Published In June 2000
The 2000 Profile confirmed what you already know--1999 was a good year to be an electrical contractor! In the last profile, printed in June, 1998, we reported that new construction had dropped to an historical low while maintenance work was at an all-time high. I guess this is a case of "what goes around comes around," because now the tables are reversed. As a large contractor, you probably experienced a nice jump in new construction work while the smaller contractor remained about the same. As a small contractor, you probably experienced a boost in maintenance work while the larger contractor remained about the same. The last profile, the 1998 profile of work performed in 1997, indicated an upward in maintenance, service, and repair work along with a corresponding downward trend in new construction work. In fact, the percentage of total sales of new construction work reached an historical low at 47 percent. Following are highlights from the profile. I suggest you get yourself a cup of coffee, find a comfortable chair, kick back, and read. You will learn a great deal about your industry and how your company compares to the rest of the pack. Types of Construction in the Industry Overall The devil or the angel is in the details. The 2000 Profile of work performed in 1999 changes everything. The current economic boom, now the longest in history, boosted new construction work to 50 percent of total sales. At the same time, the percentage of work attributable to modernization declined slightly to 27 percent and maintenance also declined slightly to 23 percent. In addition, there was a slight decline in voice/data work among the larger contractors, while the smaller contractors experienced significant growth in this type of work. Annual Sales by Market Commercial construction still dominates the market with 28 percent of total sales, followed by industrial sales with 26 percent. Not surprisingly, residential construction enjoyed a healthy increase from 13.2 percent to 15 percent of total sales. Institutional decreased from 15.percent to 13 percent. Contractors Roles on the Job Electrical contractors tend to focus on one or two main methods of working: as a sub-contractor hired by the prime general contractor and/or to work directly for the property's owner/end-user as the prime electrical contractor. The main difference versus two years ago is that contractors are more likely to work as a subcontractor to a general contractor. This is probably related to the increase in new construction work performed. Contractors Influence on Design Specifications Design/build construction increased from 29 percent in 1997 to 31 percent in 1999, clear evidence that this is a trend that will not go away. In addition, contractors also made major changes in the plans and specs before performing the work. The survey also demonstrated that contractors have very broad purchasing responsibilities, on average, choosing the brand or type of product more than 90 percent of the time. In the current survey, the percentage of contractors choosing both material type and brand rose to two-thirds. Where Electrical Contractors are Buying the Products They Install The amount purchased from electrical distributors increased from 73 percent to 77 percent in 1999. This is probably due to a couple of reasons: · The high volume of new electrical construction. · More traditional electrical distributors are now offering voice/data/video product lines. Types of Work Performed The largest volume of work continues to be in the 60-Hz power applications. The percentage increase in communications masks a larger story. Namely that growth in the area of communications (voice/data) seems to be strongly dependent on the number of small-size companies who are getting into that market, while the larger-size companies share of the market appears to be leveling off or has been overshadowed by the big increase in new electrical construction work in 1999. Electrical contractors worked on a very wide variety of "other" project types in the past year. The biggest gains versus two years ago were in premises/LAN/computer wiring; voice/data, fiber optics; power quality; sound work and home automation/entertainment. Voice/Data Work Six in 10 contractors say they currently perform voice/data work. Compared to two years ago, an even higher percentage say this work is more profitable than other electrical work. Of all firms reporting, the highest percentage say that they plan to do "more" V/D work in the coming year. · Further, an even higher percentage now say that they plan to do more in the coming year than was the case in 1998. · Virtually no one says that they plan to do "less" in the coming year. · The bigger the company, the more likely they are to plan to do "more" V/D work, rather than "the same" amount. Of those not currently performing voice/data work, 36 percent say they plan to get into that line next year and 43 percent say that they expect to adopt it when the time frame is extended to 2000-2001. The Effect of ESCOs and Consolidation Across the total sample, 25 percent of contractors say that they have been competing with ESPs or ESCOs for traditional electrical work. Competition rises with billings. Across the total sample, the net effect so far has been neutral, with 62 percent reporting "no impact." The largest firms are more likely than smaller firms to have been effected by energy deregulation. Use of computers for e-mail and use of the internet for purchasing and project bidding is very strong among contractors filling out the survey. ABOUT THIS SURVEY EC magazine has been surveying readers every two years and reporting on this statistical "profile" since the 1960s. This year, 5,000 surveys were mailed and 1,380 received back; a return rate of 27 percent. More importantly, the 1,380 contractors who responded represent nearly 2 percent of the approximately 67,000 professional electrical contractors in the United States. To get a similarly detailed survey of working adults in the U.S., one would need to survey 2.5 million people. While this summary deals with industry-wide trends, more detailed data on contractor operations by size of business is included in the end section of the survey report. You can use one of these displays to benchmark your own company to the nationwide statistical averages of your peers. DATA QUALIFICATIONS Tables and figures contained in this article come from data generated by this year's Electrical Contractor Survey (conducted by Renaissance Research, Inc., New York, N.Y. for Electrical Contractor magazine). METHOD USED TO OBTAIN DATA Before mailing the surveys, EC performed random selects from its list of subscribers (which represent the industry at large). We selected readers varying by size, while trying to mail more surveys to the larger-sized categories in order to get a more complete picture of industry trends and new developments. Only one survey recipient was allowed per company. Surveys were mailed to union contractors, nonunion contractors, NECA members, and nonmembers of NECA. INDUSTRY WEIGHTED AVERAGE The figures were arrived at via an extrapolation of data from the most recent (1997) U.S. Census of Construction for our industry (that is, the electrical special trade work contractors, NAICS 23531 which replaces SIC 1731). These averages weight the responses of the larger contractors more heavily than those of smaller ones, as the smaller contractors (as a group) employ fewer total field workers and do a substantially smaller percentage of the work. RESPONDENTS Qualified survey forms were returned by the following: · 175 contractors with sales under $250,000, representing perhaps 34,000 or more companies who together do less than 10 percent of the industry's work; · 218 contractors in the $250K to $999K range, representing perhaps 20,000 contractors who do perhaps 20 percent of the industry's work; · 301 contractors in the $1 million to $2.49 million range, representing perhaps 6,000 contractors who perform 15 percent to 18 percent of the industry's work; and · 645 contractors in the $2.5 million-and-over range, representing perhaps 4,000 contractors who do more than half of the industry's work.