Monday, July 16, 2012

Flintlock: The outsiders

How the Weiss brothers built NY's dominant nonunion contractor.

Weiss work--and they can get it: Flintlock Construction's Andrew Weiss (crouching, left) and brother Stephen Weiss (right) have nine 20-story-plus building projects in Manhattan
By Daniel Massey 

Last month, a boom truck lifted hundreds of metal studs toward the top of a 27-story hotel under construction at Lexington Avenue and East 45th Street. Blocks away, a backhoe clawed into the earth on West 42nd Street, digging a hole for a 37-story hotel. Just to the south, on West 30th Street, workers unloaded steel rods that will reinforce the concrete structure of what will be a 22-story Courtyard by Marriott.

Construction of three 20-plus-story buildings in the city within a few blocks of each other might seem to be no big deal. But all three hotels are being built by Flintlock Construction Services—and all three are being built using nonunion labor. A decade ago, it would have been virtually unheard of for a nonunion firm to land even one job in Manhattan of 20 stories or more. Unions had a firmer lock on the industry, and nonunion builders did not have the expertise to handle large, complex projects.

But the 15-year-old Flintlock has active permits to construct or substantially alter nine buildings on the island nearly that size or taller, mostly in midtown. Its success has put it in the crosshairs of organized labor, which contends that the firm succeeds by undercutting union wages and benefits.

Flintlock's bread and butter is limited-service hotels, developed mostly by out-of-towners, but it is also making inroads with local owners who traditionally build union, causing further worry in labor circles. The company is turning a 17-story former Salvation Army boarding house on Gramercy Park South into high-end condominiums for Zeckendorf Realty, perhaps the first of the city's longstanding union developers to cast its lot with a nonunion firm.

With big-time owners expressing a new willingness to consider nonunion work, Flintlock's growth may be constrained only by the dearth of nonunion subcontractors with the skill to take on complicated projects.

"I'd look at union buildings going up a few years ago, and I was amazed at how fast they would go up and how coordinated it was," said Andrew Weiss, Flintlock's managing member. "I'd say, 'We could never do it.' But we're there now. We're the same time period, if not faster."

Flintlock's roots date back four generations. The firm is run by Mr. Weiss, 51, and his brother, Stephen "Chip" Weiss, 55, whose great-grandfather built single-family homes in the outer boroughs. They got their start working with their father and grandfather in the early 1980s as developers. In the early 1990s, the duo branched out on their own, adding contracting to their portfolio. At first they built union, but when they started to get affordable-housing contracts in the early 1990s, they turned to nonunion labor.

"We did a lot of affordable housing, where every penny counts," said Andrew Weiss. "We ended up nonunion not as a goal but by accident. You just couldn't make the projects work any other way."

Doing more work than ever

In 1993, they formed Diversified Flintlock, a joint venture with DeCosta Headley, then a Democratic Party operative from Brooklyn who helped them win government affordable-housing contracts that had preferences for minority firms. Diversified drew scrutiny when Mr. Headley pressured a community housing organization for building work, according to a 1998 Daily News article.

Priscilla Wooten, a councilwoman whom Stephen Weiss and Mr. Headley supported, advocated for the company when city housing officials questioned the quality of the firm's work. One of Stephen Weiss' firms had sold two apartments to Ms. Wooten and provided free office space for her campaign headquarters.

In 1997, the brothers established Flintlock Construction Services, beginning a gradual transition away from affordable housing and other work they did with Mr. Headley. Along with other big nonunion players like Cava Construction and Hudson Meridian Construction, Flintlock has eaten away at the market share of union construction firms. Its website boasts that Flintlock was the first nonunion company in the city to construct buildings taller than 11, 24 and 31 stories and to use a tower crane.

The firm also maintains ties to the Weiss family's developer roots, holding ownership stakes in three of the hotel projects it has underway. At a time when construction in the city is generally slow, Flintlock is doing more work than ever. Its best 12-month stretch was from 2008 to 2009, when revenue hit about $75 million, according to the company website. The Weiss brothers would not discuss current revenue, but said that they will do even better this year.

"To us, Flintlock's ability to win work is a poster child for how much more we need to accomplish in reducing costs to be competitive," said Louis Coletti, president of the Building Trades Employers' Association, which represents union contractors. "They start in affordable housing, they learn, and they progressively go into different markets, winning larger and larger work."

Nonunion building grew quietly during the city's construction boom in the middle of the last decade. Unions were at or near full employment, leaving smaller jobs in the outer boroughs for nonunion companies that had previously been relegated to affordable housing or other small projects. As the nonunion firms gained experience, they migrated into Manhattan, winning midsize jobs.

"It's taken almost 10 years to bring the nonunion subcontractors up to the level that they have to be to compete with union quality," said Stephen Weiss, Flintlock's director of finance and development.

And when the boom turned to bust, nonunion firms were able to pick up unemployed union workers, further increasing their capacity. Flintlock's superintendent on the Lexington Avenue hotel project, for example, is working his first nonunion job after a long career in union construction.

With developers desperate to cut costs any way possible in a new economic environment, nonunion construction—and its 20%-plus discount off union work—has become an increasingly viable option.

The Weiss brothers say they are able to bid 25% to 40% lower than union general contractors because they are not constrained by union work rules. For example, it costs $1 million a year to run a hoist on a union project, but only $100,000 on theirs, the brothers contend. "Our hoist is run by a person who is trained; it's a $15-an-hour job," said Stephen Weiss. "It goes up and down. You don't have a master mechanic; you don't have a master electrician."

Their subcontractors also do not pay union wages and benefits, which cuts costs considerably. In the past few years, Flintlock has focused on hotels, which the company often builds for developers from "right to work" states who are unfamiliar with union labor and are attracted by the firm's relatively low costs.

"What's made Flintlock successful is they established a niche in hospitality and they stuck to it," said Kevin Lorenz, president of Allied/CMS Inc., a construction management services firm that works with Flintlock. "They know the requirements of the major flags—the Hiltons, the Hyatts. They're up front about what a project will cost, and they're very accurate."

The Zeckendorf job (about which neither Zeckendorf Realty nor the Weiss brothers would comment) suggests that the company is ready to ascend to new heights. Major union developers are looking at using some nonunion labor, and a company like Flintlock could be an option. But construction experts and the Weiss brothers said there are limits to the firm's growth, though they offer different reasons.

"When you see their business growing, the base of nonunion subcontractors that can build a job safely, build it with quality and build it on schedule gets constrained," Mr. Coletti said.

Ron Berger, executive director of the Subcontractors Trade Association, an alliance of union subcontractors, said that union painter, electrician, plumber and sprinkler contractors have received calls from Flintlock in recent months asking them to bid on jobs. "Our people told them, 'Thanks, but no thanks,'" he said. "Every one of them, I'm sure, needs the business, but they don't want to incur the union problems that they'd have if they went out and did jobs nonunion."

The Weiss brothers said they've put out feelers to union subcontractors, but not recently. They said such companies wouldn't be able to meet their price points even if they were willing to bid. Flintlock would rather stick to what has made it successful than try to get in on a massive project like the Related Cos.' 46-story, 1.7 million-square-foot Coach tower at Hudson Yards.

"I don't know that that building could be done nonunion," said Stephen Weiss. "I don't see us doing it nonunion. And I can't think of anyone else who could." They said projects of a million-plus square feet should remain union because they are complex and require a huge amount of manpower. Also, as projects increase in size, the benefits of being nonunion dissipate.

"It's an asymptote," said Stephen Weiss. "There is a size at which there is an economy of scale where the difference between union and nonunion shrinks."

Speaking of the savings from using a nonunion hoist, he said, "In a $40 million project, that's very significant, but in a $200 million project, not so much."

Paying far below the union rate

Construction unions have had the company on their radar for years but have been slow to respond to its recent gains. The carpenters and laborers are handing out fliers at the West 42nd Street site that claim Flintlock's subcontractors are undercutting union wages and benefits. One tradesman who has worked on several Flintlock job sites said that carpenters earn from $15 to $40 an hour, without any benefits. Compensation for a union carpenter is about $83 an hour, including benefits.

"The carpenters working on Flintlock projects continue to work under substandard conditions with low wages, no health care or any other essential benefit," said a spokesman for the District Council of Carpenters.

The carpenters' union is also meeting with employees of Flintlock subcontractors to help build their case that the companies undercut union pay packages. It's a notoriously difficult industry to organize, because many of the workers are believed to be undocumented, so for now the union reps are just gathering information. Even if the unions could mount an organizing campaign, they say union contractors wouldn't be able to hire the workers because many lack proper work authorization documentation.

Attention could soon turn to the developers that use nonunion companies like Flintlock. The carpenters say that they are involved in a new coalition of unions that is making plans to target developers.

The Weiss brothers remain unfazed.

"People don't choose us because they love us," Andrew Weiss said. "It's the price."

6 comments:

  1. SO THE OWL WAS THE CULPRIT. DON'T THINK SO D. WALSH. DON'T THINK SO M. BILLELO, DON'T THINK SO SPENCER & BALLANTYNE. MCWILLKIAMS IS THE LARGEST PART OF OUR CURRNET PROBLEM. HE MUST BE HELS ACCOUNTABLE FOR LOOSING MARKET SHARE.

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  2. I am really very impressed with it. Keep blogging!

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  3. fantastic post and Thanks for sharing this info. It's very helpful.
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  4. It's not a 20% difference more like 50-60% difference, wake up to the fact that they will continue to grow market share until the union wage and benefit rightsizes. These numbers are significant and if Zeckendorf is using Flintrock others will. Lou Colletti and Ron Berger can say what they want, they are protecting the old ways of working which have been eroded tremendously. The market will dictate not some goofy Association heads.

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  5. let me tell you how smart flintlock is when the barruch college went up on 25th st across the street from the original 157 building the union carpenters working for the gc were being paid by a minority company to meet dasny requirements that company was diversified inch by inch, diversified borrowed the money from flintlock with an 11% interest so as union carpenters were working the more they worked and got paid the more money andrew weiss made this information given by a former rep who uncovered this mater

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  6. so are u saying they went back and forth between jobs working union and non-union?

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