What Are The Changes From Modernism

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The Market value of the U.S. construction & engineering industry (non-residential market only) shrank by 5.2% in 2009 to $635.9 billion. By 2014, the Market is forecasted to have a value of $762.7 Billion (+19.9% since 2009). The US non-residential market makes up 28% of the Global market and 52% of the entire US construction market. (Datamonitor, 2010).

The current tough economy has taken its toll on several construction contractors as evidenced by the data noted above. The contractors that have continued to weather the storm often have a Federal/Defense portfolio and current Multi-Award Construction Contracts (MACCs) with one or more of the Department of Defense Military Services. The MACC contracts include 6 to 9 contractors with maximum capacities of individual potential maximum Task Orders from $300M to $4B. Defense/military contractors are generally, at risk, self-performing General Contractors. Other construction firms, don't self-perform work, instead they manage construction as an Owner's construction consulting representative. Several of these contractors work in Private industry or the institutional/Education market. The Educational market decline has forced several of these contractors to try to get into the Defense/Military market. Gafcon, Inc., is one of these contractors. (MilitaryIndustrialComplex.com, 2010)

Company Background (Gafcon)

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Yehudi and Pam Gaffen started Gafcon 1987. They have grown the family owned business into a major Southern California construction consulting firm. Headquartered in San Diego, CA, Gafcon has over 100 employees spread throughout offices in San Diego, Los Angeles and Orange County. They provide all-inclusive construction services to include Program, Project and Construction Management. Other construction related services include claims support, land planning and development, financial feasibility analyses and cost estimating. (Gafcon.com, 2010) Their largest current Program Management contract is the $1.5B San Diego Community College District (SDCCD) Construction Bond program. (Legaspi, 2010)

The Product

Gafcon is a construction consulting/construction management company and not a general contractor. They don't build anything. But, as the owner's representative, they manage those who do. (Legaspi, 2010) Some of their resources and services are evidenced by their staff which includes seasoned development program managers, construction project managers, real estate economists, market analysts, architects, civil engineers, schedulers, redevelopment experts, estimators, financial analysts, quality inspectors and computer professionals. (Gafcon.com, 2010)

Management Services include:

Program Management

Project Management

Construction Management

Design Management

Technical Support Services include:

Building Forensics

Condition Assessment

Quality Assurance/Quality Control

Cost Management

Constructability Review

Labor Compliance

Distressed Properties Services

With the current Real Estate problems Gafcon is well positioned to offer the following distressed property services.

Business plan development and implementation

Due diligence

Cost/benefit analysis

Condition assessment reports

Market analysis

Property entitlements

Cost effective renovations

Construction completion

Construction management

Property management

Residential sales and marketing

Information Technology (eGafcon) Services (in house):

Digital Dashboards

Enterprise-Wide Search

Self-Site Creation and administration

Internet based storage system

Collaborative and Sharing Tools

On-line document and meeting workspaces

Personalized mySite

Automated Alerts and Notifications

Document Version Control

WF and BPM Functions

Application Integration

Customizable Web Sites using Web Parts

(Gafcon.com, 2010)

The Place

Southern California is their area of operations with San Diego being their current focus. However, there appears to be more work in Los Angeles and Northern CA so they are considering focusing more resources in those areas. They have been approached by some International Companies but have chosen to stay local, in Southern California for now. (Legaspi, 2010)

The Promotion

Gafcon promotes itself through public relations articles in local trade magazines such as the San Diego Business Journal. They also sponsor client fund raisers such as the San Diego Community College Golf fundraiser (Legaspi, 2010). They have also been recognized in Engineering News Record's (ENR) Top 100 Construction Management Firm List and have been cited as one of the 100 fastest-growing architectural, engineering & environmental consulting firms in the United States. Gafcon promotes it's expertise in innovate technology application and received the Gold and Silver Constructech Vision Awards. (Gafcon.com, 2010)

The Price

In today's tough economy, the construction industry is a buyer's market. Each bid is very competitive. For instance, instead of ten (10) to twelve (12) competitors proposing on a single project there are now eighteen (18) to twenty four (24) proposers. When times were good, Gafcon would price with general open book hourly fees with a multiplier of 2 to 3.5. For instance, if they paid an employee $10/hr the rate they would charge the owner was $20 to $35/hr. With this pricing structure, they were profitable everyday they were on the project. But with the current tough economy, Owner's are now requiring fixed price contracts that involve more risk. With so many competitors, they must keep the hourly rates very competitive so their overall fixed price is competitive. (Legaspi, 2010)

Target Market

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Gafcon's target market is to include K-12 and higher educational facilities. These Public and Private educational facilities markets include:

Southern California

Construction Market

Non-Profit/Government Market

Public School Construction Bonds

Business Market

Real Estate Planning

Property Management

(Legaspi, 2010)

Marketing Concept

Gafcon's value is to function rigorously as the owners' representative, managing designers and contractors for the Owner. The Owner holds the contracts, thus limiting the liability for Gafcon. Gafcon guarantees projects are completed timely and within budget without sacrificing quality. This method is the brand of Gafcon's marketing methodology. Their vision is to have earned Gafcon a standing of preeminence and trustworthiness, one that is unrivaled in the construction management industry. (Gafcon.com, 2010) They use Microsoft Customer Relationship Management (CRM) and other tools to track public bonds before they get approved and collaborate with strategic partner (Architect/Engineer (AE)) or Joint Venture (JV) firms to position them for the Request for Proposal potential requirements. (Legaspi, 2010)

Market Segmentation

Gafcon selects the construction market segment based on the marketing concept and targets the Business and non-profit/government customer markets such as educational, residential, government, public works and private sectors. (Legaspi, 2010) The major sectors and sample projects include:

Municipal (Federal, State and local government agencies).

San Diego Hall of Justice - San Diego, CA

Gafcon provided PM services through the design and construction phases of the downtown San Diego Courthouse.

City of Coronado Police Station - CA

37,000 SF police facility contains 50,000 SF of underground parking, administration offices, prison cells, exercise facility, dispatch area, full garage, sally port and large community service facility room.

San Pedro Waterfront and Promenade - CA

Gafcon provided Real Estate planning for this public, private venture project and provided a master development plan.

Office/Retail Experience

The Alhambra - Alhambra, CA

599,000 square foot residential, office and merchandising project combines high concentration mixed-use construction with landscaped gardens and plazas.

China Basin Landing - San Francisco, CA

This 800,000 square foot historical warehouse converted to commercial and retail offices is the largest waterfront office facility in San Francisco.

Tony Hawk Complex - Vista, CA

Gafcon managed and constructed the modifications of this two-story, multi-office and warehouse facility. The facility included a 75-foot interior skate ramp.

Education Experience

Grossmont Community College District-CA

Gafcon was selected to develop a $250 million capital construction and renovation program for two campuses.

The Accelerated School - Los Angeles, CA

At over 100,000 SF, this four-story, steel brace-framed building was built on an existing 4.1 acre campus with new classrooms, gymnasium, kitchen, play area and multipurpose room.

San Diego Community College District - CA

Gafcon is providing program management services for the Propostitions S and N construction program, a $1.555 billion bond program.

Hospitality/Gaming/Entertainment Experience

Jamul Casino - Jamul, CA

To be built on existing six acre reservation, this resort will consist of a 100,000 SF Casino with 2,000 slot machines and 75 gaming tables and an 840,000 SF parking structure.

Pala Casino - Pala, CA

190,000 SF building that houses a 60,000 SF casino, an indoor-outdoor entertainment lounge, administration and security offices, upscale dining, 1,400 space parking lot and new wastewater treatment

Del Mar Country Club, Rancho Santa Fe, CA

Gafcon provided construction management on various projects including a 50,000 SF clubhouse, 18-hole golf course, six tennis courts and junior Olympic-size swimming pool.

Custom Homes Experience

Custom Home - Palos Verdes, CA

This cutting-edge residence includes four individual cast-in-place concrete and steel structures with two-foot thick architectural concrete and stone veneer walls. It is located on a bluff overlooking the Pacific Ocean with approximately 1/3 mile of beachfront.

Custom Home - Rancho Santa Fe, CA

This Rancho Santa Fe home sits on four acres and was modeled after contemporary Afro-Mediterranean trends. Authentic interior finishing materials include solid Afromisia wood doors, windows, and cabinetry, as well as interior and exterior slate flooring.

Custom Home - Rancho Santa Fe, CA

This 14,000 square foot Spanish Mediterranean style home rests on nine acres in historic Rancho Santa Fe and includes the main residence, guest home, pool cabana, private chapel, tennis court and extensive hardscaping and water features.

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(Gafcon.com, 2010)

Public Relations (PR)

Gafcon does a lot of PR work. Especially as noted above in promotions, publications in trade journals and news releases of recent awards. Below are a few examples of Gafcon's news releases and awards.

Pam Gaffen speaks about Women in Construction

Published in San Diego Metropolitan Magazine's April 2010 issue

Yehudi Gaffen Goes "Beyond the Business Card"

Published in Calif. Real Estate Journal's February 2010 issue

A Changing Industry

Constructech Magazine article featuring Yehudi Gaffen

Awards and Rankings

Ranks #40 on ENR's Program Managers List

Ranks #61 on ENR's CM-For-Fee Firms List

Ranks #75 on SDBJ Fastest-Growing Private Co's List

Ranks #7 on SDBJ Women-Owned Businesses List

Ranks #19 on SDBJ Best Places to Work List

(Gafcon.com, 2010)

Customer Relationship Management (CRM) Focus

Gafcon uses Microsoft CRM software (formally called Dynamic) to focus on their customers. It helps them with client relationship management as well as tracking leads and opportunities. They are also using Microsoft Share Point to create "dash board" metrics for the owner and all stakeholders to measure and monitor project performance in terms of Key Performance Indicators (KPI's). Gafcon is also local and relatively small so the CEO of Gafcon gets directly involved in projects and with the clients. Their clients are required to report financial information and project execution status to Citizen Oversight Committees, the Board of Education, as well as the public if they wish to attend the monthly Education Board meetings. Transparency is the key to keeping the stakeholders apprized and involved. (Legaspi, 2010)

Business Challenges

Because of the economy, they have become extremely price competitive and they need to expand their market segment. The Department of Defense will be investing millions of construction dollars at Camp Pendleton and other military bases over the next few years and into the future but Gafcon does not have the qualifying military project experience and past performance to meet the military project solicitation requirements. This is a large business challenge considering the competitors that already have this experience. The following competitive analysis considers both current and potential future competitors if they choose to get into the military work. (Legaspi, 2010)

Competitive Analysis - Kitchell Construction, Inc. (Current Competitor)

Kitchell Construction, a Phoenix, AZ based company with offices in San Diego, CA is a Construction Management firm currently big in the private health care and High End Residential market. Kitchell ranked #42 on Engineering News Record's (ENR) Top Construction Management for fee Firms in 2010. Kitchell ranked #37 on ENR's Top Construction Management at risk Firms in 2010. Gafcon ranked #61 on ENR's Top Construction Management for fee Firms in 2010. Gafcon is not ranked and does not have any projects in the Construction Management at risk sector. (ENR, 2010) Like Gafcon, they are looking to get into the military market. (Crowley, 2010) Kitchell's founding fathers (Samuel F. Kitchell and James B. Phillips) started the company in the 1950's by building the first Motorola facility in Arizona. Five decades later, they transformed Kitchell into a $850M/year Construction Management and General Contracting firm specializing in Hospitals. They are a 100-percent employee-owned company with 1,000 employees. Their headquarters is in Phoenix Arizona and they have an office in Sacramento, CA and small offices in other areas including San Diego, Fresno, Ontario, San Jose and Santa Barbara California. They offer similar services to Gafcon but add Fleet services and American Refrigeration. They have 100% ownership in a Germany Based Company and projects in Arizona, California and Hawaii. (Kitchell.com, 2010)

Services

General Contracting

Program/Project/Management

Construction Management

Engineering &

Architectural Services

Environmental Services

Custom Homes

Facilities Development

Real Estate Development

Property Management

Fleet Services

American Refrigeration

Supplies

Markets

Civic/Municipal

Criminal Justice

Cultural/Arts

Custom Homes

Education

Environmental Services

Federal

Health Care

Hospitality

Master Planned

Communities

Native American

Office/Industrial

Retail

Competitive Analysis - RQ Construction, Inc.(Potential future competitor)

RQ Construction, Inc., San Diego, CA has several MACC contracts with the Navy to include a $1.4 Billion Global MACC, a $900M Commercial Industrial MACC, a $300M Electrical Utility MACC and a $300M Wet Utility (Sewer/Storm Drain/Water) MACC contract. (MilitaryIndustrialComplex.com, 2010 and RQConstruction.com, 2010).

They also are teamed with Mentor-Protégé partners that are certified with the U.S. Small Business Administration (SBA) and eligible for "limited competition" set aside contracts with 8(a) and Service Disabled Veteran Owned Small Businesses (SDVOSB). (Halstead, 2010). RQ has innovative "Eco-lite" interior and exterior concrete wall systems which can replace metal stud partition walls. (RQconstruction.com, 2010).

Competitive Analysis - T.B. Penick & Son's, Inc. (Potential future competitor)

T.B. Penick & Son's, Inc. is currently positioned similar to RQ construction in terms of contracts and innovation. T.B. Penick declined to be interviewed due to sensitive/proprietary information. (Penick, 2010)

T.B. Penick's target market is Military Clients. They received over $180M of Military construction contractors over the past two (2) years. (MilitaryIndustrialComplex.com, 2010).

They have been in business for 100 years primarily in Southern California. Over the past decade, they've grown from a regional company working primarily in San Diego to one of the larger contractors in America, working across all 50 states and globally on three continents, (TBPenick.com, 2010)

They have three divisions including General Construction, Structural Concrete, and Innovative Concrete Systems. Some of their innovative concrete systems include Lithocrete®, Grasscrete®, and STF Porous Paving,

Lithocrete

Lithocrete flooring System at AGC San Diego's Break room.

Lithocrete® is a patented architectural concrete paving system that uses the fundamental properties of reinforced concrete, combined with the appealing quality of surface-seeded select aggregates. (U.S. Patents #4,748,788, #6,033,146, #6,016,635 and U.S. Trademark #1,873,329) Lithocrete® is environmentally mindful in using environmental and recycled materials. Overall, on typical projects, Lithocrete can credibly contribute to eight (8) LEED credits. SS cr7.1(1), MR cr2 (2) MR cr4(2), MR cr5 (2), EQ cr4.3 (1). (TBPenick.com, 2010)

Grasscrete®

Approved by the City of San Diego Fire Department as a Fire-Lane Access material, Grasscrete® is a cast-in-place, uniform, porous concrete pavement that is uninterruptedly reinforced to provide a greater structural grass / concrete / porous paving system. Grasscrete® is now used for more than just emergency access and parking lanes. It's an alternative for Fire-Lane access, Driveways, Delivery entrance routes, Excess parking areas, and Embankments. In addition, Grasscrete® is widely used for erosion control, reduction of storm water run-off and meeting landscape-zoning requirements. Grasscrete® is solely provided by T. B. Penick & Sons, Inc.\'s licensed and trained personnel. (TBPenick.com, 2010)

STF is a demonstrated alternative porous paving system to asphalt and orthodox concrete. This distinctive "poured-in-place" concrete is porous, allowing rainwater to pass through at a rate which completely eradicates surface ponding and addresses "first flush" issues. Overall, on typical projects, STF can realistically contribute up to nine LEED credits. SS cr6 (2), SS cr7 (1), MR cr2 (2) MR cr4(2), MRcr5 (2).

T.B. Penick declined to be interviewed due to the proprietary nature of their innovative concrete systems but appears to be a major competitor if GAFCON were to get into the military construction market in the greater San Diego, CA area.

SWOT Analysis

Gafcon engages in institutional, commercial and high-end residential construction. It also provides other services like Program Management, Project Management, Construction Management, and Design Management. The company is well diversified in the markets that it serves. The diversified portfolio provides defense against negative forces in specific market and allows it to prosper from opportunities available in many industries. However, the California state budget crisis and National Budget deficit could lead to less Construction Opportunities which could deleteriously impact the future profitability and cash flows of the company.

STRENGTHS

WEAKNESSES

Innovation in Technology

Relative Small Size

Recent Healthcare Market Entrant

Diversified business portfolio

Not a General Contractor

Lack of geographic diversification

Not a CM at Risk Firm

OPPORTUNITIES

THREATS

Building Information Modeling (BIM)

Federal/Defense Construction Market

Healthcare Market

Keeping up with Technology

Internal Resistance to Technology

Intense Competition

Cuyamaca College Environmental Impact Report Lawsuit

Strengths

Innovation in Technology, Relative small size, Recent Healthcare Market Entrant

Gafcon's biggest strength is Innovation in Technology. They are using Microsoft Share Point to create "dash board" metrics for the owner and all stakeholders to measure and monitor project performance in terms of Key Performance Indicators (KPI's). They are also local and relatively small so the Owner (GAF) gets directly involved in projects and with the clients. Gafcon was just selected for a $500M Hospital project for the Los Angeles County Martin Luther King hospital. This project will open the door for other health related projects. (Legaspi, 2010)

Diversified business portfolio

The company is well diversified in the market sectors that it serves. Gafcon offers it's Austin services to three major sectors: in institutional, commercial and high-end residential construction. Gafcon also offers Property Management and Residential Sales and Management services to the commercial sector and developers.

The diversified portfolio provides safeguards against negative forces in a specific market and allows it to prosper from opportunities in several industries.

Weaknesses

Not a General Contractor

Their weakness is they are not positioned for at risk General Contracting, Construction Management (CM) or CM/Multi-prime opportunities as they don't have Superintendents or the insurance required to self-perform work. There are several General Contracting opportunities in the military construction market. (Legaspi, 2010)

Not a CM at Risk Firm

Gafcon currently only performs CM for Fee projects. There is very little risk with a CM for Fee contract. You are profitable every day you are on the job whether or not the project is tracking on schedule, budget, quality, safety, etc. You bill the owner by the hour, on a time and material basis. All the risk is on the owner. However, many owners are shifting to CM at Risk contracting delivery vehicles. With a CM at Risk contract, more of the risk is shifted to the contractor. But with the risks, come the potential for more reward and profits. The Army is currently using the CM at risk alternative project delivery method. They call it Early Contractor Involvement (ECI). The Navy is now going to try the ECI delivery vehicle. NAVFAC Southwest is putting out the Navy's first ECI "seed" project. It is an FY 2011, $67M Rotary wing hangar project at Naval Air Station, North Island, Coronado, CA. (FMB, 2010).

Lack of geographic diversification

All of the company's revenues is from the US market, specifically Southern, CA. They have no operations in the evolving economies like China and India. These geographic markets have been key target markets for the construction sector recently. India and China are expected to see the high rates of global construction spending growth in the next decade. (Datamonitor, undated)

Opportunities

BIM, General Contracting, CM at Risk, Federal and Healthcare Market

The biggest opportunity is to keep advancing with Building Information Modeling (BIM) technology and getting positioned for General Contracting and Construction Management so they can enter the Federal/Defense Construction Market. Gafcon should be looking into Federal pursuits, Hospitals, and transportation projects. There will be millions of dollars spent in these sectors and their recent selection for the $500M Hospital project for the Los Angelos County Martin Luther King hospital will pave the way for future hospital work if they are successful. (Legaspi, 2010). As noted above, many owners are shifting to CM at Risk contracting delivery vehicles. With a CM at Risk contract, more of the risk is shifted to the contractor. But with the risks, come the potential for more reward and profits. The Army is currently using the CM at risk alternative project delivery method. They call it Early Contractor Involvement (ECI). The Navy is now going to try the ECI delivery vehicle. NAVFAC Southwest is putting out the Navy's first ECI "seed" project. It is an FY 2011, $67M Rotary wing hangar project at Naval Air Station, North Island, Coronado, CA. (FMB, 2010). Other Federal Market project opportunities in 2011 include:

PIER 12, NAVBASE SAN DIEGO, DESIGN BUILD, $100M

HANGAR PROJECTS, MCAS MIRAMAR, DESIGN BUILD, $180M

BACHELOR QUARTERS, NAVBASE SAN DIEGO Design Build, $75M

ROTARY HANGAR, NAVBASE CORONADO Design Bid Build, (ECI) $67M

(NAVFAC, 2010, FMB, 2010)

Threats

Keeping up with technology and internal rejection of technology

The biggest threat is that everybody is getting into technology and they must continually keep up to speed. Most people in construction are hands on and tend to reject technology. (Legaspi, 2010).

Intense Competition

Gafcon is involved in extremely competitive businesses in which owner contracts are often awarded through proposal processes based on hourly unit prices, technical capability and very little risk. However, due to the tough economy, many owners are now requiring fixed price contracts which require the acceptance of certain risks. Gafcon competes with other Program/Project Management including stiff competition from companies such as O'Connor, Vanir, and Kitchel Construction. These competitors have greater financial and other resources than Gafcon. Since financial strength is a consideration in deciding whether to award a contract in the industry, the company may lose contracts to larger players.

Cuyamaca College Environmental Impact Report Lawsuit

Gafcon, as the Program Manager for Grossmont and Cuyamaca community colleges bond program, could get egg on their face over this lawsuit. In a public relations effort, Gafcon has posted information on their website to let the public know the basic facts about the case. Depending on the outcome of this case, this could be good or bad publicity for Gafcon. The case has a long history. For several years, State agencies including cities, counties and school districts have argued over who pays the costs of growth. If a school district builds a school campus, for instance, who pays for the impact on the utility infrastructure and local roads? School districts and other Educational establishments have argued that the state constitution does not permit Educational institutions to fund non-education projects. The California Supreme Court just handed out its much anticipated ruling on the "Marina Case," a case relevant to the Grossmont District and other public schools because of its impending bearing on the development of school facility projects. The Grossmont district prepared two Environmental Impact Reports (EIRs). One for Grossmont Community College and one for Cuyamaca Community College. The Cuyamaca EIR, stated little impact, but that there could be more traffic coming onto the campus. The EIR was subsequently approved by the District Board of Education, but later questioned by the County of San Diego. After negations between the County and the District broke down, the County took the District to court. The first court favored the District's position and the County had to pay their attorney fees. The County appealed, and the Appellate Court sided with the County. The District then decided to appeal to the California Supreme Court. Soon afterwards, the California Supreme Court handed out its Marina decision, finding that when there is an impact, the State constitution does allow school funds to be used. However, it also stated that any funding should be sensible and proportionate to the impact. For instance, if additional traffic added Ten percent impact, the District should pay 10% and the County should pay 90% of a new road widening project. Gafcon can now support the district in determining the impact and negotiating with the County and hopefully come to a satisfactory solution to this issue without wasting any more of our Tax payer dollars on lawyers. (County, 2010)

Five Forces Model

Michael Porter's Five Forces Model is displayed below to reflect the current dynamic in the Southwest Construction Market bought by the Naval Facilities Engineering Command, Southwest Division (NAVFAC Southwest) headquartered in San Diego, CA. The Model shows Gafcon as one of several potential threats of being a new entrant to this sector. DPR is buying its way into the sector by the acquisition of RQ Construction who is a key competitive player in this sector rivalry. Potential threat of substitute products, or in this case, contractors is the Global Multi Award Construction Contract (MACC) contractors such as ECC, URS and DCK. These contractors are on the $4B Global MACC awarded by the Naval Facilities Engineering Command (NAVFAC), Pacific Division headquartered in Pearl Harbor, HI. NAVFAC Southwest, headquartered here in San Diego, CA with responsibility for overseeing construction contracts in California, Nevada, and Arizona has recently allowed this contract as a "substitute" for their MACC contracts or stand-alone contracts which has stirred up the rivalry contractors quite a bit. RQ and Barnhart have taken advantage of this substitution by teaming with URS and ECC respectively to pursue these opportunities. Gafcon should look into to teaming with one of the remaining Global MACC contractors or another major player from another geographic sector to get there foot in the door with NAVFAC Southwest (Halstead, 2010).

NAVFAC Southwest's buying power is very strong. Previous MACC contracts only included five (5) or six (6) contractors on each MACC. Their latest, $900M commercial and industrial MACC has nine (9) contractors on it competing for each task order. Also, they are buying construction services based on the best value versus low bid approach. So contractors must perform well and received outstanding performance evaluations on each contract or jeopardize the chances of receiving the next contract. NAVFAC Southwest is very serious about safety performance. All fiscal year 2011 solicitations will include a separate evaluation factor on Safety alone. Contractor's with high Experience Modification Rates (EMR's) will not receive good marks in this factor and could lead to being Not selected for that project. In terms of the Industry Concept of Competition (Pure Monopoly, Oligopoly, Monopolistic Competition and Pure Competition) in this area is very high and considered "pure competition". (Kotler, 2009) Subcontractor or supplier buying power is considered relatively low. (Wikipedia.org, 2010)

(Wikipedia.org, 2010)

Proposed Marketing Opportunities

Any given market has competitors playing four (4) different roles and each of these roles have a different strategy to position themselves within the market sector. These positional roles are Market Leader, Market Challenger, Market Follower, and Market-Niche. Based on Gafcon's ENR rankings, they appear to be a Market Challenger. Market Challenger attack strategies include price discount, product proliferation, product innovation, prestige goods, cheaper goods, improved services, distribution innovation, manufacturing down costs, and intensive advertising promotions. (Kotler, 2009) Of these nine (9) strategies, Gafcon could consider the following market challenger attack strategies to increase their market share in the CM for Fee Firm sector of the construction industry market:

Price Discount: They could reduce overhead and lower their multiplier even more to win more projects.

Prestige goods: They could invest more resources into Building Information Modeling (BIM) and sell this service to various owners as sexy "prestige" services.

Product Proliferation: Gafcon already offers several unique services to include distressed property services, real estate services, and building forensics. They could look at adding services such as environmental reports and services.

Product Innovation: Gafcon should continue to innovate it's Information Technology services and offer products such as :

American Biltrite Commercial Flooring - 3M Commercial Care Cleaning Products - 3M ESD tile - 3M ESD epoxy flooring - O'Brien moveable wall systems and inplant offices - Cleanroom enclosures by Clean Air Technology - CornerStone Coatings industrial epoxy flooring - Coronado industrial coatings - VAP I waterproofing system by Koester American Corp. - LeveLayer I self-leveling underlayment by Dayton Superior - Mannington Commercial Carpeting - 3M Floor Matting - NoTrax Matting Systems (Innovative, 2010)

Cheaper goods. This doesn't appear to be applicable

Improved services: Gafcon could set up a "tiger team" to improve it's program and project management services.

Distribution innovation: Gafcon should consider more effective ways to schedule and deliver it's projects ahead of schedule.

Manufacturing down costs: Gafcon could look into and select subcontractors and vendors who do off-site prefabricated systems such as pre-fabricated buildings, interior wall systems, etc. These off-site operations are not subject prevailing wage rates and can be done with improved productivity.

Intense Advertising promotion. Like most construction firms, Gafcon doesn't advertise. Their promotion is showing owner's the past project experience and past project performance. However, considering their high end residential services, I would recommend they consider establishing a program to gain more face time with its current and future customers.

Gafcon should consider getting into some Market Niches. The Banking industry was hit hard recently but is going to come back soon. Developing marketing relationships with various banks could develop into a market niche once the industry needs facilities and begins its growth.

As noted above, Gafcon should look into to teaming with one of the remaining Global MACC contractors or another major player from another geographic sector to get their foot in the door with NAVFAC Southwest. There is also the potential to pursue a Mentor Protégé Teaming Agreement with a Small Business Entity (SBE) certified through the U.S. Small Business Agency with 8a, or Service Disable Veteran Owned Small Businesses (SDVOSB). These SBE's receive set aside contracts that are not competed through the normal channels. RQ Construction currently has a Mentor-Protégé teaming agreement with Kisaq, which is an 8a and an Alaskan Native Corporation (ANC). This team just received its first two Defense contracts this year (Halstead, 2010). In order to become a general contractor, Gafcon would have to get a general contractors license, hire superintendents, and get builders risk and other required insurance.

Conclusion

In Summary, the tough economic times are driving a lot of contractors to the Military Construction Market. Gafcon should consider entering the NAVFAC Southwest Sector of the construction market either through teaming with one of the substitute contractors (Global MACC) or SBE contractors. They should also considering recruiting qualified employees now to prepare for the coming construction growth opportunity in the next few years. There are several highly qualified people available now and it would be good to get them on board before the competitors do. (Halstead, 2010).

Interview: Kristine Legaspi, GAFCON, Inc. Marketing Director, (619) 231-6100 (Nov

Q1: Describe GAFCON, Inc.

A1: GAFCON is a family owned Business that was established by the owner (Gaffen) in 1987 with its headquarters in San Diego, CA. Their 120 employees are primarily engaged in Program and Project Management activities. They don't have Superintendents or the insurance required to perform at risk general construction. They provide Project Managers and other support positions to oversee construction management firms or general contractors performing the work. They are the owner's representative. One of their larger projects is for the San Diego community College District (SDCCD) which is part of the $1.5Billion SDCCD bond program.

Q2: What is your Target Market?

A2: Public and private educational facilities to include K-12 and higher educational facilities.

Q3: What do you feel the needs of your client are?

A4: Their clients are required to report financial information and project execution status to Citizen Oversight Committees, the Board of Education, as well as the public if they wish to attend the monthly Education Board meetings. Transparency is key to keeping the stakeholders apprized and involved.

Q5: How do you market to your target market?

A5: They use Microsoft Customer Relationship Management (CRM) and other tools to track public bonds before they get approved and collaborate with strategic partner (Architect/Engineer (AE)) or Joint Venture (JV) firms to position them for the Request for Proposal potential requirements.

Q6: Do you have a tracking system to track clients (Client Relationship Data Base)?

A6: Yes, as noted previously, they use Microsoft CRM formally called Dynamic. It helps them with client relationship management as well as tracking leads and opportunities.

Q7: What is your Current Marketing Strategy?

Product/Service Strategy? (Military, Education, etc.?) They provide service (project management) versus general contracting services so they focus on consulting to an owner as they core service strategy. They don't building anything. They don't have Superintendents or the insurance required to perform as a general contractor.

Place/Distribution Strategy? (Geographic project areas): Southern California is their area of operations with San Diego being their current focus. However, there appears to be more work in Los Angelos and Northern CA so they are considering focusing more resources in those areas.

Promotion Strategy (Public Relations, advertisement, etc.): They publish several articles through the San Diego Business Journal and various trade magazines. They sponsor various owner fund raisers such as golf sponsorships, etc.

Pricing Strategy (Open book with Subs?, JV?, Mentor Protégé?): They use to price with general open book hourly fees but with the current tough economy they are now being asked to price not to exceed amounts to owners. It is now very competitive. For instance, instead of 10-12 competitors proposing there are not 18-24 on a single RFP. They must keep the hourly rates very competitive.

Q8: Do you have or forecast any International Marketing Opportunities?

A8: They have been approached by larger firms but they are sticking to Southern CA for now.

Q9: What challenges have you faced in various markets?

A9: Because of the economy, they have become extremely competitive. There is lots of work at Camp Pendleton and other military bases but they don't have the project experience.

Q10: Can you give me some examples of successes or problems you've have encountered in certain markets?

A10: They were just selected for a $500M Hospital project for the Los Angeles County Martin Luther King hospital.

Q11: What new markets are you looking into?

A11: Federal, Hospitals, and transportation projects.

Q12: What problems have you had with subcontractors or vendors?

A12: They only provide program/project management so they don't interact with subcontractors or vendors. That is the construction management firms responsibility.

Q13: Describe your competition?

A13: Vanir, O'Connor, Cummings, etc.

Q13: What is your company's primary strength (and any weaknesses)?

A13: Their biggest strength is Innovation in Technology. They are using Microsoft Share Point to create "dash board" metrics for the owner and all stakeholders to measure and monitor project performance in terms of Key Performance Indicators (KPI's). They are also local and relatively small so the Owner (GAF) gets directly involved in projects and with the clients. Their weakness is they are not positioned for at risk General Contracting, Construction Management (CM) or CM/Multi-prime opportunities as they don't have Superintendents or the insurance required.

Q14: What are the biggest Threats and Opportunities you see for your company in the current market environment?

A14: The biggest threat is that everybody is getting into technology and they must continually keep up to speed. Most people in construction are hands on and tend to reject technology. The biggest opportunity is to keep advancing with Building Information Modeling (BIM) technology and getting positioned for General Contracting and Construction Management.