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Business Observer Friday, Mar. 24, 2017 1 year ago

Ignore Defeat

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It's been a long, and not-yet-over climb out of the recession depths for a Tampa builder. The founder's resolve inspires the company to remain resolute.
by: Mark Gordon Managing Editor

Rebecca Smith was nearly giddy one day in 1989 when, a few weeks into running her own construction business, she landed her first major work opportunity.

A real estate executive with USAA in Tampa told Smith he needed a floor of office suites converted for a new tenant, a local IBM office. Smith had only quit her project management job with another construction firm months earlier to follow her dream of owning her own business. She founded her company, A.D. Morgan, with a pile of credit card debt to buy work outfits and lots of moxie. (The company name is derived from her two golden retrievers at the time, Addie and Morgan; Smith thought her last name was too boring to front a firm.)

The IBM build-out had one hiccup: Smith had a week to do it. She got started the next day, a Friday. She called some industry contracts, she remembers, at “beer thirty” to start finding subcontractors.

At the end of that first day the client saw Smith, in jeans, ripping up carpet. The dedication, she recalls, won him over. The client hired A.D. Morgan for various projects for the next two years. “That's what launched our boat,” Smith says. “That kept us busy and allowed us to build our brand with A.D. Morgan.”

Smith has since built Tampa-based A.D. Morgan into a thriving construction firm, with more than $700 million in work over the past three decades. It does design-build and project management, focusing mostly on education and public-sector work, from schools and research facilities to parking garages, libraries and jails. Past projects include the State Street garage in downtown Sarasota; New River Elementary School in Wesley Chapel; and the Baughman Center, a nondenominational chapel at the University of Florida. The Tampa Bay American Institute of Architects named A.D. Morgan Contractor of the Year in 2015, specifically citing its “exemplary attention to detail, fine workmanship and craftsmanship.”

But in the shadow of the long-term success, A.D. Morgan, more recently, has struggled to regain its footing — at least in a sales comparison to the boom years. The company's revenue hovered around $75 million a year in the mid-2000s and peaked at the figure in 2006. Revenue fell to $12 million by 2013. The payroll is down from more than 50 employees to 32 today. It shuttered two offices, and now has locations in Bradenton, Lakeland and its Tampa headquarters.

While sales rose to $34 million last year, Smith, 56, laments that the company hasn't yet returned to glory days like some peers have in the economic recovery. Lakewood Ranch-based Willis Smith Construction, for example, which has competed with A.D. Morgan to win work, had $74.4 million in revenue in 2015, up 67.9% from $44.3 million in 2013.

“We aren't in our sweet spot,” Smith says. “We aren't where we should be.”

Making the situation even more confounding: A.D. Morgan, says Smith, has $120 million worth of bonding and $80 million in bonding insurance for a single project. Yet new projects are scarce.

Why hasn't the company hit its post-recession stride?

Market forces

Smith cites two market-based issues, for starters.

One is a large portion of the construction industry recovery, she says, is in condos, hotels and multifamily projects. “When the rebound happened, it happened mostly in the private sector,” says Smith. “That's not really our market.”

A related issue is the downturn forced bigger builders down-market, into spots where A.D. Morgan usually responds to requests for proposals. Those larger companies, says Smith, some with more than $1 billion in annual revenue, have the financial wherewithal to make lower bids. That also cost A.D. Morgan some work.

A majority of the work the company has done of late, says A.D. Morgan Vice President of Operations John Kalaf, are showcase projects. One of those is a renovation of the cruise passenger terminals at Port Canaveral. Another is the Polk State College Center for Public Safety in Winter Haven. That $30 million project, a 101,500-square-foot complex, is next to the Polk County Sheriff's Office Operations Center. It houses the college's programs in criminal justice, emergency medical services and fire science technology.

A.D. Morgan handled design and construction for the public safety center, which opened last year. “That's a project where people from all over the country are coming to look at it, to see how they can design and build a training center like that,” Kalaf says.

Kalaf and Smith's working partnership goes back to the late 1980s, when they both worked at Federal Construction in St. Petersburg. Kalaf joined Smith at A.D. Morgan in 1994, and says he's long been impressed with her ability to navigate what could be a complicated industry.

“Rebecca is all in,” says Kalaf. “There's no middle or halfway or tepid with her. She's all about doing whatever she can to make the company successful.”

School's out

A.D. Morgan hit another bump in 2015, when the company was caught up in a battle with the Sarasota County School Board. It thought it had won the job to build a new campus for Suncoast Technical College in North Port. A school board selection committee ranked A.D. Morgan No.1 among all companies that responded to proposal requests to get the work.

But then-Sarasota School Superintendent Lori White, who retired at the end of February, submitted a separate recommendation for Willis Smith to get the work. White later testified in a court hearing that Willis Smith, which finished second in the bid process, would be a better fit because it built the Sarasota Suncoast Technical College campus in 2009. The school board, in a 4-1 vote, ultimately bypassed the selection committee's recommendation and went with Willis Smith.

A.D. Morgan, in response, filed a complaint with an administrative court in Tallahassee. A judge in the case ruled that while the board's decision left itself open to an “appearance of favoritism,” it didn't break any rules or laws in choosing Willis Smith. “The process worked the way it was designed to work,” says School District spokesman Scott Ferguson.

A.D. Morgan executives didn't necessarily see it that way.

“We played by the rules, had the No. 1 score and still didn't get the work,” says Kalaf. “It was very deflating.”

Smith likewise calls the board's decision illogical and frustrating. But it's not a tombstone. “When we are the best, and are told we are the best, and not getting the work, that's a problem,” Smith says. “But we will keep trying. We will play it straight. We are going to continue to kick butt and do the best we can.”

Alternative strategies


The company isn't shying away from public-sector work, despite the school district imbroglio. Earlier in March, for example, Bradenton city officials chose the company as a runner-up for a parking garage project. A.D. Morgan could end up doing the work if negotiations with the top pick falter.

Smith also has a plan to target alternative revenue streams. The heart of that effort is with a software company she founded in 2014, WoofGang Solutions. The company created a software program to help construction project and facility managers communicate with each other on worksites in real time. WoofGang won't replace A.D. Morgan, says Smith, but it could develop into a strong supplement.

The tenacity Smith has to fight for her company's survival, from the software business to challenging the school district, is reminiscent of how she started A.D. Morgan. She was 29 back then, and not far removed from earning a bachelor's degree in architecture and a master's in building construction from the University of Florida.

The daughter of a NASA rocket scientist, Smith says her biggest ally in going out on her own was her naïvete that women didn't really do that kind of thing in Florida in 1989. When she got rejected for work in the early days it only made her push harder.

“I thought if I did good work I will get the jobs,” says Smith. “When I didn't get the job, I didn't think it was because I was a woman. I was just benign to the concept of defeat.”

(This story was updated to reflect the correct date Lori White retired.)

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