Grace Pacific Corporation

Source: Construction Digital

Date :21/11/2007 16:42:26

Building Hawaii

In the proudly independent island State, one company has found a way to combine profitability with a responsible ethic that its employees appreciate while providing “Aloha” to the less fortunate people in the Islands.

Written by John O'Hanlon and Produced by John Bakke

Grace Pacific Corporation has been serving the state of Hawaii since 1920. As you travel Hawaii's roads, chances are Grace Pacific has been there before you – because its business is all to do with the infrastructure, from the aggregates and the asphalt that make up the many layers of the actual road surface to the paving, guardrails, signs, and traffic control.

The company was founded by three brothers and was a family concern until 1975 when it was bought by its key employees led by Dwayne Steele, the founder, builder, and creator of its current business philosophy.

Today it has a handful of private shareholders who own the majority of the stock, with some ten percent still in the hands of non-union employees, who also benefit from a generous profit sharing plan.

Few companies, even today, have such an entrenched policy of concern for their employees, the environment as a whole, and the community within which they operate. “We have a board of directors that’s very much oriented towards keeping our employees happy,” says Bob Wilkinson, who has been Grace Pacific’s CEO since it acquired Hawaiian Bitumuls & Paving Company, a smaller competitor on Oahu, in 2001. Since then, the company has expanded with acquisitions in paving on Kauai and Maui and on Oahu in its precast concrete business.

The latter manufactures a variety of precast concrete products including piles, girders, bridge and pier deck panels and structural components for buildings and parking structures. Non-core unprofitable concrete block and asphalt emulsion manufacturing operations were sold in the meantime.

A generous employer

A couple of years ago, says Wilkinson, there was an acute shortage of raw asphalt resulting in there being virtually no work for many workers over a six month period. To tide them over and ensure that they did not have to go looking for other jobs, GP provided long-term interest-free loans. “As a matter of principle we try to look out for our employees' welfare, and I think our company is known in Hawaii as a good company to work for,” he says. And this attitude does not stop at the door. In the last year Grace Pacific has given away over $800,000 to charity, a huge amount for a company with annual sales of $200 million.

Before Bob came on the scene, the company was a lot smaller – in fact sales have grown fivefold in the last five years. Some of this was achieved by absorbing acquired companies, such as Niu Construction, which extended the company’s footprint onto the island of Kauai for the first time, and SUN Industries, which provides safety controls as needed on roads and highways. But a lot of it came from internal growth as well.

He refuses to take the credit for this, citing a strong management team and a workforce he can rely on, nevertheless he has successfully presided over a time of great expansion.

“We have acquired companies that are related to our business, such as the safety and the precast companies, as well as starting up a new coatings company [Grace Pacific Maintenance Solutions, incorporated in 2002, a personal interest of Bob’s, of which more later]. We wanted to become embedded as a subcontractor to the main contractors, providing products and services that taken together make up a substantial part of the contract, but looked at individually are fairly small – which means the major general contractors don’t want to get involved.”

Total Quality

The company does five times the business it did in 2001, but the workforce has grown from 300 to around 650 in the same period, so productivity has improved a lot too. This must owe something to the motivational management culture we mentioned earlier, but it should be pointed out that last year saw the introduction of modern lean manufacturing methods, a culture of continuous improvement, and total quality management processes.

Company employees have been challenged to identify opportunities for improvement. Tools such as flow-charting, Ho-shin (assembling clusters of ideas), and cause and effect charting have led to a sharper definition of the processes and related issues. The process improvement effort has led to improved communications between departments, the development of work teams, and has focused problem solving on the processes rather than people, says Wilkinson.

Their efforts have already significantly increased sales, lowered costs and avoided unnecessary investment, all in the millions.

There has been considerable investment by the company as well. For example there has been a program of replacement and modernization to replace older diesel-powered engines with cleaner, more efficient equipment. Generators, off-highway trucks and loaders have all been targeted as part of an initiative that affects the whole of Hawaii. The state is now part of the West Coast Collaborative, the first pilot project of the federally-supported National Clean Diesel Campaign.

Environmental credentials

Grace Pacific is among the many companies that have seen how going green, far from being a drain in resources, can be profitable. “We love the environmental people,” says Bob Wilkinson.

“When I talk to the government, I ask where new regulations are heading because I want to be ahead of competition in my preparations. Our business relies heavily on recycling: we can’t get enough old concrete and building materials to crush up and feed into our aggregate mixtures for new road and house building projects. And as far as changing engines goes, that makes business sense too because we find we need 15 percent less fuel to run our operations with the new equipment.”

Not an ounce of material goes from Grace Pacific’s operations into Hawaii’s hard-pressed landfill sites. All the surface material stripped off the roads prior to resurfacing goes back into making new roads or foundations. Rock is scarce on the islands, and to get the right stone for general and specialty aggregates, Grace Pacific is having to import from as far afield as Canada.

The construction business is still strong in Hawaii, says Wilkinson, so growth should continue next year and beyond. “Both domestic and commercial sectors are doing well. A lot of condominiums, and a lot of regular housing, are being built.” The core business is still road building and related activities, and right now we’re investing in making sure that we have good supplies of raw materials for that.

Moving the boundaries

“My vision is to continue to grow geographically, but we will probably be looking towards Asia rather than towards the United States,” he continues. “We are getting into the sign business; we’re getting into the fence business; we are into road traffic systems and security and my vision is to see us expanding all of these activities as our customers require.

One of Grace Pacific’s largest customers is the United States Defense Department, for whom it builds runways and roads. The government is going to spend $15 billion in moving its bases in Okinawa, Japan to the island of Guam: it would make very good sense for a medium sized operator from Hawaii to undertake some of that work.

Other than that, Wilkinson sees plenty of opportunities to add value on the road networks and supplying as a subcontractor to the general contractors: Aside from the road building material itself, his company is already providing street signs, fences and safety barriers – why not branch out into lighting, electrical and landscaping products and services, for example?

A smart coat

That takes us neatly back to Grace Pacific Maintenance Solutions, a subsidiary formed in 2002 in response to the discovery of a new product developed to protect the tiles on space re-entry vehicles. MicroGuard, an inorganic siloxane surface treatment had been successfully used against corrosion and mold, and it fascinated Bob Wilkinson, whose background is in the coatings business. He realized these problems are also faced by residents and businesses in Hawaii, so he decided to take a look at the product, and acquired the rights to exclusively distribute MicroGuard in the state of Hawaii.

He calls MicroGuard a modern miracle. It has unique properties in that it’s very chemical and heat resistant. “It protects concrete very well and is good on tiling, signs and other things that need protection,” he says. Its primary market is air-conditioning, he adds, explaining that it can be applied extremely thinly and so is ideal in any situation where the air is required to flow unimpeded. From its standing start in 2002, GPMS is expected to report sales of more than $2 million this year.