A neighbor was telling me he wanted to grade a short distance of rural road – about a quarter of a mile, he guessed – by his property “out in the country,” but he didn’t want to pay somebody else $70 an hour to do it. He asked how quickly he could learn to operate a grader if he purchased one. My first reaction was that $70 an hour didn’t sound too terrible for having the grading done correctly; an expert contractor wouldn’t take long to do it. My second reaction was to wonder why the neighbor would consider purchasing a grader (not a minor investment even for a used machine) rather than renting it for such a small project. My third reaction came a few hours later: That neighbor imagines he can do anything! He believes that he can buy a grader, hop on the seat, and produce perfect results. “A crown? Drainage? I’m a Republican, why would I want a crown in my domain? In the country everything drains away, doesn’t it?” During a thoughtful evening I asked myself: Is it simply ignorance of better business practices and improved machine designs that causes some contractors to lose contracts and complain that they are being forced out simply because their competitors are bigger companies?
Attachments such as thus one can help expand a subcontractor’s business. To give total service, a subcontractor might offer more than basic excavation and grading.The profitable days of the owner who slammed the levers, kicked the tracks, and never-could-find-a-good-employee-younger-than-himself-who’d-do-a-decent-day’s-work seem to be disappearing. Those who laughed at innovations in hydraulics, cab design, power transfer methods, and machine control now own the equipment they swore would never enter the yard. Forgive us; we’re only human, with the privilege of erring. The next touted stage in the development of the North American construction industry (and it applies to users of excavators and graders as much as to anybody) might be c-o-n-s-o-l-i-d-a-t-i-o-n. To some people it sounds a loud warning because it could be a strong challenge to the concept of subcontractors, which is what many of us call ourselves. Consolidation happens when a contractor decides that he wants total control of every stage of the project. If he is pouring concrete, he wants to know that the ground on which he is pouring has been prepared correctly. It means that he might prefer to do the excavation and grading himself (i.e., with his own equipment and workers) rather than entrust it to subcontractors. Some will cry, “Foul!” They say many subcontractors have established excellent reputations for their work. That is true; nobody denies there are many good subcontractors. “Is there really more consolidation, or are current conditions simply sorting out the good companies from the … not-so-good?” asks Marsha Mitchell, who contracts in the Dakotas and Montana. After conversations with contractors nationwide, I suspect that those who are most angry about consolidation (or, in their opinion, being squeezed out by the “big boys”) are those who have not made genuine efforts to be constantly better than their competitors. Some people contacted wished to be anonymous – in case it hurt their businesses – and we have respected that, identifying them only by their regions. “In our market, most GCs want to sub anything,” remarks a small Alabama construction company owner. “They want site contractors to be mini general contractors. Many GCs want to be construction managers with no trades on their payroll.”Is Consolidation a Cycle? A Normal Turn of the Wheel?Several manufacturers have started to market trucks in addition to their traditional excavators and loaders.“I believe what we are seeing is a trend related to the economy,” observes Kevin Hugulet, project manager with Mike Becker, general contractor in La Grande, OR. “This trend – what you have called consolidation – is cyclical and will be reversed one day. When the economy is robust and growing, you see more small, independent subcontractor-type companies popping up all over the place. When the economy is on a downturn, like presently, you see those same small companies start to fall out because they cannot weather the tougher economic times as well as the larger companies. Those larger companies are doing more of their own work because there are fewer subcontractor companies available and, hence, less competition and higher sub prices. If the current trend shows larger companies are doing more of their own work, then the trend is not new. It is normal, part of the construction industry’s regular cycle.”A caution about expansion comes from Sean McCaa, owner of AWS Grading & Excavating in Hoschton, GA. “I have never seen a diversified contractor who reaches beyond his specialty – whether it be grading, hauling, landscaping, or plumbing – who has managed to maintain the integrity of any one facet of that expanded scope. We’ve heard, for example, of a hauling contractor deciding to include grading as a primary service in addition to the hauling. The grading venture spins off quite well, at least for some time. When the novelty wears off and grading loses its appeal, the contractor comes to realize his experience in hauling didn’t make him an expert in grading. Meanwhile, as he carried out his grading venture, his hauling business probably suffered, as it was serving only his own needs attached to the grading jobs. Not all phases of construction can be carried out efficiently by the same contractor. At some time or other you will need specialist help.” McCaa adds that to be competitive in today’s market, you have to be an expert at something and stick to it.In the Southeast, the owner of a midsize construction company says one of his local paving contractors recently purchased a grading and excavation business. “The advantage for the paving firm is that most of the current highway paving work is expansion of existing roadways. This requires little volume of dirt work but more detailed pipe work, and the paving company’s competitors seemed to have an edge in that respect. In our market there are only four or five decent paving contractors, so how will the remaining grading and excavating contractors quote the paving contractor who now has in-house grading and excavating operations?” To complicate that local issue, the paving company mentioned is a sister company of a big general contractor. “What will the subcontractors do? Will they feel they are bidding against themselves and not give as good a price to the GC?”The Key to Subcontractor Prosperity?If developers find reliable contractors, they do what you would expect. Thomas Stanley Grading in Apex, NC, specializes in grading and utility work. They also do curb and gutter work and some paving. “The developers and general contractors use us to do the entire site-work package, minus the landscaping,” says Bob Westall, project manager for the company. “Developers who have been doing this type of work for a while like to have one contractor because they do not have the coordination problems they run into with multiple contractors on the job. For example, if the grading and utility contract is complete but it will take two or three weeks to get the concrete and paving contractor to the site, it could rain in the meantime. When the concrete and paving contractor crews finally arrive on-site, someone is responsible for fixing what the rain might have changed [such as grades and compaction rates]. Usually the developer ends up paying for fixing the grade. If the developer has one trusted subcontractor, then he will be the one responsible from start to finish.”Underlying all decisions about subcontracting (or not) is the desire to make the entire project profitable. Kelsey Construction in Orlando, FL, is a general contractor. “I believe that general contractors have always preferred a turnkey package or one-point responsibility,” asserts Richard Heinkel, vice president of operations at Kelsey. “In the event that there are not many turnkey site contractors in a particular area, you may find that an earthwork contractor, for example, will combine with other disciplines, like utilities and paving, to put together the turnkey package. The earthwork contractor would oversee all the work even if his crews perform only a portion of it.” Economics is the reason for splitting a job so that the general contractor has a lower “site price.” The more the job is split up, however, the greater the chances are for specific scope items to fall through the cracks, costing the general contractor additional money before the end of the project. “What will dictate whether or not site packages tend to be combined [turnkey] or split apart [earthwork to one contractor, utilities to another, paving to another, et cetera] is the willingness of each general contractor to take additional risks,” adds Heinkel. “That would be in exchange for having a lower initial site price, in order to be awarded the job in the first place.”Tom Grey, president of Oak Contracting Corporation in Towson, MD, agrees that the construction industry is cyclical. He tells us his company has been through the “total control phase” in general contractor–construction manager work but now operates differently. “It has been a process of natural selection,” states Grey. “The construction business is far too costly to have any phases of your operation sitting idle. Specialty subcontractors will always be with us, and for good reason. They tend to operate much more efficiently and don’t have a fixed overhead that consumes them. When he considers insurance, benefits, equipment repairs and maintenance, office overhead, and all those costs, the general contractor perceives a monster that needs to eat all the time. The first inkling of a slowdown in the supply of new work and he finds himself not bidding to take profitable jobs but taking work at cost to keep the troops – and there will be many of them if he thought total control was a good idea – paid and fed.”Very few of the professionals interviewed for this article believe that independent contractors – at least not the competent ones – are a dying breed. They do, however, seem to be undertaking additional specialties to find new business or simply to stay in business; that, as mentioned above, might be an economical sign more than anything else. “Just this season we have seen more contractors in our area going into the paving and curbing business,” comments Bruce Kramer, chief estimator at Brubacher Excavating Inc. in Bowmansville, PA. “We all want more control of our projects. Our company does everything from layout to the finished paving, so we do somewhat control our own schedule, but we still use reliable subcontractors and will continue to do so as needed. I think it will be a long time before the independent contractor disappears.” Not surprisingly, the key to survival for the subcontractor or the smaller contracting company with multiple skills is efficiency. “Do your job well and people will want you” might always be true.That sentiment is echoed by an experienced general contractor based in Sioux Falls, SD: “We are a medium-size general contractor with some $40 million–plus per year,” relates Dave Fleck, president of Sioux Falls Construction Company. “We don’t have any interest in self-performing this kind of work [grading and excavating], and we will rely on subcontractors. This type of work takes a large capital investment in equipment that must be kept busy generating income to pay for itself. We see grading and excavating as work for a specialty subcontractor who can maintain a good market share by working for many generals or be a prime bidder on certain types of projects where most of the work is grading.”Keeping Up-to-Date to Stay Efficient and WantedTaking advantage of new technologies, such as machine guidance, will help keep contractors competitive and efficient.Those contractors who are expanding their fields of expertise to win more contracts and stay busy have already realized that fields such as grading and excavating are not (as my neighbor imagines) something that anybody can do. One of the words that springs to mind is training. Most of us have heard horror stories about those training seminars in places such as Reno, NV; San Juan, PR; or Washington, DC, where your neighbors go and listen to speakers on remote subjects but have some fine evening meals and beautiful hotel rooms. Such training programs seem to be funded most often from public funds, don’t they? But manufacturers such as Caterpillar, Deere, Case, and Volvo have initiated extremely practical and highly praised training programs for operators. Manufacturers understand that the new, sophisticated engineering in their machines requires skilled operators. Even if the control is now simpler and less physically demanding, the operator needs to know how to get the best results from the equipment. If there is one lament common to most contractors, it is the lack of skilled operators. When your operator is running a machine that costs hundreds of thousands of dollars, it seems sensible to ensure that he or she knows the best way to run it. You’ve all met that worker who can run everything, who just has to switch on the ignition to be an expert. How often does he prove to be a slow producer with poor technique and less willingness to learn? A little practical training is worth a ton of productivity.If you acquire a John Deere 950C crawler dozer, for example, your operator (who might be you) should know how to take full advantage of the hydrostatic drive train that allows power turns, power management, and infinite speed control. The operator should learn how to choose the right ground speed for a particular job. Even though the 950C has Deere’s Auto-Trac system to keep the unit straight in forward and reverse, the skill of the operator is still important. The time taken to learn the necessary skills soon will be repaid in better productivity. Ask Caterpillar about its recommendations for the cuts made by a dozer. Ask Cat about “slot dozing”; it’s a technique where slots are made at single blade width and, as each adjacent slot deepens, the sides hold material on the blade. The precision and efficiency seem obvious once you’ve seen the technique; the estimated fuel savings are impressive.Subcontractors don’t need huge fleets of equipment, just the right-size machines for the work they intend to do.While excavation remains the core of a subcontractor’s business, he might be asked to be involved in other aspects of large projects.If you intend to use an excavator with a low or zero tail swing, such as Takeuchi’s 5-ton compact excavator, Kubota’s U35, or Komatsu’s PC138USLC-2, you should know all the right moves to make before the first job. The Takeuchi TB53FR has an Interference Prevention System to stop the bucket from contacting the operator’s station, but wouldn’t it be comforting to know that your operator is aware of the range of motion available? The same applies to those choosing a Case CX excavator for their jobs in tight spaces. Case excavators are called “thinking machines,” but you know that doesn’t mean the operator needn’t think too. Volvo’s B-Series excavators claim to help you move more cubic yards, but your success will depend on your familiarity with all their useful features. Graders, say many contractors, require especially good operator-machine coordination for the best results – the only results that are acceptable. Training of new and current workers does not include only knowledge of machines. Knowing how to plan and execute an excavation or grading task is just as worthwhile. Some of the inefficiency of that man who knows how to run any machine is that he has given no thought to where he is going to run it.As Current Subcontractors RetireOperating a compact excavator requires proper training before working in tight spaces.“We may be looking at a future work force that is 90% semiskilled and top-heavy with managers,” observes John Van Liew of Charlottesville, VA. Van Liew (and, previously, his father) used to have his own company with 31 employees; he won complete site-work contracts from all the big contractors in his area. “We used to do 200,000 feet a year of curb and gutter.” He now works with major contractor W.C. English Inc., among the top 300 contractors in the United States and established for more than 90 years. They certainly are “big boys,” and their subcontractors still include some who place concrete. “Some of them are most reliable and dedicated, but they seem to have no life,” adds Van Liew. “I know one who finished a big job and took his crews immediately to the next job, to start work at 10 in the evening. Sometimes they’re working 90-hour weeks and traveling wherever there is a job, even as far away as Florida. That’s why we sold our company. For me, if being a subcontractor means having no family life, it isn’t worthwhile. Several owners of contracting companies have retired from the industry because of such pressures.”There usually is somebody willing to step in and fill the space left vacant by a retiree. As subcontractors retire or quit their businesses, they leave a void to be filled. This might be when the general contractors decide to do more of the project with their crews and equipment. If there are no reliable subcontractors available near the work site, what else would they do?The one aspect of this subject that seemed to dominate others was the location of the contractor interviewed. “In major cities,” comments a contractor based in a city of about 250,000 people, “general contractors may perceive an advantage in managing the equipment they use all the time-skid-steer loaders, rubber-tire backhoes, loaders, dump trucks, and small or medium-size excavators.” In smaller communities, contractors tend to offer more than one area of expertise, and many of the jobs are small enough for one company to handle everything. That’s where rental has become so useful. The subcontractor in many small communities is a one-man operation; he’s the person you call in to a specific small section of the work because he is the best local person at that kind of work – which might be grading, excavating, pouring concrete, paving, or masonry.
