May 08 www.bus-ex.com 71 Nearly four years ago we divested our geotech engineering and drilling and structural materials divisions to one of our then partners. We remain as general contractors, covering traditional construction, environmental remediation and bulk fuel services. Eighty percent of our work is now for the federal government, primarily the military.” The change in direction proved to be a wise choice. TolTest is based in Maumee, Ohio, about 60 miles south of Detroit. The local economy is dominated by the Motor City’s auto industry, and that hasn’t been having the best of times lately. In extremely stark contrast, TolTest has seen its revenues skyrocket, from $45.3 million in 2003 to a projected $225 million in 2008. It is one of very few companies to have been awarded multiyear, multibillion-dollar contracts. It wouldn’t happen, TolTestInc. Ruari McCallion learns how the decision to increase its focus on federal government work has helped TolTest, Inc. overcome the boom and bust in private-sector construction and fueled rapid growth Just surviving 81 years in the construction business in the US is quite a feat. That takes you through the Great Depression, the Second World War, the Eisenhower boom years, and enough recessions and expansions to make your head spin. To get that far and then to enjoy the most spectacular period of growth in its history is a story that demands more attention. “Up to 1992, the company was 100 percent commercial. That year, we submitted a proposal to the US Army Corps of Engineers, Louisville District Office, and won our first contract as prime contractor. It was a multiyear, multimillion-dollar project,” says Ernest Enrique, vice president, federal division, of TolTest, Inc., and a 25 percent owner of the company. “Later, we got into key positions that enabled us to grow in that area. Firstbuild
72 May 08 www.bus-ex.com clearly, if it didn’t deliver the goods—and it has, as its successful completion of a large hydrant fueling system construction project in the Azores and the single largest military family housing renovation program in the US at F.E.Warren Air Force Base testify. “We believe it’s essential to concentrate our resources in niche markets, rather than going for broad contract opportunities,” Enrique says. “The contracts we’ve won with the US military, specifi cally the Air Force, have opened opportunities for us. The competitive vehicles we have developed give us opportunities to provide services to the Department of Defense all over the world, including remote, austere and hostile environments. We have a presence in Iraq and Afghanistan, as well as in non-hostile areas in the Middle East, such as Kuwait and Qatar. We’re also undertaking work in Guam and Guantanamo Bay, which are both remote in logistics terms.” Federal and military work is good for TolTest for two reasons. First, the US government is the largest buyer of goods and services in the world; second, governments don’t go out of business; they pay, and in TolTest’s case, they pay quickly—on average, in less than 30 days. It delivers the goods, of course, but there’s another reason why the company gets this ongoing and valuable work. It may come as a surprise. “You have to specialize in government business. There’s a lot of paperwork involved, but once you understand it, you can go from agency to agency and they’re pretty much the same. We saw government work as having more potential for growth, and we took the time to fi nd out how to do it,” he says. The range of services the company provides to its main client is generally easy to understand; general contracting is the same in the public sector as in the private. Environmental services covers mitigation and remedial activities. Bulk fuel services, however, may be more than meets the eye. “Bulk fuel is the term for aviation fueling,” Enrique explained. “We do everything involved with fueling military planes, from bulk tank farms, to pump systems, to the hydrant point where the plane is fueled, all the way back to the storage area. We undertake design, construction, maintenance and repair.” It’s important, but it’s not the company’s leading earner. “Our principal revenue growth has been from our service as a general contractor,” says Robert Leduc, vice president and another co-owner of TolTest. “We manage projects—we don’t have armies of carpenters, tradespeople and electricians. The last thing a local government overseas wants is for you to bring hundreds of tradespeople over. We’ve managed fi ve-fold growth in revenues with only 50 percent growth in personnel. We leverage our assets as any general contractor would.” He also emphasized that he and his partners remember the lean years. Growth in revenues and activities has not led to a ballooning internal bureaucracy. TolTest remains a lean and hungry organization, focused on delivering customer service effi ciently and effectively. “Our growth overseas is with a special Air Force Agency of the Department of Defense, the AFCEE [Air Force Center for Engineering and the Environment], which is headquartered in San Antonio, Texas,” Enrique says. “With any project, we set up a PMO [project management offi ce]. All our procurement, legal, administration, health and safety, HR and technical support is located where it needs to be. We take advantage of the technical communication tools that are available nowadays. The long-term business we have has enabled us to invest in very robust Web and intranet systems.” In remote locations, treaties with local governments emphasize using local contractors. “We mobilize people in the US and start our operations with US people, but we look to blend the cultures, to bring in new people from the local area. There are challenges that come with that, but we take the time to interview both our potential subcontracting partners and our customers. The good experiences far outweigh the bad, and our approach has enabled us to continue growing.” TolTest is a company that has identifi ed its market, worked to understand it, grown with it, and is capable of standing on its own two feet and getting on with the job. It sounds like an ideal partner. TolTestInc.