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NH’s Geralco Thinks Big and Goes By the Numbers

Thu August 12, 2004 - Northeast Edition
CEG



Geralco Corporation is a small New Hampshire excavating company that thinks big and goes by the numbers.

Alan Burke founded Geralco Corporation, of Lee, NH, in 1986 and since then has worked on projects all over southern New Hampshire.

From the first day of operation, Burke has based his decisions on the idea that a small excavation company must think big to stay alive and prosper. Looking back over his 18-plus years in business, he reflected, “I have seen a lot of companies fail due to bad accounting, poor project management, inaccurate estimating and failure to do cost-tracking.”

Burke’s approach, in contrast, relies on a detailed, analytic, systematic approach to bidding, managing, and overseeing a project to success. This philosophy runs top-to-bottom, from office to job site. It is embraced by his foremen and their operators, and supported by vendor relationships that allow Geralco to focus on what it knows best.

Years ago, Burke discovered the benefits of Total Station, an engineering surveying system, and an excavating project planning software program called Paydirt. They allow him to do field layout, accurate job bids, task planning, detailed machine requirements, manpower allocation, and deal with any outstanding factors/situations that might arise.

Burke starts the process by digitizing the existing and proposed site information into the Paydirt program — including elevations, ground material, boring points, etc. Then he breaks down the job by specific task and determines how long each will take. Burke then applies production rates to each task involved by assigning each machine’s hourly cost, labor, and current fuel prices, and then adds any costs for any required outside materials. With these calculations Burke develops a schedule for each on-site activity as well as the total job.

Burke said that this approach allows him “to calculate tasks, costs, and labor … to the bucketful.” Burke’s approach — admittedly systematic, analytic, and data-entry intensive — prevents him from getting certain projects, but he said, “they are the ones I shouldn’t get or take. I know it when I hear the winning bid, and I know it when I hear later how the job ended up. If I win a job after having gone through my steps, I know I will make a fair profit.”

Burke has relied heavily on his employees to develop and improve Geralco’s system. Steve Dionne had been working on excavation crews for 10 years prior to joining Geralco. During those years Dionne had grown frustrated at not having a chance to try any of the things that he felt would improve the process. “Alan was different, he wanted my opinion on everything.” By the end of their second winter together they had it down — rate calculations for all possible work functions on a job site — men, materials and machines.

The time and effort they have invested has paid off. Gerry Couture, another Geralco site foreman who has been with Geralco since 1996 said, “The structure that we have in place makes me think about avoiding waste all the time, never touching things twice and always thinking ahead. And the guys on the crew think the same way, not for my satisfaction but for production’s sake.”

“I compare machines,” stated Burke, “an excavator vs. a dozer vs. a rock truck for a specific phase of a job that can be done a number of ways.” And every repair and service cost that comes in to Geralco is assigned to a specific machine and category — hydraulics, undercarriage, etc.

“All my machines have a detailed history — it’s the only way to know their true cost. And since there is more than one way to do a job, I want it to make the most sense in a number of ways, but especially monetarily. And this helps with the next job. I learn which way is the cheapest, and which way will cost me more in terms of wear and tear on the machines,” said Burke.

Dionne added that the tight calculations give him a game plan, telling him who is doing what, and the next step that needs to happen.

“Like all small excavating companies we try to hire people who are multi-functional and production-oriented, but then we give them a structure to thrive in,” added Burke.

“At the core of any excavating business,” said Burke, “is the equipment. The secret is to realize that the true costs for equipment are hidden for years — so consider the costs expected over the life of the machine, from purchase date to trade-in date. The equipment will wear harder near the end of its lifecycle, and if you don’t factor this in right away, it will come back to get you.

“In the instance of a Caterpillar D5 dozer,” he said, “you can run a machine cheaply for just the costs of the fuel and the operator, but what about the maintenance, from oil changes right on up to the undercarriage re-do at 4,000 hours? You need to factor that into your rates from the start, not when the repair needs to happen.”

As Burke only uses Caterpillar machines, he gauges his costs using his formula, and then compares his machine’s performance against the figures available in the Caterpillar Performance Manual, which gives numbers for all of their machines. And generally his figures are right in line.

“We have a saying around here,” said Burke, “machines are not for falling in love with. They are for making money with — guys who don’t understand this, don’t stick around for long.”

At the same time, Burke stressed that maintaining machines at peak performance and keeping each maintenance record up-to-date is an important job.

“Small excavating companies need to realize that perhaps the biggest source of equity build-up in their business is in their equipment. How can you not take care of it as best as possible?”

Milton CAT has done all Geralco’s maintenance work for the last five to six years. Says Burke,

“When we were doing the maintenance ourselves, we really didn’t do what should have been done. When there’s daylight, you want the machines to be working. At night, you want to get home. The advantage of working with Milton CAT is that they do it all on-site — and they do it when it’s convenient for me — when the machines are scheduled to be idle,” said Burke.

Another benefit to the On Site Maintenance plan, said Burke, is that “Milton CAT always goes ’above and beyond’ when it comes to repairing a breakdown. You have the records of proper upkeep to show and that goes a long way with them that you have done it the right way – they see that everything had been done to keep the machine well-maintained.

“When I costed out the expense of my doing the maintenance instead of using the dealer’s program, it just didn’t add up. The economies of scale for a small business just don’t make sense, Milton CAT knows what they are doing and they can do it cheaper.”

The biggest advantage to maintenance record keeping is perhaps realized at trade-in time.

“The maintenance record is the first thing a dealer will want to know when you go to trade in a machine. Having the complete maintenance record means it’s a whole different story. And from my point of view, as a buyer, when I go to look at a used machine, it’s the first thing I want to know,” said Burke.

“At one time I was putting too many hours on my road trucks, moving earth and rock around the site. I knew there must be a better way, so I talked to Dave Perry at Milton CAT. I fully expected to buy a new rock truck. But after talking about my needs, and reviewing the true cost of a new machine including maintenance, financing and insurance, over five years and the trade in value, I ended up walking out with a three-year lease. And my dealer setting me up with CAT Financial, a company that knew both money and the excavating business, helped to get the deal done quickly.

“I didn’t have the experience with leasing to know this, but now I’m glad I trusted and relied on other resources. I learned, and I think I benefited a great deal. They have also been great about helping with rental fleet machines — equipment that allows me to do jobs I normally wouldn’t be able to do,” Burke added.

“I think it would be better for everyone involved if the bid process depended on facts rather than on gut, and if we all made sure that we partnered with companies that share our philosophy. Our customers would be better served, and so would we,” concluded Burke.