Even with record revenues at Devcon, Gary Filizetti’s main focus remains on the clients.
THIS ARTICLE WAS PUBLISHED IN THE ‘Q’ – THE REGISTRY’S PRINT PUBLICATION – IN FEBRUARY OF 2017[dropcap]D[/dropcap]evcon Construction was founded in 1976 as a partnership of contractors, architects and developers, and since those early days the word partner has been the foundation of the company’s ethos, making collaboration with clients, subcontractors and its employees the most important aspect of how it conducts its business. It is not by accident that 20 years later, by the late 1990s, it became the largest contractor in Silicon Valley, building residential, multi-family, retail, hotels, sports stadiums, schools, shopping centers, corporate campuses, infrastructure and robust data centers. In 2016, the company did $1.6 billion in construction business.
Speaking with its President, Gary Filizetti, however, the achievements of the company and its record revenues come secondary to its relationship with its clients and how important the company thinks its employees are. The company often quotes Filizetti: “There’s a reason 95 percent of our business comes from repeat customers – people trust us.” And one gets a sense while speaking to him that if he’d like to be remembered by anything, it would be that he had done his job well enough that each one of his clients brought him more work in the future.
THE REGISTRY: You have been part of the Bay Area construction industry for several decades now. In that time, what has changed and what had stayed the same?
GARY FILIZETTI: The goals of Devcon have not changed; we think customers are very important, and employees are pretty much our most important asset. The things that I think have changed is the speed of projects and managing customers’ expectations, especially when some customers are not so sophisticated. And also, the qualified manpower is pretty scarce right now. In the past we haven’t had that problem, but today it is a major problem.
TR: Are you finding that to be the issue because of the complexity of jobs and the more technical nature of some projects?
GF: I don’t think so. I do think the skilled labor force is not as abundant as it needs to be. The demand is higher than supply, so we have fewer skilled people coming to work in our area. For example, we have travelers in the electrical union, and they come in and they’re not used to our speed, and they’re here only temporarily, so their attitude about what kind of job they should do is not as driven as someone else who is going to stay and live here.
TR: 2016 was by some measures probably another record breaker for the development and construction industry in the Bay Area. How did it fare for Devcon Construction?
GF: We did close to $1.6 billion. It was our best year volume-wise, but I don’t look at it as a volume driven company, it’s more about how did we perform for customers, and I think we did OK. We didn’t do as well as I thought we should have done, but I think we did better than some. And I rate ourselves as volume was great, but meeting schedules was a little more difficult. We made them, but it was a lot more of a hassle, because we didn’t have the qualified labor in the subcontractor pools.
TR: Our understanding is that because of the labor shortage, project timelines are getting pushed out. Are you seeing that as a consequence of the labor shortage?
GF: A little bit, but we have a good relationship with subcontractors, so we can usually challenge them to have their A players and their B players, and so it is a factor, but on the other hand we’ve been able to position ourselves to be able to manage subs and treat them as a partner.
TR: Where does that put the start of 2017? Does it look as promising this early as 2016 did a year ago and what about 2018?
GF: I expect 2017 to be plus or minus 10 percent of what was done in 2016, so we do have some capacity, and in 2018, because of how the project cycles run [in the Bay Area], you don’t know for sure between six months to a year where your volume is going to be. In 2018, jobs could get cancelled or they could get delayed, so we’re pretty much dependent on the economy. So, it’s hard to say what will happen in 2018, and in 2017 our backlog is a little less than what we did in 2016.
TR: Construction costs continue to increase. How do you respond to those challenges and communicate with your clients? What is the usual feedback you’d give to developers on that issue?
GF: Our value add is to be chosen to be a partner in the design and development process early in the game, so I do think from our perspective the costs are going up because of manpower shortages. In some trades there is a fabrication process, there’s steel, there’s glass, window systems, those things all have a fabrication process, and so if we can get early enough and award those contracts early in the game, then you have price commitments from subcontractors, and you get a manufacturing slot that is guaranteed, and then they have you on the backlog for their installation crews.
But, numbers are going up. You just have to be more cost effective in getting the design.
TR: Aside from labor and increased costs, what are some other challenges that the construction industry faces today?
GF: Specifically for the construction industry, we’ve got time cycles for the approval of projects, which has been lengthened, and I just think that cities are not adequately staffed in order to take care of the process. On top of that there’s traffic, and there’s housing. Some of our guys drive a long way, so we’ve been paying to put up people in hotels.
If you live in Modesto, it’s a long drive here every day, so to get people to want to come to work over here is challenging with traffic, and there’s no housing for them here.
Even trying to get get concrete trucks on the sites, the traffic has been incredible, so we try to change the pours to do them early in the morning, or Saturdays or Sundays when there’s less traffic. That not only affects the employees, but it also affects the delivery of material to our job sites.
TR: Silicon Valley is synonymous with high technology companies and the products they make, yet your approach to building Devcon’s business in the region has been to focus on a diverse group of clients building not just tech company campuses, but also other structures. Tell us about the importance of that approach and how do you select which projects you would like to go after?
GF: There are different segments of the economy that are going to building at any point in time. In my mind there are four that are building now. For example, we have high density housing, including mixed use with retail and hotels; if they’re going to be able to spend money, we can do those projects. Institutions and end users are [two and] three, and then we’ve been fortunate enough to do some sports projects. Some people get focused on one segment and they become really good in that one segment, but when that one segment is not building, they’re in trouble.
TR: What excites you about 2017?
GF: There’s a lot of interesting projects. We’re doing the Nvidia project right now, and that’s an incredible project, and there are some other projects that are coming. There could be the A’s [stadium] one day, there could Nvidia Phase 2 one day. There are some Apple projects that are going to be fun and some Google projects that could be fun. There is some exciting stuff coming; in the construction industry every project is a little different and a little challenging, and that makes it fun.
TR: How many more cycles do you see yourself pursuing? Is there a succession plan at Devcon?
GF: Depends on how long they are. I’m pretty happy! We do have a succession plan in place, we have five vice presidents here, so we’ll work something out. On the other hand, I’m going to work until I’m not healthy. Is this uptick cycle going to last for another couple of years and then slow down? I enjoy what I do, so when I get up in the morning, I don’t feel like it’s a job.