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Bill McConnell's State of the Surety Industry in 2016
- 1. 2016 State of the Construction & Surety Industry Presented by: William J. McConnell, P.E., J.D., CEO The Vertex Companies, Inc. Engineering | Construction | Environmental | Claims | Technology VERTEX
- 2. The U.S. Economy is Doing Very Well by Most Measures VERTEX
- 3. VERTEX
- 4. VERTEX
- 5. VERTEX
- 6. VERTEX
- 7. VERTEX
- 8. VERTEX
- 9. Private Construction is BOOMING while Public Construction Remains FLAT VERTEX
- 10. VERTEX
- 11. Construction is Outpacing the U.S. Economy by a Wide Margin U.S. Construction Industry Growth Rate Since 2011: 9% U.S. GDP Growth Rate Since 2011: 3.5% VERTEX
- 12. VERTEX
- 13. Number of Construction Establishments in the U.S. – Bureau of Labor Statistics: 2007: 896,200 2015: 763,559 VERTEX
- 14. Number of Construction Employees in the U.S. – Bureau of Labor Statistics: 2007: 7.7 million 2001: 5.4 million 2016: 6.6 million VERTEX
- 15. VERTEX
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- 19. VERTEX
- 20. The Surety Industry Continues to be Profitable for the 12th Consecutive Year, Despite a Lack of Premium Growth. VERTEX
- 21. VERTEX
- 22. VERTEX
- 23. Market Share of the Top 10 Surety Providers: 1980: 21% 1990: 42% 2004: 67% 2008: 68% 2014: 63% VERTEX
- 24. Top Risks that Face Contract Surety Providers in 2016: 1.Quality Issues 2.Labor Shortages 3.Lack of Growth in Public Construction 4.Inflation VERTEX
- 25. The Lifecycle of a Construction Company VERTEX
- 26. Corporate Lifecycle Birth Go-Go Infancy Prime Stable Aristocracy Bureaucracy Death Adolescence Source: Dr. Ichak Adizes, Adizes Institute
- 27. Top 100 Contractors of 1964
- 28. Lorem Ipsum • Bechtel Corp. (#4 / #1) • Peter Kiewit Sons’ Co. (#5 / #3) • Brown & Root Inc. (#8 / #8) • MW Kellogg Co. (#31 / #8) • Fluor Corp. Ltd (#50 / #2) • Swinerton & Walberg Co. (#52 / #35) • Walbridge-Aldinger Co. (#63 / #42) • Manhattan Construction (#66 / #52) • Granite Construction (#80 / #25) • Frank Messer & Sons Inc. (#80 / #68) • HB Zachry Co. (#98 / #32) • Perini Corp. (#13 / #13) • Walsh Construction (#15 / #15) 26 Surviving Contractors • Gilbane Construction Co. (#10 / #14) • Noble J. Dick Inc. (#32 / #62) • The Lane Construction Corp. (#41 / #44) • Henry Beck Co. (#48 / #108) • Dinwiddie Construction Co. (#70 / #84) • Great Lakes Dredge Co. (#75 / #98) • Boh Bros. Construction Co. (#85 / #177) • Basic Construction Co. (#26 / n/a) • Raymond International Inc. (#40 / n/a) • Miller Davis Co. (#78 / n/a) • Teichert & Son, Inc. (#81 / n/a) • James D. Morrissey Inc. (#86 / n/a) • Millstone Construction Inc. (#99 / n/a) VERTEX
- 29. Corporate Lifecycle Birth Go-Go Infancy Prime Stable Aristocracy Bureaucracy Death Adolescence Large Contractors - $600M+ in Rev
- 30. Corporate Lifecycle Birth Go-Go Infancy Prime Stable Aristocracy Bureaucracy Death Adolescence Large Design Firms - $130M+ in Rev
- 31. Corporate Lifecycle Birth Go-Go Infancy Prime Stable Aristocracy Bureaucracy Death Adolescence Source: Dr. Ichak Adizes, Adizes Institute Reinvention Aristocracy
- 32. Results of Top 100 Construction Firms of 1964 33% failed 26% survived 41% were acquired
- 33. Status of the 41 Contractor Acquisitions – 46% Survival Rate 9 failed post acquisition 19 survived and continue to offer construction 13 voluntarily dropped construction
- 34. Lorem Ipsum • Turner Construction Co. (#6) acquired by Hochtief in 1999. • Daniel Construction Co. (#7) acquired by Fluor in 1977. • J.W. Bateson Co. Inc. (#14) acquired by Centex in 1966; Balfour Beatty acquired Centex in 2007. • C.F. Braun & Co. (#16) acquired by Santa Fe in 1981; Halliburton acquired C.F. Braun from Santa Fe in 1989; KBR (including CF Braun) separated from Halliburton in 1989. • Fischbach & Moore, Inc. (#18) acquired by Sullivan & McLaughlin in 2005. • Huber, Hunt & Nichols, Inc. (#22) (now Hunt Construction Group) acquired by AECOM in 2014. • Pittsburgh-Des Moines Steel Co. (#28) acquired by CB&I in 2001. • Tishman Realty & Construction Co. (#29) acquired by AECOM in 2010. • T.L. James & Co. Inc. (#35) acquired by Primoris in 2009. • Fruin-Colnon Contracting Co. (Fru-Con) (#51) acquired by Bilfinger in 1978; in 2011, Balfour Beatty acquired Fru-Con from Bilfinger. • Frank J. Rooney Inc. (#73) acquired by Centex in 1978; in 2007, Balfour Beatty acquired Centex Construction. • Beacon Construction Co. of Mass., Inc. (#74) acquired by Skanska AB in 1996. • Ragnar Benson, Inc. (#84) acquired by William Charles Ltd. in 2005. 13 Successful Acquisitions
- 35. Results of Top 100 Design Firms of 1964 41% failed 24% survived 35% were acquired
- 36. Acquirers of the 35 Design Firms 3 by Parsons (employee-owned) 12 by AECOM (public) 4 by Jacobs (public) 2 by CH2M (employee-owned) 2 by Dewberry (private) 14 by Other Large Design Firms
- 37. Market Consolidation - Design (1995 – 2015) 2005 Top 10 Firms had 44.2% Market Share 1995 Top 10 Firms had 30.2% Market Share 2000 Top 10 Firms had 40.5% Market Share 2010 Top 10 Firms had 50.4% Market Share 2015 Top 10 Firms had 50.0% Market Share
- 38. Company Profile – AEC Firm Dames & Moore Headquarters: Los Angeles, CA Current Rank: Acquired by URS in 1999 VERTEX
- 39. Company Profile – AEC Firm IT Corporation Headquarters: Torrance, CA Current Rank: Declared bankruptcy in 2002 VERTEX
- 40. Company Profile Morrison-Knudsen Co. Inc. Founded: 1912 Acquired by: Washington Group Current Rank: #7 (2015 / AECOM) Landmark Project: Hoover Dam VERTEX
- 41. Company Profile J.A. Jones Construction Co. Founded: 1894 Acquired by: Phillipp Holzmann A.G. Current Rank: n/a VERTEX
- 42. Subtle Strategic Changes with Market Shifts Contractor Takeaways Planned Leadership Transition Seldom and Selective M&A Transactions; Growth is Primarily Organic VERTEX
- 43. Poor Leadership Transition – Lee Iacocca Effect Contractor Takeaways Failure to Adjust to Market Conditions and Market Shifts Excessive Bureaucracy Causes an End to Most Large Contractors – Too Slow to Move and Top Heavy VERTEX
- 44. Acquirer has Long History of Construction Contractor Takeaways – M&A Acquirer in Similar Vertical as Acquiree Current Trend: AEC Companies Acquiring Large Construction Companies – Success is TBD VERTEX
- 45. Developers that Manage Construction Companies have Difficulty Achieving Long- Term Success Contractor Takeaways – M&A Both Development and Construction are High Risk Endeavors but Development has More Reward Construction as a Non-Primary Sector Does Not Work in the Long-Term VERTEX
- 46. Large Non- Construction Buyer is Often Quick to Exit Construction to Focus on Service Business Contractor Takeaways – M&A Large Public Buyer Tends to Shed Most, if Not All of the At-Risk Work Value of Predictable Service Components Far Exceed Value of At- Risk Vertical (more buyers) VERTEX
- 47. Design Firms Must Diversify; an Over- Concentration of Work in One Sector Often Leads to Failure, Particularly When the Sector Compresses Design Takeaways Design Firms Must Embrace an Effective M&A Strategy to Continue Growth Over the Long-Term Design Firms Must Keep in Front of Technology Improvements that Improve Efficiency VERTEX
- 48. The End VERTEX
Hinweis der Redaktion
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- IBRAHIM The list crosses out firms that no longer offer construction. In red are the 26 surviving firms as well as the 13 firms that were acquired and continue to offer construction.
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- BILL Revenue: $37.2B Owners:Bechtel Family & Internally Elected Employees President:Brendan Bechtel (5th generation to lead company) CEOBill Dudley HQ:San Francisco, CA 2014 Rank:#1 (for the last 17 consecutive years) / #3 International Contractors Warren Bechtel founded the company in 1898 to construct railroads with his team of mules. Bechtel completed work on a series of railroad contracts during the early 1900s. Bechtel ventured outside of railroad construction in 1919, when the company started to build roads, bridges, and highways throughout the western US. Bechtel worked on its first power project (hydroelectric) and pipeline project in the 1920s. In 1931, Bechtel joined six other companies for form a consortium to construct the Hoover Dam. Warren died suddenly in Moscow in 1933; his son Stephen took over. Bechtel built 540 vessels for the Federal government during WWII. Bechtel’s first international project was in Venezuela in 1940. In 1947 Bechtel began construction of the world’s largest pipeline which started in Saudi Arabia and ran across Jordan, Syria and ended in Lebanon. From this point forward, Bechtel managed a tremendous amount of work in the Middle East. In 1949, Bechtel entered the nuclear power business when it built the Experimental Breeder Reactor in Idaho. Bechtel constructed the first commercial nuclear power plant for Commonwealth Edison in Illinois in 1957. Bechtel started work on the BART system in 1959. In 1960, Stephen Bechtel Jr. took over for his father as president of the company. During the 1960s and 1970s, Bechtel was involved in constructing 40 percent of the nuclear plants in the United States. By the end of the 1970s, Bechtel moved from nuclear power construction to nuclear cleanup (Three Mile Island in ‘79). They also focused on mega transportation projects (DC Metro, etc.). In the early ‘80s they handled the project management of construction projects related to the LA Summer Olympics (’84). In ’87, Bechtel handled the project management of the undersea tunnel that links the UK and France. During the recession of the ‘80s the company turned its focus to environmental cleanup and alternative energy projects. In ’89 Riley Bechtel was named president of the company. In ’91, the US retained Bechtel to extinguish the oil well fires in Kuwait. In the 90s Bechtel built: the Hong Kong Airport, the Athens Metro System, an extension of the London Underground, facilities for the ’92 Barcelona Olympics, and facilities for the ’98 winter Olympics in Japan (Nagano). Between 2000 and 2010, Bechtel completed work for the ’02 Olympics in Salt Lake and completed (with others) the $4.3 billion power project in China (petrochemical). CONTROVERSY: In ’91, Bechtel JV-ed with Parsons Brinkerhoff to construct the Big Dig – the largest and most complex urban transportation project ever undertaken in the US. Due to massive overruns and construction issues (leaks and the collapse of the tunnel ceiling panel), Bechtel received bad press. Bechtel settled litigation with federal and state officials for $352M in ’08. CONTROVERSY: Between ’01 and ’13, Bechtel worked on the Waste Treatment and Immobilization Plant at the Hanford site in Washington state (treatment for radioactive waste)(considered to be one of the most complex projects in the country at the time). Certain federal agencies criticized Bechtel for rising costs, nuclear safety and quality, and whistleblower allegations. CONTROVERSY: In ’03, Bechtel won a $680 million contract to rebuilt infrastructure in Iraq. The contract led to the company being accused of both non-competitive bidding and war profiteering. Bechtel won a number of competitively bid contracts in Iraq thereafter. CONTROVERSY: Following Hurricane Katrina in ’05, Bechtel was one of four companies hired by FEMA to build temporary housing. Certain federal officials and the media criticized Bechtel for the cost and quality of work. Bechtel Divisions: Infrastructure (transportation, fossil & renewable power, transmission, communications. Mining & Metals (mining & production of materials) Oil, Gas & Chemicals (liquefied natural gas, oil, pipeline, petrochemicals, and natural gas facilities) Nuclear, Security, & Environmental (handles company’s government work and commercial nuclear businesses) Bechtel-government links: Riley P. Bechtel served on W. Bush’s Export Council VP Jack Sheehan served on the Pentagon's Defense Policy Board George Schultz, a Bechtel employee in the ‘70s, served as Secretary of State under Reagan. Caspar Weinburger, Bechtel’s former general counsel, served as Reagan’s Secretary of Defense. W. Kenneth Davis, Bechtel’s former VP, served as Reagan’s deputy secretary of Energy and head of the Atomic Energy Commission. William Casey, a former Bechtel consultant, served as the chairman of the SEC under Nixon, head of the Export-Import bank under Ford, and director of the CIA under Reagan. Ross Connelly, former CEO of Bechtel Energy Resources Corporation, was appointed by George Bush in June of 2001 to the Overseas Private Investment Corporation. Stew Burkhammer, a current Bechtel executive, is presently a member of the Occupational Safety and Health Administration’s (OSHA) Advisory Committee on Construction Safety and Health. TAKEAWAYS: Bechtel adjusts in accordance with federal spending, on a domestic and international basis. Bechtel established a stronghold in the Power sector in the ‘50s and has held on to it for the last 60 years. Bechtel leadership has been very consistent – 5 generations of Bechtels have led the company and they have remained very low key while maintaining a network of political connections. Bechtel has exploited international work like no other US contractor.
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