These are strange and fruitful days in the electrical contracting field. The days are bright with economic expansion, design/build construction, prefabrication, datacom specialization and diversification, contractor consolidatio n, and Internet communication. New tools and materials speed electrical installation, increasing profits.
But a long dark cloud casts a shadow over this healthy, technology-driven market. It's contracting's biggest malady: the skilled-labor shortage. Booming market or not, electrical construction's biggest challenge remains finding enough electricians to work the enormous market.
There's no doubt about the market growing. U.S. electrical contracting firms performed more than $64.2 billion of work in 1997, 50% more than than performed in 1992, according to the U.S. Census Bureau's 1997 report of construction industries.
The 1997 Census, released last summer, counted 61,414 electrical contracting firms (including about 10,800 $1-million firms) in the U.S.-compared to 54,022 firms in 1992. Electricians held about 656,000 jobs in 1998, according to the U.S. Department of Labor Statistics.
Some industry observers estimate that the number of U.S. electrical workers stands at more than 800,000 in the year 2000. About two-thirds of electricians are employed in the construction industry; the remainder work as maintenance electricians in every industry. Electrical contractors make up the third largest class of specialty contractors after plumbing and HVAC contractors, according to the U.S. Census Bureau.
CEE News has identified six major electrical-industry trends that represent market opportunities. But not every trend fits every size contractor. For instance, the design/build contracting and datacom installation disciplines take a certain mind-set and obsession.
The virtual marketplace
At this writing, more than 30 Web sites cater to electrical-contractor buying needs. It seems inevitable that every contractor will employ the Internet in some shape or form to order electrical supplies. But contractors who are comfortable and satisfied with their current distributor relationship shouldn't feel pressured to hop on the Internet-buying bandwagon. Some contractors are still uncomfortable with the Internet.
An assortment of electrical supply Web sites fill specialized niches. One new Web site-Bestroute.com-is an online distributor of hard-to-find and slow-moving inventory. It provides electrical contractors and other end users 24-hour online access to an initial stockpile of 60,000 items, including many hard-to-find products.
Another site, called Electrician's Web (www.electriciansweb.com), serves as an Internet meeting room for electrical contractors. The site includes listings for excess inventory, job postings, an interactive calendar, a chat room, and free e-mail systems that can be set up so you get mail at "companyname"@electriciansweb.com.
What you can do. At this point, Internet purchasing is probably most convenient for electrical contractors in remote markets. Rural contractors can't always depend on their existing sources of supply to get deliveries to them when promised due to logistical/delivery problems in the manufacturer-to-distributor link, as well as within a distributor's own supply efforts.
The skilled-labor shortage
The skilled-labor shortage is electrical contracting's single most serious problem. There simply aren't enough electricians to meet the demand for work. It's everyone's problem, and it will only get worse before it gets better, as experienced electricians retire without journeymen electricians to fill their positions.
Some large electrical contractors have to turn away work because they can't find skilled journeyman. However, companies are searching for solutions. In Florida, Tri-City Electrical Contractors, one of the nation's largest electrical contractors, has invested in the School-to-Work program. Tri-City is one of the founding fathers of the Academy of Construction Trade (ACT), a consortium of central-Florida construction-industry contractors and trade associations that partner with local school boards and governments. Called "Wheel of Learning," the School-to-Work program trains high-school juniors and seniors for various trades and gives them job-site experience with local contractors.
Electricians learn the trade in either union or independent shops. The union side of electrical contracting spends more money on formal electrician training than the nonunion side. Union electricians complete a four- or five-year apprenticeship program. Joint-training committees made up of local unions of IBEW, and local chapters of the NECA, sponsor large apprenticeship programs. Nonunion contractors tend to educate and train their own apprentices, though local chapters of the Associated Builders and Contractors and the Independent Electrical Contractors support the training. Many open-shop contractors capitalize on government school-to-work programs as well.
What you can do. For more information on school-work-program call ACT at (407) 682-3368 or call the National Center for Construction Education and Research (NCCER) at (352) 334-0933.
The design/build method
Obsessive planning has its advantages and disadvantages. Planning a project way in advance step-by-step can save enormous amounts of time, money and material on fast-track construction projects, but it can also waste time if the project never sees the light of day.
Design/build is a team-based approach. Owners assign responsibility for construction to a single source-a team of various contractors. Owners love design/build projects because they allow a job to be done at a guaranteed price and at a guaranteed schedule, work proceeds faster and with fewer hassles and planning and scheduling are done long before actual work begins.
Electrical contractors have the on-staff expertise to draw the electrical plans. In a recent study conducted by EC&M and CEE News magazines, 68% of the electrical-professional respondents said it was "likely" or "very likely" that they would be involved with design/build work in the next 12 months. A study from the Design/Build Institute of America, Washington, D.C., found that having regular scheduling sessions attended by all the trades involved on a project can save nearly 30% on the total building construction time as compared to the conventional design-bid-build basis. The team concept fosters better and faster communications among all contractors. The team has regular, sometimes daily, meetings well in advance of ground breaking. Because a single firm bears the burden for both design and construction, design/build is said to offer a focal point and, therefore, more flexibility to contractors.
Prefabrication represents another facet of design/build. As electrical contractors search for new ways to get the most productivity out of their workers in one of the tightest labor markets in years, some contractors are developing prefabricated electrical systems-either on the job site or back at the shop-to speed installation.
What you can do. Design/build isn't for everyone. It takes a special meticulous planning and obsession with getting the job done on time. For more information about design/build call the Design/Build Institute of America at (202) 682-0110; or the American Subcontractors Association (ASA) at (703) 684-3450.
The consolidation market
Consolidation is reshaping the electrical contracting business. Historically, smaller family-owned firms performed most electrical contracting, with just a handful of regional and national firms doing business. That's no longer the case, with the emergence of nationwide electrical contractor consolidators during the past two years. Consolidators are attracted to the size and local fragmentation of the electrical-construction market.
The three largest consolidators are all headquartered in Houston: Integrated Electrical Services, Inc. (IES); Quanta Services, Inc.; and Encompass Services Corp. (Encompass is the new corporation formed in February through the merger of Group Maintenance America Corp. and Building One Services Corp., also known as BOSS). These corporations have bought dozens of smaller electrical contractors over the past two years. IES alone bought 39 electrical contractors last year and is perhaps the purest electrical contractor consolidator of the three giants; its $1.3 billion in 1999 sales came entirely from electrical and datacom work. In contrast, Encompass, which now has 30,000 employees and 250 locations through the GroupMAC-Building One merger, focuses only 43% of its total estimated sales of $3.6 billion on electrical work. However, the $1.54 billion that Encompass expects to do in electrical work this year would dwarf any other electrical contractors except IES and EMCOR Group, Norwalk, Conn., which last year did $2.89 billion in electrical work and related fields.
National contracting firms doing business for national clients are destined to hurt local contractors. Ultimately, there are two big questions. How big will national contracting get? And how much will local firms suffer? Most industry analysts agree that future contracting for chains such as Wal-Mart and McDonalds will probably be a mix of national firms and locally focused contractors. What you can do. If consolidators and or electrical franchises are stealing work from your firm, rethink your specialties. What values do you add? What kind of electrical work does your firm do better than any other? Electrical maintenance? Residential?
The datacom market
Datacom installation empowers electrical contractors to become sole-source providers of wiring for an entire project. In essence, contractors who do datacom work can offer owners one-stop shopping.
That's one reason so many electrical contractors are moving into voice/data installations. Another is that installing both fiber-optic and datacom cable has become easier over the past few years because of new tools, components and procedures. Although some contractors have had separate subsidiaries focusing on datacom work for years, many other companies have only just recently gotten serious about this business. In a recent study performed by CEE News and EC&M magazines, 64% of the 500 respondents said they were involved with voice/data cabling work. Of these respondents, 51% found datacom profits higher than traditional work.
Datacom takes specialized training. BICSI-trained traditional electrical contractors and engineers are becoming certified to design, install and test datacom systems. Many of these firms mentioned earlier set up separate divisions. National contractor organizations such as NECA and Independent Electrical Contractors (IEC) have apprenticeship datacom wiring training programs.
The volume of electrical-contracting work keeps many firms hopping, but the most exciting profits continue to come from low-voltage work. John Grau, executive vice president of the National Electrical Contractors Association, Bethesda, Md., notes that opportunities abound for contractors in urban areas to perform power and datacom renovation work for computers and Internet access. According to some estimates, datacom work already accounts for more than 25% of total sales by electrical contractors, and the percentage is expected to increase each year throughout the first decades of the 21st century.
What you can do. Many electrical contractors find datacom work easier and more lucrative than power wiring. But like design/build work, it's not for everyone. The work requires an almost obsessive diligence. NECA and the IEC both offer training in datacom. Or you can become BICSI certified.
The power quality game
Power quality offers still another specialized lucrative field for contractors to consider. The computer revolution of the past 15 years spiked the demand for power quality monitoring and testing services. Dirty power-quality and harmonics problems have increased geometrically with the availability of computers and Internet services to virtually every office worker. Power quality site analysis and troubleshooting is especially in demand during these computer and Internet-driven days. What you can do. As with datacom, NECA and the IEC both offer training programs on power quality.