Photo courtesy of E-J Electric
E-J Electric performed the electrical work on One Vanderbilt, a 1,401-ft tower that redefines the Manhattan skyline in the heart of East Midtown.

Big Year on Paper: EC&M’s 2022 Top 50 Electrical Contractors Special Report

Sept. 20, 2022
This year’s Top 50 electrical contractors pulled in an unprecedented revenue gain in 2021 as a collective group, but that masked intense pressure exerted by rising inflation, snarled supply chains, and continued labor supply challenges.

It’s unlikely that 2021 and its swirling economic winds will be remembered as a home-run year for American industry. But one sector tore the cover off the ball — accounting-wise at least.

Even as the economy struggled to regain its footing in the wake of the COVID-19 pandemic and inflation, supply chain snarls and labor shortages, companies comprising the 2022 installment of EC&M’s Top 50 Electrical Contractors reported combined record revenues of almost $40 billion for the year (see Rankings Table), a 20% gain over the $34.1 billion amassed in 2020 by the 2021 Top 50 (see Historical Trends Chart). That eye-popping gain may be partly due to the timing of revenue bookings for firms and even the inflation spike, but its sheer magnitude — easily the biggest year-over-year jump in at least 15 years — suggests that, despite speed bumps, electrical contractors as a group have been busier than ever the last two years — from the start of the pandemic, through its depths, and beyond.

Whether or not the revenue figure is an accurate barometer of industry health, contractors completing EC&M’s annual survey of business conditions and trends did indicate that 2021 was at least a better business year than 2020. The overall business climate (Fig. 1) was judged strong by 63%, a big rebound from the 37% of 2021’s Top 50 that rated 2020 as strong. Additionally, 43% said they exceeded their revenue goals for the year (Fig. 2) — well up from the 24% last year who said goals were exceeded the prior year. Only nine companies reported 2021 revenues lower than the year before. Companies’ bottom lines, however, didn’t fare better, generally. Only 10 of 41 firms responding said they adjusted their bids for greater profits in 2021 (Fig. 3), up from eight of 45 responding last year about their 2020 experience.

Looking back, several Top 50 contractors said 2021 (the calendar year that the 2022 survey is based on) was a period of rebound and reset that brought a surprising amount of success. Others described it as another challenging year.

Tom Schott, president and CEO of Cupertino Electric, Inc., (No. 6) San Jose, Calif., says the company’s 17% revenue gain was possible because it had multiple avenues for pursuing business.

“We’ve mostly recovered from the impact of the pandemic,” he says. “Our diversified approach to markets we serve — and our national presence — means we were able to rebound quickly and has allowed us to realize real growth and opportunity. Some of our markets were hit harder than others, but our diversified strategy allowed us to weather the storm.”

Commonwealth Electric Company of the Midwest (No. 42), Lincoln, Neb., saw its revenues climb 22% in the wake of a disruptive 2020.

“When COVID hit, we saw some significant reaction, mostly in project delays that caused about a 38% drop in some areas like service work and man hours, but that lasted about three months,” says Michael Price, chief executive officer. “But our revenues were back up in 2021, due in part to our geographic distribution across the Midwest and South that gives us good risk mitigation.”

Joel Van Egdom, chief financial officer at Interstates, Inc. (No. 40), Sioux Center, Iowa, says the company’s strong backlog got it through the initial stages of COVID-19 in 2020, but that relative weakness later set in, causing revenue to come in flat for 2021.

“We thought business would ramp up in the second half last year, but it didn’t happen,” he says. “So, we saw basically no growth year over year. There was increasing competition from other contractors, and we did have to take some tighter-margin jobs to secure work — so gross profit was down too.”

Input insanity

While Top 50 revenues were up, and many firms judged the business climate strong in 2021, there was no shortage of headwinds. After bubbling up in late 2020, severe supply chain problems and material price spikes surfaced in full force as 2021 progressed, complicating project starts, bidding, and scheduling. On top of that, contractors had to contend with the perennial problem of qualified worker shortages — one magnified by the combination of a surge in construction projects and heavy churn/disruption in the national labor force.

Both sets of problems were deemed major operational concerns by Top 50 contractors. Recruiting and retention of quality employees and supply chain problems ran away with the designation as factors exerting the most negative impact on business growth (Fig. 4). Also, 36 of 43 firms identified delays with materials delivery and logistics as the single biggest factor affecting their ability to finish jobs on time and within budget (Fig. 5). Respondents appear to lay the blame for supply chain problems on the pandemic and its strong link to supply and demand imbalances across the economy that have also helped ignite inflation. Supply chain issues got the most mentions (39) as a key short-term byproduct of the pandemic (Fig. 6), up from 27 mentions last year, followed closely by delayed projects (32), down from 40 in 2021.
Nick Arb, vice president of market strategy for Guarantee Electrical Co. (No. 46), St. Louis, says unusually volatile materials pricing and widespread supply chain kinks were surprise headaches in 2021 that had to be dealt with creatively.

“That really stressed the importance of having good relations with suppliers and contract partners,” he says. “And it actually played to our strength as design-build contractors because getting in on a project up-front allows owners to procure long lead-time products earlier and mitigate supply chain risks, rather than waiting for designs to be complete and then placing orders.”

Contractors also described a 2021 environment where a lack of visibility on costs for materials and labor ate into profits and prompted more careful consideration of project opportunities. Schott said Cupertino’s margins remain “under pressure” from inflation, supply problems, and labor shortages and have made it “extremely important that we make sure we’re choosing the right projects and using discretion.” Atlanta-based Inglett & Stubbs (No. 36) saw its revenues rise but struggled to assemble a stable and reliable workforce from a more demanding labor pool and navigate a difficult materials market.

“With input costs growing, we had to tackle that by managing our margins more closely and pricing more aggressively in some cases,” says Gael Perlot, vice president. “We saw more projects going to the guaranteed maximum pricing format, so we had to add to our staffing on the accounting side.”

Nearly all companies surveyed indicated they faced materials pricing challenges in 2021. Materials cited as showing the biggest price spikes were wire and cable and distribution equipment (Fig. 7), the latter ranking far higher in mentions than in the 2021 survey. A plurality of respondents (48%) put the cost increase for the material they said had gone up the most (Fig. 8) in the 15% to 29% range.

The hot stay hot

Those spiraling costs, combined with pricier labor and rising interest rates, made construction more expensive in 2021. That iced some projects, but many others moved ahead regardless, benefitting electrical contractors. For those properly positioned (able to take advantage of economically well-situated markets capable of absorbing higher construction costs), 2021 was a year to restore revenue streams and pad backlog.

Once again, the action for electrical contractors seemed centered in data centers/mission critical and health care, two markets that close to half of those surveyed included in their list of hottest markets for 2021 (Table 1). Both markets have been No. 1 or No. 2 on the hottest list for the last several years, while manufacturing placed third for the second consecutive year. As for cold markets (Table 2), retail, private office, and hospitality topped the list, closely mirroring last year’s ranking and offering further evidence of COVID-19’s lingering chilling effect on construction demand in possibly pandemic-scarred sectors.

“The office market has cooled down drastically, and hospitality too,” says Anthony Mann, CEO of E-J Electric Installation Co. (No. 15), headquartered in Long Island City, N.Y. “But the warehouse side of retail has been hot — the big distribution centers. And health care, which responded to COVID, is now getting back into a lot of its longer-term projects and driving forward on those. We also see some more opportunities coming in renewable energy and transit and airport work.”

Commonwealth Electric, Price says, saw decision makers in some markets finally “flinch” at construction costs, but rode the still-cresting wave in data center and health care work and filled gaps with a pickup in electrical components of growing street projects.

“No one is building office space, and retail is still slow, though we’ve had strong years before in that,” he says. “The strong highlight today is mission critical projects. Data center construction seems to be recession-proof.”

More government work is on Guarantee Electrical’s radar as a possible bulwark against a construction recession. Arb says that work has grown partly because more of its long-time general contractor partners are securing government contracts. More of that work is coalescing in Colorado — Air Force base projects and a NORAD facility recently – prompting the 2021 acquisition of Berwick Electrical in Colorado Springs.

“A larger percentage of our backlog is in federal work; it now stands at about 30%,” he says. “It’s an emerging market for us, while we stay strong in areas like water, health care, and distribution and logistics facilities.”

Looking ahead, the stage could be set for some electrical contractors to seize new and expanded market opportunities by way of the massive infrastructure improvement bill passed by Congress in 2021. Funding transportation, power and water systems, electric vehicles, broadband, and climate change mitigation to the tune of $1.2 trillion, the act will require the participation of many classes of contractors. For now at least, many Top 50 firms aren’t counting on a big payday from the legislation. Just 7% (Fig. 9) expect to see a significant positive impact on their business, and two-thirds see 2022 revenues tied to the spending amounting to 5% or less (Fig. 10). Contractors best positioned to gain might be those with electric vehicle charging infrastructure, road and bridge, and electric grid expertise (Fig. 11) — the three sectors contractors expect to get the biggest boost from the spending.

When it does come, much of that work will likely flow to market specialists, but Schott says established companies with strong performance track records like Cupertino could be positioned to expand their portfolios via the funding push. The company, he says, has slowly leveraged its size, scale, and ability to execute to push into the public infrastructure market, where markets like water treatment and transportation are ripe for upgrades. That “separates us, and we’ve been positioning ourselves to do more of that work for the last few years.”

Spiking optimism

With their backlogs growing amidst a still-humming construction economy — and despite economic clouds on the horizon — leading electrical contractors surveyed in late spring largely saw a stronger 2022 taking shape. The percentage anticipating current-year electrical revenue gains over the prior year (Fig. 12) increased slightly from last year, with almost 40% believing they would exceed goals. Almost half expect a revenue increase, similar to last year, with the majority expecting healthy 11%-plus increases (Fig. 13).

Meanwhile, the impact of the pandemic on business seems to be steadily fading. Fewer expect pandemic-related revenue declines greater than 10% in 2022; 91%, however, see lingering effects of up to 10% on revenues (Fig. 14), roughly in line with last year’s results. Still, half the companies surveyed seem to say business is not back to pre-pandemic normal just yet, but that “business as usual” will resume early next year. Many (42%) surveyed last year said business was back to normal in late spring 2021. This year, 37% said it was already back to normal (Fig. 15), suggesting that some may have been premature in their assessments.

The big sensibility shift, though, was on the profits front. Perhaps anticipating greater visibility on costs, 37% said they’d adjust bids for higher profits in 2022 (Fig. 16), up from 16% of last year’s Top 50 who said they saw a chance for higher profits coming in 2021.
Margins have taken a hit in early 2022 at Gaylor Electric, Inc. (No. 26), Indianapolis, but President and CEO Chuck Goodrich sees a better second half if stabilizing materials costs allow the firm to bid more confidently.

“We’ve seen tremendous margin erosion based on the contracts we had in place,” he says. “Inflation has killed us, but the good news is that now these higher costs are in contracts so our margins should increase from where we are now.”

The company’s volume of business seems to be growing as well. From January through June, Goodrich says, backlog goals were exceeded. In July, however, they fell by 6%.

“I’m concerned we could be slowing, but it won’t affect us for 2022 revenues,” he says. “Next year could be flat.”

The economic backdrop also has the attention of Frank Musolino, CEO at Power Design, Inc. (No. 10), St. Petersburg, Fla., but the design-build firm’s concentration, expertise, and relationships in the growing multi-family residential sector is a bulwark against an uncertain market outlook. Despite rising construction costs, demand for multi-family and mixed-use residential/commercial construction looks strong and sustainable, he says, provided the economy stays out of anything but a shallow recession that could lead to higher unemployment.

“The rub will be over the next year,” he says. “Can the market continue to bear these rising costs and interest rates? But our backlog is the largest in our history and carries us out two years with bigger and longer projects. The idea now is to grab work while it’s good, and make sure we’re capitalizing on this boom.”
E-J Electric’s 2022 business is benefitting from project starts put off during the pandemic and a surge in project awards in late 2021 but is also seeing some owners “holding back because material costs are up 30%,” says Mann. The uncertainty is giving the company and its potential clients time to plan and reassess.

“We’re sitting down with clients to look into the future, help them project their needs, and get into the queue on materials,” he says. “Some health-care clients are bringing us in earlier on because they’re aware of lead-time issues and the need to get engineering done faster.”

New manpower wrinkle

That will take skilled and professional labor, of course, a commodity that could continue to come at a premium in the current economy. Workers of all types might be in shorter supply due partly to a near unprecedented labor market upheaval, bad timing for an industry that has seen demand accelerate.

After labor demand plummeted due to the pandemic in 2020, most of the Top 50 reported staffing up in 2021 (Fig. 17) and the number of firms saying they’re short workers ticked up to 81% from 75% (Fig. 18). For 2022, just as in 2021, more than three-quarters of firms plan to add employees (Fig. 19). With nearly half of contractors saying labor sourcing and retention is their single biggest growth impediment, the tight labor market adds fuel to the fire, limiting the supply of qualified candidates for many positions. Top contractors, however, indicated their critical project-labor needs may have narrowed. Last year, many appeared to check multiple boxes on “most difficult positions to fill.” This year, it appears, most chose just one from a list of seven, with “electrician” taking the top spot from “electrical foreman” with 14 mentions (Fig. 20).

Cupertino’s Schott says the labor squeeze is as tight as ever, covering front-line field electricians to back-office project managers and support staff. To combat the problem, the company has ramped up efforts to burnish its image as a progressive employer.

“In the war for talent, we’ve been investing in a formal ‘employer brand’ campaign to differentiate ourselves in the market — similar to how we’d formally invest in communicating our value to customers,” he says.

 Interstates is also squeezed front to back on labor, not a big change from previous years but feeling the press of the so-called “Great Resignation” phenomenon that may be drawing experienced people out of the labor pool, Van Egdom says.

“With turnover seemingly higher than it’s been, that adds to the challenges of both retaining and attracting new talent,” he says.

Gaylor Electric is attacking its “quality” labor pipeline deficit partly on two novel fronts: carefully crafted high school partnerships to identify and groom students for its apprenticeship programs and repurposing retiring employees to serve as teachers and mentors for young craft employees.

“We’re reaching out to high schoolers, trying to find 16- to 18-year-olds we can turn into electricians,” Goodrich says.

A tool contractors might employ to ease the recruitment challenge for some jobs is hybrid work arrangements. Accelerated during the pandemic, remote and remote/on-site blend structures could become workplace fixtures after technologies allowing online collaboration and sharing proved highly capable. Offering job candidates such flexible work options could be a way for contractors to expand their geographic search maps and lure talent reluctant to pull up stakes or be latched to an office.

Contractors don’t seem to be on the same page when it comes to the feasibility of those arrangements. In a slight shift from last year, Top 50 contractors, by a narrow margin, say they’re permitting some former office-based employees who shifted to working from home fully or partially during the pandemic to continue doing so (Fig. 21). But those who are permitting it are being selective. About 70% offer the perk to less than 19% of their workforce (Fig. 22).

At Power Design, Musolino says, only a few full-time positions are remote but more flexibility has been put into employee schedules.
“We do feel that an office presence is important, but we’re trying to balance that as we can,” he says. “Construction is really a people-based industry, and if you don’t have strong relations with the team you’re working with, morale can do down. So face-to-face is important.”

Technology’s lure

Unrelenting labor challenges find more contractors, Interstates included, turning to technology to mitigate the effects of manpower and talent shortages. Van Egdom says the company is exploring more deeply IT tools, including generative design, robotic process automation, and technology-aided prefabrication processes that can improve efficiency in design and project execution management — hopeful they can supplement or supplant some labor over time.

“Technology and automation are definitely a component of the solution to the labor issue that we continue to invest in,” he says. “Taking more work off site to a manufacturing environment is also an element of mitigating peak labor needs.”

Technology’s growing importance to contractors, extending from the design and specification phase through training and down to the job site, is again evident. Becoming steadily more intertwined, technology’s advance may have quickened during the pandemic.
Plans to use technology such as artificial intelligence and augmented and virtual reality tools (AR/VR) to boost competitiveness ranked a high second on a list of possible long-term byproducts of the pandemic (Fig. 23). And the pace of AR/VR adoption appears to be picking up. Almost half say they’re already using AR (Fig. 24), well up from 26% last year, while 44% say they’re using VR (Fig. 25), up 10 percentage points from last year. Primary applications for both technologies (Fig. 26 and Fig. 27) seem to be coalescing around collaboration — with fellow contractors and clients alike — though others are popular, including training and safety enhancement, which may be gaining ground.

Inglett & Stubbs is still feeling its way through the AR and VR world, slowly embracing the tools as more projects incorporate them, and their potential benefits become clearer. Perlot is drawn to their seeming power to better unite design and construction phases, accurately monitor progress, and minimize costly problems that stem from miscommunication.

“We’ve been applying VR more, giving us some great conversations with owners about better understanding and visualizing what they want as they walk through and see what works and what doesn’t,” he says. “We’re still trying to figure out how to tackle AR, but it could be a good tool for communication between the field and the design team and doing quality checks on installations.”

The ability to bring ever more powerful IT tools into all phases of work continues to open new efficiency and performance horizons for contractors. In particular, the growing power of mobile devices and the software they can utilize has continued to make field operations more nimble, informed, and capable in execution and oversight. Their importance is evident in the top ranking that “field apps and software” has on the list of topics contractors believe employees need the most training support on (Fig. 28). That may be because they have so many regularly used functions vital to operations — from top-ranked project management, time management and tool management to job costing/estimating, codes and standards guidelines, and inventory tracking (Fig. 29). And contractors point to a range of specific useful job-related information that employees are accessing on mobile devices, with product specifications and codes/standards requirements topping the list (Fig. 30).

That information, readily accessible in the field at all levels, is becoming essential as job sites grow more complex, demanding, and schedule-driven, says Commonwealth Electric’s Price.

“On-the-ground technology that can access information through the cloud gives us remarkable capabilities,” he says, which are needed because, “as technological advances in construction have pushed construction schedule timelines from where they used to be, expectations have followed suit to the point where we have to do in a week some things that used to take a month.”

As central participants in almost any construction project, electrical contractors will need to take advantage of every technology-aided tool at their disposal to take full advantage of what looks like a full slate of opportunities stretching to the long horizon. Coming off an incredibly strong year of revenue growth tainted by profit challenges, Top 50 companies face a near-term future that looks hazy at best due to the very mixed signals the broader economy is sending. By any measure, though, top contractors delivered at least a mild surprise in a 2021 buffeted by no shortage of economic headwinds and uncertainty. Can they deliver again in a year equally (if not more) economically perilous? Stay tuned. 

Tom Zind is a freelance writer based in Lees Summit, Mo. He can be reached at [email protected].

About the Author

Tom Zind | Freelance Writer

Zind is a freelance writer based in Lee’s Summit, Mo. He can be reached at [email protected].

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