For electrical service technicians and their firms, it may be time to retire the term “subcontractor.” The label seems ill-suited as electrical contractors (ECs) expand their services to become one-stop shops for owners and general contractors. Requiring the talent of other nonelectrical subs, the collective business that emerges can ironically resemble a general contracting effort. That old construction hierarchy is not what it used to be.
An EC may expand services due to many drivers: growth, new markets, economic buoys or a new identity in the marketplace. Whatever the reasons, the EC must turn to other contractors to deliver the new service and expertise. Some subcontractors are hired strictly on a project basis. Others are invited into the company, possibly creating new divisions or specialty areas. Mergers or acquisitions are another path, offering a rapid entry into new services and capabilities. Even franchises can offer a growth option.
“Adding services reflects our belief that you need to spread a wide net as our electrical contracting industry changes,” said Victor Salerno, CEO of O’Connell Electric Co. in Victor, N.Y. “We’ve developed the resources to meet the range of clients we’ve cultivated and their diverse needs.”
Headquartered outside Rochester, O’Connell promotes itself as one of the largest contractors in New York state with additional offices in Buffalo and Syracuse. The firm has six divisions: construction, service, communications, line, solar and an electrical design firm under a different name, Syracuse Merit Electric.
“We tend to find the talent and bring them in when we expand,” Salerno said. “Our line division is a perfect example.”
That division provides substation and switchyard construction and upgrade, overhead and underground power line installation, cable installation, and other services.
“We knew we wanted to add line service but didn’t know enough about it,” Salerno said. “So we sought out an early retiree from our local utility and invited him in with the promise of his creating and heading this new division. He brought in the talent, managed the necessary fleet, and started adding to the O’Connell Electric name.”
Bold steps are common for O’Connell.
“Not too much scares us when it comes to growing the company,” Salerno said. “Not everything will work out due to unforeseen economic forces. That is why it is important to grow, so if one area of the business slows down, another can pick up some of the slack. It’s important to stay flexible.”
Flexibility means adding services as they reflect a growing opportunity. For O’Connell, that has meant providing solar and wind power in response to New York’s interest in green power.
“Alternative energy is a high-risk/high-reward venture right now,” Salerno said. “We want to move quickly and offer services sooner than later. New York state has gotten very involved in solar.”
Both its solar and wind capabilities came through acquisition. O’Connell was initially involved in installs for a small solar company in Rochester. As Salerno explained, “one thing led to another” and the company purchased the solar company, bringing its owner into O’Connell to head the new solar division.
“We consulted with NECA members in California who have been active in solar to better understand its growth potential and the necessary resources to ramp up to meet the needs of our state,” Salerno said.
Wind energy is another area the company has chosen to cultivate as interest in New York grows.
“When we bought Syracuse Merit Electric, it gave us a way into wind,” Salerno said. “Not much was happening with their wind service at the time. We knew our line work would dovetail with our wind projects. Line work involves many things you will need for wind, such as transmission lines, collection lines, and the commissioning and testing of systems. Probably a quarter of our projects are now wind with this division.”
Going with the flow
When you look at the portfolio of services offered by Action Electric Co. in Smyrna, Ga., you not only see the depth in which the company serves its commercial and industrial base, but you can almost chart the evolution of the electrical contracting business. Its offerings include the expected installation, voice and data systems, fiber optic design and installation, instrumentation, power monitoring, programmable logic controller (PLC) programming and installation, infrared scanning, and power quality testing.
“The progression of the electrical industry had definitely influenced where we’ve expanded our services,” said Mickey Poe, CEO of Action Electric. “Fiber optics is a good example. Control and instrumentation is another. We asked ourselves: Do we hire out other subs as work comes in or train ourselves and bring in talent? We chose the latter.”
Poe has been with Action Electric for 30 years. He used his experience as an electrician in the industrial sector to expand business and delve into new markets. Originally a commercial shop, today Action Electric has made its mark in industrial markets, branching out into nontraditional electrical services, such as heating, ventilating, air conditioning, millwright/rigging, pipefitting and sheet metal fabrication.
“We never liked the approach of hiring out other subcontractors when the work demanded it,” Poe said. “We didn’t have the control we wanted. We sought out the talent of other subs from past projects and invited them to join our company. I came from an electrical contracting company that was offering ‘multicraft’ work, and it helped me see how this blend of service could work for Action. It was a gradual evolution, but we now advertise ourselves as Action Electric and Mechanical Contractors.”
A door opens
Sometimes a client request directs a company down a new road. That has been the case for Action Electric. For example, while working on an electrical project for Ford Motor Co., Action Electric was approached to provide some industrial hoods and other sheet metal construction, Poe said. That started what became a new atypical division for the electrical contracting company, which also fabricates pipe and ducts.
Action Electric also has developed a working relationship with owners who now approach the company directly with projects.
“We do a lot of work with the owners,” Poe said. “It started with our work on industrial projects. We were working with tooling and mechanical folks that brought us in direct contract with owners. We found ourselves serving as our own general contractor, now hiring the subs in piping and rigging in later projects. The quality of our work, our expansion into mechanical work and our rapport with the owners built a familiarity and comfort level.”
What Poe especially likes about offering electrical and mechanical services is catching customers at both ends.
“If someone comes to us with an electrical job but has a need for some mechanical work, we have them covered. We handle the same in the reverse. By offering a service array, we are a one-stop contractor that offers many subcontracting services. That means one purchase order for the client.”
Other Action Electric divisions include civil (machinery foundations, transformer pads, building floor slabs and others) and services including on-site safety management, design, start-up coordination and field training.
Expanding services can attract new markets
Turnkey solutions. One-stop shopping. Single provider. No matter how you state it, ECs recognize the value in achieving that claim. It is a game changer in the construction marketplace. However, can you be all things to all people?
Paul Aggarwal, vice president of estimating for Cupertino Electric Inc., San Jose, Calif., admits it can be a struggle when a company expands. However, he finds it works itself out, as you only remain in markets where you find success.
“If you know what you are doing, it really doesn’t matter how many markets you serve,” Aggarwal said. “Nothing is so foreign when you are applying your expertise to the market at hand.”
O’Connell, Action Electric and Cupertino Electric are each involved in 15-plus markets. Some were sought. Others appeared. Both O’Connell and Cupertino acquired specific companies for their services. For O’Connell, Syracuse Merit Electric enabled the company to provide full electrical design and gave it a door into wind energy. Ceitronics provides Cupertino Electric with system integration services in fire/safety, security, structured cabling and audiovisual.
Sometimes, new markets find you. Your earned reputation gives customers the confidence to recommend you to new clients in new markets. And sometimes, there is no need for a customer entree. That was the case for Cupertino Electric when Google, based in Mountain View, Calif., approached the company for a special project. Its headquarters features a 1.6 MW solar electricity rooftop system.
“Google did more than take a chance on us,” Aggarwal said. “They hired us with confidence to do the preassembly and electrical work for what is considered the nation’s largest corporate campus: solar rooftop installation atop its new company headquarters. Our electrical contracting reputation preceded us. When we won the work, we put a team together for this project and brought in the technical expertise we needed.”
Based on its success with the Google project, Cupertino Electric knew that opportunity was knocking, and photovoltaic (PV) services are now part of its portfolio.
“Today, we not only design and install PV systems; we help set up financing,” Aggarwal said. “It’s an important part of our future.”
Cupertino Electric’s primary emphasis is the design/installation and commissioning of electrical infrastructure systems for semiconductor plants, commercial and industrial structures, and “mission critical” data centers, a service evolution for the firm. Its key service groups are engineering, estimating, prefabrication, purchasing (vendor relations) and facility services.
In the end, expanding services that incorporate other subcontracting talents has been transformative for all three electrical contracting firms. Each would agree it has been a sound progression as the electrical contracting industry evolves.
“Don’t be afraid of adding new services,” Salerno said. “After all, at the end of the day, it’s all electrical work.”
GAVIN is the owner of Gavo Communications, a marketing services firm serving the construction, landscaping and related design industries. He can be reached at email@example.com.