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Bouncing back to win big

Calgary's Stealth Acoustical & Emission Control more than tripled its revenue after it won a Siemens contract on the second attempt

From Tuesday's Globe and Mail

Colin Davison

(CHRIS BOLIN FOR THE GLOBE AND MAIL)

When Colin Davison decided to bid on a project for the Canadian unit of global giant Siemens in the fall of 2008, he knew there was a good chance his small company wouldn't get the job.

A year earlier, he'd been in the exact same spot. Siemens Canada had asked his company, Stealth Acoustical & Emission Control Inc., to provide a bid for work on equipment to be used at the Suncor Firebag oil sands project in Fort McMurray, Alta. Siemens already had one bid but, at the last minute, decided it wanted another option.

Calgary-based Stealth designs and fabricates acoustical enclosures and noise-abatement systems for equipment such as power generators and gas compressors, keeping the noise they produce within legal limits.

Mr. Davison worked night and day for a week to prepare the 2007 bid by Siemens' deadline; normally, it would have taken months to put such a bid together. He knew that landing the $6-million job – double the value of any project the company had done in its almost two years of business – would mean big things for Stealth.

“We can only grow as fast as the money that comes in the door and we were growing at a good pace, but we were limited in the size we could get to because we never could get that long-term project that would give us sustained growth,” he recalled.

Although Siemens liked the bid, it didn't give Stealth the job because the company Siemens was working for, Suncor Energy Inc., said it would not have time to qualify Stealth as a vendor, a process that involves checks on quality controls and safety programs.

“It was very disappointing,” said Mr. Davison, 33. “There are so many layers to doing business with a company like Siemens. They may want to go with your bid, but to do business with these companies, there really is a mountainous-like effort involved.”

So when Siemens came back to Stealth, exactly a year later, asking it to bid on the next phase of the job, Mr. Davison paused before responding. “Just because they were asking me for a bid, it didn't mean we were likely to get the project. But we felt that their inquiry was legitimate, so we busted ourselves again to do it.”

This time, in September, 2008, Siemens awarded Stealth the contract to provide acoustic packaging for its electrical equipment. Unlike the previous year, Suncor had time to do an initial vendor analysis, followed by a more thorough qualification once the job was under way.

Landing the project was tough, but Mr. Davison knew getting the actual job done would be tougher: “The size and scope of this project was far and away the largest of any project we'd worked on.”

A typical project for Stealth involved one or two staff working on a project for three or four months. “This job would be three or four people dedicated for six to eight months,” he said. Siemens would ship its electrical equipment to Stealth, which would then build enclosures for the gear. Those would be shipped to the Fort McMurray site, where the enclosures would be integrated into the larger system.

And Mr. Davison knew he was taking a risk by accepting such a big project from a single customer.

“You take your eye away from your regular customers who have been very supportive of the business over the course of two or three years to do a large project like this,” he explained.

“We didn't have to just get the Siemens project done. We also had to ensure our existing clientele and projects were taken care of. We had to be sure we weren't taking on more than we could handle.”

Mr. Davison hired additional staff, including two engineers who specialized in energy projects. In fact, he has found that the calibre of this project had an overall affect on hiring. “In terms of attracting high-level employees, it's been great,” he said. Since taking on the Siemens project, Stealth has more than doubled its staff to 75, from about 35.

It has also had an effect on Stealth's ability to purchase sophisticated, heavy-duty fabricating machines. “When you're a small business starting out, it's difficult when your ability to invest is tied to month-by-month projects,” Mr. Davison noted.

“Getting $100,000 here and $100,000 there is one thing. Getting this $6-million deal has allowed us to go out and purchase equipment that will have a lasting effect on our business. It helps us stay out front in terms of the competition and be a leader.”

Having better equipment has, in turn, resulted in more work. “We just finished a half-million-dollar project for Devon Energy that had similar design issues to the Siemens project,” Mr. Davison said. And now that the company has an established relationship with Siemens, Stealth is in a strong position in its bid for three other Siemens projects across Canada that could amount to upward of $30-million over the next few years.

As a result of the Siemens deal, other sources of cash have opened up for Stealth. “We've had a lot of investment interest in our company as a result of what we've done in the past year,” he said, adding that the company is currently considering the interest of a handful of investors. “And the banks like us a lot better, and right now that can't be understated. In a market like today, it's a godsend.”

The most important effect of the Siemens job, due to be completed this month, has been its boost to the company's credibility. “When we can demonstrate that we handled a project of this scope from start to finish to a successful conclusion, that says a lot in terms of prequalifying us in the eyes of other clients.”

On the Record

On Friday, Mr. Davison joined us to talk about his company's breakthrough. Click here to read the discussion.

Expert Insight

"Ultimately you need to get to the bag of money. And I believe a lot of times we end up talking to the bag of wind. So first you have to dig around in the corporation and find out who they are and where they are," says Tim Breithaupt, founder and president of Spectrum Training Solutions. On Wednesday, he talks about Stealth's experience with Siemens. Click here on Wednesday to read the interview.

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E-mail: nhulsman@globeandmail.com.

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