Gary Smalley has taken the helm of Sylmar-based construction giant Tutor Perini Corp. as the first non-Tutor family chief since the company’s founding in 1949. He replaces Ron Tutor, who stepped down as chief executive at the end of last year.
Smalley has gotten off to an auspicious start as the civil construction company is on a remarkable streak, having won six contract awards worth more than $1 billion since the beginning of last year and another recent award falling just short of $1 billion. The company’s backlog of contracts awarded – but for which work has not begun – has reached a whopping $21 billion, nearly twice the pre-pandemic peak. Investors are loving the ride as the share price has topped $60, the highest level since 2007.
Smalley spent more than 20 years in various executive roles at Irving, Texas-based construction and engineering firm Fluor Corp. before joining Tutor Perini in 2015. He rose through the ranks, becoming president in late 2023. In his first media interview since taking over as chief executive on Jan. 1, Smalley discusses Tutor Perini’s successful contract award run and the challenges that lie ahead.
You are the first non-Tutor family member to run Tutor Perini Corp. since the Tutor Construction portion of the company was founded in 1949. How do you intend to carry on the legacy?
It’s quite an honor. I was humbled when Ron (Tutor) selected me and the board approved me. Ron was with Tutor Perini and its predecessor companies for 61 years before he stepped aside as CEO. He’s a legend and an icon in the industry. That’s some big shoes for me to fill. But I’ve been here a decade now. As Ron was transitioning to the executive chairman role, he worked tirelessly with me to ensure a seamless transition. He could have rested on his laurels. But instead, he was instrumental in securing this record backlog. It’s been a real inspiration to me to work for him.
What’s been the most surprising thing about your first few months at the helm?
The biggest surprise to me is the sheer volume of things coming across my desk. I never appreciated how much Ron (Tutor) did as CEO. But I’m enjoying every minute of it and couldn’t be happier with the way things are going right now.
Before the recent surge in mega-contracts, Tutor Perini went through a tough patch coming out of the Covid-19 pandemic where big contracts were not coming in and the share price languished in the single-digit dollar range. What was going on then?
During the pandemic, we were working when many others weren’t working, so that was great for a while. But there was a lack of funding. Ridership was way down at transit projects around the nation. No one knew how long it would take to bounce back. We had to work off projects (that) we had in backlog and some smaller contracts that were still coming in.
Then we started to win a couple of big contracts, but the funding wasn’t there. The funding was pulled back by the awarding agencies as they looked at the continuing lag in ridership figures – a much longer lag than many expected.
How has Tutor Perini turned this around?
What happened was all at once there was more funding. The giant infrastructure bill passed in late 2021. All of a sudden, there was ample funding. And when that funding became available, there was such pent-up demand to make up for years of underinvestment in infrastructure. Also, transit agencies finally started to see their riders return to mass transit.
On the other side, during the contract drought, a lot of companies had given up on this work, so that meant when the funding was finally available, there was less competition for some of the bids. That allowed us to seize the opportunity to bid on these mega-projects, capitalizing on this pent-up demand. Our customers also had confidence in our ability to execute.
You’ve talked about mass transit projects coming back, and of course, Tutor Perini has a long history in building rail projects. But Tutor Perini’s biggest recent contract wins have been to build jails in New York – one in Queens for $3.9 billion and the other – still pending a final vote for a $3.8 billion jail in Manhattan. How has this come about?
In the case of New York, the city is under a court order to close the Rikers Island detention facility by the end of 2027. So that means a need for new facilities, and the city decided on four facilities, each in a different borough. We’ve done detention facilities previously, but no one has done projects of this size. Their size and complexity are what kept a lot of competitors away from the bidding process. But we’re confident we will be able to execute these projects, even though they are quite complicated.
Complicated how?
Unlike for many of our transit projects, no one is closing the nearby streets. So, we have to build these in very busy, congested areas. And then there are the electrical systems for fire warnings. For our transit projects, everything is geared toward evacuating people as quickly and safely as possible when there’s a fire. But in these projects, you can’t have all the prisoners leave the prison when the alarm sounds. That adds a layer of complexity.
The construction industry in general is facing a lot of challenges these days, including immigration-related raids and their fallout. What’s been the impact on Tutor Perini?
We haven’t had much impact at all. For years, we’ve been participants in the government’s E-Verify program, which screens potential workers to make sure they have proper authorization to work in the United States. That’s why we haven’t had any problems and don’t expect to have any problems related to these raids.
What has been the impact of the unfolding tariff situation? Has it impacted the availability of construction materials or equipment?
It hasn’t impacted the availability, but it has impacted the price. What we’ve done is build as much of these price increases into our bids as possible. Also, we now buy all or most of the materials we will need for a project at the beginning of work, not just before the materials are actually needed. This locks in the prices with our vendors. If the prices increase along the way, it’s the vendors who have to deal with the increases, not us. As an example, on a huge multi-year project that I’m not going to name, we bought 97% or 98% of the materials within a few weeks of receiving the award. On top of all this, in some cases, we have cost-escalation clauses in our contracts.
Locally, is Tutor Perini working on – or looking at – projects in its home turf of the San Fernando Valley?
Nothing in the Valley itself. Of course, we’re working on projects in the Los Angeles area – the Metro D Line phases two and three (subway from Beverly Hills to Century City and Westwood) and the Cedars-Sinai Marina del Rey replacement hospital are two that come to mind.
Looking ahead, there is one project that we have our eye on – the Sepulveda Transit Corridor – that will have a significant portion taking place in the San Fernando Valley. We’re still waiting for that project to sort itself out.
Is Tutor Perini planning any major acquisitions in coming months?
Is the company planning to enter new types of construction markets? We’re not planning any major acquisitions at this time. We went through that phase 10 to 15 years ago. Now we believe we’re positioned to compete effectively in the marketplace. We are one of the few vertically integrated construction companies in the nation and we have very large scale. That said, we’re always looking for experienced industry executives.
As for our markets, on the civil side, we focus on mass transit, bridges and highways. On the building side, we focus on health care, casinos, hotels and detention facilities. We don’t see ourselves going into new markets at this time – we have so much work available in the markets we serve. Just look at our record backlog. In the longer term, of course, we are always seeking new markets.
