The very fragmented electrical contracting industry includes about 60,000 companies with combined annual revenue of $70 billion. A few large firms such as Emcor Group, Quanta and Integrated Electrical dominate, but most firms are small, with less than $500,000 in annual revenue and fewer than ten employees. Only some 600 companies have annual revenue exceeding $10 million.
With electrical work accounting for 10 percent or more of the value of new industrial and commercial buildings, and 5 percent to 10 percent of new residential projects, the importance of the segment cannot be overstated. Industrial and commercial contracts most often involve modernization and retrofit work, while residential contracts involve mainly new construction and maintenance.
Key Trends in the Industry
Among the major trends impacting this segment are:
Increasingly Complex Electrical and Lighting Systems - Electrical contractors face new challenges and opportunities in installing and wiring state-of-the-art systems, especially on high-end commercial and institutional projects. Many modern projects specify new components in designs that require complex control systems for operation, and which require integrating control systems into building management systems with custom programming.
Increasingly Complex Codes and Regulations - Today’s building codes and regulations often differ by geographical area and are based on type of structure. New software and Internet tools help gather building code data and analyze compliance.
Trend Toward Fixed-Price Contracts - Electrical contractors bear the risk of material and labor cost fluctuations with increasingly popular fixed-price contracts – particularly on long-term projects. Significant cash and financial pressures can result.
Critical Issues
Among issues of greatest importance to electrical contractors today are:
Fewer General Contractors - Because electrical contractors often work as subcontractors, they depend on a project’s general contractor for revenue. In many local markets, general contracting has become concentrated in the hands of a few companies – limiting the pool of organizations to work with and for.
High Debt Levels - Significant consolidation in the commercial segment of the industry in recent years has left acquiring companies with high levels of debt. This constrains resources that could otherwise be invested in talent, tools and marketing.
Utilities Become Competitors - Electrical contractors may well face increased competition from deregulated utilities and large non-utility energy companies as these players look to add new revenue streams.