Tiny Builder Carves Niche Among Giants Low Volume, Intense Oversight Pay Off For Kearsley
When he worked for some of the largest construction companies in Spokane, Doug Kearsley thought about what a nice living someone could make just on the money a big company wastes.
“When I was at Lydig, we used to say to each other, ‘What if you could just have the money that drops through the cracks?”’ Kearsley says.
That’s not a criticism of Lydig Construction Inc., one of Spokane’s biggest builders. It’s just the nature of all the big companies, Kearsley says.
“There are so many tiers that a few bad decisions are made here and there, a few things are overbought, a few things are put in wrong and torn out. Stuff like that.
“And that’s all money wasted.”
Of course the big companies - the “volume lords,” Kearsley calls them - do enough work to absorb the waste and still come out ahead.
But what if, Kearsley thought, a person could take just one of those $3 million or $4 million construction jobs and manage it carefully and intensely, watching every penny from start to finish?
How much more profitable could that job be? Almost five years ago, Kearsley decided to find out.
After 15 years working for the biggest Spokane public works contractors, Kearsley decided to go into business for himself.
In order to succeed on his own, Kearsley knew he needed a niche. Early in his career he’d taken a shot at being his own boss as a home builder, and didn’t make enough headway in a crowded field.
But now, “I do public works contracting,” Kearsley says. “Government contracts. Schools, libraries, jails, that sort of thing.”
It’s the traditional territory of the big companies. But Kearsley does one project a year. His target is the $3 million to $5 million contract. He mixes in enough smaller jobs to keep his few employees working all year. But he is careful not to allow the smaller efforts to disrupt his focus on the year’s main project.
His first real crack at this formula was the $2.3 million remodel of University Elementary School for the Central Valley School District in 1994. His 1995 job was a remodel of Sutton Hall at Eastern Washington University, about a $3 million contract. His current project is an elementary school at Deer Park, a $3.3 million job.
Staying small, looking big
In a business era of downsizing, belt-tightening and more-with-less, Kearsley Construction may be a model approach.
The company consists of Kearsley, his wife Patti and a couple of full-time employees at any given time. Technology in the form of state-of-the-art computers and communications helps put a tiny company on equal footing with the big boys, Kearsley says. Subcontractors do most of the site work under Kearsley’s supervision.
“It’s the exact opposite of being a specialist,” Kearsley says. “We’re vertically integrated in that I’m here with the owner’s hat on. And I’m the estimator and the project manager. With computer savvy I can push all the paper. But then I can turn around and put my hard hat on and my tool belt and boots and go out in the field and work.
“That cuts out a whole lot of middle people.”
Kearsley’s strategy, though, is not something just anyone could plug into.
“You can’t be a house builder who just builds a little bigger house each time and eventually get to this point,” he says. “You need to have worked for the large corporations, and then step back.
“If you open my job files,” he says, “they look exactly the same as the bigger contractors. My accounting, my cost code reports all look the same as the big guys. So when I go to the bonding companies and the banks, they don’t feel like they are looking at a small contractor.”
For a company trying to look big, Kearsley’s first job after its incorporation in December 1991 was pretty small. He installed a service counter at a Spokane escrow company. Next came some small contracts with the city of Spokane.
“We did the Corbin Community Center, the Sinto Senior Center,” says Patti Kearsley, “and then one of our first big ones, remodeling the restrooms at Albi Stadium.”
The contracts ranged from $50,000 to $100,000 as Kearsley patiently positioned his company.
“You have to build your reputation slowly, particularly with the bonding company,” Patti Kearsley explains. “They’re not going to bond you for $1 million right off the bat. You start with $30,000 or $40,000 first.”
Kearsley chose progressively larger jobs as the company’s bonding capacity - now at $5 million - grew.
“The thing about public works is that if I can furnish a bond, and I show up at bid time with the low bid, by law, they pretty much have to use me,” Doug Kearsley says.
That doesn’t mean, though, that the owners of the project are always comfortable with Kearsley at the outset.
“From an owners point of view, a small company doing a $3 million to $5 million job can be pretty scary,” Kearsley says. “So we usually get checked out pretty thoroughly.”
The project owner usually has “some initial misgivings” about the size of Kearsley’s company, says architect Steven McNutt. “But then when his excellent performance plays out on their project, they are just thrilled.”
McNutt is a principal in Northwest Architectural Company. By happenstance, his firm has been the prime architect on each of the last three big bids Kearsley has won.
“Doug Kearsley was one of Lydig’s top managers for a long time,” McNutt says. “So in these jobs, you get all that management talent focused on one project. He mother-hens his projects, and they come out great in terms of quality of workmanship, timeliness of completion and delivery.”
For the last two years, Kearsley has made the Puget Sound Business Journal’s list of the 100 fastest-growing companies in the state. But, he says, that growth has peaked. He wants to be no bigger than his one $5 million project a year.
This size, he says, allows him to offer the “real personal hands-on touch that they really aren’t used to in the public works sector.”
As director of auxiliary services for the Central Valley School District, Dave Jackman was responsible for overseeing the University Elementary School project.
“Our experience with Doug Kearsley was that he was more responsive to our needs and certainly more timely in some of the work than we had experienced before.”
Satisfied customers mean a lot to Kearsley. They don’t, however, translate to more work.
“Reputation in the private sector can mean a lot more work,” he says. “But in public works, if some other contractor - good, bad or indifferent - is $5,000 under my bid, he gets the job.
“And I expect him to. That’s the game we play, and it’s a tough game.”
The art of bidding
The real key to Kearsley’s success is that not many people undercut his bids. In almost five years of bidding, Kearsley Construction has won 18 of 38 projects it has gone after.
Kearsley says bidding is an art. He mastered it working for the big companies. And now, he says, he knows how to make the big companies’ complexity work against them.
He plans for his single 1997 project to come from bids he will make on remodels of Bowdish Jr. High School, Trent Elementary School or construction of a new elementary school in Liberty Lake.
He will devote himself exclusively to researching each bid for two to three weeks. He’ll start with the plans, talking with architects to be sure he understands all the fine points.
He’ll talk to subcontractors he works well with, and try to convince them to bid the job.
“When I was at Lydig, I would be running anywhere between $12 million and $20 million worth or work at one time,” Kearsley says, “and someone would walk into my office and say they wanted me to bid a $5 million school job.
“Well, I’ve got 3,000 meetings to go to. I’ve got two other projects I’m supervising. So I’ll come in on Saturday and get that bid taken off. Maybe three days before the bid, I’ll let everything else slide and concentrate on it, but by then, it might be too late.”
To an outsider, the paperwork involved in a public works project looks daunting. But Kearsley knows the routine. On bid day, he’ll use the five phone lines in the basement office of his home and three fax machines to gather information and refine the bid up to the last moment.
The result, Kearsley says, is “a respectable living” and the satisfaction of guiding his own destiny.
“What I like is being the superintendent, being at that job site in the trailer running the job,” Kearsley says, “but I’m still able to use my expertise in bidding and estimating.
“And I’m very proud to say that each time we’ve left a job behind us, the owners have been very complimentary. Earlier this year the Deer Park school district catered a lunch for the entire crew of 75. And the guys on the crew were just shaking their heads. Some of them had worked in this business for 15 or 20 years and done school after school. They’d never had a school district buy them lunch.”
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