in Washington say. There are still too many positives."

Economic comeback delayed

Another take on the future
(% chg., value of U.S. construction put-in-place)

Top 20 U.S. design-builders
(2001 domestic and foreign revenues, in $ mil.)

Top 20 U.S. specialty contractors (2001 domestic and foreign revenues, in $ mil.)