Phoenix contractors riding the wave of strong economy

PHOENIX, AZ — Contractors here are pretty happy with the way things are going. Business is great in all market segments, and most hvac contractors seem to be doing well, including W.D. Manor Mechanical, a mechanical contracting firm that specializes in commercial, industrial, and institutional work.

Don Petty, vice president, says the 50-year-old company keeps very busy with the industrial facilities in the area, as well as with the many hospitals around town. The company has annual sales in the range of $20 million, which are divided about evenly amongst three divisions — plumbing, process piping, and hvac.

In addition to his duties at W.D. Manor Mechanical, Petty is also president of the Phoenix chapter of Air Conditioning Contractors of America (ACCA). He believes that the economy will continue to be strong, with industrial firms fueling much of the growth.

“My view is there is going to be a tremendous expansion here in the next 24 months in terms of the industrial side, and I feel that’s going to drive all the other markets as well,” he says.

But like just about anywhere else, a great economy does not mean that contractors are without worries.

Local concerns

Petty says one of the nice benefits to having a strong economy is that local ACCA membership is growing at a good clip. The organization, which currently has 150 contractor members in the Phoenix area, has been growing at a rate of 10% to 15% for the last three years. Members meet once a month for dinner and conversation.

One of the main topics of conversation here, as in most other markets, is the lack of qualified help.

“Everybody’s competing in a market that’s expanding, and it’s difficult to grow your employee base quickly,” says Petty.

This is especially difficult when a contractor is working on a fast track — or hypertrack, as Petty calls it — in which it’s necessary to work as fast as possible.

“When you’ve got to grow the crew size rapidly from five to 40, it gets difficult,” he says.

He notes that’s a particular concern to small residential service companies, which have a hard time attracting employees, especially because most of the smaller contractors tend to be non-union. In order to find and retain help, many contractors are setting up in-house training programs.

“Our members are very proactive in terms of how they get their people trained, and a lot of people are spending money on training,” says Petty. “They’re doing a good job.”

He adds that ACCA is there to support members with training manuals and other materials, as training is one of the major thrusts of the organization.

Utilities pose another concern to Phoenix-area contractors. When deregulation becomes a reality here, Petty believes it’s going to shake things up a bit.

Right now he feels contractors have been fortunate because local utilities here haven’t been as aggressive as they have been in other states. He believes that’s not going to last forever though.

“Right now the utilities don’t own a service company. Instead they have partnerships with several contractors. But when deregulation comes, Arizona Public Service (APS) anticipates having a tremendous drop in revenue, so I believe they’re going to start buying service companies.”

Better quality

In a booming economy, it’s often difficult to keep up with the demand for service. But just showing up to perform a job is not good enough — customers are looking for quality, and they’re becoming more demanding.

Petty believes this stems from building owners getting smarter in terms of how they manage their properties. He sees many owners now looking at energy management systems (ems) to help control their expenses. In addition, they’re beginning to understand that the type of equipment they put in at the beginning of a project will determine what that monthly bill looks like at the end of the project.

Along with these smarter customers, though, comes more demand for quality.

“Quality is definitely an issue. You can’t do things wrong. Most of the owners we work for are very demanding,” he says. “They want it done right the first time, and they want to make sure you have all the right training. Everybody who shows up better be good.”

But it’s not possible for the contractor to do everything. Petty notes that building owners are having a hard time finding qualified people to run the equipment after installation.

“We are building very technically oriented buildings. We’ve got control systems that you wouldn’t believe, but owners are having a hard time finding operators who understand what they’re doing.”

That frustration is shared by both contractors and engineers, who have often complained about building personnel improperly operating or maintaining systems. Many times the systems are so complex that building personnel just don’t understand how to operate the system. To solve this problem, some contractors, like W.D. Manor, are offering extended service contracts.

“We have a goal of retaining every building that we build,” says Petty. “We want to retain that service relationship. We have the ability to monitor their control systems and by doing that we can get the alarms in-house and we’re doing the preventive maintenance things for them, and that way they don’t have to spend the money up front.”

Consolidation: a consideration

Consolidation is also brought up at ACCA meetings, but it doesn’t seem to be as much of a concern. Although Petty notes, “It’s a different world out there and it’s a stressful market.” He doesn’t believe his company would ever sell to a consolidator, but he also notes that if somebody comes into a company only worth $5 million and offers many times that amount in order to purchase it, it would be hard to say no.

Consolidation definitely does affect ACCA, though. Petty says when a contractor is bought out, that membership is often gone. He says the organization is working hard to market itself to the community, so people will understand what they do and why they’re there.

“We haven’t done a good job on that in the past, but we’ve put some money behind that in the budget, and we’re going to market the name of ACCA.”

He adds that one of the biggest benefits to belonging to ACCA is the great networking opportunities. The members often enjoy parties and golf tournaments, while still being about talking and comparing notes about “the business.” And as big as Phoenix is, it’s a small town when it comes to air conditioning and plumbing.

“Everybody knows somebody, and we have a great relationship with each other here,” says Petty.

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