Someone Please Build This: America’s Industrial Construction Co.

With all of the talk of reshoring American industry and building manufacturing capability, one target of this effort should be on public infrastructure. At times overlooked for its more visually-appealing cousin, manufacturing, infrastructure builds the foundation with which manufacturing can take place. I’m talking about roads, bridges, electric transmission, water desalination & piping, dams, deepwater ports, airports, high speed rail, and more.

It's no secret that China is years - perhaps decades - ahead of the US in building the aforementioned infrastructure projects, and the US needs to catch up. While I won’t go into all of the reasons why, the fundamental argument here is that the reshoring of American industry cannot happen without infrastructure to support it. The most efficient, automated factory in the world is hamstrung without a proper road or rail network for transporting raw materials in and finished goods out. The most awesome nuclear plant, built at record speed and cost, has no way to get its electricity to millions of homes and businesses if there isn’t a highly capable transmission network. I could go on…

Those in the VC/deep tech/hard tech ecosystem will likely agree with all of the above, and many are working on solutions to a subset of these problems, including yours truly via Base Power. One big gap in this space however is construction. Specifically high speed, massive scale, industrial construction. The problems to solve here are operational and financial in nature, not primarily technical. Sure, small technical innovations exist around the edges (and doing this right requires the use of an existing modern tech stack), but I believe that industrial construction fundamentally is just about the operational stack required to move fast at scale, rather than software or other supporting fundamental tech. Someone should endeavor to build a business focused on this.

One of the largest industrial constructions in the history of the US was the Hoover Dam, built by a joint venture called Six Companies.

The Plan

Building a company like this would be a multi-decade, extremely capital intensive and difficult endeavor. Why is it needed? Well, as I point out below, the existing incumbents are centuries-old traditional companies with minimal technology use and, importantly, poor operations and incentive structures. Through observing and working at great physical-world companies like SpaceX, Anduril, Tesla, and others, my mental model is beginning to solidify on the following:

There’s no “one thing” that makes most real-world companies great. No specific breakthrough technology, no specific product innovation, financial trick, or management vision. Instead, it's just everyone being a little better at their jobs. Working a little harder. Having less bureaucracy in the organization. Thinking from first principles. Hiring more ambitious people. That’s what the fundamentals of differentiation of America’s Industrial Construction Co would rest on.

Incumbents

As one would expect, there are existing incumbent players in this space that have both the scale and government relations to be fierce competitors on industrial construction projects, many of which are either directly or indirectly funded by the government, such as roads. Companies like Bechtel build nuclear plants, EV charging station networks, liquefaction plants, LNG terminals, and more. If it has a lot of concrete, steel, and manpower required, they’re likely building it. Bechtel is an interesting case: it's a family-owned privately held mega corp with $17B in revenue (2022). It was founded in the late 1800’s…

Bechtel built Vogtle units 3 and 4, the only new nuclear reactors built in decades. They were 3 years late and $16B over budget. Yes, billion.

Similarly, Kiewit builds huge infrastructure projects like airports and rail tracks. Also privately held and started in the 1800’s and has $17B of revenue.

Flour is one of the largest in America, building bridges, roadways, and nuclear decommissioning facilities. And, you guessed it, Fluor was founded in the 1800’s.

Turner, Skansa, and Clark round out some of the other large players, all founded in the late 1800’s or early 1900’s.

To say the incumbents are old would be an understatement.

Funding & Pricing

This would not be a VC-funded endeavor (the ecosystem which most people reading this are likely closest to), or at least the majority of it wouldn’t be. This would end up likely being a relatively low margin/low % IRR/ROIC (or pick your favorite metric for returns) albeit massive revenue business. Given the size of the projects, funding would likely be project-specific, with large capital pools like infra funds, public bonds, and direct government funding.

Instead of the traditional time & materials or “cost plus” model, AIC would work with the funders (likely local, state, and federal governments in most cases) to develop performance-based incentives that handsomely reward the company for early delivery of projects. It's relatively rare, but this does already exist in some pockets, like the Texas Energy Fund which awards up to $120k per MW interconnected within the specific timeframe. For a project over 100MW (which is what the program is for), that’s a a good portion of the total cost.

The SunZia project in NM & AZ, built by Quanta Services, one of the largest electric transmission construction companies in the US. This type of construction is exceedingly difficult to automate. AI doesn’t make this go any faster.

People

Unsurprisingly, the people recruited for this hypothetical company make or break the whole endeavor. Also perhaps unsurprisingly, my bias would be to hire early-career engineers who are mission-aligned and willing to push through walls to make things happen. Put engineers in most positions in the company. As mentioned above, part of the whole thesis of this company is to do what the incumbents do, with modern but not groundbreaking tools, and just do it better/faster/cheaper. Following cultural principles like those I outlined in this post, it would be absolutely critical to build a fast paced culture that was focused on building.

In addition to engineers and operations-minded folks, you’d also need to hire a comparatively small contingent of finance and policy-minded folks. As I outline above (financing) and below (policy), this is critical to the impact and ultimate scale that the company is able to achieve. For this highly external-facing group, there is likely some benefit to hiring more experienced folks who have the connectivity and acumen to obtain funding, move policy in favor of speed (like permitting), and win contracts. Similarly, co-founders that have experience building big projects (perhaps someone from Tesla’s construction team + a high finance type or similar) would be the best-equipped to build something like this.

Policy

One of the largest realizations that have shaped my worldview over the last year or two is related to policy: you need to play the game on the field to be successful. It took me years-too long to realize this, but the interpersonal relationships and connectivity between private sector leaders and public sector rulemakers could not be important for physical-world businesses. Whether it's permission to operate or funding or both, and whether I like it or not, local, state and sometimes the federal government holds the keys to success of a business like this. Many engineers find this type of work ‘icky’ or amoral in certain ways, as I did if you asked me 5+ years ago. That couldn’t be further from the truth.

The messaging of the company to policymakers would echo that of companies like SpaceX, Anduril, and Base Power: we’ll deliver a better product at lower cost, faster than the incumbents. We’ll bring along a whole generation of employees and share the financial and cultural rewards with them, and benefit American industry in the process. Their help will be needed to cut red tape and build incentive structures that reward performance rather than spending money.

Someone should definitely build this. Is anyone? Drop in the comments if I’m missing this already happening.