Another Strong Year

Good times prevail for Texas contractors

by Deb Wood

From commercial to heavy industrial, infrastructure and health care, the Texas construction market is sizzling for the state’s top contractors.

An aerial view of the 1.5 million-sq.-ft. Samsung A2 Fabrication Plant in Austin. Hensel Phelps is scheduled to complete the project next month.

“The market is booming everywhere,” says Tim Hess, director of preconstruction services for the Southwest District of Hensel Phelps Construction Co. in Austin. “We have a record level of backlog right now. The biggest challenge is getting the resources to do all of the work that’s out there.”

The firm ranked No. 25 in Texas Construction’s annual ranking of the state’s top firms with $206 million reported for in-state revenue.

Hess attributes the heightened activity level to a good economy with available funds and low interest rates. Additional factors come into play in certain sectors. Aging baby boomers have led to greater demand for modern, technologically advanced health facilities. Hensel Phelps is working on an Outpatient Care Center for Methodist Hospital System in Houston. The total project cost is $331 million.

Hensel Phelps recently broke ground on the University of Texas at Austin’s 150,000-sq-ft Dell Pediatric Research Institute, which will include a vivarium and wet labs. The project cost was not disclosed, although last year the Michael & Susan Dell Foundation announced a $50 million donation to the UT System.

Of that, $38 million would match other donations dollar-for-dollar to help establish the institute, under way on Austin’s Mueller airport site next to the nearly completed $200 million Dell Children’s Medical Center of Central Texas.

A rendering shows an aerial view of the 78,000-sq-ft student recreation center at Stephen F. Austin State University in Nacogdoches. J.E. Kingham will complete the project this year.

Also for UT Austin, the company is working on a $150 million 10-story North End Zone stadium expansion and memorial plaza.

In El Paso, the U.S. Department of Defense’s Base Realignment and Closure Commission recommendations will require $5 billion in upgrades at Fort Bliss, of which Hensel Phelps was awarded design-build contracts totaling about $500 million for enlisted personnel housing, company operations and tactical equipment maintenance facilities.

“By building offsite and bringing these premanufactured facilities onsite, we reduce labor risk, improve quality and accelerate construction,” Hess says.

On the private side, Hensel Phelps has under way the 1.5 million-sq.-ft. Samsung A2 Fabrication Plant, the high-tech company’s second semiconductor chip plant in Austin. The project began in May 2006 and is scheduled for completion next month. The construction cost was not released by Hensel Phelps, but the governor’s office, which helped close the deal with a $10.8 million grant from the Texas Enterprise Fund, and other sources report the project’s cost at approximately $200 million. In 2003 Samsung began a $500 million expansion and upgrade to its first Austin plant.

In Dallas, Hensel Phelps has begun a $100 million mixed-use renovation of the Mercantile Block for developer Forest City Enterprises of Cleveland, Ohio. The project includes converting the 31-story former bank building into 214 apartments and building a new 16-story tower with 154 apartments. Both structures will have retail and parking facilities.

Employee-owned Hensel Phelps had more than $2 billion in total revenue in 2006 and self-performs much of its concrete, formwork, rough carpentry, masonry and earth work. Hess says employee ownership opportunities have helped the company attract and retain workers in a tight labor market.

Rosenberger Construction of Sugar Land keeps busy with office construction. Shown here, Offices of Brooks Lake, a 43,351-sq-ft space.

Jim Kingham, president/CEO of J.E. Kingham Construction Co. of Nacogdoches also says health care and education are strong. The company plans to finish this year a $25 million, 78,000-sq-ft student recreation center for Stephen F. Austin State University in Nacogdoches. A two-story weight and fitness space wraps around an outdoor pool and courtyard. The company ranked No. 47 in the state’s list of top contractors, with total revenues of nearly $120 million in 2006.

“We have a good backlog of business going through 2007,” Kingham says.

Kingham Construction boasts more than a century of experience in the Texas market and three years ago, with partners, opened a design-build subsidiary Kingham-Dalton-Wilson Ltd. in Houston. That company is building a $25 million, 350,751-sq-ft world headquarters for drill-bit manufacturer ReedHycalog in Conroe.

Office construction also keeps Rosenberger Construction LP of Sugar Land busy. The company expects a late-spring completion of the $9.7 million Intellicenter, a 158,000-sq ft, three-story, sustainable-design office building in Houston for Koll Development Co. of Dallas, and it recently completed the $9 million, 200,000-sq-ft Oak Park II in Houston. Both projects employed tilt-up concrete construction methods.

Rosenberger Construction has grown from $20 million in revenues in 2000 to $73 million in 2006. The firm is ranked No. 69 in the top contractor list. Kent Rosenberger, president of Rosenberger Construction anticipates more growth in 2007.

“Our architect and engineer relationships are busy, so the pipeline is full,” Rosenberger says. He adds that while the work is available, subcontractors, especially, are being stretched to their limits.

“We know we have to be careful about what we are pursuing and not pursuing,” he says. “We want to make sure we have enough capacity to take care of our negotiated and repeat clients and are looking away from some other opportunities.”

Repeat clients include Trammel Crow Co. of Dallas, Simpkins Group of Houston and Archway Properties of Houston. While industrial, office and warehouses still comprise slightly more than half of its contracts, commercial office work now accounts for 31 percent of >> Rosenberger’s business, with the remaining jobs stemming from retail, health care and industrial build-outs.

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Heavy industrial projects, such as power-generating plants and liquid natural gas terminals, are a mainstay for Zachry Construction Corp. of San Antonio, which was founded in 1924 in Laredo. At least three-quarters of its work is large, private industrial projects. Companywide 2006 revenues totaled $1.6 billion, with about two-thirds of that generated in Texas. Zachry ranked No. 3 on the top contractors list. As with other contractors, Zachry has become discriminating in the projects it pursues, being careful it and its partners do not over commit.

“The Texas market is strong,” says Keith Manning, senior vice president of Zachry. “Our challenges are selecting the right projects to participate in given our resources. There are a lot of good projects, a lot of robust sectors, and we’re fortunate to participate in a lot of those sectors.”

Manning says that Zachry seeks to work with owners, partners, design consultants and subcontractors that share its values and can consistently execute projects. It also seeks well-financed jobs with owners who propose realistic costs and schedules and share a culture of collaboration and the ability to partner.

The 600-ton roof of an LNG storage tank is raised into place using air pressure from below. (Photo by Greg Davis, courtesy of Zachry Construction.)

“The old master-slave philosophy that once dominated contracting is not the way to get things done,” Manning adds. “We prefer to work with people rather than for them.”

Zachry leads a joint venture team, Calaveras Power Partners, which is building a new 750-mw coal-fired power plant for CPS Energy of San Antonio at its J.K. Spruce site. Partners include Black & Veatch Corp. of Overland Park, Kan., and TIC The Industrial Co. of Steamboat Springs, Colo. Zachry did not release cost information. However, a statement released by Calaveras Power Partners last year estimated the construction cost at “several hundred million dollars.”

For Freeport LNG Development LP of Houston, Zachry is constructing the first liquid natural gas regasification terminal built in the United States in more than 25 years, Manning says. Zachry is part of a consortium working on the $215 million facility in Brazoria County. The other players on the turnkey engineering, procurement and construction contract include Technip of France and Saipem SpA of Italy. The team began work in January 2005, with completion of the first phase scheduled for February 2008.

Zachry also is completing several projects for the Texas Department of Transportation. The work includes $116 million in widening improvements to Loop 410 in San Antonio; $68 million reconstruction of the interchange at Interstate 35 and South Loop 363 in Temple, scheduled for completion by early 2009; and a $44.4 million four-lane divided highway south of Sinton.

In addition to general building projects such as educational, worship and hospitality facilities, Journeyman Construction of Austin keeps busy with transportation projects including building toll plazas and tunnels.

For Williams Brothers Construction Co. Inc., its single largest customer is
TxDOT. The Houston company started in 1955 with the interstate highway program and has grown to $550 million gross income annually for each of the past two years. The firm ranked No. 4 on the list of top contractors. The company is 42 percent employee owned. Founding partner James D. Pitcock Jr., president of Williams Brothers, says he plans to bring employee ownership up to 100 percent.

Pitcock describes highway work as being on an even keel, although he expects it may slow down this year. In prior years, bond funding has helped ratchet up the project load, but Pitcock does not foresee that continuing. All TxDOT work is competitively bid.

“It’s a matter of doing what we do well enough to be the low bidder and still have a slow and steady growth,” Pitcock says.

Williams Brothers is completing the last phase of $1.25 billion in contracts for rebuilding the Katy Freeway/IH-10 in the Houston area, which started in 2003. Pitcock expects to wrap up the four-year project in 2008.

In San Antonio, the company is building a $150 million interchange at U.S. 281 and Interstate 410, near the airport, >> and a $70 million interchange between IH-410 and IH-10. In the Rio Grande Valley, it is working on $200 million in projects on U.S. 83 and U.S. 77. It recently received a contract to build a bridge over the Trinity River in Dallas.

Journeyman Construction LP of Austin also focuses on highway projects, albeit of a smaller scale. In addition, the 7-year-old firm builds schools and other commercial projects. It employs 60 people and has annual revenues of $60 million. About 20 percent comes from the private side. The firm ranked No. 91 on the top contractors list.

Upon completion next year, Austin’s Long Center, under way in downtown by Austin Commercial, will provide vast new theater space for all of the city’s performing arts organizations. (Photo by Eileen Schwartz.)

“The year looks good for us,” said Sam Kumar, president and general partner of Journeyman.

The company has completed about 60 percent of a $20.8 million project to build a toll plaza, tunnels and four buildings on State Highway 130 in Austin and is >> working on a $5.4 million, 10,000-sq-ft, two-story toll plaza building and tunnel for the North Texas Toll Authority. Architectural stainless-steel panels and curved glass clad the oval-shaped building.

Journeyman has two school projects under way, a $2.5 million addition and renovation for the Navarro Independent School District and a $1.5 million renovation at Kazen Middle School and Oliveras Alternative School for the South San Antonio Independent School District.

On the private side, it is building a $4 million, 62,000-sq-ft, four-story Marriott Courtyard hotel in San Antonio; hospitality projects in Mississippi and New Mexico; and the $7 million Galleria office building in Cedar Park.

“I don’t see any tapering of business,” Kumar says. “Maybe in the next two years, we may see a little less public work.”