Hensel Phelps Construction Company

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Hensel Phelps Construction Company

420 Sixth Avenue
Greeley, Colorado 80632
U.S.A.
Telephone: (970) 352-6565
Fax: (970) 352-9311
Web site: http://www.henselphelps.com

Private Company
Incorporated: 1937
Employees: 2,600
Sales: $1.83 billion (2004 est.)
NAIC: 236220 Commercial and Institutional Building Construction; 237310 Highway, Street, and Bridge Construction

Hensel Phelps Construction Company operates as one of the largest private construction companies in the United States. The company, which is employee owned, pursues a broad variety of projects, including the construction and renovation of industrial and residential spaces, commercial offices, airports, sports facilities, healthcare and educational institutions, public assembly areas, and retail space. The company provides a broad range of pre-construction and post-construction services, including scheduling, estimating, budgeting, zoning and code compliance, bid packaging, engineering and status reporting, as well as certificates of occupancy, warranty programs, moving services, and as-built documentation. Hensel Phelps also offers development services, such as land acquisition, feasibility studies, financing, and leasing.

Beginnings

Hensel Phelps Construction Company was founded in 1937 by Hensel Phelps of Greeley, Colorado. The success of Hensel Phelps, however, lay in the extraordinary business odyssey of Hensel Phelps's son, Joseph. Following his graduation from Colorado State University in 1951 with a bachelor's degree in construction management, Joseph Phelps spent four years as a naval reserve officer during the Korean War. Upon his return in 1955, Joseph joined his father as a partner in the Hensel Phelps Construction Company, a modest commercial enterprise that specialized in supplying remodeling and construction services. Joseph was the company's second full-time employee. When Hensel Phelps retired two years later, the younger Phelps bought his father's share in the business and proceeded to develop it into one of the nation's preeminent construction firms.

After becoming president in 1957, Joseph Hensel introduced the idea of making equity interests available to managers and employees of the company. By doing so, he created a uniquely successful incentive program that he and others later credited with playing a major role in the company's remarkable growth. In 1963, Joseph Phelps hired field engineer Bob Tointon, who was promoted to vice-president one year later and then to president of Hensel Phelps in 1975, with Joseph remaining as chairman of the board. Together, Phelps and Tointon built the company into one of the nation's leading construction firms by opening a series of regional offices around the country and successfully competing for major construction projects.

National Expansion

In 1967, Hensel Phelps opened its first branch office in Burlingame, California, to coordinate and oversee the growing number of construction projects in California. The company then expanded into the Southwest with the opening of an office in Austin, Texas in 1972. The Southwest office focused on construction projects in central and southern Texas and New Mexico. With the real estate boom in the 1980s, the company experience rapid growth and expansion. New offices were opened in both Santa Clara, California, in 1983 and Little Rock, Arkansas, in 1987. The company's national growth was spurred by large projects for such technology companies as IBM, as well as Wal-Mart. Hensel Phelps expanded its presence in Southern California with the opening of its Irvine office in 1990.

By the later 1980s, however, Joseph Phelps and Bob Tointon began to phase out their ownership of Hensel Phelps. Joseph Phelps's day-to-day involvement in the company already began to decline beginning in the late 1970s as he pursued his interests as a wine maker and merchant. In 1973, he bought a ranch in the Napa Valley and launched a second business in the wine industry. By 1982, he was devoting himself full-time to his business interests in the wine industry and had become a resident of California. He later produced one of the top ten red wines of the world, Insignia.

New Ownership and Continued Growth

In 1989, ownership of Hensel Phelps passed to twenty-eight employee stockholders, none of whom held more than a 10 percent stake. The buyout represented the culmination of 25 years of the employee ownership program developed by Joseph Phelps. At the same time, Phelps Inc., the parent company of Hensel Phelps, was reorganized under company president Jerry Morgensen and other long term managers, who assumed control over Phelps Inc.'s general contracting business. After selling his shares in the firm, Joseph Phelps continued his business partnership with Tointon by forming another company, Phelps-Tointon, Inc., which took over the diversified real estate and non-general contracting activities of Phelps Inc. Thereafter, Phelps-Tointon owned and operated several manufacturing companies, including Armor Safe Technologies, Southern Steel Company, and Rocky Mountain Prestress, Inc.

By 1990, Hensel Phelps had become the largest construction firm in Colorado and the thirty-fourth largest in the country. Since 1957, the company's annual sales had grown from $1.6 million to $600 million. The company also succeeded in restoring to life the once venerable Pickens-Bond Construction Company after acquiring it in 1987. Founded in 1947, and once considered Arkansas' premiere construction firm, Pickens-Bond went bankrupt in the summer of 1987 when a number of its real estate ventures turned sour. Hensel Phelps saw the collapsed firm as an entry point in the Southeast market. After untangling its business deals and landing new contracts both within and outside the state, Hensel Phelps turned the firm around, leading it to earn $100 million in 1990. The Southeast was a new market for Hensel Phelps, and it looked to greater Atlanta and other areas for new growth opportunities. At the same time, the firm began to expand into the international arena.

In early 1991, the company could point to numerous and successful major construction projects, such as a 400-room luxury Sheraton Grand Hotel in La Jolla, California, a Ritz Carleton Hotel in San Diego, the Shamu Stadium at Sea World in Texas, and a terminal at San Antonio International Airport. In 1992, the firm became an equity partner with Elitch Gardens in its planned new and relocated park in Denver. The new park was expected to cost $90 million, with Hensel Phelps serving as both general contractor and long-term investment partner.

Major Projects in the 1990s

In the fall of 1994, United Airlines hired Hensel Phelps to resolve problems with a controversial baggage handling system which repeatedly delayed the opening of the new $5 billion Denver International Airport (DIA). Although the venture came with risks, it also presented opportunities for the company to make a bigger name for itself in airport and terminal construction projects. The company succeeded in resolving the problems to the satisfaction of United Airlines. In 1996, The Press-Enterprise of Riverside, California, quoted Gary H. Lantner, director of facilities for United Airlines, as saying that the "successful inauguration of the first phase of the baggage system required to open DIA could not have been achieved without the firm leadership of Hensel Phelps." The successful DIA venture, together with other expansion projects for United Airlines at San Francisco and Los Angeles airports, helped the firm secure a project to build a $250 million, 530,000-square foot, twenty-six gate passenger terminal at Ontario International Airport in 1996. In 1998, the company was also chosen as the overall manager of a massive $1.2 billion expansion at the Dallas/Fort Worth International Airport. The project included plans to expand the airport's existing terminals in addition to the construction of new terminal space and a $650 million passenger transportation system between the terminals.

The company went on to build other major projects, including the National Ignition Facility at Lawrence Livermore National Lab in California, rocket launch facilities at Cape Canaveral in Florida and in California, the Midfield Concourse at Washington Dulles Airport, the Sahara Hotel and Casino in Las Vegas, and the Stealth Fighter Maintenance Docks at Holloman Air Force base in New Mexico. By the late 1990s, the company had a record of building just about anything and had district offices in San Jose and Irvine, California; Phoenix, Arizona; Austin, Texas; Little Rock, Arkansas; Orlando, Florida; and Chantilly, Virginia.

In 1999, Hensel Phelps was in its fourth generation of employee ownership with a net worth exceeding $78 million. In 1973, the company was earning $87 million in business; in 1989, $400 million; and in 1998, business volume had risen to over $1 billion. Despite the company's remarkable success, Hensel Phelps president Jerry L. Morgensen said the company was struggling to recruit workers. He noted that the low-tech construction business now existed in a high-tech world with fewer people looking into the trades to replace a craft base that was aging and retiring.

Company Perspectives:

Closely directed by personnel in district offices strategically located throughout the United States, Hensel Phelps builds a diverse range of project types, including new construction and renovation of commercial office, airport, distribution and industrial, correctional, public assembly, sports, health care, educational, institutional, residential, mixed use, retail, hospitality, mass transportation, entertainment, microelectronics, research and development, and laboratory facilities. These projects have been built for both the public and private clients using various delivery methods. Since 1937, Hensel Phelps Construction Co. (Hensel Phelps) has delivered the best value in building services by placing expert construction professionals on every project undertaken. Hensel Phelps is consistently ranked among the top general contractors and construction managers in the nation by ENR.

In 1999, the company also began planning a change in its international focus from foreign clients to pursuing projects for U.S. companies and government agencies that required overseas construction services. Moreover, Hensel Phelps planned on concentrating more on securing project management positions overseas rather than on general contracting work, given the complicated nature of the projects and the constantly changing rules with private foreign clients. Nevertheless, the company saw better returns on international projects with margins in the 10 to 15 percent range as opposed to about 5 percent in the United States. Although Hensel Phelps believed it needed to pursue international business for continued growth, it kept a firm footing in the U.S. market.

Entering the 21st Century

By 2000, Hensel Phelps was consistently ranked among the country's top ten domestic general contractors. The company had a strong financial base, unlimited bonding capacity, and a debt-free portfolio. As Hensel Phelps entered the 21st century, it continued to win prime construction contracts. In 2001, for example, the company won a $125 million building contract from the Smithsonian's National Air and Space Museum at Dulles International Airport, a $285 million expansion contract for the Colorado Convention Center in Denver, and a Pentagon renovation contract worth $758 million. The company had an advantage in obtaining the Pentagon contract because of the more than $1 billion in contract work it had performed around the world for the Army Corps of Engineers. The renovation project began before September 11, 2001 and continued alongside the repairs to the building caused by the terrorist attack.

In 2001, the company expanded its South Central presence with the opening of another office in Dallas, Texas. In succeeding years, Hensel Phelps's numerous projects included the design and construction of a technical support center for the Federal Bureau of Investigation, a 32-story condominium tower in downtown San Diego, an Electromagnetic Aircraft Launching System facility for the Naval Air Engineering Station at Lakehurst, New Jersey, and a new U.S. consulate Compound in Cape Town, South Africa.

With these and numerous other contracts, Hensel Phelps had firmly established itself as one the nation's leading general contractors. In 2004, the company continued to win significant new contracts, including one with the University of Arizona to expand a chemistry building and to construct concrete frames for a medical research building. Hensel Phelps also secured a project for a new 733-stall parking garage for Denver Health and Hospital Authority. Together these and other projects were expected to provide a continuing stream of revenues for the near future.

Hensel Phelps's strengths relied primarily on its strong relationships with top U.S. corporations, including Kodak, IBM, United Airlines, and Wal-Mart. Nevertheless, while these relationships seemed to assure a stable source of future projects, they also signified a high dependence on the U.S. market. In addition, by 2005, the company still had not pursued significant overseas development projects, leaving it exposed to the risks of fluctuations and downturns of the U.S. economy. Still, the company could look to strong growth in such sectors as new residential development and the life sciences industry, including health care services, which were poised for considerable expansion in the coming decade in the United States.

Principal Competitors

Austin Industries Inc.; Barton Mallow Company; Clark Enterprises, Inc.; Dick Corporation; DPR Construction, Inc.; Hoffman Corporation; McCarthy Building Companies, Inc.; Rooney Brothers Company; Rudolph & Sletten, Inc.; The Sundt Companies, Inc.; The StructureTone Organization; Turner Industries, Ltd.; Walbridge Aldinger Company; Hunt Construction Group.

Key Dates:

1937:: Hensel Phelps Construction Company is founded.
1955:: Joseph Phelps, son of founder Hensel Phelps, joins the company.
1957:: Joseph Phelps becomes company president after Hensel Phelps retires.
1963:: Bob Tointon joins the company, forming a business relationship with Joseph Phelps.
1967:: The company opens its first branch office, in Burlingame, California.
1972:: The company opens a southwestern branch office in Austin, Texas.
1973:: Bob Tointon is appointed company president; Joseph Phelps remains as chairman of the board.
1983:: The company opens a branch office in Santa Clara, California.
1985:: Jerry L. Morgensen becomes the fourth president of the company.
1987:: Hensel Phelps acquires Arkansas firm Pickens-Bond Construction Company.
1989:: Ownership of Hensel Phelps passes to twenty-five stockholders.
1990:: A Southern California office opens in Irvine.
1994:: United Airlines hires Hensel Phelps to resolve its baggage system at Denver International Airport.
1996:: A Mid-Atlantic office opens in Chantilly, Virginia.
1998:: The company's Southeast district expands to Orlando, Florida.
2001:: The company opens a South Central district office in Dallas, Texas.