A General Sheet Metal employee bends metal in the shop. GSM of Clackamas, Oregon, has performed fabrication for other contractors for more than 40 years. Photo: GSM
If someone calls ACP Sheet Metal asking if it can quickly make duct for a project, staff doesn’t have to ask company President Nathan Dills.
They know what he’s going to say. Do it.
“I don’t let my guys say no,” said Dills, whose family has run ACP since 1977. "With the staff we have, both in the office and in the shop, we will do everything we can to meet a customer’s needs and schedule."
As demand for duct fabrication services near all-time highs, more SMACNA members are offering to make ductwork for other contractors — including local competitors and in some cases, nonunion companies.
It’s smart business, they say. With ongoing supply chain problems making it difficult for many contractors to source raw materials, having access to sheet metal and the ability to fabricate duct on short notice means that they can sell their products at premium prices.
And while this is a new venture for some contractors, for others, it’s been a part of their business for decades.
Oregon mechanical and architectural contractor General Sheet Metal (GSM) has supplied ductwork for what company CEO Carol Duncan describes as “our friendly competitors” for over 40 years.
ACP Sheet Metal in Oklahoma City buys all its ductwork from Midwest Fabricators, a separate company set up to supply duct to ACP and other regional contractors. The 21,000-square-foot shop contains a full coil line, plasma table, two large press brakes and other machinery. Photos: ACP Sheet Metal.
“We’ve always had a good reputation in the marketplace for quality duct and being able to respond quickly to needs,” said Duncan, who sits on SMACNA’s Executive Committee as the secretary and treasurer.
2022 marks the 90th year in operation for the company, which does around $30 million in annual revenue.
For GSM, Duncan said it makes business sense to keep the company’s coil lines, plasma tables, press brakes and other sheet metal equipment running rather than letting it idle between projects.
“It’s an expensive proposition to set up a shop,” she said, adding that making product for other contractors in SMART Local 16 helps keep her employees working.
Duncan estimates that around 30% of the ductwork GSM fabricates is installed by other contractors.
“It keeps our shop busy,” she said. “It keeps our hours local.”
Outside fabrication saves clients money
For the contractors based in some of the region’s larger cities, such as Seattle and Vancouver, Wash., hiring Clackamas-based GSM to make duct also saves money when they’re working on local projects.
While Duncan prefers to keep her shop and its workers busy, the ongoing supply chain issues related to the COVID-19 pandemic don’t always make it easy. GSM has taken to stockpiling a four- to six-month supply of steel coils because of market uncertainty. Previously, it was easy to have steel delivered within one business day, she said.
“If we can’t get something, that’s not moving the project along,” she said. “(That) holds up the fabrication, which in turn holds up the whole project.”
Despite the supply chain issues, Duncan said GSM rarely has to turn down a request to make duct for an installing contractor. And she doesn’t like to do it.
“If we tell somebody no, we might not get them back,” she said.
An Oklahoma pioneer in fab-only
Commercial, institutional and industrial contractor ACP Sheet Metal was founded by Harold Dills in 1977. Today the company is run by his son Nathan, a former local prosecutor who gave up practicing law to help run the family business.
In addition to ACP, Dills also oversees Midwest Fabricators, an independent company that makes ductwork for ACP and other sheet metal contractors in the region.
ACP — or what Dills calls “my installation contracting company” — buys almost all of its duct and fittings from Midwest Fabricators, Dills said.
“The only thing that we don't build that my contracting company would purchase from outside is snap-lock pipe and adjustable elbows,” he said. “We purchase (those) because we don’t have any equipment to build them.”
Both companies are based in Oklahoma City. In fact, they’re in the same building. ACP employs the estimators, project managers and installers, while Midwest employs the shop workers and uses up-to-date technology and equipment such as coil lines, plasma tables, press brakes and Pittsburgh machines.
According to Nathan Dills, it was both competition and cost savings that inspired Harold Dills to start Midwest Fabricators in the early 1990s.
“(My father) was afraid that competitors in town would not buy from ACP Sheet Metal,” he said. “But if it were a second company, he’d have a better chance of selling to them.”
Starting a separate company also saved him money on his worker’s compensation insurance coverage, due to the way they were classified by the insurance company.
Recognized an opportunity
Dills said his father knew that a lot of the smaller HVAC contractors in the region would never be able to operate their own sheet metal shop. He saw an opportunity.
“The target market really was some mom-and-pop (shops), some smaller businesses that didn’t really have the automation or the equipment or the capacity to produce what we could produce,” he said. “They had the capacity to install it. They just didn’t have the bankroll to either open a shop, buy all the equipment for a shop, or (hire) all the people to know how to run it.”
In the early 90s, owning both an installation contractor and a stand-alone fabrication-only shop was unusual in the Oklahoma City market, and Dills said it’s still not common.
“I don’t know very many companies that have completely separated their shop into a different business,” he said. “They may have a different business that does spiral pipe, but nobody has their shop completely separated out that I know of. So we’re kind of an anomaly when it comes to that.”
Midwest Fabricators’ 21,000-square-foot shop includes a full coil line, a 20-foot coil-fed plasma machine, water jet for duct liner, two shears, two large press brakes, a spiral duct machine, a gasketing machine for spiral fittings and an ovalizer, plus smaller sheet metal machinery.
“We’re the only shop in town that has an ovalizer,” Dills said. “We can make perforated, inner liner, double-wall, round and oval pipe. And not very many, if any, of the shops in town keep the materials in stock to do that.”
Those kinds of capabilities are why close to half of duct Midwest Fabricators manufactures is installed by contractors other than ACP Sheet Metal.
“We have — and pride ourselves on — the ability to get it out and meet customer schedules,” Dills said. “I just took an order this morning from a small contractor that's 45 minutes outside of Oklahoma City. He called and said, ‘Hey, tell me if you've got this in stock. … I need 20 feet of 14 inch pipe, 20 feet of 12 inch pipe and 10 feet of 10 inch pipe with some couplings and some end caps. And I said, ‘We've got it.’ And he said, ‘OK, I'll see you in an hour.’”
At GSM in Oregon, Duncan said she has a similar philosophy.
“It’s also a matter of making sure it’s right the first time and that the quality is there,” she said. “If you get it right the first time and the quality is there, they’ll be back. If the duct’s on time, but it’s not very good, you won’t see them again.”
Price is less important today
One consideration that isn’t as big an issue as it was in the past is price. With the supply chain unable to keep up with demand, GSM and Midwest Fabricators are regularly fabricating duct that’s being installed by nonunion workers — even though labor costs are typically higher for union-made ductwork.
Dills said he’s OK with that.
“I would rather the union get part of the pie than none of the pie,” he said.
Jay Bowman isn’t surprised. The partner at construction industry consulting firm FMI has spoken numerous times at SMACNA events about the evolving HVAC and duct fabrication industries.
Bowman said this is among the craziest markets he’s experienced in three decades of studying HVAC construction. Sheet metal has seen some of the biggest price spikes and longest lead times of all construction materials.
“Supply trumps price right now,” Bowman said. “If you’re the one who can guarantee supply, you’re going to get the project.”
The situation means that the share of ductwork produced by noninstalling companies is likely much bigger than the 30 percent historical average that FMI previously reported, he said.
“My gut tells me that’s gone up,” Bowman said. “Right now, I would peg it higher at 40 to 50 percent. I don’t think it’s a permanent shift, but I do think it’s very reflective of where we are now.”
If the recession many economists are predicting does hit in 2023, Bowman said he expects the share of duct made by fabrication-only firms or outside contractors to fall back to its historical average of around one-third of the market.
3 Questions to Ask Before You Fabricate for Other Contractors
Carol Duncan, the CEO of General Sheet Metal in Clackamas, Oregon, said it can be a good add-on service for contractors who have the workforce and resources it requires.
“Strategic alliances are good for all, in my opinion,” she said. “If a larger contractor is coming into your area, it’s a great opportunity to keep the labor hours local, provide quick turnaround for rush orders, provide a service and develop relationships that benefit all parties.”
However, it may not be right for every company. Nathan Dills, president and owner of ACP Sheet Metal in Oklahoma City, said while it can be a good way to keep equipment running and shop workers busy, there are risks, such as not prioritizing projects properly.
So before you jump in, here are three questions to ask yourself when deciding if fabricating for others’ projects are right for your company.
How well do you know your customers?
Dills said this is an important issue. Unscrupulous contractors may inquire about your fabrication prices only to see if their own prices are competitive.
“We’ve sent contractors prices and they never call us to place an order,” he said. “Then we find out they’re buying it from somewhere else.”
They may use your quote to secure a lower bid from competitors. Or, Dills said, they’re a competing shop that’s trying to figure out how to price their ductwork.
“So you have to trust them,” he said. “You just have to figure out what the customer’s intent is. And you have to not be afraid to fire a customer.”
Do you have the shop workforce, equipment and space that you need?
Duncan points out that if your shop is not ready to take on extra work, you’ll quickly gain an unreliable reputation, which will take years to recover from.
“Contractors need to consider their own fabrication needs, being able to prioritize all projects, for both in-house customers and outside customers,” she said. You need to keep internal and external customers happy.
And Dills added that contractors who fabricate for others should have a shop big enough to stockpile raw materials and finished product, especially with today’s struggling supply chain.
“I keep all of the material on hand,” he said. “I keep stainless steel. I keep aluminum. I keep perforated. I keep the other materials that I can make spiral pipe out of where a lot of people just keep galvanized.
“I keep that material in my facility where if you call me today and you say, ‘Hey I need 400 feet of double-wall pipe with perforated liner,’ I can go out there and run it because I’ve got the perforated material sitting on the floor.”
Do you have the right staff?
A sheet metal contractor needs to have the right kind of salespeople to ensure a fabrication business succeeds, Dills pointed out.
I have a great staff. Our VP over production, Jeff Duerksen, does a great job meeting with customers, taking orders and selling projects," Dills said. "He will even go out and measure up a small job to ensure we produce exactly what is needed for a customer’s project.
And Dills said company owners need to know how to talk with their customers. Many don't.
“There’s a lot of business owners who don’t have what my dad called ‘the gift of gab,’” he said. “I’ve got that. I was a courtroom lawyer for a long time. I can walk in a room and know everybody’s name by the end of it and try to sell somebody some ductwork while I’m in the room.
“Because it’s still about salesmanship,” he added. “It’s not just about answering the call and placing an order. You’re more than an order taker.”