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AB&C Group of McLean put a distribution center in Winchester and a call center in Orange. "We like the state of Virginia," says CEO David Himes.

photo by Mark Rhodes

Once AB&C decided not to expand in Martinsburg, finding the Winchester site was relatively easy. The company needed space and access to interstates, and Winchester's proximity to the business's other locations was a plus. The same factors converged that had made Martinsburg attractive years earlier -- an able local work force and a rapid turnaround on the site. The company plans to employ 130 to 150 people at the new distribution center. But AB&C also needed a call center, which could go anywhere, so the company searched nationwide. They ultimately narrowed the field to sites closer to home. "We just liked what we ran into in Orange," Himes says. The company plans to employ 100 to 120 people at the call center when it becomes fully operational.

"We didn't start with an extensive bias toward Virginia," Himes says. The fact that it was within a day's drive was a plus, but that doesn't move a site to the top of the list. "We like the state of Virginia," Himes says. "It's a good climate for business. State officials and local economic development people were supportive, and there were some financing incentives. Not the best, but far from the worst."

The commonwealth could adopt a new slogan: Virginia is for expansions. In the year ending June 1998, the existing industry development division of the Department of Business Assistance worked on 182 expansion projects, according to division director Jim Witherspoon. The result was 10,666 new jobs and new capital investments just shy of $1.6 billion.

Most of those deals were on-site expansions, but there also have been a fair number of intrastate deals. Economic development officials want to know when Virginia businesses are ready to grow so that Virginia localities can make a case for keeping new facilities inside the state.

That's not hard to do, according to Gregory Wingfield, president of the Greater Richmond Partnership Inc., a public-private economic development organization. To make sure that companies aren't lured away to competing states, Wingfield and his counterparts in other regions are focusing on Virginia's work force. "We are training our college students to have the right skill sets in place by industry cluster," he says. "We are looking at those high-growth jobs, like semiconductor business, and those areas where there are tight labor demands, such as computer support and health care."

The big payoff comes when companies continue to expand within the state. Falls Church-based Capital One, for example, already has several business units in Henrico County, where it traces its roots to the old Signet Banking Corp. Signet spun off Capital One, its highly successful credit card division, before Signet was acquired by First Union Corp. The Charlotte, N.C.-based banking giant got the goose, but not the golden egg. Capital One established its headquarters in Northern Virginia, and it recently announced plans to build a major operations center in Chesterfield County.

Those kinds of expansions are good signs, says Chris Lloyd, director of the Virginia Business Expansion and Relocation service at McGuire Woods Consulting LLC. Many of the clients Lloyd represents look at many sites. "They will entertain offers from other places," he says. But if the company's experience in the commonwealth has been good, it generally has some bias toward staying here.

Gannon Technologies Group could have gone anywhere when it opened an electronic image conversion center in Warsaw.

Its parent company, St. Louis-based Gannon International, has offices in Miami, Hong Kong, Ho Chi Minh City, Washington, D.C., and Herndon. And it did consider spots all over the world -- southeast Asia, Mexico, the Caribbean and India. Ireland offered some lucrative incentives, says William Franke, Gannon International's president and founder. "But the key consideration was the quality of the work force. We needed a dedicated group with the ability to understand a complex work discipline."

"The work force doesn't have to be trained, but trainable. That's what we're most pleased with in Warsaw," Franke says.

In two phases, the company is converting 50,000 square feet of a sagging shopping center into its Warsaw offices. The current employment base will be around 70 people, but Gannon is getting the facility ready for a work force of at least 400 people, most of them from Warsaw and surrounding communities on the Northern Neck. When employment reaches that level, the company will be pumping about $12 million a year into the local economy.

Gannon's new facility isn't far from the headquarters of two sister companies, Gannon Technologies Inc. in Herndon and Litigation Systems Inc. in Washington, D.C. Proximity is a plus, but it "is not as rigorous a requirement as it used to be," Franke notes.

What cinched Gannon's decision was state officials' involvement. "Even before Gov. [Jim] Gilmore took office, he was prepared to do whatever he could to help that job base get into Warsaw," Franke says. "Other people offered us more money, and the wage rates were dramatically less in other areas, but in the final analysis, it was the commitment of the governor and others. We decided there was more to it than bringing a few extra dollars to the bottom line."

When Ferguson Enterprises, a Newport News plumbing supply company, decided to build a distribution center, it had to look inland. Ideally, a distribution center can get one-day deliveries to clients within a 350-mile radius. "By putting it in Tidewater, a great deal of the radius would be in the Atlantic Ocean," says Don Swain, Ferguson's manager of development.

Because the company has strong markets in Northern Virginia and Baltimore, its site search spanned Maryland, Pennsylvania and West Virginia. But Front Royal, the largest town in Warren County, came out on top.

Ferguson's $22 million distribution center, all 500,000 square feet of it, is scheduled for completion in 2000. And by the second quarter of this year, it will employ about 100 people, with 25 more positions coming later.

The site selection process Ferguson used involved two ratings systems: One was purely economic, while the other weighed factors such as the work force, community attitudes, and access to airports, rail lines and ports. "We have a pretty strong allegiance to Virginia because we are headquartered here," Swain says. But allegiance wasn't going to swing the deal. In fact, Swain says he scrupulously avoided drawing conclusions before presenting the options to the company's decision-makers. "I did not want to be accused of cooking the books" to favor a Virginia site.

Taxes in some other states were lower, and other areas offered similar or better incentives. But Swain says looking only at the initial incentive package can be misleading. "On the surface it looked as if it would be more economical [to locate elsewhere], but at the end of a 20-year scheme, that wouldn't necessarily be the case."

The long-term cost of doing business is usually a huge factor in selecting a site, and so it was for Roanoke-based VFP, which manufactures small buildings that house communications systems. These shelters have generally been made out of fiberglass, wood and steel, but there has been an increasing demand for concrete structures. To test its ability to compete in that market, VFP built some concrete shelters at its existing facility, but there wasn't enough room there when the company decided to go for full production.

VFP solicited bids for construction of a separate plant in the Roanoke area, but all of the those bids were "more than we could chew," says CEO Frank Van Balen. So the company went looking for an existing plant that could be modified. And there were some unusual requirements, including ceilings high enough to permit cranes inside.

When an agent found a vacant building in Duffield, Van Balen didn't even know where Duffield was. But after a three-hour drive to far Southwest Virginia, he found a 100,000-square-foot facility with cranes already inside. The building was in disrepair, and VFP spent about $700,000 renovating it before production started in late 1997.

The company now employs about 45 people in Duffield, and it plans to expand to nearly 70 by this summer. "We'll probably top out at about 100," says Van Balen. Clearly, the work force is there. When the company advertised its first 35 positions, 900 applications poured in, but finding skilled workers, such as master electricians, has been more difficult.

Generally, however, the positives have outweighed the negatives. "We're not totally happy with a subsidiary of ours being 200 miles away," Van Balen says. But the three-hour drive is manageable, and the state and the locality are happy to have the company there. The plant is run by "hard workers, and the production is good."

If low employee turnover is the way to measure success, Richmond-based Reynolds Metals is off the scale in Russell County. Of the 200 people it has hired there during the past two years, only one or two have left, says Dennis Loughran, managing director of the company's global wheels division. "Once you train people in a new business," he says, "you'd rather not have to repeat that process."

In 1996, Reynolds Metals announced plans to build a forged aluminum wheel plant in Russell County. Forged wheels, rather than the traditional cast wheels, were a new product for the company and an increasingly hot commodity nationwide. The stronger wheels are used for sport utility vehicles and trucks that carry heavy loads or traverse rough terrain.

The company first looked at areas where it already had cast-wheel plants: Canada, Italy, Venezuela and Beloit, Wis. "We had a lot of choices," Loughran says. But the company wanted an adaptable work force for the computer-controlled equipment used in the forging process. They found the people they needed in Southwest Virginia. "Russell County had an unemployment rate of 13 percent. The people are well-educated and skilled," Loughran recalls. "Many were coming from machinist programming backgrounds." Bonuses included a ready industrial park site, quick access to an airport, and key road improvements. "Gov. [George] Allen ... got the Department of Transportation ... to improve road spurs," he says.

Even so, starting a new product line meant extra risk for the company, but the county's willingness to let Reynolds build in two stages, both of which are now complete, was a big benefit. "We didn't want to make an entire investment in one sum, and they didn't want a bait and switch on the project," Loughran explains. In the end, they negotiated an agreement that gave the community some confidence that Reynolds would follow through on both phases of development without forcing the company to pull the triggers on both barrels at the same time.

The deal seems to have worked well for the county and the company. Even though Reynolds has built a half dozen plants elsewhere in the past several years, Loughran says he "would be hard-pressed to say we had an equal experience with any of the others."

Be it ever so humble, there's no place like home -- even in the wheeling-and-dealing world of site selection.