Dunbar Mechanical

Answers from Stephen E. Dunbar (Steve), president and CEO

Dunbar Mechanical started in 1936 as Glenn Dunbar Plumbing and Heating in Delta, Ohio, a small town just west of Toledo, by the husband-and-wife team of Glenn and Victoria Dunbar. The company moved into Toledo in the late 1950s and went into commercial construction at that time. Stephen’s older brother, Harley, became president in the mid-1960s and took the company into refineries, where the Dunbars learned to be an industrial contractor and a prime contractor.

Please describe the history of Dunbar Mechanical after you took over as president.

I became president and part owner of Dunbar Mechanical in the late 1980s. During the 1980s and 1990s, we developed a strategy of focusing on the ultimate end users (owners) of our services. We also focused on bringing value to our customers and becoming more than just a run of the mill mechanical contractor. This strategy, as well as living our mission, “To be customer driven, fair and predictably excellent with a commitment to employee growth,” allowed us to grow to be one of the 100 largest mechanical contractors in the United States (according to industry magazine rankings).

In 1990 we moved into our 115,000-square-foot facility on Reynolds Road, which allowed us to add greater value by focusing on planning and scheduling, 3D CAD, building information modeling (BIM) and production fabrication. We also began to focus on design-assist partnering and integrated project delivery to allow the owner to know exactly what they were paying for and to assure that they were getting the finished product they needed and desired.

On the last day of December, 1998, we sold the company to FirstEnergy Corporation, a utility holding company that purchased 11 mechanical/electrical construction firms across the Northeast and Midwest. I continued to manage the company as president and CEO. FirstEnergy’s strategy was to vertically integrate their deregulated services. We also looked at it as beneficial to Dunbar, because we believed it would allow us better access to customers at a different level, as well as allowing us to expand our services.

During our time as a FirstEnergy company, we expanded and professionalized our service group and established offices in the Cleveland, Columbus and Detroit areas. We also developed FirstEnergy as a long term customer.

In 2000, Dunbar Mechanical became ISO certified. We determined to become certified to have authoritative third party recognition that Dunbar truly does what we say we will do and to show operational excellence. Currently, Dunbar Mechanical is ISO 9001:2008 certified. We perform 33 annual internal audits of our systems as well as two annual external audits by a registered ISO auditor.

In October, 2006, Peter Corogin, majority owner of Lake Erie Electric, and I bought the company back from FirstEnergy. Since regaining our independence, we have continued to focus on operational excellence and on expanding our product offerings to our customers. I continue as president and CEO, Peter is chairman.

How did you get involved in the industry?

I grew up in Dunbar Mechanical. I worked in our warehouse and shop while I was a teenager and drove a truck as soon as I had my license. After I graduated from Mt. Union College in Alliance, Ohio, I taught high school math for a year and then decided to join the company on a full time basis. At the same time, I entered the University of Toledo to earn my mechanical engineering degree.

What are your initiatives for the company?

I am working with my son Erik to identify and develop the next generation of managers for Dunbar. We are installing a completely new project and business management system. We intend to go live in April 2011. We anticipate that this will streamline our project management processes, eliminate redundancy in reporting and eliminate paperwork.

In Estimating, we are working on estimating using electronic takeoff with a touch screen process. We are also looking to implement a process that will allow estimating software and CAD software to communicate directly with each other.

We have a drive to increase the percentage of our labor that is done in our production and manufacturing facility, and we are putting increased emphasis on safety, which will be “top of mind.” We want to show both our employees and our customers that safety has value. We are implementing additional safety processes and have instituted a glove policy that, hopefully, will eliminate hand and finger injuries.

We are training more of our people to earn LEED certifications. We are working to grow our newest product lines — building automation systems, building commissioning, retro-commissioning and energy services. We also want to grow our presence in northeastern and central Ohio.

Please describe your markets (commercial, educational, industrial) and what services you provide.
Approximately 65% of our work is for industrial customers, with a heavy emphasis on food, energy/power, steel, chemical and automotive. Approximately 30% of our volume is in healthcare. The remainder of our work is large commercial. Dunbar Mechanical is a full service mechanical construction firm. The product lines/services we provide include:

• Piping (all types): carbon steel, stainless steel, other exotic metals, fiberglass, plastics (all types), aseptic, process, ammonia refrigerant, utility, power
• HVAC — both wet and dry
• Plumbing
• Medical Gas
• Rigging, machinery moving, equipment setting
• Material handling systems, conveyor
• Structural steel fabrication and erection
• Boiler installation
• Commissioning, retro-commissioning; test, balance
• Building automation systems, temperature controls
• Mechanical systems maintenance — 24-hour service
• Green buildings, energy savings construction
For a “snapshot” view of our company, visit www.dunbarmechanical.com.

How has your company dealt with the economy?

In late 2008 we saw the economy slowing down, so we reduced our office staff by almost 25%. This was painful, but necessary for the company to adjust to the business levels in Ohio and Michigan, as well as to reduce our overall project cost structure. Additionally we challenged our project managers, estimators and field force to develop more efficient ways to perform the work, thereby lowering the overall cost for our customers. We added the Trimble Robotic Total Station to begin to reduce our CAD and field layout costs, while improving accuracy. Also, in recent months we have begun to make more customer touches to assure that current, past, and potential new customers are aware of Dunbar Mechanical, our capabilities and our availability to perform work for them.

How can mechanical contractors bolster or maintain business (sustainable, solar, repair and remodel, etc.)?

Mechanical contractors must work to make sure that whatever we do is in the best interest of the customer and that the services we provide help to make our customers more competitive in an increasingly difficult market. We must look for ways to make sure that we provide integrated services that assure that the customer has mechanical, building and process systems that work well as total systems. We must also develop methods that show the benefits of lowering overall life cycle costs versus immediate short term costs. This is particularly true in renovation and retrofit work, but applies to new construction as well.

We see opportunities in alternative energy, energy services and sustainable energy work, but only to the extent that it is economically feasible and has a reasonable payback. We also see an increased need for professionalized service providers, and we are working to provide that type of mechanical service, both for preventive maintenance and for diagnosing and providing emergency repairs.

How do you see the economy, short term and long term?

Our geographic market is primarily Ohio and southern Michigan. Our industrial sectors are showing increasing signs of coming out of the doldrums. However, they still seem to be very cautious about spending capital. Dunbar expects there to be increased construction activity in the industrial sector. Part of this is because our customers are seeing some increase in consumer demand. Also, our customers realize that they must continue spending to improve their products, while reducing production costs, if they are to continue to be competitive in a global economy.

The commercial retail, hospitality and office sectors in our geographic markets are still very depressed, with a significant amount of space readily available. So we do not anticipate significant activity in this sector. Our healthcare market is starting to increase capital spending again after an approximately two year hiatus. Part of this is technology driven, as healthcare institutions want to continue to provide the best in medical care to their clients.

Long term prospects in our geographic markets are driven in part by federal actions in both healthcare and in any “cap and trade” activities. We continue to be guardedly optimistic about the long term industrial market in Ohio and Michigan. Our industrial customers must continue to be innovative and nimble in order to adjust to global demand for products. Our customers must also have a regulatory environment that allows them to compete globally.

Dunbar must also work with our customers to assure that the mechanical and project services we are providing allow them to provide products quickly and efficiently to their customers.

How do you see the future of mechanical contracting (trends, technology, consolidation, etc.)?
We believe that we will continue to see shorter and shorter schedules for projects — from concept to completion. This will mean a need for improved project integration both between construction disciplines as well as between design and construction.

We see a trend to building facilities and processes that have shorter life spans. Products and manufacturing processes are changing so rapidly that erecting processes and buildings that last 20 or more years may no longer be optimal. Joining methods are becoming simpler and more mechanized.
We see a significant trend toward off-site modularization of building and process components, often modularizing entire rooms, frequently incorporating all aspects of construction.

Communication is becoming more open, automated and transparent with the advent of project websites, FTP sites, etc. Safety is becoming increasingly important, with many customers demanding construction companies that can demonstrate successful safety programs. It is becoming more and more accepted that safe workers are more productive workers and that this leads to quicker project completion.
In our geographic markets, we see a growth in more regionalization of mechanical contractors. In the past, contractors often did not travel more than 50 miles or so. Now we are seeing contractors willing to perform work up to 300 miles from their home offices. Part of this is due to the improved communication technologies and improved project management systems.

How do you see Dunbar Mechanical in the next five years?

• We will be completing a transition to a much younger office staff and project management group, as well as to a younger field supervision force.
• We will be much more technologically savvy in project management processes, estimating processes, CAD/design and layout processes and communication processes.
• We will be using many different automated or mechanized construction techniques and doing ever increasing modularization.
• We will be providing more integrated project resources to our customers, with increasing collaboration both with our customers and with designers and other construction disciplines.
• We will have expanded somewhat geographically, especially growing our presence in other areas of Ohio and southern Michigan.
• We will have a more regional service group that will provide integrated building automation, commissioning and energy services.
• We may grow through providing additional integrated mechanical services.

The last time I said, “Today is a good day,” was …

Wednesday, February 9. We held a Lessons Learned meeting with our customer FirstEnergy on the Fremont Energy Center project, which is a greenfield, 700 megawatt combined cycle power plant. FirstEnergy was very complimentary of our efforts and how well the project went. They would use Dunbar Mechanical again, as well as the integrated project delivery method we used, to perform another project together. Fremont Energy Center, at more than $40 million, is the largest single project in the history of Dunbar Mechanical.;