2015 Mechanical Contractor of the Year: McKinstry Co.

How did a molecular biologist/geneticist and a booking agent for rock bands end up heading one of the largest mechanical contractors in the Northwest?

Dean Allen, chief executive officer of Seattle-based McKinstry Co., and David Allen, the company’s executive vice president, started out as most kids whose parents own their own business — working at McKinstry Co. on weekends and summer breaks digging ditches and helping the plumbers. And while college gave them different careers, they both ended up at the company their father, George Allen, founded in 1960 with partner Merrill McKinstry. When George Allen died in 2004, the brothers and President Doug Moore, P.E., took over running the business.

The plumbing and piping company started with six plumbers and is now a multimillion-dollar firm (2014 revenue of $573 million) with 1,800 employees in 25 offices doing work in 24 states. McKinstry Co. ranked No. 4 on Plumbing & Mechanical’s 2014 Pipe Trades Giants ranking, which was our final Pipe Trades list.

McKinstry Co. is not your average mechanical contractor — sustainability and innovation are two very important parts of its corporate culture. It’s a design-build-operate-maintain company with 19 facility management services sites that help customers implement energy-efficient heating and cooling programs and save on utility costs — serving clients for the life of their buildings. This is part of what the company calls “a total commitment to collaboration.”

“We think about ways to do things differently in the mechanical contracting industry, to challenge the status quo,” Dean Allen notes. “Too much siloing and specialization exists, creating opportunities for fumbles and mistakes — different consulting engineers handing off projects to different subcontractors, who in turn are handing off to different operators.

“So we tried to mix it up, partly to deal with the silos but also to create a diverse group of people at our company. We’re putting together different people with different perspectives — plumbers, pipefitters, sheet metal workers, sprinkler fitters, electricians, data cabling experts and commissioning experts — to share ideas and come up with better ideas.”

McKinstry built a 20,000-sq.-ft. commons area in the center of its Seattle headquarters in order to help employees share their ideas with others in different trades. It includes basketball courts, gym facilities, a cafeteria, deli and eating area.

One of the company’s core beliefs for five decades is driving sustainability — in its business, local communities and industry. It’s website states, “No company anywhere is more focused on creating innovative products and systems that get the most for every energy dollar.”

About 40% of revenue can be tied to energy-efficiency retrofits, Dean Allen notes, and investing in technology has helped the company grow this business.

It’s for these reasons that Plumbing & Mechanical selected McKinstry Co. as our inaugural Mechanical Contractor of the Year.

‘Innovation soup’

McKinstry’s Seattle campus is 350,000 sq. ft., which includes two large office buildings, a fabrication building, parts building and parking garage. On top of the parking garage is 40,000 sq. ft. of office space, two-thirds of which is occupied by the company’s Innovation Center.

“The Innovation Center is an incubator where we host small startup companies and nonprofits,” Dean Allen explains. “The idea here is to mix younger entrepreneurial new ideas and new, diverse businesses with McKinstry employees.”

The Innovation Center’s tenants have McKinstry badges and access to all the health, fitness and food facilities on the Seattle campus.

“So McKinstry people are constantly bumping into a new education nonprofit trying to make a difference in math and science, or a startup trying to figure out how to recycle used tires into usable products,” he says. “It creates an innovation soup where people are constantly reminded there’s a lot of fun in chasing the next new thing that might make a difference for customers and the planet.”

Tenants also can ask for help from McKinstry employees involved in the different trades of the company, David Allen notes.

“Innovation Center tenants have the opportunity to request help, whether it’s a mock-up of their idea in our shop, project management coordination, marketing help, grant writing or talking to our financial people about funding,” he says. “It’s good for our people to have the opportunity outside the mechanical contracting business to interact with a startup and learn.”

While the brothers saw the mechanical contracting industry as “old fashioned,” they also believe American businesses in general don’t put their employees first. And that can put businesses at a disadvantage — constant turnover leads to lower productivity and eats into company profits.

“David and I are both people persons, if you will, and so was our father,” Dean Allen says. “I believe innovation really comes from putting people first. Having a diverse group of people with different perspectives and experiences coming together with respect and figuring out how to help each other be successful in a collaborated environment — that is the start of the opportunity to innovate.”

David adds: “We have that innovation DNA from our father.”

Innovation can be found in McKinstry’s Seattle and Spokane, Wash., facilities as they are used as laboratories to test different plumbing and heating systems. A heat transfer system uses the waste heat from the data center to heat the building. Radiant under-floor cooling is installed in the virtual design area. In Spokane, the building has in-slab radiant heating and cooling fed by a geothermal system.

Not only does McKinstry listen to its employees and Innovation Center tenants, it listens to its customers.

“We place a high value on listening to customers and tying to understand what their unique problems are,” Dean Allen says. “I believe much of the innovation comes from an orientation around customers who seem to have difficult, intractable problems.”

In fact, one customer’s problem has turned into a large chunk of McKinstry’s business. A local software company wanted to make it easier for its employees to request service and maintenance for their office buildings. McKinstry did all the process mapping and then managed the software deployment project that eventually created a Web-based issue management system for facility operations. The company’s employees could now enter their repair or maintenance issues into a streamlined, Web-based format.

“Now we operate buildings all across the country off that platform,” Dean Allen says. “We have built mobile apps for our facilities services system where tenants and technicians can use their smartphones to identify equipment, tap into our database and inquire about required maintenance and the last service call, and request any needed service.

“We probably owe most of those innovative ideas to having good ears. If we listen to customers, look at what’s happening in the marketplace, look at the innovations happening in our customers’ facilities and in their back-end operations, we get good ideas we can use to change our industry.”

Systems thinking

Seventy percent of McKinstry’s revenue comes from commercial customers, while 25% are institutional and less than 5% are industrial customers. But whatever customers come to McKinstry for — an air-conditioning system, lower energy bills or better control of water usage — they expect McKinstry staff to be the experts. They want someone else to figure out the most cost-effective, energy-efficient, cheapest method to maintain their systems, Dean Allen says.

“We don’t do them a good service if we force them to be a contractor in kind and understand all the complexities that we’re supposed to deal with,” he notes.

David Allen says: “Many people ask us how we, as plumbing and heating guys, got into workflow management, national critical environment (projects with highly technical challenges), energy efficiency and integration. It’s in our space. Energy consumption is fans, motors, pumps and chillers, air conditioning and generators — what Dean and I have always considered as systems.”

And what McKinstry customers, like many large commercial and institutional entities, are looking for are system solutions for their unique problems.

“Systems can be power for lights, emergency power, air conditioning, graywater plumbing, sanitary systems — they can be a lot of different things,” Dean Allen explains. “But it’s the outcome that drives us to systems thinking, and systems thinking drives us to a multicraft, multidiscipline approach. We’re trying to make it easier for customers to get what they want and what they need. We don’t think of it as a transaction just to get some revenue.”

He compares it to buying a computer. Most people don’t buy the laptop or CPU from one person, then a modem from another person, and a monitor and keyboard from someone else. They buy everything as a personal computing system.

“It’s a manufacturing approach, managing the end-to-end solution,” he adds. “I believe our industry needs to think that way. It may sound risky, but it’s easier for us to manage that risk than our customers.”

Technology mind-set

Adopting new technology is part of the solution McKinstry provides to its customers, including building information modeling, wireless technology for remote monitoring and mobile capabilities.

Dean Allen is quick to point out, however, that it takes good people to implement these technologies to solve problems for customers in the most efficient and effective way.

“Technology and innovations can enable great work, but it comes down to people who know how to work together and solve problems,” he says. “Making sure you’ve got that mind-set and culture in place really allows new technologies to add value. We don’t look at it the other way around. Usually our people have figured out some really smart way to do something and then they look for technology that lets it happen.”

The brothers acknowledge that not all mechanical contractors are able to do what McKinstry does. They are very involved in the industry and with their fellow contractors through groups such as the Mechanical Contractors Association of America; American Society of Heating, Refrigerating and Air Conditioning Engineers; American Society of Mechanical Engineers; Associated General Contractors; Building Owners and Managers Association; and American Society of Safety Engineers.

“Construction is a tough-margin, high-risk business, which makes it difficult for many contractors to put aside money for investments on technology and innovation,” David Allen explains. “We’ve been fortunate to be able to do it. We invest millions of dollars in new technology in our shops every year. They are important investments that keep us competitive. No matter how good we are, customers don’t want to pay us more money. They prefer our expertise make the cost lower, which I respect.

“That’s the message we’ve been trying to give our fellow contractors. They’re learning they have to buck up and go for it. But I don’t believe enough people in our industry have made the leap in technology investments because it’s been a tough business for many years.”

He adds that if contractors make a significant investment in technology, they will need to learn to be in a different business. McKinstry has a technical CEO and 25 IT professionals working on technology systems, writing computer code and developing apps. “It’s different than running a field crew of construction workers,” he says.

Using BIM models can help five or six trade crafts within McKinstry on one project, increasing productivity by prefabricating as much as possible and assembling part kits for certain trades. “When we build a model, we get a return on investment for our plumbing, piping, sheet metal, fire protection, electrical and data-cabling teams,” Dean Allen notes. “We have an incentive to integrate BIM into our process.”

The mechanical contracting industry has the biggest return on investment from using BIM technology, he adds, because mechanical contractors are fabricators. So it makes sense for the industry to be a leader in adopting BIM and other 3D modeling technologies.

Sustainable work

While the Allens are committed to energy efficiency and water conservation, part of the reason they made the decision to enter into green construction was to keep their employees working. Business was wonderful during the boom times, but what would happen if interest rates went up or the country went into a recession?

“We would have these fantastic people working for us and no projects to build,” Dean Allen says. “So we got into the energy-efficiency business with the idea that we could create projects for our people to work on for our customers, even if our customers weren’t growing and didn’t have any money.

“If we could audit their buildings and propose investments that would pay for themselves, we could create projects in a down market. The work in these energy-efficiency projects are things we do every day. When improving a facility, 85% of the investment is in mechanical and electrical systems — chillers, boilers, lighting upgrades, pumps, generators, etc.”

As the company became more involved in energy efficiency upgrades, the Allens became more aware of climate change, pollution and wasted energy. With 80 billion sq. ft. of facility space in the United States that consumes 70% of the electricity generated, which produces 40% of all carbon emissions, better ways are needed to build energy- and water-efficient new buildings as well as retrofitting existing buildings.

“In our industry, the green movement began with the U.S. Green Building Council and its LEED rating system,” David Allen explains. “It was a prescriptive way to build buildings with safer products and use less energy, which quickly became a discussion of renewable energy.”

Dean Allen notes: “We saw it as a great business opportunity but also a societal imperative. And all organizations, I believe, reach higher and excel when what they’re doing is not only good for business, but good for the world. We combined our sustainability view with the waste we see in the ‘silo delivery’ of mechanical contracting and we believe that justifies our vision of creating a sustaining planet.”

McKinstry practices what it preaches. Along with energy-efficient and water-conserving systems in its buildings, the company has electric-powered loaner cars, van pools, bike racks and company-paid public transportation passes. It has on-site compost collection and recycling programs.

The company designed, built and now operates a five-turbine, 4.25 MW wind farm in central Washington that more than provides for McKinstry’s electrical needs. Instead of sending power back to Seattle or down to Denver, the excess is used to power 1,000 area homes.

For interested clients, McKinstry installs solar and geothermal systems as well as small-scale wind projects.

“We do believe energy efficiency comes first,” Dean Allen says. “We believe customers need to wring out the towel first and get their facilities operating as leanly as they can. That makes the need for renewable smaller for them to get to a neutral spot. We don’t start by selling them a wind, solar or geothermal project. We look at it holistically and say: ‘What are your facility goals? What are you trying to accomplish?’ And waste is waste. Asset deployment in renewables is a different thing than efficiently operating your building.”

McKinstry is trying to use the lessons its learned in creating energy-efficient buildings to help conserve water. It has partnered with the Western Resource Advocates for water-conservation efforts along the Colorado River system.

“I believe water is the new ‘gold’ and will continue over the next few years,” Dean Allen explains. “We want to create a pathway to apply the kinds of strategies employed for saving energy in the energy services company model to water conservation. People in our industry typically think about water conservation in terms of plumbing fixtures. But rainwater collecting and graywater recycling systems also are part of the water-conservation picture.”

David Allen adds: “It’s all about systems, and that’s how our people think. They start with a systems view of things and a better understanding of what drives sustainability.”