Supply and demand

Donohoe Construction capitalizes on the construction market in the greater Washington, D.C., area by focusing on relationships and doing things right the first time.

By Clair D. Urbain

Few areas of the country have the stability of continued construction like the Washington, D.C., area. However, there are wild swings in the types of construction that keep contractors on their toes, says Charles Mead, Jr., director of Business Development at Donohoe Construction Co.

The 50 year-old general contracting firm is part of The Donohoe Companies, Inc., a D.C.-based full-service real estate firm. The construction division focuses on preconstruction services, general contracting, design/build and construction management.

The company also has a hotel group that develops and manages hotel properties and a division that provides property maintenance.

“Over the years, the company’s construction niche has changed,” says Mead. “In the ’80s, many office buildings were constructed before the savings and loan collapse and economic downturn in the early ’90s. Office construction slowly increased until the dot-bomb dropped in 2001. Then, the events of 9-11 brought a huge demand for housing as companies and the government responded to Homeland Security initiatives. The Washington area has a demand for an additional 30,000 units, much for high-end condominiums. It’s a very intense housing market.”

Due to the housing demand, most of the company’s present activities focus on luxury apartments and condominiums.

“Residential projects are more complex than an office building where you have fewer tenants. Condo owners are paying $600 and more per sq. ft., so floor plates can’t shift to accommodate drawings that aren’t quite right or some run that needs to be added.

“Instead of having one punch list, you have two punch lists for each unit – one that’s reviewed by the condo owner and one by the developer. With the upgrades available, it can get complicated,” he says.

Due to the complexity of these projects, Mead says negotiated or design/build work, instead of bid work, makes more sense. “Owners need a team to address construction issues. We coordinate shop drawings between us, the owner and architect and the subcontractors. Our field people have laptop computers to access information and to communicate with others.”

A recent example of the residential market’s complexity is the Odyssey Condominium project in Arlington, Virginia. This 15-floor high-rise building has 306 units, many with commanding views of the Capitol and surrounding areas.

“After construction started, the owner upgraded the top five floors to high-end units. From the eighth floor up, we had to work with the architect to add amenities without reducing living space. Significant reconfiguring was needed. We moved plumbing and walls to make the units larger,” says Mead.

Even with changes, the project is on schedule.

Stepped-up mold prevention
Construction speed is only one concern in this tight housing market. Mold from water leaks during construction is closely monitored by building owners and inspectors.

Mead says that Donohoe crews and their subcontractors have stepped up efforts to prevent water leaks in new construction.

“We now require that any water event be mitigated and thoroughly documented. If the water event is severe enough, we will bring in a third party to remediate it. Preventing water events is part of our quality control process, and having such a process in place has improved our building quality and reduced our liability exposure.

“We are looking at a paperless solution to track how we remediate water events. It uses a handheld device with a built-in camera to record how the site was remediated. Our quality control process won’t eliminate water events, but it has made a difference on our insurance. Insurance on residential projects can be as much as a point higher than an office project because they are more complex,” he says.

Donohoe relies heavily on subcontractors to complete jobs, although it can add to the level of project complexity. It has built a list of preferred subcontractors with proven track records and who know how Donohoe does business.

“We have developed a preferred list of subcontractors. We share drawings with them on the front end and rely on their experience to help identify items that need attention before we get into the project. Some of them have been working with us for 50 years,” he says.

“We work with contractors who have completed good work for us in the past and agree with our philosophy of fair play,” says Mead. “We extend that fairness philosophy to our material suppliers, trade contractors and the owner. Things happen on jobs and when issues arise, we treat them fairly and work it out with all the parties involved.”

The reputation for fairness, Mead says, helps retain the services of trade contractors in the future, but that doesn’t mean they aren’t open to looking at other subcontractors.

“If it’s a new contractor who has been in business a few years, we may give them a few jobs through our tenant division to see how he or she performs. We match the job to their capabilities. As they complete jobs successfully and grow, we’ll give them larger jobs,” he says.

With the hot housing market, Mead says they are not just selling the company’s expertise to owners, they are also selling time and workforce availability. “We are selling slots of time. That is driving the market. That also means we must look hard at the capacities of our subcontractors.

“Unfortunately, there is a tremendous shortage in our area for experienced, skilled trades and part of it is caused by the cyclical market. Young workers didn’t join the labor force in the downturn of ’92, ’93 and ’94, and they would now be in the market with 10 or more years of experience and ready to move into supervisory roles,” says Mead. “We are experiencing sticker shock. Some owners are holding off developing because of rising labor costs and, in some cases, labor shortage.”

Some trades are scheduling jobs to share workers. “We have two competing mechanical trades contractors that balance work so they can share tradesmen. It’s a way to alleviate the worker crisis,” he says.

Long-term view
Donohoe Construction has taken a longer-term view of the worker shortage, and has been very active with area organizations that focus on attracting new workers.

Beth Ong, proposal manager at Donohoe, says the company participates in many programs to attract workers to construction.

“In this hot market, the supply of managers is very short. We would like to bring in more, but they simply are not available,” she says. To that end, Donohoe works with local associations to get more people interested in construction. “We work with organizations that focus even on young children to get them interested in the trades.

“For example, the D.C. Metropolitan Subcontractors Association has helped build FutureForceNow.com, a Web site that helps students find careers in construction. We also adopt schools and often visit with students and train teachers on the skills needed in construction. The teacher training takes them onto a jobsite, which helps them better understand what skills are needed,” Ong says.

Donohoe also is a part of the Montgomery Youth Works program, which provides an internship that allows high school students to shadow and work at construction firms. It is also active in the local Associated Builders and Contractors, which has programs and trades training to help recruit workers.

To meet the housing demand, Mead says it’s important to do the job right the first time.

“With the labor shortage and the high value of properties, it’s very expensive to go in and do things over. We gear our processes to do it right the first time,” he says.

Published in the January/February 2006 issue of Contractor Tools and Supplies magazine.