November 5, 2009
Stuart Olson Inc. thrives on building relationships
If Hollywood was writing a script about Stuart Olson Inc., it would have no trouble figuring out who the good guys are. To the Calgary-based contractor, the entire building team — from client, to architects to sub-trades — represents a powerful alliance, strengthened by trust and respect.
It makes for a great story, but the movie industry can’t sell tickets to a film populated entirely by heroes.
“In our movie, the job is the bad guy,” says Paul Polson, Vice President of Business Development with Stuart Olson. “That’s the one we need to beat.”
The company has a long history, with the business founded in 1939 by the company namesake, Stuart Olson, a carpenter who emigrated from Sweden to Edmonton.
Always thriving and looking to grow within its areas of expertise, the company saw rapid growth in the late 1960s, as it expanded westward. Through the 1980s, it opened offices as far west as Vancouver and as far east as Saskatchewan acquiring other businesses, including Bennett & White and Camwill Construction. Its most significant partnership was cemented in 1989 as the company joined the Churchill Corporation, a diversified Edmonton-based construction company, while retaining its own identity and business relationships.
“We’re building partnerships here, and the confrontational model of business characterized by hard bids and change orders isn’t our style,” says Polson. “We’re in the construction management business, and when we’re contracted to complete a project, it’s with the understanding that we’re bringing relationships to the table.
“Our clients know that we will treat their money like our own, and prove it by spending it as carefully as if it were ours.”
Most of the company’s revenue is generated by repeat business or through invited tenders. Less than 20 per cent of revenue is generated by fixed-price bids.
Stuart Olson runs a tight ship. Like other large contractors in the western provinces, the company tenders 95 per cent of its work to remain flexible and accountable to the bottom line.
“We still have a talented team of carpenters and concrete workers, but it’s not as capital-intensive as maintaining a huge workforce and equipment inventory,” says Polson.
The company knows how to maximize relationships with architects and sub-trades, but the partnership model echoes through all of its decisions. “We may have a short list of mechanical or electrical contractors we like to deal with, but we’re making the final decision based on who we want to partner with on that particular job, not solely on price,” says Polson.
“We want to know if they have the commitment and manpower to hit the schedule.”
Polson has observed the Stuart Olson operation from both sides of the fence. He spent more than 20 years in the architectural field, partnering with the contractor on various projects. He jumped at the chance to be part of the Stuart Olson team, impressed by the construction management approach that the company brought to the table.
>A case in point: the company leveraged its construction management experience on major renovations and additions to the Calgary Health Region’s (CHR) Peter Lougheed Centre on a construction budget of $241 million. On that contract, CHR pays for all services, including labour and construction management, on an hourly basis with material costs covered on a cost-plus-fee basis.
The arrangement helped the client to control costs, while calling on Stuart Olson’s relationship with its suppliers and sub-trades to bring in the best value for money.
Polson’s bullish on Western Canada
The company recently re-opened its Saskatchewan office, which had closed in the mid-90s. “We still see Alberta, British Columbia and Saskatchewan as the place to be — the drivers of Canada’s economic engine,” he says.
The company’s revenue picture has remained solid despite the gloomy economic picture painted by pundits and analysts. Stuart Olson generated $525 million in revenue in 2007, and $574 million in 2008. The current year promises to be a strong one as well with significant carry-over work and expected growth in 2010 and 2011.
One such long-term project is the company’s ongoing work on Edmonton’s new Remand Centre for Alberta Infrastructure and Transportation. It’s a five-year project started in 2008, with a budget of $620 million.
The company also recently netted a $47.3-million federal government contract to modernize the fleet maintenance facility at the CFB Esquimalt dockyard.
“We recently had an executive meeting where each one of our branches presented its list of potential projects and markets,” says Polson. “If you attended that meeting and walked out of there blindfolded so you couldn’t see the newspaper headlines about tough economic times, you wouldn’t know we were in a recession.”
But while Stuart Olson remains busy, a less-overheated construction market has given the company some breathing room and allowed it to take advantage of a more competitive market in labour and sub-trades.
“Two years ago you might be begging electrical guys to bring in a bid for you,” says Polson. “Now we can get five guys to bid. It’s very competitive. The same is true for the labour market — it’s still overloaded and very competitive.”
The company sees the relative softness in the energy sector as an opportunity. It’s no longer in heavy competition with oil and gas for labour, expertise or managerial talent.
“It’s a good time to pick up key individuals that will help the company to achieve its potential for growth,” says Polson. “During the red hot phase of the economy you sometimes had to grab people based on the fact that they were breathing. Now that we’ve got a full bus we can make sure that the right people are along for this ride.”
Stuart Olson is also well positioned to capitalize on P3 projects, with the healthy financial backing of parent company Churchill. “They’ve got a strong financial statement and cash portion,” says Polson.
The contractor is aggressively courting contracts as the government of Alberta solicits proposals to build new elementary, junior and middle schools for the Edmonton Capital and Calgary regions through public-private partnerships. The company finished second in competition for the first batch of schools to be delivered and has been short-listed for the second.
Stuart Olson is also benefiting from a spate of hospital construction projects. It’s nearing financial close on the $230-million Fort St. John Hospital project and will soon begin work on the Lethbridge Hospital Expansion, a project delayed by building permit issues.
“We’re well diversified across commercial, institutional and industrial projects,” says Polson. “And we’re still busy because if our clients now only have one job to offer the construction sector, instead of three, we’re the ones who get selected for our ability to work with the client’s team and to meet their schedules.
“They come to us and tell us, ‘You looked after us during the crazy times, let’s continue to work together now.’ ”
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