Construction management firms build in stature.

O'Brien-Kreitzberg emerges as largest in L.A. activity

The local office of San Francisco-based O'Brien-Kreitzberg & Associates Inc. is the largest construction management firm in Los Angeles County, based on 1991 local billings, reveals this week's List.

This week's List represents the first time the Business Journal has ever ranked construction management firms, so prior-year comparisons are unavailable.

But such firms have been assuming an increasingly important role in Los Angeles County in recent years, due to the burgeoning number of large public-sector projects coming through the pipeline here.

Construction management firms act as consultants to developer/owners of construction projects. In that advisory capacity, such firms are paid a flat fee to perform four basic functions: To make sure each stage of the construction project is completed on time, within budget, and up to predetermined quality standards; and to make sure all precautions are taken to minimize or prevent legal claims.

The main reason construction management firms have been flourishing in Los Angeles County lately is that public-sector agencies have been undertaking large, long-term construction projects here. And that public-sector activity is expected to continue into the foreseeable future, sources said.

The preponderance of public-sector clients listed by top-ranking construction management firms on this week's List provides an indication of how important the public sector is to the construction management industry.

"I would estimate 97 or 98 percent of our work is performed for public-sector clients," said Lawrence Hazzard, senior vice president at No. 1-ranked O'Brien-Kreitzberg.

The granddaddy of those public-sector clients, in terms of the opportunities being provided to construction management firms, is the Los Angeles County Transportation Commission.

The LACTC's 30-year transportation improvement program is resulting in a huge windfall for construction management firms. And that unfolding windfall is drawing increasing numbers of such consulting firms into the Southland.

The LACTC's capital program is relatively new, compared with those at other public-sector agencies, such as the Los Angeles Department of Public Works.

As a result, the LACTC does not have the internal staff experience needed to manage its incredibly complex capital program internally.

"The LACTC went into its program with a mandate to make massive investments in a relatively short period of time," Hazzard explained. "So it needed to bring in consultants like us."

A growing number of public-sector agencies, in fact, have been opting to use consultants, rather than hire additional in-house staff.

"To maintain a huge staff in a bureaucratic setting is not really cost effective," Hazzard asserted. "Taxpayers and voters may be supporting transit for a time, and then suddenly switch when something else becomes a hot issue."

Since many public-sector capital programs depend upon voter-approved bond measures for funding, shifts in voter approval can cause wide fluctuations in the resources available to any public-sector agency. And that undependable funding makes hiring consultants on a temporary, as-needed basis even more attractive.

Another reason for the growing number of construction management firms in Los Angeles County is that other lines of business within the construction industry have come to a virtual standstill. To stay afloat, local construction firms have expanded into the construction management arena.

Many of these newcomers, however, are artificially inflating their market positions by lumping together their billings from well-established general contracting operations with billings from their fledgling construction management operations, charged Brian Winkelspect, director of project development at West Los Angeles-based JCM Group Inc.

"Now that commercial and industrial construction is all dried up, these contractors are all calling themselves construction managers," lamented Winkelspect. "They claim their general contracting jobs right along with their management jobs just to make themselves look good."

JCM Group Inc., which is ranked fourth on the List, is the highest-ranking locally based firm.

No. 1-ranked O'Brien-Kreitzberg is based in San Francisco; No. 2-ranked CRSS Construction Inc. is based in Houston; No. 3-ranked Vanir Construction Management Inc. is based in Sacramento.

As a result, JCM gets a much greater proportion of its total billings from Los Angeles County.

Specifically, 83.6 percent of JCM's total billings were from Los Angeles County in 1991, compared with 5.3 percent for O'Brien-Kreitzberg, 15 percent for CRSS, and 52.2 percent for Vanir.

JCM actually stands for Jones Construction Management, and is owned by most of the principal owners of West Los Angeles-based Peck/Jones Construction Corp.

"Most of Peck/Jones' work has been conducted in Southern California, and they've been active here for 70 years," Winkelspect explained. "So there's lots of name recognition for us in this market. Since we (JCM) were only founded in 1983, this is a logical market for us to attack first."

At least one company will likely disappear from any future List on local construction management firms. Tishman West Construction, ranked 23rd on this week's List, announced last week that it plans to be acquired by the Koll Co. of Newport Beach. That acquisition is contingent on Tishman West purchasing the 50 percent interest owned by its partner, Balcor Co. of Chicago.