Electrical Work

SIC 1731

Industry report:

This category covers special trade contractors primarily engaged in electrical work at the site. The construction of transmission lines is classified in SIC 1623: Water, Sewer, Pipeline, and Communications and Power Line Construction, and electrical work carried on in repair shops is classified in SIC 7622: Radio and Television Repair Shops; SIC 7623: Refrigeration and Air-Conditioning Service and Repair Shops; or SIC 7629: Electrical and Electronic Repair Shops, Not Elsewhere Classified. Establishments primarily engaged in monitoring of burglar and fire alarms with incidental installation are classified in SIC 7382: Security Systems Services.

Industry Snapshot

The electrical contracting industry in the United States is made up of a few large firms doing business in many regions and a large number of small companies that generally serve customers in their local vicinities. Many of these smaller firms are family-fowned. Most work in this industry depends on intense competitive bidding, and the obtaining and completing of contracts makes for fluctuating needs for skilled electricians. Most electrical contract work companies are nonunion, but there is a strong union that is influential in some parts of the industry.

According to industry statistics, there were 114,478 electrical contracting firms employing 846,224 electricians who collectively boasted more than $96.4 billion in revenues in 2010. Electrical work comprised 57.3 percent in industry share with sales of an estimated $33.4 billion. The general electrical contractor held 26.6 percent in market share with completed projects totaling $43 billion. Other sectors within this industry were roughly 861 electrical power systems contractors firms employing 8,812 workers with sales of nearly $4.6 billion; electrical workers who specialized in communications with 1,757 firms with revenues of $2.4 billion; 2,901 electrical firms who specialized in the fire detection and burglar alarm systems sector generating nearly $2.2 billion; 137 electrical firms that worked in the energy management controls sector with completed work totaling nearly $1.5 billion; and 2,172 electrical firms working in telephone and telephone equipment installation sector with $1.7 billion in revenues.

In 2007 the National Electrical Contractors Association (NECA), which boasted 120 local chapters, called the electrical industry a $100 billion industry. The International Brotherhood of Electrical Workers (IBEW) counted 750,000 members in 2007. In 2004 there were 102,640 electrical contracting firms with 804,404 electricians. Together, they generated approximately $95.8 billion in annual sales. The majority of the electrical companies were small, employing about eight electricians. Electrical work represented the largest sector within the industry, with 55.2 percent of the market. Combined, they generated $29.9 billion in annual sales. The general electrical contractor controlled 28.6 percent, with completed work generating $46.3 billion in sales. States representing the majority of the electrical firms were California with 11,173; Florida accounted for 6,377; New York had 6,362; Texas numbered 6,352; and Michigan with 3,503.

According to industry statistics, there were 114,478 electrical contracting firms employing 846,224 electricians who collectively boasted more than $96.4 billion in revenues in 2010. Electrical work comprised 57.3 percent in industry share with sales of an estimated $33.4 billion. The general electrical contractor held 26.6 percent in market share with completed projects totaling $43 billion. Other sectors within this industry were roughly 861 electrical power systems contractors firms employing 8,812 workers with sales of nearly $4.6 billion; electrical workers who specialized in communications with 1,757 firms with revenues of $2.4 billion; 2,901 electrical firms who specialized in the fire detection and burglar alarm systems sector generating nearly $2.2 billion; 137 electrical firms that worked in the energy management controls sector with completed work totaling nearly $1.5 billion; and 2,172 electrical firms working in telephone and telephone equipment installation sector with $1.7 billion in revenues.

Organization and Structure

While the wide range of company sizes and large number of firms in electrical contracting yields a diversity of operations, there are certain patterns relating to the types of customers and jobs, internal functions, costs, union and nonunion conditions, trade associations, training, and governmental regulations and standards. A company's principle costs are in materials and labor.

Customers and Jobs.
Electrical contracting firms, as well as other trade contractors, generally do their work at the construction or facility site, though some specialty work may be done in their own shops. When a new building is constructed, these trade contractors are retained by a general contractor who is responsible for the entire building's construction. The specialty contractors, however, are sometimes subcontractors of other subcontractors, and other times, especially with repair and maintenance jobs, they may deal directly with the facility's owners. The ultimate customers are individual homeowners, businesses, institutions, and governmental agencies, each of which has its own manner of dealing with contractors and subcontractors.

Internal Functions.
Whether an electrical contracting firm is an individual or a company with 500 employees, it performs the necessary business functions of marketing, estimating, planning, scheduling, purchasing, accounting, and training. The estimating function is especially important in the electrical contracting industry because many jobs are obtained on the basis of competitive bids. Jobs bid too low result in losses, and bids that are too high result in business lost to lower bidding competitors.

Unions.
The International Brotherhood of Electrical Workers is an affiliate of the American Federation of Labor-Congress of Industrial Organizations (AFL-CIO) that dates back to the 1890s. Generally, the electrical contractors in larger cities have had larger numbers of union employees. The number of nonunion shops increased during the 1980s, and the IBEW launched a campaign to strengthen its membership. In 2007, the IBEW counted 750,000 members in more than 1,100 local unions in both the United States and Canada.

Standards and Regulations.
The National Electrical Code (NEC) was established to provide electrical work guidelines to assure the avoidance of hazards. The code was fostered by the American National Standards Institute and by the National Fire Protection Association. The code is revised and updated every three years to meet changing technology and improve safety features. In 1996, the NECA introduced the National Electrical Installation Standards (NEIS) for electrical products and systems. Not intended for regulatory use, they are voluntary standards intended to create a more specific definition for what is meant by the "neat and workmanlike" standards to which the NEC refers, creating a baseline level for quality and workmanship in electrical construction. Other specifications under development by NEIS at the end of the 1990s included standards for electrical symbols, industrial lighting systems, motor control systems, raceways, cables, hazardous locations, industrial heat tracing systems, and telecommunications.

Regulation.
Local and state authorities generally require adherence to code, and most have set up their own supplementary procedures and regulations to monitor its enforcement. Most localities require that electricians performing commercial and industrial work be licensed as journeymen, and some localities provide a "residential wireman's" license for residential work only. Work permits and inspections are required for new construction, and most cities require yearly code inspections for commercial buildings. In addition, the Underwriters Laboratory has provided a service to manufacturers of electrical and other products to analyze and certify approval to those products that the laboratory has determined meet its minimum safety standards.

Background and Development

The commercial use of electrical products and services developed rapidly in the late 1880s after Thomas Edison's invention of the incandescent lamp and other applications. Electrical products and service businesses grew along with related organizations, associations of electrical contractors, and electricians' unions. Although growth has been continuous, there have been cycles with downswings, as in the early 1990s.

One measure of the continuing growth in the electric industries is the fact that the amount of electricity used in American homes tripled in the four decades after 1950. Other data showed growth and change in the structure of the electrical contracting industry in the years between 1972 and 1999. The number of employees reached an all-time high in 1999, and the number of establishments continually increased.

Electrical contracting firms, however, like all construction businesses, have always been subject to significant up and down cycles according to economic conditions. The late 1980s and early 1990s were a period of decline in new construction, and electrical contractors were affected accordingly, as the specialty contracting business in general had lower revenues than in prior years. The addition of "limited energy systems," such as voice-data lines and fiber optics, has expanded the work of electrical contractors.

Unions and Associations.
The National Electrical Contractors Association was founded in 1901 and by 2007 boasted 120 local groups and 4,000 contractor members. It has traditionally worked with union leaders in developing training programs and negotiating relationships. Independent Electrical Contractors, Inc. (IEC), formed in 1958, represents primarily open-shop electrical contractors and also administers apprentice-training activities. By 2007, the IEC had more than 70 chapters representing almost 3,700 electrical contracting companies and nearly 70,000 electrical workers. The 750,000-member International Brotherhood of Electrical Workers, founded in 1891, is an affiliate of the AFL-CIO.

During the second half of the 1990s, an ever-increasing number of electrical contractors branched into the quickly expanding systems work, which included low voltage applications, such as building alarm systems, automatic building controls, and voice-data communications lines. An increasing number of customers hired electrical contractors solely for their installations of telecommunications wiring and infrastructure.

To stay competitive, many firms sought business in the adaptation of old facilities to meet current and future computer needs, such as the installation of systems for new technologies. More and more firms also offered design services to customers. Moreover, a large percentage of homes built before 1970 had electrical systems that were inadequate for their current and future needs, indicating continuing business potential for electrical contracting firms in the area. Maintenance and building modernization accounted for nearly 25 percent of industry sales by the end of the 1990s.

After experiencing growth in the mid- and late-1990s, due to nationwide economic improvement and a boom in housing construction, the bottom fell out of the commercial and industrial building industry. Although residential building continued, fueled by low interest rates, commercial development projects fell during 2002 to the lowest levels since 1996. After peaking in 2000 at 66,800 firms with 698,000 employees, the number of electricians and electrical firms declined over the next years to reflect 1997 employment levels. Although the industry stabilized slightly in 2003, many electricians began diversifying their skills and their client base to adjust to the changing economy.

In an effort to insulate themselves against downturns in the construction industry, electricians began adding new skills to their resumes. Two top trends for electricians in the early 2000s were home networking and security system installation. Home networking provides a user-friendly interface that connects residential subsystems, such as computer networks, telecommunications, entertainment, and security systems. Electricians could obtain additional training to receive certification as a home technology integrator. According to In-Stat/MDR, as reported by EC&M Electrical Construction & Maintenance, the home networking equipment market nearly quadrupled in size from 1999 to the end of 2001, growing from $150 million to $585 million. The journal also reported that the magazine Archi-Tech predicted that the number of U.S. networked homes would jump from 650,000 in 2000 to more than 1.7 billion by 2005.

Another fast-growing market for low-voltage applications was security systems. In the wake of the terrorist attacks of September 11, 2001, Americans became increasingly concerned about monitoring physical access to facilities. Although special government contracts were expected to obtain a large portion of the federal push to update security systems at government facilities, electricians will benefit from an increase in security installations across the board, including at schools, hospitals, small businesses, corporate and industrial facilities, and residential installations. Digital and remote monitoring are the established standards in security maintenance, but the greater use of many new applications could be on the horizon, including iris scanning, retinal scanning, hand scanning, and face recognition.

According to a late 2004 EC&Mmagazine survey of the leading 50 electrical contracting executives, half expressed their concern that the dormant economy would be the largest obstacle entering the late 2000s. One electrical contractor reflected upon the market conditions and responded, "The number of bidders on individual projects has doubled, and some contractors appear to be bidding at cost to keep their electricians busy." Meanwhile, some of the top performers have either traveled overseas, opened branches overseas, or relocated to another region to remain competitive. One industry leader, Fisk Electric of Houston, Texas, conducted about 30 percent of its business from offices in the United Kingdom and Australia. Another, Quanta Services, extended its presence in Burnaby, British Columbia, Canada, in an effort to capture some electrical work on Canada's transmission grid. In fact, 21 percent of survey respondents had performed electrical work in other countries. A popular new method for businesses seeking subcontractors was by setting up an online auction. However, this "online bidding" was challenging for electrical workers in their already highly competitive market.

Still another major issue facing the electrical contracting firms was the lack of future skilled labor. The U.S. Department of Labor projected that even though there will be 550,000 new construction projects arising from 2005 until 2008, 240,000 workers will exit the industry. The average age of electricians at the time of the survey was about 49 years of age. As a result, with the "Baby Boomers" coming of age for retirement, there will not be enough skilled electricians to go around.

According to the early 2005 Electrical Contractor magazine "Power Quality Survey" of about 497 electrical contractors, power quality projects constitute some 60 percent of the respondents' revenue, with 40 percent projecting the same results into the late 2000s. Of those queried, 93 percent responded that 60 percent of completed work was related to installation over maintenance. Installation accounted for an estimated 27 percent, maintenance represented 17 percent, and sales stood at 14 percent. On average, the majority of projects were focused on power monitoring equipment, power conditioning equipment, and battery replacement. K-rated transformers, harmonic filters, on-site generation, and alternative power equipment were least worked on by electrical contractors during 2004. Out of eleven types of equipment used in the survey, 40 percent of the electrical contractors cited uninterruptible power systems, surge suppression, and standby generators as equipment that would increase quantity of work into the late 2000s. The survey concluded that electrical firms normally complete power quality projects with ten or more electrical workers rather than by smaller firms.

In 2004, despite the need of a complete overhaul of the U.S. electric transmission grid, electrical contractors did not see Congress coming up with a plan in the near future; however, that will be a niche market for the electrical contractors when implemented. Even though the commercial market sector had not yet materialized fully from its market downturn, elder-care facilities, residential construction, retail, government, and transportation had been on the rise in 2005. In February 2005, a monthly survey conducted by the Electrical Business Confidence Index (EBCI) reported "conditions are favorable for growth." However, not everyone was optimistic when it came to the subject of interest rates. One respondent, in reference to the possibility of rising interest rates, stated, "They will not only stall the recovery, they may very well push us into another slowdown."

Current Conditions

Earlier predictions were realized as the economic slowdown that began in 2008 was still impacting electrical workers well into 2010, particularly, within the construction sector. Stringent lending practices by banks placed a strain on larger projects while smaller projects were delayed or canceled altogether. Therefore, with electrical projects fewer and farther in between even the largest electrical contractors were forced to bid lower just to remain competitive. A lack of utility contracts only added to the industry's woes. To offset losses some electrical contractors began to trim down their overhead while others closed underperforming offices. Still, others opened offices elsewhere within the United States in hopes of landing a project.

While "The firms expect many of the challenges they faced in 2009 to remain into the rest of 2010 and beyond, particularly the shortage of new large projects, increased competition, and low margins," according to a late 2010 EC&M magazine survey of the leading 50 electrical contracting executives. Even though the American Recovery and Reinvestment Act of 2009 allocated $81 billion for electrical infrastructure projects, 76 percent of respondents indicated stimulus funding would have provided a minimum improvement at best in their bottom lines. However, those electrical firms exploring green technology will be ahead of their peers in the long-term. According to New York-based McGraw-Hill Construction's market research report 2009 Green Outlook: Trends Driving Change, both residential and commercial green construction will take center stage with annual growth through 2013 in the double-digits. In the meantime, electrical firms continued to monitor their business climate and if needed continued to cut overhead expenses just to survive.

While many industry sectors displayed signs of emerging from the harsh economic conditions in early 2011, construction still lagged. Many industry analysts expect that trend to continue throughout 2011 or at least until the residential housing market stabilizes. One analyst, Keith Leggett, vice president and senior economist for the American Bankers Association (ABA) implied there was a 50 percent likelihood that the U.S. could revert back into yet another recession within an 18 to 24 month period. His reasoning, "the current level of jobless claims is more typical of a recession than one year into a recovery." cited from the January 2011 issue of the Electrical Contractor magazine.

Industry Leaders

Most electrical contracting firms were small and limited to a specific geographical area. In addition, most such firms provided electrical contracting services only, whereas outfits engaged in additional contracting work, such as carpentry or masonry. Several construction companies specializing in other fields performed electrical work as well. The top three electrical contracting firms in terms of revenue, according to Electrical Contractor Magazine, were EMCOR Group Inc., Integrated Electrical Services Inc., and InfraSource Service, Inc.

Based in Norwalk, Connecticut, EMCOR Group reported $5 billion in revenue in 2006. The EMCOR Group acquired several large industry leader firms, such as Dynalectric. EMCOR boasted 70 subsidiaries and 27,000 employees and conducted more than a third of its business outside the United States. The company worked with a wide variety of industries and offered complete project design and construction in all phases of mechanical and electrical construction. EMCOR Group Inc.'s revenues reached nearly $6.8 billion in 2008 before plummeting to $5.5 billion in 2009, a reflection of the stagnant economy. Additionally, the company employed 25,000 employees, down from 27,000 in 2006.

Based in Houston, Texas, Integrated Electrical Services grew rapidly since going public in January 1997. The company had 2006 sales of $950 million, 7,183 employees, and 121 locations nationwide. Integrated Electrical managed rapid growth by acquiring a large number of smaller companies, totaling approximately 170, and by offering services in every aspect of electrical contracting, including commercial, industrial, residential, service, power line and information technology. Integrated Electrical Services revenues plunged from a high of $813.3 million in 2008 to $460.6 million in 2010 with 2,921 employees.

InfraSource Services, Inc., of Media, Pennsylvania, reported 2005 sales of $571 million. The company was acquired by Quanta, Services, Inc. in March 2007. Other leading electrical firms included Henkels & McCoy, Inc., of Blue Bell, Pennsylvania; MYR Group, Inc., of Rolling Meadows, Illinois; Fisk Corp. of Houston, Texas; Rosendin Electric, Inc., of San Jose, California; Bergelectric Corp. of Los Angeles, California; M.C. Dean, Inc., of Dulles, Virginia; and Cupertino Electric, Inc., of San Jose, California.

Workforce

The principal technicians in the electrical contracting industry were journeyman electricians who had the skills, training, and experience to perform the demanding work. The union status of a contractor had a significant effect on the relationships between management and the electricians, as well as the individual firms' apprentice training approach. Wages varied with job requirements and were influenced significantly by the wage levels in the locality. Jobs for electricians were found in all areas of the country and at all times of the day.

Approximately 50 percent of electricians were employed in the construction industry, and 10 percent were self-employed. The remaining 40 percent worked in a wide variety of other industries and provided a broad rage of business functions, including estimating, engineering, planning and scheduling, purchasing, material control, and accounting.

Unions.
The share of construction work undertaken by union shops decreased toward the end of the twentieth century. The IBEW began a campaign to increase union membership among electrical contracting firms that had been open-shop firms. This campaign was part of an AFL-CIO construction-worker crusade called COMET (Construction Organizing Membership Educational Training). It was expected that the members of Independent Electrical Contractors (IEC), which are open-shop firms, would carry on various efforts to maintain their open-shop status. Union membership was heaviest among larger firms and in the major urban areas.

In the union apprentice-training program, contractors and the union collaborated in organizing and administering training courses. IBEW and NECA had a joint committee, the National Joint Apprenticeship and Training Committee (NJATC), that established training standards for the local groups' guidance and promoted journeyman and apprenticeship training. In 2007 NJATC reported spending $100 million annually in journeyman training programs, all of which was privately funded. In open-shop localities, training programs were run by the IEC.

Research and Technology

Electrical contractors, as well as construction firms in general, continued to rely on computer programs, such as computer-aided design (CAD), for a variety of functions. Through the use of CAD 3-D modeling, construction companies could now detect design interferences and problems earlier in the development of a project. Also, the rapid development of the Internet dramatically increased the need for systems work involving upgraded building wiring and fiber-optic cable work.

Deregulation.
Since the passage of the Energy Policy Act of 1992, the door opened to deregulation of the electric utility industry. Various states passed legislation that required deregulation in the late 1990s and early twenty-first century. Industry analysts predicted nationwide deregulation of the utility industry, and it began in several states. While the majority of the impact of this regulation would be felt by utility providers, it remains to be seen how this will affect the status of electrical contractors.

© COPYRIGHT 2018 The Gale Group, Inc. This material is published under license from the publisher through the Gale Group, Farmington Hills, Michigan. All inquiries regarding rights should be directed to the Gale Group. For permission to reuse this article, contact the Copyright Clearance Center.

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