MELLON-STUART COMPANY History

Address:
One NorthShore Center
Pittsburgh
Pennsylvania
United States

Telephone: (412) 323-4600

Public Company
Incorporated: December 31, 1917
Employees: 1500
Sales: $949.5 million

Company History:

One of the oldest construction companies in the United States, the Mellon-Stuart Company is involved in general contracting; construction management; and industrial, mining, heavy and highway construction. In the past two decades Mellon-Stuart has experienced tremendous growth, and is now one of the top ten builders in the nation. Though the company's work traditionally has been concentrated in the eastern states, Mellon-Stuart has in recent years begun to expand its realm to encompass the entire continental U.S.

In the early 1900's, Thomas A. Mellon of Pittsburgh decided on a career outside the prominent family banking business. With associate Robert Grace and uncles Andrew W. Mellon and Richard B. Mellon, he organized a firm which specialized in railroad, tunnel and bridge construction. The firm, called the Robert Grace Contracting Company, was responsible for large construction jobs for the Cleveland Belt Line, the Erie Railroad, and the Baltimore & Ohio, Erie and Pennsylvania. Thomas Mellon became president of the firm several years later after buying Grace's interest. In 1917 the company merged with the Stuart Company, which specialized in reinforced concrete work and erecting office buildings and power plants. Stuart had built several large office buildings in the Pittsburgh area, most notably the Oliver Building and the City-County Building. James L. Stuart served as president of the merged Mellon-Stuart firm for two years. Upon his retirement in 1919 due to failing health, he sold his interest in the enterprise to Thomas Mellon. By 1921 Mellon was the president and sole owner of Mellon-Stuart.

In the early years, the firm's activities were primarily in heavy industrial construction, especially railroad and bridge work. Railroads that contracted with Mellon-Stuart were the Illinois Central; Delaware, Lackawanna & Western; Baltimore & Ohio; Norfolk & Western; and Erie and Pennsylvania. The majority of the company's non-railroad work was in Pittsburgh, but Mellon-Stuart also maintained offices in New York and Chicago. The Chicago area was the more active of the two; in that city the firm built, among other projects, the massive Union Station in 1925 and the exclusive Standard Club. (Al Capone worked for Mellon-Stuart as a laborer on the Union Station job.) In the New York area the company concentrated on commercial construction; two important projects were the Pren-Brook Apartment Building and the Flatbush Industrial Building.

In the 1920's and 1930's Mellon-Stuart erected many distinctive buildings in Pittsburgh, including the Mellon Bank headquarters (completed in 1921), the Koppers Building (1929--at that time the city's tallest), the Gulf Oil Corporation headquarters (1933), and the Mellon Institute (1937). The Mellon Institute was a scientific research center established by the two uncles who had helped Thomas Mellon get started in construction, both members of the banking part of the family. Begun in 1913 as part of the University of Pittsburgh, from 1927 to 1967 it functioned as an independent entity. In 1967 it joined the Carnegie Tech to form Carnegie Mellon University. Construction of the facility lasted from 1930 to 1937 and entailed solving some unusual engineering problems. Designed to echo classical Greek architecture, the building is ringed with 62 columns and has five below-ground levels (to keep the facade low, in keeping with its Greek precedents). To ensure that the 42-foot columns would not chip when lowered into place, Mellon-Stuart engineers had enormous blocks of ice positioned on the precise spot where each column was to rest, then placed the column atop the ice. As the ice melted, the column gradually dropped into place. Construction of the building required 269 traincar loads of limestone and 62 of granite.

The New York and Chicago offices closed in 1930 as the company began feeling the effects of the Depression. In 1933 Mellon-Stuart let its construction permits in those cities expire. During the Depression the company also sold all its heavy construction equipment. From then on, Mellon-Stuart no longer engaged in bridge, railroad or tunnel construction, concentrating instead on commercial, institutional, industrial and industrial housing activities.

The firm's third president, E.P. "Ned" Mellon, the son of Thomas Mellon, began his tenure with the company in November 1930, though not in a management capacity; he worked an air hammer on the Mellon Institute construction job. A Mellon-Stuart foreman had bet the younger Mellon $50 that he could not operate an air hammer for 60 days at the bottom of a 4.5-foot diameter caisson. By the time Mellon collected his money, he had dug to 42 feet below the bottom floor of the Mellon Institute.

In 1936 Ned Mellon took a vice presidency in the firm. He assumed the presidency in 1947 when his father became chairman of the board. The elder Mellon retired later the same year because of ill health. Ned Mellon moved into the chairmanship at that time, and another vice president, James B. Kelly, took the presidency. Two years later, in 1951, Mellon-Stuart recruited Donald C. Peters to replace Kelly. Peters had been the director and vice president of Crump, Inc., another Pittsburgh firm. Ned Mellon remained the chairman, and the two men controlled Mellon-Stuart together until 1975. Bob Peters took the presidency in 1975, when his older brother Donald became chairman of the board. Five years later Bob Peters replaced his brother as chairman; he stayed in the post until 1986.

Defense contracts were plentiful during World War II. Mellon-Stuart received six large-scale contracts, the largest being one for more than $17 million to build Camp Reynolds (with a capacity of 20,000 troops) outside Greenville, Pennsylvania. After the war Mellon-Stuart offices opened outside Pittsburgh again. The first were in Youngstown, Ohio; Fairmont, West Virginia; and Owensboro, Kentucky. Contracts during the late 1940's ranged in size from the $8.5 million western area headquarters building for Bell Telephone of Pennsylvania to small jobs for as little as a thousand dollars.

Mellon-Stuart undertook several internal innovations during the 1950's. These included an employee incentive plan, quarterly salary bonuses and a comprehensive budget control program. The first two have been quite successful, enabling the firm to boast that its annual personnel turnover at the managerial level has been lower than 5% during the life of the company. The third was a cost estimating and control system called Advanced Budget Control, under which bidding for all jobs to be done by contractors is handled in the order the tasks will follow in the construction process. Bidding begins during the design process, though bids for some later phases are not received until after construction has begun. Standard practice dictated taking all bids at once, and only after the design phase is complete. Mellon-Stuart's method shortened the time between design and construction.

David Figgins joined Mellon-Stuart as a trainee estimator during the 1950's; he is now chairman of the board. In 1954 Figgins emigrated to the United States from Ireland to pursue a career in singing. He only managed to earn $68 a week as a professional vocalist, however, so he took a job as a field engineer for a Toronto construction firm. Figgins signed on with Mellon-Stuart at Bob Peters' request in 1956. He worked as a project engineer, field engineer and project manager, until in 1964 he became a vice president of the firm. In 1980 he would take the Mellon-Stuart presidency.

In the 1960's, Mellon-Stuart established an Employee Stock Ownership Plan, but initially few employees participated. Indeed, by 1970 all stock in the company was held by just eight managers. At one point, Donald Peters owned 50% of the stock, and his brother held another 30%. Retirement by people holding such large interests would clearly create cash strains, because they would take their equity with them. In fact, it was rumored that Bob Peters was asked to delay his retirement precisely because of the prospect of a cash problem. Subsequent changes in the plan have made it impossible for individuals to hold more than 10% of Mellon-Stuart's stock. At present the company is entirely employee-owned.

Mellon-Stuart reorganized as a holding company and expanded its activities greatly during the 1970's. The company especially sought contracts outside the Pittsburgh area, primarily because of the decline of Pennsylvania's steel-based economy. At the same time Mellon-Stuart reopened an office in Chicago, and it now operates a total of five offices in the United States. In 1972 the company entered the mining business when it formed Badger Construction, a mine construction division. At the beginning of the 1980's the construction industry magazine Engineering New Record ranked Mellon-Stuart 192nd in its list of the top 400 contractors in the U.S.

The current president of Mellon-Stuart, Edward Poth, left the presidency of Paschen Contractors Inc. of Chicago to join the company in 1986. Paschen's rank in the industry was much higher than Mellon-Stuart's and the majority of its jobs have been competitively bid public works projects. Figgins, who is now chairman, has stated that this is the direction in which Mellon-Stuart management wants to move. The firm hopes to achieve an equal blend of competitive bids and negotiated contracts. Since Poth joined the company, it has reduced its number of ongoing jobs and begun to concentrate on projects of a larger scale. Figgins has said the company should have 15 continuing projects in its portfolio at any given time, and that it will only seek jobs in the $10 million to $40 million range.

In recent years Mellon-Stuart has attempted to tighten control over its operations, in part because several projects went badly in the mid-1980's. For instance, the company lost over $2 million on a Pittsburgh renovation project when the developer went into bankruptcy. Also, though the company will continue to operate regional offices, all operations are under central control. Reorganization within Mellon-Stuart in the past few years has entailed consolidating operations and streamlining the managerial organization, resulting in the elimination of jobs, changes in the structure of responsibility and reassignment of personnel. In the current structure, each officer of the company is responsible for developing a long-term relationship with at least one repeat client or promising prospect.

Today Mellon-Stuart is the ninth largest general builder in the U.S. It ranks as the country's 24th largest contractor and the 35th construction manager. In the future, the firm's management hopes to enter more joint ventures and broaden Mellon-Stuart's geographic scope to encompass the entire continental U.S.

Principal Subsidiaries: Cameron Construction; Carnegie Properties, Inc.

Source: International Directory of Company Histories, Vol. 1. St. James Press, 1988.