Chicago Contractors Cautiously Optimistic

January 9, 2003
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CHICAGO — The last year has not been easy for many Americans, and the shaky economy has been particularly hard on the construction industry. The second half of 2002 did bring some hope into the lives of Chicago contractors, however. During that time period business started to pick up again, in some cases dramatically. As Chicago readies itself to host the AHR Expo and ASHRAE Winter Meeting, many contractors have so much work that it was difficult for them to find a few moments to discuss just how busy they are.

Thankfully, two Chicago-area contractors did spare a few moments to talk about how their businesses are doing.

Bob Wasniewski

Forging Ahead

Bob Wasniewski is co-owner of Roberts Environmental Control Corporation, a family-owned company in Tinley Park that covers the entire Chicago metropolitan area. The company is almost entirely involved in the commercial/industrial sector, and, as the fourth quarter of 2002 drew to a close, the company was projecting over $10 million in sales for the year.

“We were concerned through the first half of the year,” said Wasniewski. “We thought we might be down 50 percent in revenue, but as we’re getting into the last quarter, it looks like we may come very close or hit last year. Fortunately, we do a lot of work on existing buildings, so we aren’t dependent on new building construction schedules.”

Chicago is an enormous city, which can be an advantage or a disadvantage. The benefit is that there are a huge number of buildings that require ongoing service and replacement work. But if there’s a slowdown in the economy, there ends up being an overabundance of contractors, so there are often too many people bidding on too few jobs.

“That can hurt,” said Wasniewski. “Usually the good-quality contractors will go to a point where they can still do a good job and pay their overhead. We’ve scraped by a couple of times in the past. The main thing is to grow slower rather than faster, so you’re not biting off more than you’re capable of doing, or getting so large that if it does slow down, you’re stuck.”

Bob Axelrod, president, Cooling Equipment Service Inc., Chicago, also runs a family-owned business. His company is involved in the commercial arena, providing cooling, heating, and refrigeration services to the entire Chicago area. With 25 employees and annual sales in the $5 to $5.5 million range, Axelrod has had to deal with growth issues in the past.

“Last year was a difficult year, probably not so much because of 9/11, although that certainly affected us toward the end of the year. The problem was we grew considerably, and I think we had some growing pains. We had plenty of work and it wasn’t a terrible year, but productivity was an issue. Things are better this year,” said Axelrod.

He also agrees with Wasniewski that contractors who are coming in with extremely low bids are hurting business. “There are a lot of contractors, even some large ones, who are not as busy as they would like to be,” noted Axelrod. “Because of that, there are a lot of people who are shooting prices around that are considerably lower than they were a couple of years ago. We’re seeing people getting more prices, so we have to explain ourselves a little bit more and make sure the customer is comparing apples to apples.”

That’s one of the biggest issues, he maintains, because contractors who submit low bids may be taking shortcuts that will eventually cost the customer money. Axelrod said that as a quality contractor, he wants customers to end up with a quality job. “We’ve taken the attitude that we won’t install a job that we can’t be proud of when we’re done. It won’t really serve the customers’ needs. Sometimes it makes things difficult in that it prices us out of the everyday job. Not everyone is looking for quality work. That has presented problems sometimes, but we’ve dealt with it.”

Bob Axelrod

It’s The Economy

The economy continues to be the main area of concern for many contractors in the Chicago area, as it is for others around the country. “We certainly would not want to see the economy continue to go down to where there would not be enough work in the Chicagoland area. I think the good thing about the HVAC industry, especially in Chicago where you have the seasons change, is you need heating and cooling,” said Wasniewski.

Axelrod noted that some of his customers are delaying work, particularly in industries that rely on consumers spending their money for non-critical items. “We have had customers who have put off some projects. Like the rest of the country, we’ve seen a big slowdown in discretionary spending by the consumers, and we do a lot in the food distribution industry. Most restaurants are not having a good time of it, and a lot of the people we deal with are really being cautious,” stated Axelrod.

Wasniewski noted that in addition to dealing with the current economy, in which there is a smaller market for about the same amount of contractors to compete, independent contractors have been facing competition from manufacturers and utility companies with deep pockets. “Some manufacturers that design, manufacture, market, and sell HVAC equipment to independent contractors also want to be contractors and compete with their own customers. The utility companies also want to compete with independent contractors,” he said.

Independent contractor associations such as the Northern Illinois Air Conditioning Contractors Association (NIACCA) have been helping independent contractors by working for a fair playing field in Illinois. “Independent contractors have to fund these efforts to try to maintain fair competition. ACCA is the legislative watchdog on the national level. Besides doing high-quality work at a competitive price, maintaining customer relationships, keeping abreast of new technology, and maintaining an excellent happy work force, contractors have to get to know their legislators. They also have to work with and fund their industry associations to maintain fair competition with utility companies and manufacturers, as well as deal with rapidly accelerating insurance costs,” stated Wasniewski.

Overall, both contractors remain optimistic about the future. Axelrod stated that he’s taken advantage of the downturn to reinforce his staff. Other contractors in the area haven’t been as fortunate to stay as busy as Axelrod’s company, and, as a result, some high-quality people have found themselves out of a job. Fortunately for Axelrod, some of these people have found a home with Cooling Equipment Service Inc.

Staying busy during a downturn can be difficult, but Axelrod emphasized that continually looking for new products and services to offer can help a business stay afloat. “We’re offering a lot of things that nobody else offers. Whether it be brands of equipment or having our equipment custom made the way we want it, such as oversizing condensers or using specialized equipment in the condensing units, which makes them a better value for the customer. It’s more expensive, yes, but over the long run, they’ll pay for themselves many times over in better service and energy efficiency.”

Wasniewski noted that his company has also carved out certain niches for itself in the area, which helps him to have a positive outlook for the future. “We’re concerned and optimistic for next year. We think we’ve made good relationships and have steady customers and steady employees. We’re looking forward to being busy next year and looking forward to being ready for the next upturn, too.”

Publication date: 01/13/2003

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