Click here to view firm rankings>>

Complete Report - The entire Top 400 Contractors list, with market-segment charts and a special supplement showing subsidiaries, is available in an electronic format. Click here for more information.

For many, if not most, large general contractors, this is a time like few have ever seen. The economy is strong, the markets vibrant, and there is more than enough work to go around in most major markets and geographic regions. What soft spots that can be found are not catastrophic. And there is little evidence of a major downturn in the immediate future. This has led many firms to enjoy record years. It also has led to major contractors to take a close look at their businesses to make sure they can handle the prosperity.

The scale of the boom can be seen from the revenue figures submitted by ENR’s Top 400 Contractors. The Top 400 posted a combined revenue of $235.56 billion for 2005, a hefty 12.3% above 2004’s mark of $209.74 billion. This bounty was shared between the domestic and international markets, with domestic revenue rising 13.0% to $199.97 billion while international revenue rose 8.4% to $35.59 billion.

For many firms, this is the best market they’ve ever seen. “There’s at least enough work out there for everyone,” says Mike Bolen, CEO of McCarthy Building Cos. “It truly is the best of times.” Mervyn Sambles, vice president of strategic development for Fluor Corp. agrees. “I’ve been in the business for 30 years and this is the best I’ve seen the markets. Some of our senior managers say this is like it was in the late 1960s.”

“Last year was our third straight year of record revenue,” says Jude Laspa, deputy chief operating officer at Bechtel. “It’s nice to have that level of backlog. It gives employees confidence about the future.” Greg Nook, executive vice president of J.E. Dunn Construction agrees. “There are good fundamentals in place for a solid market for the foreseeable future. It also means hope for some markets that have been quiet.”

For some firms, growth has been explosive. The biggest jump on the Top 400 was by Alvin H. Butz Inc., which nearly tripled in size. “We acquired Shoemaker Construction Co. and Alexander Building Construction in 2004, but that didn’t account for our increase,” says Robert Episcopo, business development director. Several major projects and an overall redevelopment boom in Pennsylvania’s Lehigh Valley and in Philadelphia boosted the firm’s revenue. Butz currently is finishing a new 350,000-sq-ft headquarters facility for Olympus America in Center Valley, Pa., just south of Bethlehem, and Shoemaker Construction is finishing the $100-million Waterfront Square project—two luxury high-rise condominiums on the Delaware River in Philadelphia.

Butz also is expanding to Florida almost by accident. “We had a senior manager retire down to the Naples area and he told us of the huge opportunities down there,” Episcopo says. After a few false starts, Butz teamed with a local firm to form a joint-venture company, Gates-McVey-Butz Institutional Construction, to work in the schools market. “We’ve managed to book $129 million in work in schools, condo conversions and retail in less than a year,” Episcopo says.

For some firms, the market is strong, but not overheated. “In the Pacific Northwest, we have a ‘Three Bears’ market,” says Bart Eberwein, vice president of marketing for Hoffman Construction. “It’s not too hot. It’s not too cold. It’s just right.” He notes that there were some bad years after 9/11, but that corporate spending now is rising. “We are seeing a lot of work in medical, lab facilities and research facilities. The American economy is strong, so everyone seems to be building labs and research & development facilities,” he says.

Revitalized

A significant market trend is urban revitalization, which is showing up across the country, particularly in the Rust Belt states. “We are seeing a lot of mixed use in urban downtowns,” says Mike Kolakowski, CEO of Konover Construction, which works in New England and Middle-Atlantic states. “It seems like this is the program of choice for redeveloping cities.”

One city that is working hard on redevelopment is St. Louis. “We are seeing a major demographic shift toward living in the cities,” says Joe McKee, president of Paric Corp. He says that the price of gas is only one factor in people deciding to trade the life of the suburban commuter for city dweller. “It’s also a move toward an alternative lifestyle where people want to be near shopping and cultural facilities,” he says.

Another area undergoing revitalization is eastern Pennsylvania. “Philadelphia is working to revitalize its downtown with a lot of new residential towers,” says Episcopo. Allentown also is undergoing a major redevelopment, he says. Part of that redevelopment is the construction of a new Triple-A baseball park currently being designed by HOK, with Alvin H. Butz as construction manager, Episcopo says.

But there is a cloud on the horizon. The question of urban development has become a hot political issue after the U.S. Supreme Court ruled last June in Kelo v. City of New London that local governments could use eminent domain to condemn aging structures and neighborhoods to make way for private development. “You are seeing anti-growth groups using this ruling to fuel the debate against urban redevelopment,” says McKee.

McKee notes that Missouri on May 5 passed a law barring the use of eminent domain solely for economic development purposes at the urging of Gov. Matt Blunt (R), who plans to sign it. McKee says there also is a petition for a ballot initiative to put an even more restrictive requirement in the state constitution. Illinois already bans using eminent domain for private economic development.

Condo Mania

For many contractors, the multi-unit residential market is a Siren, singing a sweet song but fraught with peril. “You have to be very careful with mixed-use projects” because of liability issues, says Bolen. He notes that in a few states, the risk of litigation makes any condominium-related project perilous. “Our risk counsel makes a pretty rigorous review before we would even touch a condo project,” adds Mindy Frink, communications director of The Beck Group.

For Turner Construction Co., the overall market is “volatile and exciting,” but Turner also is careful about multi-unit residential work, says Peter Daveron, CEO. “You have people coming out of nowhere to build condos to make a buck, but who are untested,” he says. Turner is spending more time on due diligence of owners than ever before. “That’s why we’ve stayed away from the residential market except for our regular customers,” Daveron says.

In some areas, the bloom may be off the rose in the multi-unit residential market, as supply exceeds demand. “In Las Vegas, we’ve seen residential projects get canceled because the area is becoming overbuilt,” says Bolen. “But you see that whenever you get a really hot market.”

New York also is seeing a resurgence in multi-unit residential. “People keep expecting a downturn in the residential market, but in the New York City area, it continues to be strong,” says Bob Mullen, CEO of Structure Tone. “The market never got overheated here the way it did in Las Vegas and southern Florida.”

Many firms are particularly wary of the condo market on the West Coast, where it is very strong. “Out here, ‘mixed-use’ is code for condos with a coffee shop,” says Eberwein of Hoffman. The firm is careful about such work. “We turn down more of these projects than we take. Contractors will take risks no one else would, but we want to know what those risks are,” he says. The performance of a building over a long period of time for a large number of owners is tough to judge, and the litigation risk is too much for many contractors, say industry sources.

One good sign is that, with the residential market peaking in many areas, the commercial market is beginning to pick up. “We’ve seen more commercial office work in the past couple years than we’ve seen since 9/11,” Bolen says. He says the commercial office market dried up in 2001, “but much of the excess capacity has been absorbed and the old-line developers are coming back into the market.”

“In the Southeast, condos were the hot deal for several years,” says Tom Wening, senior vice president of H.J. Russell & Co. But the condo market has fallen off in favor of mixed-use commercial and retail, he says. Russell is doing the core and shell on the 43-floor Wachovia First Street Office Tower in Charlotte, N.C., and is building the state headquarters for Blue Cross-Blue Shield in Chattanooga, Tenn. Both projects are about $200 million.

One trend that seems on the rise is the increasing use of off-balance sheet financed dormitories in higher education. “Universities are going more to design-build-operate for things like dorms,” says Wening. Russell is building such privatized student housing for Albany (Ga.) State University and Fort Valley State University in Fort Valley, Ga.

On the Road Again

On the infrastructure side, some down markets are beginning to percolate again. “California’s budget crunch of the past few years depressed the market for infrastructure, but we are seeing more projects come on line,” says Michael Crawford, CEO of Sukut Construction. Part of that is the continuing migration to the state. “We also do a lot of landfill work, and with all the new people settling here, that means a lot more trash,” Crawford says.

For highway contractors, the passage of the long-awaited federal highway funding bill last year was more a relief than a cause of celebration. “As the bill was being bandied about by Congress, the states simply went ahead with a lot of their plans,” says Joe Prego, vice president of American Infrastructure. The problem in waiting so long is inflation has taken a toll on plans. “The DOTs are not getting the repaving miles they thought they would because of the increases in asphalt prices,” he says.

American Infrastructure has made some recent moves to blunt price increases and improve schedules. “We recently added to the aggregate side of the business toward becoming a fully integrated firm, offering both materials supply and contracting,” Prego says.

Many heavy contractors are watching recent private investments in road projects with interest. “These firms come in with foreign money, but when it comes to the execution of the project, they’re going to find local partners,” says Prego. The major difference is that highway contractors will be working for corporate partners rather than government agencies, he says. “The risks will be greater, but so would be the potential rewards.”

“You are seeing foreign firms like [Spain’s] Ferrovial, ACS, and CINTRA deciding that the U.S. is an attractive market,” says Sambles of Fluor. But despite the initial high-profile jobs awarded to these firms, he doesn’t know if this will continue to create a lot of new work. “I think in the future there will be more emphasis on buying existing infrastructure systems rather than building new ones,” he says.

Some heavy and highway contractors in California may fall victim to that state’s aggressive environmental regulations. “There are negotiations in Sacramento over [proposals] for requiring heavy equipment to have Tier I engines,” says Crawford of Sukut. Right now, the debate is not over whether to require engine replacement, but only the time frame. He says that Sukut, like many  large heavy contractors in the state, already are making the move to cleaner engines. “But the smaller firms that don’t have the capital to make the change could find themselves in big trouble,” he says.

The domestic industrial process and petroleum markets have been sluggish for years, but that is changing with increases in commodity prices. “Companies in the oil and gas exploration, refining, and transmission and mining and minerals industries are all committing major new money to their capital budgets to take advantage of product higher prices,” says David Layton, CEO of The Layton Cos.

On the petroleum side, there is a new focus. “With the price of oil so high, refining capital programs are shifting from clean fuels projects to adding and...