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The prospect of being purchased by another firm can conjure feelings of anxiety and uncertainty, and this certainly was the case when Michigan City, Ind.-based Tonn and Blank Construction changed ownership in 1998. Adding to this anxiety was the fact that the company’s prospective owners had no experience in owning a construction company. In fact, these new owners had never even been in the business of making a profit.

However, when the Sisters of St. Francis Health Services recognized the quality of work performed by Tonn and Blank Construction, they saw a strategic opportunity to ensure their healthcare facilities could meet the rising demand for their services through periodic expansions and renovations.

The sisters operate as a nonprofit organization and currently own 13 hospitals throughout Indiana and Illinois. According to Tonn and Blank President and CEO Jon Gilmore, the organization was looking to purchase a contractor with a reputation for success in healthcare. “Today, they provide a consistent backlog of work for us, and encourage us to seek work from other customers, as well,” Gilmore says.

“What’s unique about this new relationship is that we’re no longer working for owners who are buying boats and houses with the profits. Any profits that we make from our work goes into their mission to help the poor. And, any work we do for them provides healthcare for the community. It creates a new reason to come to work every day.”

Today, Tonn and Blank performs approximately 60 percent of its work for the sisters, but actively seeks work for outside clients, as well, Gilmore says. The company operates as a general contractor, construction manager and also performs design/build work for a variety of customers in commercial, office, healthcare and institutional segments. In addition, the firm self-performs many trades such as concrete, masonry, structural steel, roofing and drywall.

According to Gilmore, its ability to control many facets of a project in-house gives the company a key advantage in the marketplace. “Even when we aren’t required to self-perform these trades, we understand how everything goes together because our superintendents have done it before,” he says. “Therefore, we can manage the quality and schedule of a project better than most.”

Changing Dynamics
Owners today are more educated about the construction process, and many are attempting to shift project risk onto the contractor. Gilmore says owners expect more from contractors, which can present challenges for many companies. However, with Tonn and Blank’s experience as an owner on many projects, the company better understands how to meet and exceed expectations.

“Owners want general contractors to guarantee that incomplete designs will remain within budget, unforeseen conditions are included and owner-initiated changes will not affect the completion date,” Gilmore says.

“All of this can be accommodated, but this is often why we read about public bids coming in over budget. It is a matter of educating the owners on the cost of risk shifting.

“A project’s risk vs. its reward has become a complicated dynamic in our industry in the past several years,” he continues. “We have to be very cognizant in what we’re signing, because the traditional fee structure has to change when the contractor takes on additional risk.”

Growing Pains
The company’s rapid growth in recent years has also posed a challenge. In only three years, the firm has grown its revenues from $100 million to more than $250 million. Gilmore says to maintain its momentum, the firm strives to hire talented outside personnel while developing its people further. “We would rather grow completely from within, but when you’ve been growing as fast as we have, you don’t always have that luxury,” Gilmore says.

However, hiring from the outside has its benefits, as well, by introducing a fresh perspective to the business. Gilmore himself started with the firm as a laborer right out of high school in 1987, and climbed the ranks until becoming president in 2003. To him, hiring from the outside is refreshing.

Community Support
Tonn and Blank strives to operate in accordance with its owners’ mission to serve the community whenever possible. “It all goes back to the sisters’ values, because we try to emulate that as much as we can,” Gilmore says.

In fact, Tonn and Blank recently participated in a Habitat for Humanity project in Gary, Ind., where it donated the materials and labor for the basement portion of the home. “We try to be very involved with the community,” Gilmore says. “[We are] a viable construction company that’s in business to help the community while building the community.”