CNY construction firms cope with war, economy

CNY Business Journal (1996+), Mar 28, 2003 by Spohr, George

SYRACUSE - The United States' military campaign against Iraq will have a direct impact on the region's construction industry, say business executives, to the point where a prolonged war will significantly damage the bottom line.

"We have no control over the war and, yes, it will put some federal budgets on hold," says Cleveland Hughes, president and chief executive officer of CHC Construction Group, Inc. "Our construction activities for the federal government are on the civilian side of the [business], so we do work for the FAA [Federal Aviation Administration], General Services Administration, those types of agencies. However, if matters get prolonged, it eventually will impact that segment of the federal government."

In short, it "essentially means there will be new realities to adjust to," Hughes says.

The construction industry, like many others, is negatively affected by a weakened national economy and the war against Iraq. Whether it's the increasingly high cost of fuel for trucks, or the loss or delay of federal contracts, the industry is reeling.

"It's the price of oil, which is going to follow back into asphalt, paving," says William C. Gaetano, chief executive officer of Charles A. Gaetano Construction Corp. in Utica. "Then you can't get firm quotes. That affects us. It affects us with higher prices."

Companies can either cry over spilled milk, or tackle the problem head-on. Gaetano's construction firm continues to do jobs across the state. And Hughes' Syracuse-based firm is continuing expansion across the country. He advocates the creation of new opportunities, a heightened entrepreneurial spirit, and the creation of new partnerships.

"Yes, the economy is in a state of uncertainty in the United States, which means there will be weak areas, but more importantly, there are many opportunities out there," Hughes says. "The beauty of being an entrepreneur is that you have to find those opportunities and take advantage of them while they're available and then be able to sustain the market."

Staying the course

At CHC Construction, a five-year strategic plan was created at the height of the dot-corn boom. The economy was roaring, with no end in sight. The Dow Jones Industrial Averages and NASDAQ Composites soared into record territory. Gasoline prices sunk to lows unseen for decades, to about 90 cents per gallon.

Now that the economy is struggling and gas prices are double what they were - it would be easy to contract the company, pull back from new markets, and focus on existing ones. Hughes says doing that wouldn't do a construction company any good.

"I won't say we have deviated from the plan, but we have altered the plan to accommodate some available opportunities," Hughes explains. "We have not laid off any employees, but we have refocused some employees into other divisions. We have also taken our marketing department to another level, so now I feel we're ready to keep pace with our overall five-year strategic plan."

Specifically, CHC Construction's Energy Conservation Services Division, which provides energy-conservation measures for facilities in the private and public sector, is the new poster child of growth for the company. "We are investing more dollars in this sector than we had previously planned, because the opportunities are there," Hughes says.

Bullish growth

Hughes' company has an energy-services office in Chicago, a full-service office serving New York City and New Jersey, a full-service office in San Diego, and - new this year - energyservices offices in Miami and Boston. Over the next year, offices will open in Phoenix and Seattle. Then comes Atlanta and Memphis - two more cities where CHC Construction will focus on the growing energy-services market.

"The new offices will take us a step closer to the national coverage that we're looking for," Hughes says. Retracting in a weak economy would be foolish, Hughes says, because maintaining growth in 2003 is the foundation for the way in which the company will perform in the future.

"Much of the activities that we are investing in now will contribute to our core business three to five years down the road," he adds. "We obviously are relying on geographic expansion for some growth."

But as Gaetano points out, "it's going to get slower before it gets better. Unfortunately, a lot of the nonprofits are tied to state money, and I think that's where some of our work is going to slow down. Until this budget gets settled - if it ever gets settled - a lot of projects are going to sit on the shelf

Forming partnerships

For Gaetano, "the referral very rarely comes from an architect," he says, so the alliances and partnerships his company forms are with clients.

"We constantly are building relationships, or reinforcing our existing relationships," he says. "We do a lot of design/build work, also. That's been very strong. We have two projects to start next month, both design/build."

Strong partnerships are the reason Gaetano's company is doing work across the state, even in places where he doesn't have an office. "We have two projects in the Hudson Valley, private accounts, and that's territory we haven't worked," he notes. "We're all over the state now."