For General Contractors, It’s a Tale of Two Sectors — Public and Private
“Sluggish with a capital S.”
That’s the phraseology Dave Fontaine summoned when asked to offer his view of the current construction market. His choice is understandable given the fact that his firm, Springfield-based Fontaine Bros., specializes in public sector work — and there is very little of that currently in the pipeline.
Spending on new public schools was frozen by the state three years ago, he explained, and it looks like it will remain frozen for at least another six months or more. “But it’s not just schools,” he continued. “It’s all kinds of municipal buildings — police and fire stations, senior housing, just about everything, and I’m not really sure why.
“In short,” he continued, referring to his firm, “we’re just in the wrong place at the wrong time.”
But others would say they’re in the right place at the right time. People like Peter Wood.
He’s the vice president of Sales and Marketing for South Hadley-based Associated Builders, and he already has more work on the books for next spring than he expected to have, and he’s still getting calls from people who would like to see if they can get added to the list.
“There’s quite a bit of interest out there,” he said, noting that factors ranging from the comparatively low price of gas to uncharacteristically warm December weather have companies and institutions, at least those in the private sector, thinking about building. “A lot of people are still in a ‘geez, I should build a building’ mode.”
The wide discrepancy in these takes on the construction market helps explain the current, and somewhat complicated, state of the building sector. Many general contractors would tend to side with Fontaine and see the glass as half-empty — at best. The market has been down for some time, and several firms between Worcester and Boston did not survive the slide. But for others, meaning those in a position to capitalize on private-sector work fueled by still relatively cheap money and strong competition for jobs that is yielding some attractive bids, times are good, and the glass is more than half-full.
“You were either extremely busy last year, or you were very slow,” said Fontaine. “It was hard to be in the middle.”
But that’s about where The O’Leary Company in South Hadley found itself. Tom Zabel, its president, offered cautious optimism for 2007 after a year that was “decent,” but not spectacular by his estimation.
“We had what I would consider a good year, not a great year,” he said, adding that for ’07, he is projecting more of the same. Like Wood, he said the bulk of the work currently available is in the private sector, and there should be a healthy amount available in the year ahead if business owners remain confident enough in the state of the economy to move forward with expansions and new building. “Overall, I think there will be enough work to go around.”
This issue, BusinessWest looks at the state of the construction sector, its prospects for the future, both short and long term, and what current conditions mean for area firms.
For Fontaine Bros., the depressed public sector market means expanding that firm’s reach — in terms of both geography and the nature of the projects on which it will bid.
The company is finishing a school-building project in Lawrence for one of those aforementioned firms that recently went under, for example, and has chased work in Waltham, the Berkshires, and New York state, areas generally beyond the radius within which it prefers to operate. Meanwhile, to keep its many project managers busy, Fontaine has taken on work it might not have considered years ago — like the installation of a synthetic athletic field at Westfield State College.
“There’s a lot more to it than simply rolling out the carpet,” Fontaine said of the WSC job. “We’re chasing things that we wouldn’t normally be going after, because that’s what’s out there; we have a lot of field supervisors looking for a place to go.”
That’s because the company spent most of 2006 finishing up a number of projects it started in 2005, but not putting many new ones in the pipeline for 2007. There are still some projects to finish in the year ahead, including the new women’s correctional facility in Chicopee; the new Chicopee Comprehensive High School, one of the few school-building projects ongoing in the Pioneer Valley; and a new prison in Greenfield. But Fontaine says he’s working hard to fill in the slate with new work.
And he says the bidding activity on some recent, and comparatively small, projects would indicate that he’s not alone.
“There were 12 bids for a small Town Hall renovation project in Stockbridge,” he explained, “and a lot of companies bidding on some physical plant work at UMass. That’s indicative of what we’re seeing.”
But the view is not the same for all general contractors.
Wood said there is still considerable interest in building among many businesses and private institutions, enough for him to project that ’07 might even be an improvement on a year that would be described as solid.
Indeed, Associated, which specializes in design-build work, has a number of projects in progress, including an addition to Senior Aerospace in Enfield, an expansion at High Tech Mold & Tool in Pittsfield, the first building in an new office complex in East Longmeadow, a new ‘freezer building’ for J. Polep Distribution Services in Chicopee, the retrofitting of space in the Agawam Industrial Park into a 50,000-square-foot facility for Diana’s Bakery in Agawam, and a 15,000-square-foot headquarters facility and light assembly plant for DieCast Connections in Chicopee.
For ’07, the queue is nearly full for the spring, prompting an optimistic outlook. “Based on the inquiries we’ve received, it looks like another solid year for us,” Wood said.
But he acknowledges that such optimism does not pervade the industry, because of a general slowdown — one that comes after years of general prosperity for the sector fueled by modest economic expansion and attractive interest rates — especially in public-sector building.
“Industry-wide, things aren’t exactly rosy,” he said, “but there is still a lot of interest in building, and we see it across the board — manufacturing, health care, distribution, almost every sector.”
Zabel, who acquired The O’Leary Company about 20 months ago, agreed.
“There’s plenty of activity out there; money is still relatively cheap, and people are looking at projects,” he said. “Things are in the planning stages in many sectors — commercial, industrial, financial services, office space … people are still building.”
There is, however, greater competition for the work that comes on the market, he said, noting that, when times get tougher in other sectors, like public projects, or in other geographic areas, like the Eastern part of the state, contractors will cast a wider net in search of work.
The O’Leary Company is currently working on several projects, said Zabel, listing everything from interior fit-out work for Innovative Mold in Chicopee to an addition for Able Machine in Agawam; from parking lot work for Bridgeport Bindery in Agawam to an expansion at Australis Aquaculture in Turner Falls, which needs space for additional tanks to farm more of its popular barramundi species of table fish.
Gauging the year ahead, Zabel says O’Leary, which also specializes in design-build work, has several projects on the books, ranging from airplane hangars to recycling facilities. It’s shaping up as another decent year, with its overall quality to be determined by overall confidence in the economy.
Looking forward, Fontaine said his company, like most that live primarily off public-sector projects, will have more scrambling to do for another year and perhaps longer.
He anticipates that it will be at least that long before the spigot is turned back on for school building initiatives and individual projects to move through the design stage and into actual construction.
“It could be 18 months before the public-sector market puts people to work,” he said, adding that the pace and extent of recovery depends largely on Gov. Deval Patrick and the degree to which he loosens the budget reins. “There’s nothing that brings an economy back quite like spending money.”
Speaking from experience, Fontaine said the current downturn for the construction industry is part of another cycle, the type that firms like his must ride out while waiting for conditions to improve.
“This isn’t the first one of these we’ve seen, and it certainly won’t be the last,” he said. “What we’re going though is part of the cyclical nature of the business; you just have to be ready. You hope to get your people through the slower times and be poised and ready to work when it’s your turn.”
The area’s general contractors hope their turn comes soon.
George O’Brien can be reached at[email protected]