High Rise And Handsome

Far from the glamorous valleys of high technology, the fastest-growing private company in the United States has been casting handsome profits from poured concrete in downtown Washington, D.C.

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Anyone scouring the streets of Washington, D.C., searching for a large construction company would be hard put to find this one. There is no nest of rusting cranes lying around in a back lot. No hoists, derricks, or backhoes litter the street. Indeed, aside from a few desks and typewriters, and a computer system that founder, president, and co-owner (with his wife, Fllen) Gerald R. Sigal recently had installed, the entire capital equipment of Sigal Construction Corp. is parked unobtrusively outside the company's Georgetown offices -- five neat-as-a-nail pickup trucks.

Even though he is involved in commercial building, Sigal doesn't need so much as a spade more. Rather than driving piles and erecting steel, his company provides a white-collar service -- construction management. A relatively new trend in an industry that once was dominated by the traditional, hard-hatted general contractor (GC), the construction manager (CM) acts as a consultant for the building-to-be's owner. As a labor broker, Sigal Construction, on behalf of its client, arranges for the various elements of building to come together at the right price and at the right time. While a general contractor, acting on its own behalf, quotes a job in its entirety and then hires subcontractors at prices that allow the GC a profit margin, the CM works within a budget established by mutual agreement with the client, then signs up each vendor -- foundation digger, plumber, electrician, painter -- as prime contractor. The attractiveness to a client is that, in so doing, a construction manager is able to avoid the adversarial conflict of interest that often ensnares a general contractor to the detriment of the owner. A CM's profit is made simply through a fee based on a percentage of the gross billings.

The CM enters the construction picture right from the start of planning, usually as soon as the architects have been chosen, and occasionally even before. It then consults on drawing up plans, budgets the projects, bids aspects of the job, hires the right crews, and, in the end, guarantees to get the whole thing done right and on schedule. "If I say you can move in on November 5th at 10:00 a.m., you can have the moving trucks there at that time," Sigal pledges. Because there is virtually no risk to the CM (Sigal has yet to experience the failure of a contractor in the middle of a job, but in any event he is not liable for it), Sigal's profitability is deceptively low, running from 4% to 7.5% of sales. It would be virtually foolproof -- but even lower -- if Sigal Construction did not on occasion dabble in construction for its own account reselling its buildings at a profit.

Members of the trade will appreciate that there is no love lost between the wide-open construction management approach and the tough-fisted, close-circled general contractors that it has been replacing. The subject is discreetly avoided in conversation. Even so, Sigal asserts, "Washington was really a general-contracting town until we came along. We've eliminated the general contractor and showed that the construction-management process really works." It works so well, in fact, that Sigal Construction has grown more than 20,000%, to $47.5 million in sales since he launched the business in 1977 -- this in a period of difficult business times. Construction was especially hard hit. Twice in this period -- from 1979 to 1981, and again from 1982 to 1983, commercial construction collapsed. In the 12 months through August 1983, the real value of new nonresidential construction, Sigal's bread and butter, declined by more than 10%.

But judging from the relentlessly cheerful facade of Jerry Sigal himself, the six years he has been in business have been a piece of cake (some of which, in view of a modestly outsize girth, he has managed to both have and eat). Sigal Construction just kept growing. Of the 10 buildings recently put up in Georgetown, Sigal reports that he has been involved with no less than 5. The best explanation for the company's ability to persevere through thick and thin is that Sigal runs a highly individualistic operation. He deals only in the finest materials and craftsmanship; no sloppy mitered joints that you can see through into the next room for him. A man of unusually refined tastes, Sigal prides himself on the impeccability of his work. His appetite for la creme de la creme is underscored by his own suite of offices, lavishly carved from exotic woods and boldly decorated with modern art that he and his wife personally gathered in Manhattan's Soho district. "We only go for the best. I love quality work," says an obviously smitten Sigal. But there may be more than aesthetic considerations in his enthusiasm. "There's always room for quality when the economy goes bad," Sigal explains.

One room that bears out the theory is ABC News's Washington headquarters, a 110,000-square-foot interior construction job that Sigal executed in 1981. Other major interior clients include USA Today, a division of Gannett Co., in Arlington, Va., for whom Sigal did seven floors of production facilities and offices comprising 160,000 square feet; National Public Radio, a five-floor, 135,000-square-foot modernization project; and the Shoreham Hotel, a Washington landmark, in which Sigal Construction, hiring highly skilled artisans, painstakingly restored the painted architectural details of its public rooms. Constructed buildings completed by Sigal include one with the now renowned Watergate Development Corp. of McLean, Va. Although Sigal's main office is in Washington (a second opened last March in Baltimore, and a new office is planned in Philadelphia), he has not done any government contracts, because "they haven't been spending in the last three years."

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