Making it Big

Eight of Minnesota’s top 10 builders are general contractors. This could make them diversified enough in the geographical markets and industries they serve that a meltdown in any one spending category or region wouldn’t topple them. “There is just enough fluctuation in what market is hot or not that you really need to be diversified,” says Todd Schilling, vice president and general manager of Knutson’s Minneapolis office. “Smaller contractors don’t need to be as diversified.” If a smaller firm’s specialty is electrical work, for example, it really doesn’t matter whether the company puts in the electrical system for an office building or a baseball park.

“We’ve tried to develop a strong expertise in markets that are less susceptible to market swings,” Kraus-Anderson’s Gerhardt says. “We like to think of these markets as recession resistant—life sciences, K-12, health care, senior housing—and we have no more than 20 percent of volume in any one market.” Kraus-Anderson, which does about 75 percent of its building in Minnesota, also had a strong backlog heading into 2008—“probably as strong as we have ever had,” Gerhardt adds.

More than half of the respondents to an Associated General Contractors of Minnesota survey expected to have less work in 2008.

Two of Minnesota’s top-10 builders are specialized: Ames Construction and Fagen, Inc. Headquartered in Burnsville, Ames builds roads, bridges, and heavy-industrial projects. The firm conducted the early work on the Denver International Airport starting in 1989, where crews moved 125 million cubic yards of earth and rock, installed almost 90 miles of underground pipe, and laid 80,000 cubic yards of concrete. (The company still does work at the facility.) It also constructed the Martin Olav Sabo Bridge, the first cable-stayed pedestrian bridge in Minnesota and part of the Midtown Greenway pedestrian and bike trail in Minneapolis.

Founded in 1988, Granite Falls–based Fagen is a fairly new but rapidly rising entrant to the top 10. While several of the state’s largest firms have projects in energy, Fagen is the sector’s largest player among the major firms. The company’s revenues soared from $315 million in 2004 to roughly $2 billion last year, due to its heavy focus on constructing ethanol plants. As a hedge against an expected slowdown in ethanol production, company founder and CEO Ron Fagen says his company is diversifying into wind farms, power plants, and biodiesel facilities.

Fagen is also looking abroad for projects. “We are going to build an ethanol plant in Croatia,” he says. “We’ll duplicate the plant built in Granite Falls, which produces 50 million gallons of ethanol a year.” The plant will be his first venture overseas. Crews are expected to break ground in Croatia sometime late this fall, pending air permit approvals.