Digging Deeper

Utility contractors feel the economic strain of a residential building downturn

Utility and electrical contractors are focusing more on public work to stay afloat during the plunge in private-sector work during a troubled economy.

Utility contractors across Colorado are making hard decisions and finding creative ways to hang on during the economy’s downward spiral.

Tony Milo, executive director of the Colorado Contractors Association, says that only the segments seeing growth for utility contractors in the state are energy and oil and gas.

“Highway and utility markets are shrinking, and at the same time, the cost of labor, materials and fuel are drastically increasing,” Milo says. “With less investment in infrastructure, we’re seeing layoffs as well as cutbacks in new equipment purchases.”

Some contractors are looking to relocate to Wyoming, Utah and New Mexico for more opportunities, he adds.

Going Public Utility contractors involved in both private and public-sector work are better positioned to ride out the storm than those who work mostly in the harder-hit private sector.

Lloyd Kuehn, chief financial officer with Scott Contracting in Henderson, Colo., says the company has always maintained a presence in the public market. “Those markets still have work coming out, and we have been able to convert our private work to public work and have fared fairly well,” Kuehn says.

Even so, the company is still feeling the pinch on its annual revenue stream.

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“We have drastically reduced our capital purchases in 2008, mostly due to the privately funded work sector drying up,” Kuehn says. “But new equipment is more expensive now because of increased costs in fuel, tires and steel, so the cost is being passed on to the consumer.”

In better years, the company’s construction equipment purchase list might include excavators, loaders, compactors, asphalt pavers, concrete pavers and tractor-trailers.

Bob Roth, director of business development and preconstruction with Duro Electric in Englewood, also says the company’s annual budget for purchases and supplies has taken a hit.

“The price of copper has been up and down, but steel has been steadily escalating,” he says. “Boxes, conduit, light fixtures-almost everything we purchase that goes into our work-is going up.

“We’re able to quote our projects at current rates, but if that changes next week, we still have to honor our bids, and they can be valid for up to 60 days. And raising our prices to cover the extra costs causes us to be less competitive.”

Roth says he is putting a tighter focus on preconstruction marketing efforts as one measure to help his firm’s and its clients’ position in the market. “We always try to offer our clients the best service we can to help them keep their costs down even before the project is let,” he says.

Tough Road Ahead Milo says he anticipates that Colorado contractors will be seeing more of the same for at least the first half of 2009. He adds that he hopes the state will invest in more infrastructure improvements in 2009, which “would help create jobs and greatly improve our lives here in Colorado,” he adds.

Kuehn says he keeps “waiting for the bottom to hit, but I haven’t seen it yet.” With retail development following on the heels of the housing market, he expects to see commercial construction leveling off or decreasing in 2009.

Roth says Duro Electric is still strong and viable in assisted-living facilities, health care and education. “Several bond issues recently passed or are about to pass are pumping money into the construction industry,” he says.

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