ACHRNEWS

Contractor sees more advanced technology projects

March 30, 2000
The 11th-largest mechanical contractor in the country and the third largest in California, Southland Industries has seen big changes since its founding in 1949.

With corporate offices in Irvine and 10 regional offices throughout the United States, Southland has come a long way from its post-World War II days of installing heating systems in tract homes.

During the late 1950s and early 60s, Southland transitioned from heating into residential and retail air conditioning work, receiving its big break in the late 60s when the company became the mechanical contractor for the first regional shopping center in Oxnard. Mike Moore, chairman and ceo, came on board shortly thereafter.

The type of clients has become more and more sophisticated, Moore says. “When I started, our clientele was smaller retail and projects like bowling alleys. Now it’s the likes of Intel and Motorola.”

About 75% of Southland’s $200 million work annually is attributable to contracting with general contractors, with the remaining 25% being “owner-direct.”

Preference for design-build approach

Moore says Southland’s business philosophy has always been “to create customers for life — as much repeat business as possible.” And also, as much as possible, to avoid “always having to come in with the lowest bid.”

Moore maintains that being the low bidder “doesn’t give us the opportunity to add value to a project. If we only get a job because we’re the lowest bidder, we’re just a commodity. It’s never been any fun to work that way.

“When we took that Oxnard shopping center job in 1969, there were only two or three contractors who were able to do that kind of work. Now there are 20 or 30.”

When Joe Cvetas joined Southland in 1987, the company was primarily involved in hotel and office projects. “There was virtually no work in advanced technology at that time,” says Cvetas, one of Southland’s two group presidents, with the mid-Atlantic, Los Angeles and Santa Clara CA, and National Advanced Technology divisions reporting to him.

From the late 1980s to mid 90s, that market grew to become the majority of the company’s business. In the last couple of years, however, Southland saw that business slump, although it’s now experiencing a resurgence, with major projects for Applied Materials in Santa Clara in the heart of the Silicon Valley and Intel in Hillsboro, OR.

Although Southland’s largest advanced technology projects tend to be in the West, White Oak Semiconductor in Richmond, VA, awarded the contractor a $35 million contract.

“Traditionally, high tech has been in the Silicon Valley and Phoenix [AZ],” says Cvetas, “but there’s been a swing to the Pacific Northwest, Texas and Colorado. And now we see more large-scale high-tech projects on the East Coast too.

“Basically, we’re seeing advanced technologies moving into areas that offer a better quality of life for their workers, more outlying areas.”

What Southland has done to capture that advanced technology business is to develop “A teams” of project managers and field supervisors who have experience on similar facilities.

“With big, fast-track facilities, it’s hard to build them if you haven’t built them before,” Cvetas says. “You have to have an experienced team.”

These teams have to be ready to act quickly, since as soon as management at a semiconductor, biotech, or pharmaceutical company funds a project, they want to produce product from that new facility ASAP.

“As building costs continue to rise every day a project is delayed,” says Moore, “the only way to make it viable is to make very tight demands on the schedule. The window of opportunity is so small and so narrow that the company can’t wait to get its product to market. And that means they need a contractor who can act fast.”

Sidebar: Changing face of government contracts

Government contracts, which the company had only a few years ago considered not worth pursuing, are now a major part of its business at the Sterling, VA office, which services the Capital Beltway.

The institutional market is “very active,” Moore says, and Southland is currently involved in a large-scale design-build project for the Pentagon.

The traditional way the government operated was “always based on awarding the job to the low bid,” Moore says, who believes that only makes for “poor relationships with designers and builders, creating a very adversarial and time-consuming process.”

Recently the General Services Administration (GSA), an oversight agency of the federal government, came up with a new delivery system that “embraced design-build, putting incentives in contracts to finish within budget and on time.”

Sidebar: Advice for economic downturns: diversify, relocate good people

As with most businesses, not every prospect Southland has touched has turned to gold. “The economy was so bad in Hawaii,” Moore says. “We kept waiting for the phone to ring in Honolulu, but it didn’t ring, so we moved those people to Portland.”

Southland’s work in Hawaii was primarily hotels, including the renovation of the Kahala Mandarin Oriental near Diamond Head on the island of Oahu. When the real estate market collapsed in the mid- to late-90s, new construction and renovations came to a standstill.

“Sure, there will always be ups and downs in the economy,” says Moore, “but as one area slows down and another heats up, we’ll move people around. We won’t be forced into becoming the low bidder.”

Cvetas’ advice to other contractors is to “stay close to the end-user, the owner, and service the general contractors who are doing the kind of work you want to do.”