Contractor of the Year

Pursuing Work in Growing Markets Keeps Up Revenue at Mortenson Construction

Combining work in building construction, renewable energy, and federal contracting, Mortenson Construction increased its revenue from $2.1 billion in 2007 to $2.8 billion in 2008. The company has jumped from 38th to 22nd on Engineering News-Record’s listing of nationwide, top contractors over the past two years.

By Paula Widholm

Soaring revenue amid a downward-spiraling economy may seem miraculous, especially in construction, but a Minneapolis-based firm has been able to pull it off by staying active in its niche: healthcare, stadiums and municipal buildings, and by landing work in such new specialties as renewable energy and federal contracting.

Healthcare construction has been a major market for Mortenson. Three of the company’s leaders pose at a hospital under construction near Milwaukee. From left: Mark Sherry, vice president and general manager-Milwaukee; Greg Werner, vice president and general manager-Chicago; and David Mortenson, executive vice president. (Photo by John Luke Photography)

Because Mortenson Construction has beaten revenue odds through innovative approaches, Midwest Construction has named Mortenson its Contractor of the Year.

Here in the Midwest, Mortenson reported 2008 revenue of $574 million for the states of Illinois, Indiana, Missouri and Wisconsin, a 28% increase over the $448 million reported in 2007 for this region.

Nationwide, Mortenson’s annual revenue jumped to $2.825 billion in 2008 from $2.135 billion in 2007, according to a recent report from Engineering News Record, like Midwest Construction, a unit of McGraw-Hill.

This moved the firm up to No. 22 on ENR’s Top 400 Contractors list for 2009, compared to No. 27 in 2008 and No. 38 in 2007.

Mark Sherry, vice president and general manager of Mortenson’s Milwaukee office, has a bit of a humble explanation for the 2008 growth spurt. “Our selection on these projects starts well ahead of construction starts,” he explains. “We may have a project with 12 months’ worth of preconstruction work – working with thearchitect, designer, and scheduling—and we get selected ahead of that process.”

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Thus, much of the Mortenson’s current work is for projects it was selected for at the height of the construction industry. “Many of these are larger projects, therefore they have longer schedules,” Sherry says. “It’s a combination of us being in the right place in the right markets with a strong business, a good reputation, and people that like working with us. The longer life cycle allows our backlog to last longer than [those of] other smaller companies.”

The right markets Sherry explains that Mortenson’s nationwide business is split into thirds, with one-third focused on the construction of commercial, institutional, healthcare, sports, and municipal buildings; one-third devoted to renewable energy and a third in the federal contracting business.

The biggest of its many healthcare projects is going up in downtown Chicago. The joint-venture team of Mortenson/Power is constructing the $632-million Lurie Children’s Hospital, a 288-bed, 23-story, 1.25-million-sq-ft pediatric acute care, academic teaching and research medical facility. It is scheduled for completion in June 2012.

Mortenson’s construction of the Kane County, Ill., adult justice center and sheriff’s office included placing 96 completely outfitted, precast, double-cell modules in just seven days. (Photos courtesy of Mortenson Construction)

Healthcare, while not immune to the difficult economic times right now, is one of the markets not as negatively impacted as other markets such as high-rise residential, says Greg Werner, vice president and general manager of the firm’s Chicago office.

Midwest sports construction under way includes the TCF Stadium, the Minnesota Gophers football stadium; Target Field, the Minnesota Twins ballpark and a new basketball arena for the University of Louisville.

In renewable energy, the 55-year-old firm has been building wind farms for about the past 15 years, “but that market has grown substantially over last five years,” Werner says.

“Wind farms are one of the few renewable energy businesses that have matured to the point where the opportunities and volume are there,” Sherry says. “Biofuels is lagging behind, but we fully expect that to mature over the years as well.”

Perhaps one of the largest growth opportunities for Mortenson now will be in the area of federal projects, under the new U.S. Army Corps of Engineers “umbrella contracts.” At the close of 2008, Mortenson was awarded the $139-million IBCT Company Operations Facilities project at Ft. Bliss, Texas. This is the federal contracting group’s largest single project to date, and one of the company’s largest design-build projects.

Wind-power construction is a major market for Mortenson. Here, a crew prepares to install a blade for one of 100 wind-power-generating towers during construction of a 150-MW wind farm near Peoria, Ill. On this project, Mortenson provided engineering, built 26 miles of access roads, constructed 100 turbines, installed electrical transmission lines and a substation and built operations buildings.(Photos courtesy of Mortenson Construction)

The project consists of 12 separate COF buildings, totaling 718,000 sq ft, to support two Infantry brigade combat teams. These buildings will provide operational support space for more than 7,000 soldiers.

COFs are similar to industrial park office/warehouse buildings. The buildings range from 46,000 to 75,000 sq ft. Each includes a 15,000-sq-ft, single-story administrative module providing office space for four to six companies. The remainder of each building consists of “readiness modules,” which are essentially warehouse space including arms vaults, secure storage areas, lockers for individual soldiers’ gear and mezzanines for platoon sergeant offices. The scope of work also includes canopy structures to provide “covered hardstands” at each building, totaling approximately 120,000 sq ft. Mortenson’s design partner is Black & Veatch. The Mortenson / Black & Veatch team recently completed four similar COF buildings at Ft. Riley, Kansas.

Other federal contracting work has included being part of a $4.1-billion expansion program at Ft. Bliss near El Paso, Texas, to provide facilities for six new brigade combat teams and an aviation brigade, as well as re-positioning of the 1st Armored Division, which will bring more than 25,000 additional soldiers to the base.

The completed Kane County Adult Justice Center stands six stories tall and can house up to 640 inmates. Mortenson constructed the $56.4-million facility on time and under budget. Municipal-building construction is a mainstay in the company’s mix of work.(Photos courtesy of Mortenson Construction)

Mortenson’s federal contracting group has been working to acquire several key multiple-award task order and multiple-award construction contracts. Mortenson was awarded seven of these umbrella contracts in the last half of 2008. Combined, they represent opportunities on a limited competition basis for more than $2.7 billion of work over the next few years.

In particular, the Corps plans to award $1.9 billion in individual project “task orders” under five new MATOCs. These contracts cover brigade/battalion headquarters, UEPH & WIT Barracks and COFs throughout the western U.S.

“Federal contracts are a significantly different type of process,” Sherry says. “They have certain requirements, and they have to do things a certain way.”

What’s more, each federal department has slightly different requirements on delivering projects, and “there are nuances that make it difficult for firms that don’t have that background to jump into it,” Sherry says.

Mortenson has also been tapped on state-level government work. The firm completed a consulting assignment with the Wisconsin Department of Transportation that’s caught the attention of other state DOTs.

“In the past, WisDOT had their share of projects with schedule and budget issues,” Sherry says. “Representatives from WisDOT sought advice from vertical construction contractors and asked to learn more about the tools used to manage commercial construction projects.”

As a result WisDOT hired Mortenson as a consultant on its $810-million Marquette Interchange in Milwaukee, which wascompleted in August 2008. Mortenson brought project tracking tools common in commercial construction to solve schedule and financial-related construction issues.

“This project is now viewed nationally as a successful template,” Sherry says. “Many other states are looking at how Wisconsin delivered that project. Mortenson has now started its third major DOT controls consulting project—it’s a growing business for us as well.”

The Marquette Interchange, a cornerstone of southeastern Wisconsin’s highway system since the 1960s, was replaced with new structures and roadways. It was the largest public infrastructure project in the history of Wisconsin.

“The Marquette interchange was delivered under budget and ahead of schedule. Prior to that, that was not always the norm,” Sherry says.

The new interchange occupies the same amount of land with design features such as two-lane ramps, gradual curves on ramps, more distance between ramps to eliminate traffic conflicts from lane changes and the elimination of all left-hand entrances and exits. These features were designed to ensure the safe and efficient flow of traffic.

The four-year project included four legs encompassing the roadways traveling into the heart of the interchange. Mortenson provided services for all four legs of the project and was responsible for the timely collection and management of information, such as tracking issues, costs, schedule, submittals, and project documents.

Virtual Design and Construction Another key to rising revenue has been the firm’s use of virtual design and construction technology and seeking out the necessary software that best suits each project. The company says it first used VDC in 1998 while building the Walt Disney Concert Hall in Los Angeles. “With curves in all directions, we had to model it using CATIA, a program used in the aerospace industry for nuclear subs,” Sherry says. “This program didn’t exist in the commercial world. We had to create communication tools between the model and how subs utilize modeling. We took what we learned on that project and followed up with it on a project for the Denver Art Museum. We blazed a trail in what tools to use and how that adds value to the process.” Out of manufacturing, building-information modeling (BIM) is now a construction industry-wide tool.

Collaborating on a three-dimensional model eliminates common questions regarding construction sequencing and constructability, Mortenson officials say. This process affords subcontractors a means to effectively communicate questions from the field, while architects have the benefit of added site information to understand how their designs are being executed.

“Every single construction project we do is one of a kind, totally custom, and has typically never been built before,” Werner says. “The VDC process allows us to virtually build a project before we get out on site to maximize efficiency, quality and safety.”

VDC also brings about innovate design solutions. On the recent construction of a $55-million jail for Kane County, “All of the prison cells within the jail were fabricated offsite with all the fixtures and bunks in them, and we trucked them to the job site and used a crane to hoist them into position,” Werner says.

The Crown Plaza Hotel, completed in Wauwatosa, Wis., was the hotel chain’s first ground-up construction. “Before that, existing buildings were remodeled into a Crown Plaza,” Sherry says. “We spent a lot of time with the developer and with the Crown Plaza corporate people involved in the job creating our own prototype.”

Mortenson is currently building the 50,000-seat University of Minnesota TCF Bank Stadium, which will be home to the Gopher football team. The open-air, horsehoe-shaped stadium is scheduled for completion in August. Mortenson has been doing work for the University of Minnesota since 1924.(Photos courtesy of Mortenson Construction)

For an 800,000-sq-ft hospital for Aurora Healthcare, use of VDC reduced the schedule from three years to 22 months and reduced project costs by 10%, Sherry says.

“There’s a high-dollar investment in the purchasing of software and training of people,” Sherry says. “It’s an interesting dynamic, we have younger kids out of school who are strong using the software, and we pair them up with more seasoned superintendents that have built everything with their own hands. Within a short period of time that superintendent can’t live without these models. They see how much value they add.

“There’s not a job we have that we don’t use the technology on.”

People “We have exceptional people within the company,” says Werner, a 20-year veteran of the firm who joined Mortenson upon graduating college. “At the end of the day, that’s what makes the organization exceptional, the people of the company.”

The company employs 2,400 people nationwide, and it develops leaders through a formal training program. In Chicago, Mortenson has 160 supervisory and craftspeople. It also employs 280 in Milwaukee, 300 in Minneapolis, 480 in Denver, 250 in Seattle and 60 in Phoenix.

While the company nearly hit the $3- billion mark in revenue last year, Werner notes, “There is a real strong family heritage to the organization that’s true even today with the size of the company. It’s not a company that feels big to me. The leadership of the company has made it a place where you’re ultimately able to stay and achieve.”

Sherry is another long-time employee with 22 years at the firm. “We take our resources, mainly people, and spend a lot of time training them and providing the right example for how we are focusing on the customer,” he says. “There’s a strong mentorship program, and we’re at the forefront year after year on the technologies out there.

“People have very little reason to leave. Once people come here, they stay their entire careers.”

Endorsements People and technology are two reasons Michael Scholl, vice president with Hammes Co., keeps returning to Mortenson. “They’re well managed,” he says. “They have big, complex projects and have experience using some innovative technologies like BIM. They’re reliable in cost estimating and project management. I’ve worked with them for 15 years, and I’m now working with them on two hospital projects.”

Scholl supervises construction projects on behalf of Aurora Healthcare.

“They have strong personnel, and they have a strong internal training orientation program,” Scholl says. “There’s no weak link in the group.”

Scholl says Mortenson responds well to meeting aggressive scheduling requirements. “In building the 800,000-sq-ft hospital in Summit, Wis., in 22 months, we had a very aggressive schedule. They helped us map out a way to accomplish that goal, and BIM was instrumental in taking on that schedule. They brought that to the table and it paid off for us.”

While prefacing that her reasons sounds a bit “hokey,” Lori Skora, vice president, facilities planning and development for Saint Joseph Regional Health Center, sincerely says, “One thing they brought to the table was their Midwest values.”

Other credentials that led to Mortenson being selected to build the organization’s 658,000-sq-ft hospital in South Bend, Ind., include “their focus on safety and their ability to do 4D modeling,” Skora says.

At the job site, Mortenson also has impressed Skora with green guidelines that include recycling 75% to 80% of the construction debris on the project, which is scheduled to be complete in October.

“We also worked with them to set minority participation goals modeled after the State of Indiana of 6% minority, 6% women-owned businesses,” Skora says.

Mortenson partnered with Tonn & Blank on this $225-million hospital project to access local ties to contractors and resources in the labor market.

Consumer publications also note the perks of working at Mortenson, which was named one of the “Best Places to Work” in Illinois, and was voted “Best Place to Work” by Milwaukee Magazine.