Electrical Subcontractors Charged With Weathering Economic Storm

 

Electricians, the highly skilled must-haves in construction, make sure power moves where it’s needed. But many tradesmen in Northwest Arkansas said keeping the lights on at their own office has become a practice in alchemy.

“Right now it’s a pretty tough environment,” said Paul Dolle, president of Dolle Electric Inc. of Rogers. “On bid day you’re seeing fewer people bidding on projects. They just kind of disappear[ed].”

Revenue is down, Dolle said. He estimates his company did 25 percent fewer projects in 2009 compared to five years ago.

Of the five largest electrical subcontractors who reported 2009 revenue to the Business Journal for its annual list, only one saw positive movement. The companies’ aggregate revenue was down an average of 25 percent. The list begins on Page 12.

“Everybody is just trying to survive,” said Chester Leonard, executive director of the Arkansas chapter of the National Electrical Contractors Association based in North Little Rock.

“A lot have gone out of business,” he said. “Right now, especially with a down economy, there are only so many jobs to bid. There’s just more competition.

“Until people feel better about buying things, until the perception changes, most customers that are industrial are sitting on their money,” Chester said.

“They’re replacing things, maybe making sure their plant stays in production, but they’re not expanding.” 

Despite anecdotal evidence that electricians are pulling the plug, as of late August, there were 15,363 licensed electricians in the Natural State. Nearly 2,000 of those are in Benton and Washington counties, said the Arkansas Department of Labor.

The statewide number is up nearly 24 percent from the ADL’s fiscal 2009, which ended June 30 that year. There were 12,416 tradesmen then, up from 9,305 at the end of fiscal 2000.

In 2008, the U.S. Dept. of Labor reported that electricians held roughly 694,900 jobs in the U.S., with about 9 percent of those being self-employed.

In May 2009 the U.S. Bureau of Labor Statistics reported the mean hourly wage for an electrician in Arkansas as being $20.10, and $41,800 as the mean annual wage.

 

Hummer Buzz

John Herrington is a commercial master electrician who owns Paige Electric Inc. in Gentry.

He said he “quit looking at the profit margin with gross revenue a long time ago. I just look at the basics anymore.”

A few years ago, when he employed 12 to 15, times were high. More recently, Paige Electric’s headquarters moved from a comfortable office building on Main Street into Herrington’s house. Added difficulties include layoffs and letting personal property go – anything to keep his five-person shop alive and kicking.

“I hope what’s on the table pans out,” Herrington said. “Budgets are shrinking and the work is increasing. They want more out of subs these days.

“Many have gone out of business. Big, small, mom and pop – everything has been affected by this,” he said.

Two years ago Herrington could have bought a Hummer in a heartbeat, he said. These days he’s more likely to buy extra food for the freezer.

“Business is bad,” he said. “There’s no profit in anything right now. When we bid a job we basically have to bid it at cost and be lucky to pay the bills and have food on the table.”

While jobs at the University of Arkansas and Washington County Sheriff’s Department help, Herrington’s firm is no longer capable of bidding on certain projects.

“We have to beat the bushes to find work,” he said.

One obstacle Herrington faces is illegitimate competition, which he said comes in the state unlicensed. Meanwhile, it’s costly for honest contractors to remain legit.

“I would like to see the state come in with a big broom and clean the floor is what I would like to see,” Herrington said. “We’ve got people in Arkansas and Missouri coming in on a project, grabbing the cash and taking off. The state catches them when they can, but what are you going to do?”

According to the Contractors Licensing Board, there are 469 licensed electrical contractors based in Arkansas and a total of 245 out-of-state companies licensed to work in Arkansas. The board tries to keep tabs on anyone doing work in the state valued at more than $20,000.

Herrington said it’s become harder to find good people willing to work.

“Unemployment’s too good right now,” he said. “They’ll work, but only if they can keep their unemployment benefits and work for cash.”

For people contemplating getting into the electrical contracting industry in 2010, it should come as no surprise that Herrington advises thinking twice.

“You better have a bunch of money if you start an electrical company now,” he said. “It’s a bad time to get into this business.”

 

Future Shock

Though revenue is down, Rick Barrows, president of Multi-Craft Contractors Inc. of Springdale, said he’s employing 425 full-timers, the highest number in company history.

About 25 percent of those are electrical workers. 

He said the industrial field has been good for Multi-Craft, but he anticipated a slower 2010.

“We think it’s pretty competitive out there,” Barrows said. “But by the same token some of the players aren’t around anymore. I think people are looking at the financial viability of all the participants now.

“Maybe being around a long time has its advantages,” Barrows said.

While Barrows acknowledged that electrical contracting had grown more complicated and technology-driven in recent years, he believes the demand will remain high.

“Somebody’s got to build things and make them operate,” he said.

Still, Barrows worries that it will be difficult to replace industry leaders as they begin to retire over the next decade.

“It’s a viable concern,” he said. “I think we’ve done a poor job of promoting our industry with young people.

“We need to be more proactive,” he said.

Leonard, with the contractors association, admits some people don’t want to go into construction, and find it preferable “knowing where you’re going to be next week.”

Dolle has seen bad times before. In comparison to the early 1980s “this recession is 10 times better than the bad times 25 years ago,” he said.

Dolle pointed to several major Northwest Arkansas projects (the Pinnacle Promenade and St. Mary’s Hospital among them) representing over $1 billion in construction that won’t be replicated anytime soon.

That’s why Dolle – a master electrician who has been in the industry since 1967 – believes people would be wise adjusting to the current economic climate for the foreseeable future, along with the potential for fewer electrical contractors.

“I think it’s a good industry, ” Dolle said. “You see companies start up in a difficult time. These are guys that are going to learn tough lessons about how to run a business and survive.

“When times get good they’re going to thrive. Most the businesses that started when times were good did not survive because the got in business at a time when profit margins were kind of unrealistic. Whereas someone who gets in business now, they’re going to be able to survive anything.

“Activity now is going to be the new normal for several years,” he said.

“Our firm is set up well to survive that. We hope so.