An Interview With: Jim Davis, Dennis Cotter, and Bill Moyer

DAVIS Construction, based in Rockville, is the second largest locally based general contractor in the Washington region, expecting to clear nearly $650 million in sales this year, and currently working on over 60 projects. Founded by the father of current CEO Jim Davis, 47, DAVIS has close to 500 employees and in March celebrated its 40th anniversary. In various forms the family has been involved in construction since 1915 — residential, office, commercial and industrial. Dennis Cotter and Bill Moyer join Jim as the managing principles, and below explain their specific responsibilities.

Bisnow on Business: Jim, do you remember the first time when you realized your family was in the construction business or the first project you visited?

Davis: Actually, I do. I always wanted to be like my dad and be in the construction business. I remember when I was age five, he was doing a renovation of the American Red Cross building downtown and it was in the winter. My mother had got me a new blue coat, and I went with him and I leaned against a freshly painted wall. Ruined the coat as well as the wall. I remember my parents were unhappy.

Cotter: We don’t let Jim visit job sites. [Laughter.]

Did you work summers?

Davis: I was a laborer on various jobs. Each summer, my dad made me get interviewed by the superintendent prior to being hired by them to work. They always found the toughest jobs they could for me. Like mucking out the sewer, or sweeping and carrying, and there were some other nasty little jobs that they thought up for me.

When did you take over the company?

Davis: I joined in 1982 on a full-time basis. I became president in 1987, and now I’m President and CEO.

When did you become CEO?

Davis: I don’t remember. We tacked it on to be like everybody else.

Everybody gets to be called a CEO now.

Davis:: Right. [Laughter.]

What was the size of the company when you became president versus today?

Davis: My father sold the company in 1985 to a British firm and then we re-purchased it in 1990, and I became president half-way through that time period. So I really measure the point of starting in 1990 when we purchased the company, at which time we were doing about $50 million worth of construction. In the current year, we’re expecting to do around $650 million worth of construction.

That’s a spectacular clip. To what do you attribute it?

Davis: First of all, I think we’re very fortunate to be in the greatest market in the world here. This is a class A office building market, driven in large part by the Federal Government’s needs and the fact that the private sector wants to have headquarters buildings here as a result. It’s also a great place to live, so a lot of people are coming to Washington. But I also think that our company has been a very good general contractor, and we have captured market share from some of our competitors.

You started an Employee Stock Ownership Program in 1990. Why?

Davis: It’s been a great thing because it changes everyone’s thinking. They own a piece of the rock. We get our company valued every year, we present the financial statements. They know what their stock is worth through their retirement plan, and what it really does is focus everyone on being the best, pleasing clients, and staying long-term with the company.

Cotter: The stock gets distributed based on salary, our employees are owners of the firm.

Who are some of your biggest relationships with?

Cotter: We’ve done probably ten buildings with Monument over the last couple of years, including three major projects with them right now — Columbia Center, Monument III in Herndon, and Monument – in Gaithersburg, which is a new building that we just signed a contract for. We’ve completed over 10 projects with Lowe Enterprises. Douglas Development is another company that we do quite a bit of work with, and together with Carr, such as right now down on F Street

Davis: DAVIS has been working with Realty Capital Partners for a long time. I did my first job with them when I joined the company 25 years ago.

Construction companies are a big blur to some of us. What’s your strength?

Davis: I think we’re different in quite a number of ways. Our people are different because of the ESOP, so we don’t have many disputes with our owners or our sub-contractors. And I think we get asked to do the really difficult jobs. We’re not just doing the suburban boxes for the most part. We also get the tougher jobs, the downtown jobs. Most of the jobs are negotiated and they have to be done on a fast-track basis, and one of our strengths has been doing great pre-construction services. Great estimates. We have found that to be more difficult these days with the inflation that has occurred in the marketplace.

What does “great estimates” mean?

Moyer: It means they’re very detailed, and we provide them in a menu-type format so that clients can really understand where we have dollars attributed to their project. That helps them make decisions as the design develops.

It never occurs to us laymen that a construction company’s strength would be in something that happens before construction.

Cotter: It’s all in the planning. The year’s work in advance of construction is critical in making sure that the job runs smoothly. It’s scheduling, it’s estimating, it’s design and construction reviews. It’s really being a team member from the first day that the project starts.

You are always subject to penalty clauses, or reward clauses?

Cotter: They all have penalties. There’s very few reward clauses. The reward is us making our fee, and being asked to do the next project.

How does a Douglas, a Lowe, or a Monument choose the construction firm that it uses? Does it tend to have a stable that it relies on, or do they have bake-offs?

Davis: Pretty much the first. This is a relationship business, after all. Granted there are contracts, but there’s a lot of trust involved, and we have grown with these companies as they have expanded, and when you’ve done a number of tough jobs together, I think they look at their projects and say, yes, this is a great job to have DAVIS do. And then we dive in and give this very detailed and comprehensive pre-construction work because the jobs are done on a fast-track basis.

By the way, Bill and Dennis, what are your particular responsibilities?

Cotter: You want to hear what I’m doing?

Davis: It’s about time I learned what you do. [Laughter.]

Cotter: I’ve been with Davis for 20 years. Previous to that I was a sub-contractor for Davis for about five or six years and really enjoyed seeing how things were done on the other side of the table. My primary duties are business development and looking after a number of clients, the majority of it on the interior and renovation side of the company.

Moyer: And I’ve been here for 22 years after spending five years working for a large national contractor [Whiting-Turner]. I’m an architectural engineer. That’s really where some of my passion comes from for construction, and the pre-construction side. We need to fully understand the engineering side of our projects and make sure that our operations are running at peak efficiency.

How are your projects distributed around the region?

Moyer: I think it’s reasonably even. The large jobs are in Washington, but now the focus is switching to Virginia and Maryland, although the Maryland presence has just not been that strong the last four or five years.

Cotter: We’ve had one or two buildings go up in Maryland in recent years.

Moyer: We’ve got Monument Gaithersburg about to start, and we’re going to have a couple of buildings underway along the 270 corridor. In addition, we will be wrapping up the Lakefront at Washingtonian project next month.

You have offices throughout the region — Rockville, McLean, and K Street?

Davis: Actually, this is an interesting thing. We found that the traffic in Washington is so difficult that we wanted to attract talent from all three jurisdictions. I think we’re probably the only general contractor that has taken our offices and split it up this way, and it’s been a major attraction. I’m referring to the project management jobs, operations portion of the work. Of course the superintendents are stationed at the job site, and frequently on the larger jobs our project management or operations staff is situated at the job site as well.

You guys know about construction costs as well as anybody. How are they looking?

Davis: Last year construction costs went up by 12% or more in the Washington market, which is why we’re struggling to meet budgets. A lot of the raw materials have gone up. Currently we’re seeing a lot of plastic products or petroleum product driven raw materials go up. PVC pipe is going up a huge amount. Last year it was steel but this year it appears to be plastics and glass. Copper went up 30% as well in the past year, but we’re seeing a little bit of tempering. And another essential component is concrete. Last year a cubic yard of concrete cost $83. Right now concrete costs $97 a cubic yard, which is a huge increase in one year.

What’s that going to mean for the industry?

Davis: We’re thinking the overall building costs are going to go up between seven and nine percent in 2006. And so with land prices also going up so much, the only solution is going to be that the rents will go up, otherwise developers won’t do these deals.

Cotter: That may slow the speculative building. We’ve seen that on a couple of deals downtown. One other thing in this market that has pushed the pricing up is the amount of residential work that’s being done. What that’s done is taken a lot of resources out of the commercial construction market and pushed it into the high-rise residential market. So we’re seeing a shortage of good subcontractors, which has an impact on costs and schedules.

Is this what keeps you awake at night? Or other things?

Davis: Managing construction costs does, because we do this pre-construction work and our owners are making multi-million dollar decisions based upon our estimates. Maybe secondly is making the schedule. Because manpower in this market is so tight, it is very difficult to make sure that you have the proper qualified people on the job to achieve the schedules.

How do you address that?

Moyer: The major manpower that we provide to our projects now is mainly on the management side through our project management and superintendent staffs. The subcontractors have their challenges with putting skilled tradesman on the job and that’s a major effort that needs to be taken care of on their side, but as far as bringing new people on board here at Davis, we have a rather extensive recruiting program out at a lot of the regional universities and we also really try to do the majority of our recruiting through word of mouth and employee referrals.

When you go to a job site, do you put on a different kind of attire?

Davis: No, it’s just my hardhat and safety glasses.

Does your hardhat say something on it, like you would have a director’s chair, does it say boss or anything?

Davis: Absolutely not. I’m one of the guys trying to get the job done. :)