Passing the torch

A couple of years ago, Joe Serpa looked around at the feverish residential construction in northern Nevada out-of-town-builders pouring into the market, speculators bidding up the price of everything and had one thought:

This can't last for long.

It was more than a passing thought for Serpa, who last month became chief executive officer of Sparks-based Q&D Construction Co., succeeding John Breternitz, who retired.

Historically, about 60 percent of the company's revenues about $320 million in recent years came from moving dirt, paving streets and laying underground utilities to get residential subdivisions and commercial projects ready for construction.

Serpa, who was working as Q&D's vice president for general engineering at the time, redirected the construction giant away from work on residential subdivisions and refocused it instead on municipal infrastructure projects.

It proved to be a good move.

The residential construction market retreated from its froth-filled days, but cities, counties and other government agencies in northern Nevada continued to build infrastructure to catch up with all the growth.

The change involved more than simply picking up a different set of plans.

Municipal projects are hard-bid work the lowest bidder gets the job. Work with developers, however, generally is negotiated, and the creation of a long-term relationship between a contractor and the customer allows both sides to make some concessions on price, Serpa says.

As a result, Q&D, like other builders, structures its margins differently when it submits a bid for municipal work.

A negotiated deal with a contractor may hold the promise of years of work and years of profits, allowing a builder to give up margin today in hopes of profits tomorrow. That hope doesn't exist in a hard-bid job, where the builder needs to ensure a profit today.

With the increased emphasis on infrastructure work, Serpa projects that revenues in Q&D's general engineering operations this year will be within 5 percent of the 2006 figure.

Continued strong activity in the other side of the business building construction is making up the difference. In fact, Serpa says, building construction probably will account for about 60 percent of Q&D's revenues this year compared with about 40 percent historically.

Among the biggest of that building work is construction of The Ritz-Carlton Highland at Lake Tahoe's Northstar. The $300 million project, a joint venture of Q&D and Swinerton Builders of San Francisco, is scheduled for completion in 2009.

The pipeline of building projects remains full for Q&D the new gas station at Boomtown and the ballpark development in downtown Reno, to name just a couple.

And for the first time in several years, Q&D is beginning to edge back into construction of big industrial buildings.

Even though the company's total employment of 950 is down from some 1,200 a couple of years ago, Serpa says the privately held company's profitability remains strong.

Today, he says, the company's workforce includes top workers who need less supervision and complete better-crafted construction. A couple of years ago, the influx of lesser-skilled workers into the industry slowed projects and eroded margins.

Even so, the number of skilled craftspeople and construction managers isn't unlimited, and Serpa says his biggest worry these days is scheduling Q&D's busy book of business.

He developed a gut-level appreciation of scheduling issues during his earliest days in the construction industry, working as an equipment operator and a member of Operating Engineers Local 3. (Even today, he's a member of the union's apprenticeship committee.)

Serpa spent 13 years with Helms Construction, rising through the management ranks from equipment operator to foreman, then to superintendent, project manager, division manager and vice president.

Among his big jobs with Helms Construction: Infrastructure work for the Resort at Squaw Creek.

When he was tabbed to lead Q&D's general engineering division in 1994, the unit was handling about $2.5 million a year in work.

Under his leadership, it grew to revenues of $140 million a year with more than 100 project leaders and a staff of more than 600 operators, laborers, truck drivers and mechanics.

He's also in line to become president of the Nevada Chapter of the Associated General Contractors in 2009.

"I love it. I wouldn't do anything else," says Serpa.

Succeeding Serpa as head of the general engineering division of Q&D is Lance Semenko. Tim Kretzschmar heads the building division.

Norm Dianda, who founded the company with a kitchen remodeling job in 1964, remains president of Q&D.