Heavy Construction, NEC

SIC 1629

Industry report:

This classification covers general and special trade contractors primarily engaged in the construction of heavy projects, not elsewhere classified.

Industry Snapshot

The heavy construction business is divided into several specific categories that represent separate building and development industries. There remain, however, multiple specialty construction activities that cannot be easily classified. Consequently, this miscellaneous heavy construction industry was named to encompass and represent these specialties. This industry is composed of companies primarily engaged in the construction of heavy projects not classified elsewhere. The array of categories in this group includes athletic field and golf course construction, clearing of brush and land, land drainage, canal and channel construction, chemical complex or facilities construction, dam and dike construction, hydroelectric plant and petrochemical plant construction, missile facilities construction, pier, wharf and waterway construction, pond construction, power plant construction, and railroad construction. Highway and street construction are classified in SIC 1611: Highway and Street Construction, bridge and tunnel construction are classified in 1622: Bridge, Tunnel, and Elevated Highway Construction, and water, sewage, and utility construction are classified in Water, Sewage, and Utility Lines.
The structure, history, and current status of this industry is closely related to, and often overlaps, the major divisions of the overall construction industry. Therefore, this entry stresses many of the unique specialties that are considered miscellaneous, and serves to tie up loose ends of the heavy construction market that are not addressed in other standard industrial classifications. For more information on the structure and history of this industry, see related entries in the heavy construction industry.

The U.S. construction industry overall continued to grow throughout the late 1990s, largely as a result of a strong economy, which drove building in both residential and nonresidential markets. However, by the early years of the first decade of the twenty-first century, as the U.S. economy weakened considerably, this trend had reversed. Based on a 2003 ENR survey of the top 400 contractors, revenues fell by 3.2 percent in 2001 and by another 2.9 percent in 2002. Estimated 2002 domestic revenues for all establishments in this classification were $174.79 billion, compared to $200.93 billion in 2001. International revenues declined by 10.9 percent to $19.6 billion in 2002.

Apart from a weak economy, factors influencing the decline in this industry were the terrorist attacks of September 11, 2001, which devastated the U.S. insurance industry, the Enron scandal and subsequent bankruptcy, and various other highly publicized discoveries of corporate fraud and accounting irregularities. As the economy worsened, declining tax revenues and funding cuts prompted state and local governments to tighten their construction budgets.

Despite the troubles of the early years of the first decade of the 2000s, prospects for the near future in this industry were generally considered favorable by industry analysts and insiders. The opening of foreign markets to American construction companies created great potential for further international growth, while domestic funding for government-based initiatives was expected to increase as the economy slowly recovered. The transportation sector was expected to perform particularly well.

During the mid- to late years of the first decade of the 2000s, the heavy construction sector was faced with a challenged economy, rising costs of construction materials, and a shortfall in federal funding. However, public works did not experience the sluggish conditions felt elsewhere within the overall construction industry.

In 2007, based on dollar volume, industrial plant construction was the industry leader with revenues of $18,853.5 million, while land preparation construction generated $11,687.0 million in revenues, and marine construction was valued at $11,516.3 million. Finally, increased demand for renewable energy resources boosted power plant construction to $10,891.4 million and chemical plant and refinery construction reached $3,965.8 million.

The overall U.S. economy experienced a banking crisis beginning in 2008 and extending through 2009. Although recovery was noted during 2010, it was slow and erratic. Heavy construction initially suffered from lack of funding as many capital projects were postponed or canceled. However, an influx of funding from a federal stimulus package began to filter into public works and infrastructure projects during 2009. The industry reported revenues o $59.3 billion in 2009.

Organization and Structure

Because the miscellaneous heavy construction industry is actually a conglomeration of many distinct activities performed by diverse companies, there is not a formal structure by which it is characterized. Likewise, few statistics exist that provide a representative picture of the companies within the industry or the markets that they serve. Many of the firms in this industry are active in several areas, while others are highly specialized. Furthermore, it is difficult to distinguish this classification from other sectors of the overall construction industry because many of the miscellaneous activities are closely related to other markets. For instance, aqueduct construction is not part of this industry, but both canal building and waterway development are included. Similarly, subway tunnel construction is part of the industry, but highway tunnel work is not encompassed by this classification.

Most companies in this industry usually act as general contractors for specific construction projects. This means that they sign a contract with the entity for which the job is being done and are responsible for seeing that all work pertaining to the job is accomplished. Responsibilities of general contractors include hiring and managing sub-contractors. In some cases, however, companies in this industry act merely as sub-contractors serving as part of a team of companies working to construct a project rather than orchestrating and managing the entire job.

Although huge multinationals dominate the top ten lists of industry leaders, most companies in this industry are quite small. The vast majority of establishments indicated that at least 51 percent of their business was specialized. Taking into consideration both the number of establishments and the size of those establishments, the most common areas of specialization included marine, railroad and subway, athletic facilities and grounds, land preparation, refinery and mining related construction, and other specialty services such as earth moving, land cleaning, and power plant construction.

Many of the miscellaneous projects in the heavy construction industry are so irregular that they cannot be comfortably categorized with a significant number of other activities. For instance, removing underwater timber and extinguishing oil well fires are both relatively distinctive enterprises. On the other hand, a few broad categories exist that encompass many of the miscellaneous activities, and thus bring some order to this industry classification.

Some of the projects included in the transportation sector are heavy construction field are subways, railroads, and canal construction, including repair work on existing projects. Nearly 597 companies specialized to some degree in mass transit construction alone.

Construction projects that fall under the categorization of power plants include new power plants, conversion of existing power plants from oil and gas to coal, modernization of power plant buildings, and myriad modern, unconventional power plant projects, which are spurred by technological advances..

Work in the sewage and wastewater category primarily entails contracts related to water and sewage treatment plant construction and renovation, including filtration and desalinization plants. Sewer and water line development is not considered part of the miscellaneous heavy construction industry. Nearly 700 establishments considered this one of their specialties.

A few of these activities include furnace construction for industrial plants, kiln construction, missile facilities development, pile driving, underwater rock removal, construction of industrial baking ovens, and development of chemical complexes and facilities. Sports and recreation facilities, such as golf courses, racing speedways, tennis courts, or ice rinks, also fall under this classification.

A category of construction that split among these and other categories was conservation. Some of the jobs included in this heavy construction industry include breakwater construction, brush clearing and cutting, land clearing, drainage project construction, dredging, earth moving (not related to building construction), flood control project development, land and sea reclamation, pond construction, and water power plant development. Over 3,000 establishments considered this their specialty to some degree; more than 2,146 specialized completely in this area.

Background and Development

Although the success of individual specialties within the industry varied widely in the 1980s and early 1990s, the industry followed the same economic pattern as the general construction market. Most commercial construction sectors boomed during the mid-1980s but became recessed in the late 1980s and early 1990s. In contrast, industrial and public construction remained comparatively stable.

The health of the miscellaneous heavy construction industry was similar to that of the overall construction industry in the mid-1990s. However, a greater proportion of these miscellaneous projects were related to public works (except military installations) and industrial activity, rather than commercial construction. Although the commercial sector was the most depressed segment of the construction industry, the market for miscellaneous projects was not as adversely affected as other construction markets by the economic downturn of the late 1980s and early 1990s.

For example, total expenditures for commercial construction plummeted about 40 percent between 1985 and 1992, falling from approximately $87 billion to $54 billion. During the same period, however, the value of all work done in the construction industry fell about 13 percent to an annual rate of just under $410 billion by the end of 1991. Furthermore, spending in several sectors that represented disproportionately large amounts of miscellaneous construction actually increased. Spending on water supplies increased from $3.5 billion in 1989 to about $4.8 billion in 1992. Similarly, spending on all miscellaneous private structures increased from about $2.3 billion in 1989 to about $2.9 billion during 1992.

Despite the industry's resilience, most contractors that offered miscellaneous heavy construction services were still striving to recover from unfavorable market conditions that began in the late 1980s and lingered into the mid-1990s. Several factors contributed to these conditions: increased competition from global competitors as well as from domestic contractors fleeing from depressed market segments; lower profit margins caused by increased competition; a weak economy, which was resulting in a general reduction in the demand for new construction and was generating fewer tax dollars for public improvement projects; and a lack of capital available to finance new projects.

In 1992, the value of new conservation construction amounted to approximately $4.5 billion, reflecting a growth of 5 percent. This figure excluded repair work on existing facilities, but included some work classified in other construction industries.

In 1993, federal expenditures accounted for more than 80 percent of the activity in the conservation category and were administered by three federal agencies: The Army Corps of Engineers, the Bureau of Reclamation, and the Tennessee Valley Authority (TVA). The hydropower facilities of the Army Corps of Engineers accounted for 30 percent of the U.S. power generating capacity in 1993.

Although the last of the Bureau of Land Reclamation's "mega-dams" were put into place in Arizona and Utah in 1993, several new smaller projects were planned. The Army Corps of Engineers was planning significant rehabilitation expenditures for major repairs of its dams, many of which were built in the 1940s and 1950s. Other conservation construction spending was slated by the TVA, which launched a $100-million redevelopment program in 1991 for dam repairs. Furthermore, more than $1 billion of spending was earmarked for flood control projects in such states as California and New Jersey.

One of the more ambitious conservation projects proposed in 1993 was an effluent diversion plan in the San Francisco Bay area. This $3 billion proposal, developed by the city's Department of Public Works, called for treating, storing, and delivering municipal wastewater to farmers nearly 50 miles away. Part of the plan proposed spending an additional $200 million to construct a seven-mile tunnel across the city that would transport effluence to the ocean.

The Water Resources Development Act of 1999 (WRDA) was expected to make available over $4.3 billion dollars for 45 major conservation projects, including flood control and dredging. That federal money was expected to be matched by local money, bringing the total to $6.3 billion. One goal of the bill was to develop nonstructural methods of flood control, including the restoration of wetlands and floodplains. "Challenge 21," as the project was called, was slated to receive $200 million of the federal WRDA money. Major dredging projects included Oakland Harbor (receiving $128.1 in federal money) and Savannah Harbor ($145.2 million). Beach rebuilding projects were planned for mid-Atlantic states, including Delaware and New Jersey. Congressional members also mentioned the possibility of a similar act in the year 2000, which might include significant funding for the restoration of the Florida Everglades.

In late 1999, the House considered reauthorizing the Clean Water State Revolving Load Fund program, which expired in 1994. A bill co-sponsored by Rep. Sue Kelly (R-N.Y.) and Rep. Ellen Tauscher (D-Calif.) would fund the program at $3 billion per year for five years. Part of that money would be earmarked for smaller projects in less populated areas.

During 2005, river and harbor construction increased 21 percent and 17 percent in 2006, in part from construction in the Gulf of Mexico following Hurricane Katrina, followed by a six percent decrease to $8.0 billion in 2007. Further funding for Corps of Engineers work helped boost river and harbor construction spending up to $8.3 billion. The water supply sector advanced 26 percent to $13 billion in 2007. A few projects included a $1.3 billion water filtration treatment plant in New York and a $190 million reservoir purification facility in Colorado. The water supply sector was expected to enjoy favorable conditions into 2008, with focus on acquiring additional water supplies.

Power Plants.
Although the inflation-adjusted value of electric utility construction (excluding water power) dipped by 47 percent during the 1980s, the decline appeared to have leveled off in the early 1990s. The market for power plant retrofits, which increase plant efficiency or convert plants to run on different fuels, was especially promising. In fact, expenditures for the maintenance and repair of electric utilities were almost as great as new utility construction spending in the mid-1990s. This phenomenon was due in part to increased regulatory requirements and financial risks associated with building new utility facilities.

Rail Transportation
Growth in mass transit construction activity, much of which falls into the miscellaneous heavy construction industry, received a significant boost by the Intermodal Surface Transportation Efficiency Act (ISTEA) of 1991. ISTEA was created to generate as much as $90 billion in additional funds for new mass transit projects between 1992 and 1997. ISTEA was also responsible for much of the projected 21 percent growth in the Department of Transportation's mass transit spending for 1994. The Federal Highway Administration recognized that economic and environmental constraints of the 1990s would make it impossible to build the 34,000 lane miles needed to meet U.S. traffic demand, and consequently focused on boosting rail industry prospects.

Although traditional railroad construction, which is also part of the industry, was relatively stagnant in the early 1990s, there was growth in the rehabilitation of commuter and intercity tracks. For instance, Amtrak was electrifying a line between New Haven and Boston under a $300 million construction contract. At least $500 million of additional spending would improve other areas of Amtrak's Northeast corridor. Additionally, Los Angeles was continuing construction of a multi-billion dollar, 400-mile regional rail system in 1993.

Using trains for airport transportation was a growing trend in the late 1990s: as of 1998, 166 cities worldwide either had or were planning or building such systems. An expansion project underway for San Francisco International Airport carried a price tag of $1.1 billion; a new system for JFK in New York was projected to cost $1.5 billion. Parsons Brinckerhoff was the general engineering consultant for the San Francisco project, while the JFK project was a joint venture of Bombardier Transportation, Skanska USA, STV, Inc., Alcatel Canada, and Perini Corp.

Traditional rail was on the rise in the late 1990s as well, for both passengers and freight, as infrastructure investments reached record highs. Capital spending by "Class I" railroads was over $6.26 billion in 1997, as railroads increased capacity to compete directly with the trucking industry. Several railroad companies announced plans in 1998 to spend even more: Union Pacific planned to spend $1.4 billion, CSX Corp. announced nearly $320 million in construction projects, and Dakota, Minnesota & Eastern Railroad was seeking federal approval for a $1.2 billion expansion.

The passage of the Transportation Equity Act for the 21st Century (TEA-21) in year 1998 was expected to boost this sector of the heavy construction industry through the year 2005. The Act, which was the largest public works measure ever authorized by Congress, set aside $217 billion for transportation construction, at an average of $26.2 billion per year over five years. Important areas for growth in transportation construction included light rail projects--representing at least 10 percent of TEA-21 projects--and airport construction. Cities considering building commuter lines included Cleveland, Minneapolis-St. Paul, Madison, Seattle, and Salt Lake City. Areas with existing commuter rail--including Long Island, Miami, Boston, and Chicago--were also making plans to extend services. In March of 2004, the House Transportation and Infrastructure Committee approved a $275 billion version of TEA-21, dubbed the Transportation Equity Act--a Legacy for Users (TEA-LU). TEA-LU was drafted as a compromise between the $318 billion version of TEA approved by the U.S. Senate and the $256 billion version of TEA advanced by the Bush administration. If enacted, the bill will authorize the spending of $275 billion on transportation-related projects through 2010.

High-speed rail was another beneficiary of TEA-21 funding, with $121.5 million in earmarked funds from 1998 to 2004--plus another $1 billion to study magnetic levitation technology. High-speed rail, which travels at speeds from 150 to 300 mph, was primarily considered for areas with high population density and heavily touristed areas, including lines from Anaheim, California to Las Vegas, Nevada; from Orlando International Airport to Disney World; between Dallas, Houston, and San Antonio; and between San Francisco, Los Angeles, and San Diego. If passed, TEA-LU will earmark $69 billion for transit projects of all kinds, including high-speed rail, through 2010.

On August 10, 2005, President George W. Bush signed into law the Safe, Accountable, Flexible, Efficient Transportation Equity Act (SAFETEA-LU), which continues the TEA-21 concept of guaranteed funding between 2005 and 2009.

"Utilities and independents are building power plants again," according to a year 2000 report in Forbes. Deregulation was one of the main factors in the increase in power plant construction, especially renovating existing facilities. However, by the early years of the first decade of the 2000s, this segment of the industry proved to be one of the hardest hit. According to a May 2003 article in ENR, "The surge and then collapse of the power market has been well documented particularly in California. Starting with California's deregulation of power, then the Enron debacle, followed by the state's regulation of the industry, the market has been poor." Adding to industry woes, particularly in California, are the highly publicized financial troubles experienced by both Southern California Edison and Pacific Gas and Electric Co.

In 2006, the value of electric utility construction reached $16.2 billion, a significant increase compared to the average $8 billion per year in each of the prior three years. In 2007, contracts retreated back 16 percent to $13.6 billion, with activity still way above the levels from 2003 through 2005. States that drove power plant projects in 2007 were Texas with $1.8 billion; West Virginia ($1.3 billion); Florida, $600 million and $475 million; and Pennsylvania ($550 million). There were 218 power plant construction companies that represented a mere 1.3 percent of the industry total employing 12,799 workers with revenues of $10,891.4 million in 2007. Demand for renewable energy sources, transmission line work, and a continued reduction of carbon dioxide emissions will push the utility market forward.

"Between 1997 and 2007, water and wastewater agencies around the country faced capacity issues, overdue capital upgrades and federal mandates for improvements, and spending nearly doubled," Robert Murray noted in ENR in November 2008, adding that "�construction starts in the environmental public works sector will end up flat for 2008 at $36.8 billion, with a 5 percent drop to $35.2 billion forecasted for 2009." In 2007, funding in the sewer sector increased 9 percent to $15.8 billion. Completed projects included a $300 million wastewater treatment plant in Washington, water pollution control plants in Virginia ($267 million) and New York ($228.00 million), as well as a $1.2 billion sewer project related to hazardous waste cleanup in Washington. Construction within the sewer sector was expected to increase 2 percent, or $16.2 billion, for 2008.

Current Conditions

According to industry statistics, in 2009, 17,092 establishments were classified as Heavy Construction, n.e.c., with a total of 205,774 employees, an average of 12 employees per establishment, which marks a decline from the average of over 19 in the early 1990s. Only 18.5 percent of firms within this industry fell under the categorization of heavy construction, nec, with $1 billion in revenues.

Waterway and marine-related construction made up the largest section of this industry, accounting for 4,046 firms, or 23.2 percent. These firms combined for roughly $15.6 billion in revenues in 2009. Significant categories with the marine sector included marine construction, with 1,128 firms, 12,962 employees, and $10.11 in revenues; dams, waterways, docks, and other marine construction with 522 firms, 7,115 employees, and $1.51 billion in revenues; and dredging contractors, with 244 firms, 3,051 employees, and $1.54 billion in revenues. Smaller categories within the sector included dam construction, dock construction, drainage system construction, irrigation system construction, pier construction, and pond construction.

Another major sector in this classification was land preparation construction, which accounted for 1,240 firms, 12,436 employees, and $14 billion in revenues in 2009. Relatedly, earthmoving contractors accounted for 1,262 firms, or 7.4 percent of the market, employed 16,744, and generated revenues of $2.07, and land clearing contractors accounted for 2,021 firms, or 11.8 of the market, employed 13,553 and generated $1.57 billion in revenues.

Industrial plant construction had 317 firms, 23,618 employees, and $13.52 billion in revenues.

Power plant construction had 239 firms, or 1.4 percent of the market, 14,565 employees, and $1.92 billion dollars in revenues. Sewage and wastewater treatment, and related projects, took 3.4 percent of the market, with 589 firms and $2.45 billion in revenues in 2009. Transportation, which included rail and subway construction (highway construction is classified in 1611), took 3.5 percent of the market in terms of the number of firms, with 597 firms and $937.5 billion in revenues.
The economy of the late 2000s was detrimental to the construction industry as a whole. Total nonresidential construction grew between 2006 and 2008 before declining in 2009. In 2006, total nonresidential construction spending totaled $547.8 billion. In 2007 and 2008, spending increasing to $651.9 billion and $709.8 billion, respectively. In 2009, nonresidential construction spending fell to $654.2 billion as an economic recession caused many firms to postpone or cancel capital projects to cut costs.

Sewage and waste disposal spending declined from $25.7 billion in 2008 to $24.4 billion in 2009. However, power construction spending actually increased in 2009--buoyed by a $787 billion federal government stimulus package--from $81.1 billion to $89.4 billion. Likewise, transportation spending increased from $35.4 billion to $38.5 billion over the same period. While certain segments of this industry classification were helped by the massive influx of government spending during the difficult economic conditions, other sectors had no such security net. For example, those firms engaged in commercial and industrial construction such as earth moving and land preparation found little demand during the late 2000s. Construction spending in these areas dropped by over 25 percent during 2009, and retail construction hit a 25-year low. Many of the country's largest construction firms posted losses for 2009 as demand dried up.

Industry Leaders

Because miscellaneous heavy construction markets are so fragmented, no company engaged primarily in this industry dominates it. Although some of the largest construction companies in the world complete numerous projects within the industry, these companies are not dedicated to projects included in the miscellaneous heavy construction market. Rather, the industry is mainly composed of thousands of unique small and mid-size companies. Many of these companies specialize in a single activity, such as brush-clearing or pier construction. According to Katherine Grieder of Insurance Marketing Research, "Approximately $4.1 billion in premium, or 75 percent of the total, is in small and medium sized accounts. The average premium per account of $12,300 for small firms and $124,000 for medium sized firms makes this a much sought after area for independent agents."

Bechtel Corporation of San Francisco, a private company founded in 1898 and still run by its founding family, employed 47,000 people and generated worldwide sales of $11.6 billion in 2003, down 13.4 percent from 2002. By 2009, Bechtel was the leader in the industry, with revenues from ongoing work of $30.8 billion and 49,000 employees.

Fluor Corporation of Irvine, California, posted sales of $8.8 billion in 2003, down 11.6 percent from 2002, and employed 29,011 people. In 2007, Fluor had 41,260 employees and revenues of $16.7 billion, up from $14 million in 2006. Fluor continued to grow its assets and in 2009 posted revenues of $21.99 billion. The firm employed just over 36,000 in 2009. The oil and gas sector accounts for over 50 percent of Fluor's revenues.

KBR (Kellogg Brown & Root), based in Houston, Texas, was best known during the 2000s for helping the U.S. government rebuild Iraq. About 35 percent of its contracts were in Iraq. The firm posted sales of $12.1 billion in 2009 and had 51,000 employees. KBR had been the construction arm of Halliburton but spun off to become a separately traded firm in 2007.

The Shaw Group of Baton Rouge, Louisiana is the largest engineering and construction contractor for the power generation market, as well as one of the leading environmental services firms, bolstering $7 billion in revenues in 2009, compared to $5,723.7 million in 2007. Turner Industries Group LLC, of Baton Rouge, is another of the country's largest heavy industrial builders. The company had revenues of $1.77 billion.


Although employment in the entire construction industry dropped from over 5 million to less than 4.5 million during the recession of the late 1980s and early 1990s, the miscellaneous heavy construction industry fared better than most other segments of the construction market. In fact, certain areas of this industry were realizing significant employment growth in the 1990s. Most growth was expected to occur in sectors that benefited from increased federal spending or from federal mandates requiring businesses and localities to invest in construction. By 2002, despite a waning economy, employment in construction had recovered to 6.7 million workers, due in large part to booming residential construction, which was far outstripping miscellaneous heavy construction by then.

Significant growth was expected to occur in miscellaneous activities related to environmental construction such as wastewater treatment, retrofits of energy producing facilities that were polluting the atmosphere, and land reclamation. When these sectors bottomed out in the early years of the first decade of 2000s, however, analysts began pointing to international markets, where the largest growth was expected to occur.

Job positions in the miscellaneous heavy construction industry were similar to those available in related heavy construction industries. Jobs in construction management, skilled trade work, physical labor, equipment operation, and sales were representative of the overall construction industry. Growth was most likely to occur in positions that required technical knowledge, as more firms were relying on advanced technology to reduce costs and become more competitive in the crowded market.

A multitude of niche opportunities existed in miscellaneous projects as well. For instance, high-paying jobs in weapons disarmament and battlefield reclamation were on the rise as foreign governments increasingly sought U.S. expertise in removing and detonating live explosives that remained after armed conflicts. Another growing field was removal of underground storage tanks, many of which were leaking hazardous residues and were contaminating surrounding soil and water tables.

Construction jobs were few and far between in the late 2000s as the recession stalled demand for construction-related activities. In November 2010, the Bureau of Labor Statistics reported that the construction industry had 5.6 million employees, with an unemployment rate of 18.8 percent. In the same month, construction workers made an average hourly wage of $23.48.

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