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.
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."
Sigal Construction is composed of two totally separate divisions: One, responsible for 42% of revenues, manages interior remodeling; the other, accounting for 58%, manages work on new and restored buildings. A parallel operation, Sigal Development Corp., was spun off in 1980 and is independently run by Ellen Sigal. In three years, Sigal Development has grown to $40 million in sales; indeed, were that company old enough to be included in the INC. survey, husband and wife might rank #1 and #2 on the list. Sigal Construction does the building for Sigal Development -- a tie, apparently, that has made their 20-year marriage as solid as an I-beam. Although husband and wife occupy contiguous offices, they rarely see each other during business hours except on business matters. "We've had lunch together maybe twice in the past year," Sigal estimates. Given the hectic pace behind both doors, even that frequency seems surprising.
What makes Sigal's workday so encumbered (he puts in "a good 10 hours a day, six or seven days a week" -- a stint unabated since start-up days) is not only that he maintains an open-door office -- anybody can come in at any time for any reason -- but that he insists on keeping a finger in every aspect of the business. Sigal likes to give his 71 employees -- most of them college graduates -- a broad range of authority, but he will be out at a construction site at dawn for hands-on progress inspection, and be back in the office by noontime to sign payroll checks even though each division has its own vice-president. Yet the 40-year-old Sigal is determined not to let the exigencies of the trade crowd out family life in the Sigals' Victorian townhouse four blocks from headquarters. He insists on setting aside six weeks a year for vacation -- five spent traveling en famille with his wife and their two sons and one alone with his wife.
When Sigal Construction was founded in 1977, there was no need to ensure family togetherness -- everything was intimately run from the couple's second bedroom. The son of poor immigrant parents who settled in Brooklyn, N.Y., Sigal got his civil engineering degree by attending New York University at night for eight years. By day he worked as a concrete inspector. "I asked everybody I inspected whether they'd have a job for me after I got my degree," Sigal recalls. Recognizing a raw talent for poured concrete, Tishman Realty & Construction Co. of New York City said it did, and Sigal joined the business in 1962. For the next 15 years, Sigal worked exclusively for Tishman, discovering that the industry was an "exciting business," and eventually getting to travel around the country as a construction superintendent. Assigned to the Washington office, Sigal "fell in love with the city," and Tishman lost its faithful employee. In 1977, having pooled some $2,200 in savings, he decided to strike out on his own on the banks of the Potomac.
But he didn't try to borrow start-up funds from the banks of the Potomac. Rather, Sigal knocked on doors like a vacuum-cleaner salesman of the building trade. With the endorsement of Tishman, he was able to pick up small interior jobs. Do a good job and be honest about it, were his guiding principles. Every morning, workmen ready to get on with the good job would show up in his bedroom at 6:30. The first year's revenue was about $234,000, which Ellen Sigal entered into the books. "I definitely should have had more capital," admits Sigal, looking back on days that were so tight he acted as cleanup crew at the job site after the crew had gone home for the day. Had he the sense to start with more money, he feels, he wouldn't have had to take the very small jobs and might have begun the upswing even sooner. The point is academic in the scheme of things, but, says Sigal, "It makes us humble that we came that way." Sigal's first major project, a four-floor renovation undertaken in 1978, was for the accounting firm of Ernst & Whinney. That one project grossed as much for the company as everything they had done the previous year. The business was off and running. To help operate the company, Sigal hired the man, now 72, who 16 years back had signed him on for Tishman. And Sigal remains humble to this day: although both Jerry and Ellen now drive Mercedes-Benzes, his is six years old.
Despite Sigal's personal devotion to fine craftsmanship and design -- a company hallmark that has earned it a number of industry awards -- Sigal admits that when he has to do-it-himself, he is all thumbs. Nonetheless, Sigal mixes it up with his contractors' crews, even to the extent of walking across high open girders -- a giddy passage Sigal takes in stride. "I used to do that at the World Trade Center on 110 stories. Those things never bothered me." He also prides himself on being able to remember the names of all the workmen, as well as seeing what they are doing where they are doing it. "It gives them that extra little push," he feels.
Clearly, Sigal could retire now and tack on 46 weeks to his vacation schedule (he likes to take busmen's holidays to exotic places like Egypt to determine why their concrete buildings are falling down). But the thought appalls him. "The excitement of a new project is still very much a part of me, and I need it," he says. "I don't think I'll ever retire. I've got to be doing something, thinking of some new ideas. I feel I know the construction business very well." So well, in fact, that Sigal confidently predicts construction management will be the coming thing throughout the country. But Sigal doesn't envision participating much further in its spread. "I don't project continual growth [for Sigal Construction], because I like to be involved with my projects," he explains. "To me, that's very important." With this in mind, Sigal has been trying to keep his client base down. Nonetheless, in calendar 1983, "we'll probably be making some good money," he hedges. What "some good money" means to a company already growing at a five-year annual compounded rate of 278% staggers the imagination.