William J. Gilbane, Jr., is president and COO of Gilbane, a 133-year-old, 1,800-employee contractor and construction manager headquartered in Providence, R.I. The firm, ranked eighth among construction firms and seventh among CMs in BD&C’s 2006 Giants 300 with $3.48 billion in revenues, also performs program management, transition planning, and catastrophic events assessment for property insurers. Gilbane holds a bachelor’s degree from Brown University.
BD&C: Please describe Gilbane’s approach to the construction market.
William J. Gilbane: Our strategy is to be very selective. One of our golden rules is that we do not take jobs and then hire people. The Gilbane team has to be 75% Gilbane-trained and -experienced people. We go for repeat business, and we get one out of every two projects we pursue.
There are owners that you don’t want to work for, and there are architects that you don’t want to be on the job with.
Right now, this industry is stretched. All the good contractors are busy. There’s a limit to the number of people available. We’re seeing it in the fees that people are quoting; they’re much higher than before.
BD&C: Where do you see the current market going?
WJG: We have 26 offices, a good geographical spread. New England is strong, as well as the Mid-Atlantic, New York, New Jersey, Arizona, the West Coast, and Texas. The Midwest is a little slower than the others.
BD&C: What about by sector?
WJG: We have five very active centers of excellence: higher ed, K-12, mission critical, healthcare, and pharmaceutical/life science.
Higher education is a very good market for us—the Big 10, the Ivy League, schools like Trinity, Fairfield, UConn, Temple, the University of Virginia. We’re on 50 college campuses, plus a lot of community colleges.
We have subsets within higher ed, such as arenas and athletic facilities. Dormitories are a strong market. We’re just starting a $120 million residence hall at the University of Chicago.
K-12 is huge for us. Also mission-critical facilities and data centers, particularly for financial institutions like Citizens Bank, Credit Suisse, Bank of America.
In healthcare, we have 36 projects in design phase or closeout. Nobody’s got extra money, but they know they have to modernize their hospitals. They all realize that if they don’t do it now, it could be 10% more next year. So the jobs are going ahead.
Pharmaceutical is the one market that’s been off. There’s been consolidation in that industry. Our business there has shrunk from 25% of our total business, to 10%.
BD&C: Gilbane’s been around for a long time. What’s your secret?
WJG: Customer satisfaction. We sit down with the owner before we start a job and ask for their expectations, and we constantly revisit them and the architects through surveys. We get 600 completed surveys a year. The project teams and business units respond to those surveys.
We catalog that information in a database, with a search engine, so no matter what you’re facing on a job, you can drill down and get all of Gilbane’s experience. It can be a shop drawing on the proper installation of a skylight, or which adhesives work with certain materials, or how to protect color concrete.
We go back to every job a year after it’s done. We go through it with the facilities people, and ask how it’s working.
BD&C: Any storm clouds on the horizon?
WJG: The people issues—recruitment, retention, and shooting for 6% voluntary turnover, which some people laugh at. [The industry average is 10-15%.] What I worry about is that the growth goes faster than the ability of our people to satisfy our clients.
Another issue is succession: 550 of the 1,800 people at Gilbane are over 55 years old. A lot of our people do stay well beyond 65. One of our top superintendents is 75 and you’d never know it. Another one is 83, the only World War II veteran to actually work on the World War II monument. We do have people coming up behind them, people in their 30s and 40s, but the content experts are all the 55-year-olds.
BD&C: How is the cost of materials affecting jobs?
WJG: The escalation, and predicting it, is critical. We used to put a 3% annual escalation in our estimates, but now we have to add one for unusual escalation, and we have to look at it on job-by-job basis. In new construction and heavy piping and mechanical jobs, you really have to evaluate what you carry as a contingency.
Forget what you bought structural steel for last month—you’d better think what you’re paying for it now.
BD&C: Any pushback from clients?
WJG: Yes, there’s got to be. There are several projects where the feasibility is right on the line, and we’re coming up with creative ways to get those jobs. But it’s a challenging time. BDC