Look forward, not back, to make choices

Eric Raff

Eric Raff helped found Milpitas-based XL Construction 25 years ago with Dave Beck. Since their early days, they have been staunch champions of XL’s commitment to improving lives. XL Construction wants to be known for its projects in helping serve humanity, but also for its efforts in being great partners with its clients.

Eric’s personal approach grounded in constant encouragement and support has helped build a company that has achieved new heights in both revenue and project complexity. After 30 years in the industry, Eric has seen it all, making his perspective on 2018 and beyond that much more relevant.

We keep expecting the Bay Area economy to slow down, but it hasn’t shown any clear signs of doing so in the near future.

By all measures, 2017 was a remarkable year for the construction industry. Has 2017 been as promising as you hoped it would be a year ago?

2017 was a successful year for XL. We not only met our revenue and profit goals but passed some significant milestones: Ten years with no lost time injuries; and celebrated 25 years of being in business.

What are some of the projects of which you are especially proud that were recently completed?

  • Design Tech High School at Oracle
  • LinkedIn Middlefield Campus
  • Bayer Quality Control Lab
  • Sonoma Academy Guild & Commons Buildings (LEED Platinum certified, net-zero energy efficient, Living Building Challenge)

Which projects are you especially excited about in 2018?

  • El Camino Hospital New Behavioral Health Center
  • SKS Assembly at North First Street
  • Exelexis Pharmaceuticals TI at Waterfront at Harbor Bay • Skyline College Building 12 Environmental Sciences

As you’ve seen XL Construction grow from its founding days to today, what has changed and what has remained the same within the organization?

What’s remained the same are our core values: we not me, be true, and go beyond. We have learned to better articulate them, and it’s been amazing to see them remain constant for 25 years.

What has changed are our technical capabilities, resources and the ability to take on larger, more complex projects. We celebrated our first $1,000,000 project nearly 25 years ago, and our first $150,000,000 project last year.

Sonoma Academy Guild & Commons Buildings

With growth and an ultra active industry there also come challenges. What are those and how has XL Construction mitigated them?

The main challenge we see is the shortage of people, both craft and professional. To mitigate the effect and overcome the challenge, we focus on our people and company culture. In 2017, XL was voted #1 Best Place To Work in the Bay Area (for the second time in the last 8 years). We have a great group of people that work well together, and others are attracted to that.

The development community is often distraught with the escalating construction costs. How do you navigate these issues and how do you work with the development community to be seen as a true partner?

It’s true. The whole spectrum of development costs have risen to the point that many projects simply won’t pencil-out for developers. And construction costs are a big component of that. It’s a significant, industry-wide issue.

Looking forward, we expect the upward pressure on construction costs to continue. For the last few years, most of the escalation has been driven by labor cost increases. While that is unlikely to change, it is also possible that we will see cost increases for certain types of materials in the year ahead due to the demand from recent natural disasters and the possibility of new tariffs and quotas.

While we cannot change industry-wide trends, we can and do make a significant impact on reducing construction costs through skilled planning during the preconstruction phase of a project. For example, providing options analysis for alternative structural systems or for different exterior cladding materials provides our customers with choices to maximize value given the current market conditions prevailing at the time. We also employ various strategies to lock-in prices early in the project’s development cycle to avoid incremental cost increases. In addition, we put great emphasis on selecting and aligning the entire team so that the project is delivered in the shortest time possible thereby reducing overall development costs.

On the flip side, one of the challenges that you face daily is access to resources, both natural and human. How is XL mitigating these and what challenges do these issues pose for your organization?

From out in the field to back in the office, human resources are crucial to the success of our projects and business and yet are scarce. We attract and retain talent by providing a great culture and place to work.

Our clients care about the materials going into their buildings to mitigate impacts to the environment, and for their employee’s health and productivity. Even when our clients don’t have sustainability standards, XL applies our own. We recently completed the Janet Durgin Guild and Commons for Sonoma Academy that is anticipated to achieve LEED Platinum, full Living Building Challenge and Well certifications. As a result, the facility will be Net Zero Energy, Water, Carbon and Red List materials. The beauty of pioneering certifications like these is that we now have best practices and lessons learned to apply to future projects.

Bayer Quality Control Lab

We live at ground zero of technological innovation. How have you seen technology enter the industry over the years? What are some interesting innovations that you as an organization employ today that you find to be really transformative?

The rate of change in construction technology is finally moving at a fast pace, and it’s transforming the industry. Construction Technologies, including Virtual Design and Construction (VDC), laser scanning, and model- based layout, improve schedule and cost certainty on projects. They also increase overall project efficiency by helping our clients visualize different options and make quick decisions early in the project, avoiding costly and time-consuming re-design. These technologies also provide more opportunity for prefabrication, which reduces schedule and cost while improving safety.

Are there any areas of industry that you will emphasise more in 2018 and beyond? In other words, are there certain construction projects that you will likely pursue more in the future than you had in the past?

XL will remain targeted with what we pursue. We have developed deep relationships with our clients and an intimate understanding of their needs within each market segment. I foresee continuing with and further strengthening our expertise in the commercial, civic, science and technology, healthcare and education markets.

Construction companies often look at development projects in the future in months of active projects. How far are you booked up? Are you seeing any slowdown in the construction industry that you find interesting or of note?

XL has a very healthy backlog; our resources are mostly committed through the end of 2018. We are pursuing projects with construction beginning in late 2018 and 2019.

We keep expecting the Bay Area economy to slow down, but it hasn’t shown any clear signs of doing so in the near future.

What industry figures to you like to track personally that give you a sense of where the industry is or where it’s heading?

Architectural index and industry consultant outlooks.

What excites and what worries you about the industry in 2018 and beyond?

Resources, traffic and the cost of living for our good, hard-working employees are my main concerns for 2018 and beyond.

It’s an exciting time to be in the Bay Area, the economy here is diverse and hitting on all cylinders. The companies we build for are producing life-changing products and services for the whole world. The time and geographic location we are in give us a great opportunity to help companies solve some of the world’s biggest challenges and improve lives locally and over the world.