McCarthy Leverages Diversification, Skill
McCarthy Building Cos. has had a standout year. From overcoming unique challenges in Las Vegas on the Hakkasan Nightclub and Restaurant to meeting the demands of the unique people-moving Sky Train at Phoenix Sky Harbor Airport—and handling a plethora of projects in between—the firm has burnished its reputation and legacy.
Due to these reasons and many others, McCarthy has been named ENR Southwest's 2014 Contractor of the Year.
The company is celebrating its 150th anniversary this year. Timothy McCarthy began a lumber business in Ann Arbor, Mich., in 1864, and soon thereafter became a builder of farmhouses and barns.
Although headquartered in St. Louis, the company opened a Phoenix office in 1979 and has been among the largest contractors in the Southwest for more than a decade. Among the firms participating in ENR Southwest's Top Contractors survey, McCarthy, with $441 million in revenue in 2013, was ranked No. 1. In the past three years, the firm has been among the top three firms in revenue.
Even though McCarthy has been successful nationally and in the Southwest for decades, suppliers and customers say the firm has never outgrown its commitment to be responsive and collaborative.
"They are a big company, but working with them is like working with a local company," says James Piotrowski, solar director for Arizona Public Service Co.
Charting a Successful Path
Many firms working in the Southwest compare current revenue numbers to the more active pre-downturn days. While McCarthy also saw a dip during the recession, they have steadily gained work during the recovery, posting revenue of $345.12 million in 2011 and $389.75 million in 2012. Bo Calbert, president of McCarthy's Southwest region, says a big reason for the firm's recent success is a diversification plan that began in the 1980s.
"The first thing I started figuring out was that you had to be diversified," Calbert says about his early days in the Southwest. "By the end of the 1990s, we were a $100-million company."
The survey results show that McCarthy's diversification has spread to several categories. The firm ranks first in the Southwest in power, sewerage/solid waste and water projects. McCarthy ranks second in education, health care, hospitality and renovations.
The firm also seeks out projects no matter the scope, says Justin Kelton, vice president at McCarthy.
"We will do a job no matter the size. It's about what our clients need," Kelton says. "A lot of what we do is smaller jobs of $50,000 to $10 million."
Not being seen as just a megaproject contractor helped them navigate the downturn, according to both Calbert and Kelton. The Southwest offices of McCarthy went after any and all jobs when the economy soured, which helped them avoid significant layoffs.
"It was an investment," Kelton says. "And for me, that is what defines McCarthy. It's easy to say things when times are good, but it's another thing to actually do it when times are tough."
The "tough" times weren't just about the lack of jobs, but having jobs cancelled, according to Ray Sedey, vice president and head of the firm's Las Vegas office.
In 2011, McCarthy was awarded the contract to build a new city of Las Vegas Water Pollution Control Facility. Later on, the city decided the new facility was no longer needed. "It was supposed to be a $100-million project, but six to nine months after it was awarded it was decided that they weren't going to do it anymore," Sedey says.
Instead of getting frustrated, McCarthy pursued a more modest renovation project of the city's existing facility, and in the end was awarded that job—at a smaller price tag of about $20 million.
The project began in 2013 and included installation of approximately two miles of electrical duct banks in existing roads to supply three new power feeds. A 6-ft by 10-ft concrete structure was also installed to allow the headworks building to be bypassed.
"We are kind of an anomaly," Sedey says. "We don't look at one type of work. We're not just in the business of hospitality and gaming."
The Rebirth of Big Projects
A commitment to small jobs and maintaining their work force paid off for McCarthy as the economic tide began to turn over the past several years, says Calbert. While the firm is still pursuing smaller jobs, larger-scale projects such as the Sky Train in Phoenix, the Hakkasan in Las Vegas and others are also being performed by the general contractor's project teams.
McCarthy and Kiewit are engaged in a $124-million joint venture at Sky Harbor International Airport in Phoenix that will extend the airport's new intra-airport Sky Train system. Known as phase 1a, construction includes the complete fixed facilities for the extension of the Sky Train from just west of the Terminal 4 station through and including Terminal 3, a 2,992-linear-ft extension of the guideway system from Terminal 4 to Terminal 3, a new 37,500-sq-ft station at Terminal 3 and a connector bridge over Sky Harbor Blvd.
The project also includes renovations to Terminal 3, the installation of nine retaining walls totaling 2,795 linear ft and two 80 linear ft taxiway bridge extensions. By the time the project is complete in 2015, the phase 1a extension will be supported by 55 caissons with depths ranging from 60 to 125 ft.
"One of the things that really hit me on the project is that there are really tight tolerances," says Kelton. "It was really heavy structural concrete and electrical, and we had to build that to 1/16th of an inch. There are a lot of moving parts at that airport. It's like a ballet."
Construction activities including the bridges, two post-tensioned box girders and the elevated station were performed within secured and unsecured areas.
The project is on time, under budget and "on track to meet our goal of serving passengers in time for the Phoenix area to host the Super Bowl in 2015," says Kyle Kotchou, deputy aviation director for design and construction with the Phoenix Aviation Department.
The Sky Train project is one of a number of projects that have re-energized the firm in Arizona—the Banner Estrella Tower in West Phoenix is another example—but McCarthy was also one of the first firms to get re-engaged in Las Vegas after the downturn.
Early last year, the firm completed work on the Hakkasan, an approximately $170-million, 5-story, 80,000-sq-ft restaurant, lounge and nightclub at the MGM Grand on the Las Vegas Strip.
"It was one of the most challenging projects we've been involved with," Sedey says. "Even some of the subcontractors that have worked on most of the projects on the strip say the same thing."
One of the biggest hurdles on the Hakkasan was that there was no back access to the project site. Tropicana Boulevard had to be closed for an extended period and the southwest corner of the MGM Grand casino was demolished. Eventually, the exterior wall was moved out 30 ft and a new dual marquee was created.
But Sedey said the unforeseen circumstances—including finding more than 15 ft of sub-surface concrete and a "closet" that ended up being a power room—made the job especially memorable and demonstrated the adaptability and talent level of the construction team.
Solar Plants and People Shine
While McCarthy has been diversifying for several decades, the firm has recently capitalized on the solar construction renaissance throughout the Southwest to expand into this market sector. McCarthy has served as the general contractor on major solar utility projects, including Cotton Center, Chino Valley and Hyder II for Arizona Public Service.
Piotrowski says McCarthy progressed from a learning phase on large-scale solar projects to a state of high proficiency within the span of a couple of projects.
The 21-MW Chino Valley Solar Project has more than 77,000 photovoltaic modules outfitted with a single-axis tracking system. Work on the 200-acre site required more than 126,000 man-hours and included more than 18,000 driven piles and the equivalent of 440 miles of linear welds.
The work on this project and others resulted in McCarthy being named one of Arizona Public Service's suppliers of the year for 2013.
"They are definitely one of our preferred contractors," says Piotrowski.
The Chino Valley project also won an ENR Southwest Excellence in Safety award in 2013.
Randy Eskelson, president and COO of Schuff Steel, Phoenix, says a big factor in McCarthy's success not only on solar jobs but on all project types is that they do work properly, with a high level of proficiency.
"In my opinion, McCarthy is, if not the most, one of the most respected contractors in the country," he says.
Eskelson says the firm seems to always be on the cutting edge of engaging customers as well as going "all-in" on new technology.
"As far as a lot of the BIM process is concerned, they were one of the first to tell us that we had to do that," Eskelson says. "They really know how to manage a job. Every job has issues, but they know how to minimize them."
Calbert says much of the credit should be given to the work force, who are also part owners—McCarthy became employee-owned about nine years ago.
"It's all about talent and the quality of that talent," Calbert says.
