Special Projects Divisions

by Sheila Bacon

Large general contractors are well known for their big, flashy projects: Turner? The firm built Seahawks Stadium. R&H? The Brewery Blocks.

Still, these and other general contractors often house divisions within their companies that take on smaller projects, the ones that - in lean times - help sustain a firm.

S.D. Deacon's Special Projects Division. In its first year of operation, S.D. Deacon's Special Projects Division in Bellevue, Wash., contributed 15 percent to the office's total revenue. The group performed TI work for KinderCare in Seattle. Photo courtesy of S.D. Deacon

Often called the Special Projects Division or Tenant Improvement Division, these departments are usually defined either by the cost of projects they do (under $10 million, for example) or the type of work they perform (tenant improvements, build-outs).

Lease Crutcher Lewis' Seattle office is finding considerable success in repeat business from consistent customers. Its Special Projects group focuses on projects under $10 million in a wide range of markets: biotech, medical, office, retail and others. While the construction market is not nearly as prosperous as it was in the late 1990s, smaller jobs still seem to be coming.

"The market is interesting," said Margaret Amo, division manager for Special Projects at Lewis, a group she helped boost from a basic tenant improvement division nine years ago to a venture that contributes approximately $60 million to the company annually. "It flattened out, but the $10-million-and-under range has been consistent. There are companies out there that are repetitive construction users with ongoing construction budgets."

For example, there are clients like Starbucks or Washington Mutual, which need new branches built or existing office space reconfigured. And Fred Hutchinson Cancer Research Center in Seattle regularly hires Amo's division for new build-outs or renovation work.

A New Venture

advertisement

Big-box retail builder S.D. Deacon of Bellevue, Wash., launched a Special Projects Division one year ago that has met with success, said Steve Foust, Deacon's general manager of special projects.

Specialty work and tenant improvement projects are handled by the group, with anything over approximately $4 million typically sent over to the firm's corporate side.

The market was good for the launch of the division, Foust added. S.D. Deacon's Washington office had a similar division in the past that wasn't pursued, and its Oregon office has run the successful "Deacon Enterprises" for many years.

In its first year of operation, the Washington office's Special Projects Division contributed 15 percent to the office's total revenue.

Moving into tenant improvement work was a natural progression, Foust added. As a big builder of strip malls and shopping centers, the firm was physically close to a lot of the build-out work done inside the malls. It made sense to bid on some of the smaller jobs.

"It's just another avenue to bring work in and get the clients in front of us," Foust said. His group has been busy with the remodel of Bill Koenig Chevrolet in Port Angeles, Wash.; the remodel of 11 fitting rooms at Northgate Mall's Bon-Macy's in Seattle; and a remodel of a Top Food and Drug store in Lacey, Wash. Other jobs have included work for restaurants, strip malls and banks.

Turner completed approximately $8 million in seismic upgrades and renovations to the Compass Center - a homeless shelter in Seattle's Pioneer Square district that was damaged by the 2001 Nisqually Earthquake. Image courtesy of Turner

An Independent Division

Turner Construction Co.'s Seattle office has housed a successful Special Projects Division since 1986. The group operates like an independent company within Turner, said Don Severide, manager of business development for Turner's special projects.

The group handles the procurement, estimating and management of the jobs within the division and does not rely on the staff of Turner's main building division. That involvement from inception of a project to completion fosters a closer and more service-oriented relationship with the client, Severide said.

Turner's Special Projects Division focuses on smaller jobs, and to a firm the size of Turner, "small" is defined as around $30 million or less. The division performs work in biotech, health care, industrial, restaurant and several other areas.

Boeing's "Move to the Lake" project in Renton, Wash., typifies a Turner Special Project job, said Severide. It's fast-paced, challenging and involves considerable construction work in an occupied space. This existing manufacturing plant is continuing to operate while Turner builds three office towers inside the facility.

Turner's Special Projects Division is working on seismic upgrade and build-out work on an existing structure along Seattle's Airport way for the Seattle Police Department. Rendering by DKA

The recent seismic upgrades to the exterior of Starbuck's headquarters building in Seattle's SODO district also took some creativity. Working amidst office employees, Special Projects crews installed a noise-proof, sturdy and attractive partition around the inside of the building's perimeter while crews removed the existing exterior brick and placed a new façade.

Started Small

While most general contracting firms add special projects divisions once a successful large building division is established, R&H Construction of Portland, Ore., started small and grew from there.

The firm's Interiors Division is still considered a key segment of R&H's business, performing a whopping 332 contracts in 2003.

R&H Construction started business in 1979 as an interiors contractor performing tenant improvement jobs in a retail strip center, said David Gunsul, R&H's vice president of the Interiors Division. Opportunities led the contractor to larger and larger jobs, and today the firm reports revenues of more than $100 million annually.

But the company never forgot its roots.

"(Interiors work) is consistent," Gunsul added. "It keeps dollars coming through the company and a steady flow of subs revolving through the door."

Almost $30 million of the company's annual revenue can be attributed to Interiors Division work, he said.

Most of the jobs in Gunsul's group are renovations or build-outs under $2 million. Many of the division's clients are repeat customers, such as Washington Mutual, Nordstrom and a number of restaurant clients. The group built the Portland City Grill in Portland, Manzana Rotisserie Grill in Lake Oswego and Gustav's in Portland's Lincoln Center.

"I don't think anyone can touch us when it comes to restaurants," Gunsul said. Of the division's $30 million in revenues last year, approximately $7 million was restaurant work.

O'Brien Constructors' Specialty Projects Division in Portland has become so successful since it was started in 1997 that it now accounts for up to 75 percent of the general contractor's total business, said Bob Jensen, project manager/estimator for O'Brien. "We're not just building a building for someone, we're building a relationship," Jensen said.

Most of the division's work is tenant improvement jobs and build-outs, typically under $2 million. Working in occupied spaces requires a certain amount of sensitivity and a lot of communication with the owner to ensure the job goes smoothly.

Jensen's crew impressed the Beaverton, Ore., School District recently when it was hired to demolish some existing houses to make way for a parking area. Sub-par design drawings meant work wasn't finished in time for the start of school in the fall. Even though the missed schedule wasn't O'Brien's fault, crews helped direct school bus traffic through the construction site so students could safely return to school.

It's likely that personal touch was a reason the school district named O'Brien as one of four general contractors to handle construction services for the district.

"Always trying to find a better way…"

It's clear that it takes a different type of mindset to work in a company's special projects division. While conventional builders may be able to focus on one job at a time, special projects staffers and crew members must juggle several jobs at once and be able to move quickly from one short-lived project to another.

"You have to have the right mentality," said R&H's Gunsul. "You have to be mobile and you have to be able to work quickly."

And Turner's Severide said: "People in special projects wear a lot of hats. They're multitaskers, creative types of people always trying to find a better way of doing something."