Ecmweb 5745 604ecmcoverstorytable1
Ecmweb 5745 604ecmcoverstorytable1
Ecmweb 5745 604ecmcoverstorytable1
Ecmweb 5745 604ecmcoverstorytable1
Ecmweb 5745 604ecmcoverstorytable1

Mission: Infrastructure

April 1, 2006
Find out what put EC&M's Top 40 electrical design firms on the front lines of growing construction markets. Between reconstruction efforts as near as the Gulf Coast and as far as Iraq, as well as the ever-improving economy for select construction markets, 2005 proved to be a momentous year for many of the electrical design firms on EC&M's 2006 Top 40 list. In 2005, these 40 design firms reported a total of $18.4 billion in design services revenue.

Due to an editorial error, last month’s cover story about the Top 40 electrical design firms misstated the 2005 total design services revenue for Stanley Consultants, Inc., Muscatine, Iowa. The firm’s design services revenue for 2005 totaled $152. 7 million, not $59.9 million, which is the company’s reported 2005 electrical design services total. The correction moves the firm up seven places to the No. 17 spot on the list and takes it out of the group of the worst year-over-year performers. The firm actually realized a year-over-year growth rate of 22.9%, placing it among the Top 10 growth leaders in our listing. The staff of EC&M is happy to make this clear and regrets any confusion the error caused. The following story reflects the corrections made in both the text and the charts.

Between reconstruction efforts as near as the Gulf Coast and as far as Iraq, as well as the ever-improving economy for select construction markets, 2005 proved to be a momentous year for many of the electrical design firms on EC&M's 2006 Top 40 list. In 2005, these 40 design firms reported a total of $18.5 billion in design services revenue. Even more impressive is that overall they experienced an average year-to-year gain in design services revenue of 12.6%. An incredible 33 firms posted increases in revenue. Of the eight that reported declines, only three dropped more than 10%. Due to last year's financial successes, many individual rankings rose dramatically. In fact, six firms are making their debut appearance on the list (Top 40 Listing, see link below).

Top 40 Chart

What was at the root of last year's success stories? Many of the firms on this year's list attribute their good fortune to an improved economy, which boosted growth in core markets. See Table 1 at right for a listing of the eight hottest and coolest market sectors as identified by the respondents to our Top 40 survey. The imminent retirement of the baby-boom generation continued to spur the health-care vertical market, as well as design services for non-traditional residential retirement facilities. New construction for the higher-education market — housing, classrooms, and research labs — was on the rise due to a hike in the student population, as well as increased competition for R&D funding for academic institutions. More than $300 billion in new U.S. multi-year funding for highway, transit, and water-related infrastructure was also an impetus for government projects in 2005. Finally, an extension of the Patriot Act funded additional security and defense measures for government and private institutions.

However, not all markets grew. According to some Top 40 firms, the residential market finally started to show signs of slowing down due to higher interest rates. In addition, as the cost of raw materials and energy increased, producers gravitated toward sources of cheap materials and large consumer bases, such as Russia and China. Therefore, the manufacturing, pulp and paper, and automotive market segments remained sluggish. Telecommunications and retail have not been able to build momentum, and product liability, patent expirations, fewer best-selling drugs, and increased pressure to reduce drug pricing caused a sharp reduction in capital spending in the pharmaceutical industry. Fortunately, these slower markets weren't strong enough to overshadow the upturn in the industry as a whole. Of the firms that responded to our survey question about revenue expectations, 18 answered that they had exceeded their fiscal goals. Only three indicated they hadn't met expectations.

For next year, the Top 40 maintain an optimistic outlook. The majority of firms are looking at posting even bigger revenues in fiscal 2006 (Fig. 1 above). Of the 26 firms that answered our question regarding what kind of increase or decrease they expect for design revenue in 2006, nine of them are predicting an increase of more than 10%. Another eight are forecasting an increase in the range of 6% to 10%, and six are projecting an increase of 5% or less. One firm expects to stay the same, and one firm expects a decrease of 6% to 10%. Only one firm is expecting a decrease of more than 10%. All in all, this bodes well for the electrical design services market in 2006.

Note: The information used to generate this report was obtained through an exclusive EC&Msurvey, published annual reports, telephone interviews, and company press releases. If you would like your company added to our survey mailing list, please contact Beck Finley at [email protected].>

 

Top 10 Success Stories

  • Holding on to the No. 1 spot for the third year in a row, URS Corp., San Francisco, posted an impressive 37.5% increase in design services revenue from 2004 to 2005, finishing the year at $3.92 billion — planning and design comprises 50% of the company's total revenues. The firm has approximately 29,000 employees in a network of more than 300 offices and contract-specific job sites in 20 countries. URS is structured in two operating divisions: the URS Division and the EG&G Division. The URS Division provides a full range of planning, design, and program and construction management services to a variety of private and public sector clients. The EG&G Division primarily serves U.S. federal government clients, including Department of Defense agencies such as the Army, Navy, Air Force, and the Department of Homeland Security (Fig. 2 below).
  • At No.2, with estimated design services revenue of more than $2.2 billion — 14.2% higher than in 2004 — Jacobs Engineering Group , Pasadena, Calif., is one of the largest firms in the world. Its global network includes more than 70 offices in more than a dozen countries, including North America, the United Kingdom, Europe, India, Australia, and Asia. By offering its services to industrial, commercial, and government clients across multiple markets, the company was able to move up one spots in our 2006 listing. The services Jacobs provides include scientific and specialty consulting as well as all aspects of engineering, construction, operations, and maintenance.

    Jacobs attributes its success in fueling steady financial growth to building long-term client relationships and aggressively controlling costs. In fact, it claims that 90% of its work is repeat business, yielding cost advantages, predictable revenue streams, and consistent earnings growth. On a year-over-year basis, the company finished with low net earnings — $151 million — but continues to increase its total backlog to more than $8 billion, up from $7.5 billion the previous year (Fig. 3 below). The firm's oil and gas business grew considerably, delivering on Indian Oil Corp.'s $330 million refinery expansion in Mathura, India. Jacobs' highway, transit, and water-related infrastructure division also won several key projects in 2005, including the $130-million, three-mile Sanibel Causeway Bridge project in Florida.

  • Dropping one spot to No. 3, Fluor Corp., Aliso Viejo, Calif., is the only firm in the Top 10 to report a decrease in design services revenue, finishing the year at $2.1 billion — a 6.9% fall from 2004's $2.2 billion figure. Fluor's 35,000 employees operate globally through a network of offices in 25 countries across six continents. The company's five strategic units — Oil & Gas, Government, Power, Industrial & Infrastructure (I&I), Global Services — combined to bring in total revenues of $13.2 billion in 2005, with only I&I reporting a loss — $17 million, down from an operating profit of $62 million last year — despite making progress on copper and iron ore mining projects. Fluor's backlog of business, more than 60% for international projects, grew for the third year, to $14.9 billion. The company booked $12.5 billion in new project awards, slightly below last year's record of $13.0 billion.

    Flour's Oil and Gas division, driven by strong demand, grew 50%, to $242 million, in 2005, as did the market for new coal-fired power generation. Flour performed substantial work for the Departments of Energy, Defense, State, and Homeland Security, as well as Gulf Coast reconstruction efforts for the Federal Emergency Management Agency (FEMA). The company's government segment posted operating profits of $84 million. New awards of $2.5 billion grew 12% over 2004, but backlog at year-end was down 6% to $1.4 billion, due to declining work levels in Iraq.

  • Holding steady at No. 4, CH2M HILL Companies, Ltd. , Englewood, Colo., posted more than $2.0 billion in design services revenue, an 18.1% increase over 2004. The 15,000 employee-owned EPC firm, with more than 200 regional offices worldwide, serves the water, energy, environment, transportation, communications, and industrial market sectors.

    In September, CH2M HILL was commissioned by FEMA to identify and manage temporary housing units for 7,000 displaced Hurricane Katrina survivors in Alabama, Louisiana, Mississippi, and Texas, including providing transportation, medicine, and security for each housing location. This came on the heels of the CH2M HILL company Kaiser-Hill Co., responsible for cleaning up the former Rocky Flats nuclear weapons plant west of Denver, sending more than 2,500 giant fabric bags to the U.S. Army Corps of Engineers (USACE) to use as sandbags to close breaches in New Orleans levees. Each bag was filled with about 16,000 pounds of sand and lowered into the breached section of the levee with Chinook helicopters helping stop the flow of water into the city.

    In October, CH2M expanded its Water Business Group with the acquisition of Ohio-based BBS Corp. Through this acquisition, the firm expects to enact key company strategies including leveraging the company's reputation and staff to expand work for key clients in the Ohio market; acquiring increased capacity to deliver in the region in the area of conveyance and wet weather treatment and experience; leveraging a local East Coast presence; and positioning the company in Ohio's emerging design-build market.

  • For the second year, San Francisco-based Bechtel, ranks at No. 5. In 2005, the firm posted design services revenues of $1.85 billion, an 18.5% hike over last year's figure. The value of new work for the firm with 40,000 employees in at least 26 countries rose from $15.7 billion to $18.5 billion, the third highest in the company's history. Another milestone for the firm was its overall safety performance. During 2005, more than 50 Bechtel projects recorded at least 1 million consecutive job hours without losing time because of an accident.

    The firm's Oil, Gas & Chemicals unit, capitalizing on the demand for new energy, led the way with liquified natural gas production projects in Australia, Egypt, Equatorial Guinea, and Trinidad. The firm also won a contract for a re-gasification project in Louisiana as part of the Hurricane Katrina recovery efforts.

  • Parsons Brinckerhoff, Inc. (PB) , New York, moves up one spot to No. 6 in this year's ranking. The private, employee-owned company logged $947 million in design services revenue for 2005, up 5.9% from last year. Overall, PB achieved its highest-ever operating income — nearly $46 million — and net income — $27 million — on revenues of $1.4 billion. The firm booked $1.2 billion in new sales, exceeding the goal set in 2004 by 11%.

    The 9,600 employees in more than 200 worldwide offices worked on several key projects throughout the year. In FY05, PB helped a public-private partnership obtain financing for a toll bridge in Calcutta, India; developed 3D/4D models to picture current and proposed conditions for a massive renovation of a subway station in New York City; and completed a corridor-wide pilot project to demonstrate that WiFi technologies can be used for communications between buses and traffic controllers.

  • This year proved another strong showing for The Shaw Group, Inc., Baton Rouge, La. After breaking into the Top 10 last year by posting a record 48.7% increase, the company continues its success with a $784 million posting for 2005, up 24.7% from 2004. The company's backlog as of fiscal year end Aug. 31 rose to $6.7 billion, exceeding last year's consolidated backlog of $5.8 billion. Three markets — energy, chemicals, and environment and infrastructure — comprise the entirety of the company's backlog , as well as its revenue (Fig. 4 below). Energy comprised 43% of the company's 2005 revenue, along with environment and infrastructure at 43%, chemicals at 21%, and other at 2%. Shaw received several major awards in these markets in 2005, especially in the power segment, including grass-roots power plant projects and flue gas desulphurization work.

    Greatly affecting the company's performance was the devastation caused by Hurricane Katrina on Shaw's home turf. Because of the company's record of rapid deployment during recovery efforts following almost every hurricane since Andrew in 1992, Shaw was federally pre-qualified. Since the first days of levee repair, power restoration, and removal of the floodwaters from New Orleans, Shaw has been onsite throughout southern Louisiana, Mississippi, Alabama, and Texas. In addition, the company hired nearly 70% of its subcontractors from among small local businesses.

  • Holding steady at No. 8, Black & Veatch Corp., Overland Park, Kan., reported $775 million in design services revenue for 2005, an increase of 5.9% over 2004. The 7,285 employee-owned company has 79 offices across the United States and executed projects in 70 countries on six continents last year. The firm attributes its growth to strong core markets — government, power, water and wastewater, telecommunications, and enterprise management consulting services — and expects a revenue increase of more than 10% in 2006. Design/build accounts for 46% of its revenue, the rest coming from operations and maintenance, energy management, project/construction management, and engineering/contracting services.

    Projects awarded to Black & Veatch Corp. in 2005 include the TransAmerica Generation Grid (TAGG), a national energy initiative to deliver more reliable, cost-effective power through a High Voltage Direct Current (HVDC) transmission path and link major load centers between the eastern and western parts of the United States, and a technical and economic feasibility study of proposed modernization alternatives for a central heating plant that provides hot water for district heating, process steam for local industry, and electricity for the local grid in Bialystok, Poland.

  • This year, Edmonton, Alberta-based Stantec's $537 million in design services revenue, a 34.7% increase over 2004, lets it break in at No. 9. Founded in 1954, the firm provides design and consulting services in planning, engineering, architecture, interior design, landscape, surveying, and project management. Through three acquisitions — The Keith Companies (TKC), Irvine, Calif.; CPV Group Architects & Engineers, Calgary, Alberta; and Keen Engineering, Vancouver, British Columbia, and Seattle, Wash. — the firm opened more than a dozen offices in the United States and Canada, adding 1,150 employees for a total of 5,500, expanding its reach to automated and manufacturing processes, production lines, fire protection systems, and sustainable design based on the United States Green Building Council's (USGBC) LEED (Leadership in Energy and Environmental Design) Green Building rating system for energy-efficient buildings.
  • Making its debut in the Top 10, Carter & Burgess, Inc., Fort Worth, Texas, posted $364 million in design services revenue, up 11.1% from 2004. Since 1990, the firm has expanded dramatically from 300 employees and $22 million in revenue to 2,800 employees in more than 30 locations across the United States and an estimated expectation of $500 million in revenue in 2006. The company specializes in building and transportation programs, survey, acoustics and audiovisual, urban design and planning, public works, environmental, and land development.
  • In January 2005, Carter & Burgess was selected by authorities at Fresno Yosemite International Airport (FYI) as the design consultant for various taxiway rehabilitations and reconstruction projects at the airport. The company designed the $30 million expansion and renovation for Prime Outlets, a retail outlet center in San Marcos, Texas. The 200,000-square-foot expansion has a Venetian theme and will include gondolas, statues, and gardens. Later that year, the firm finalized an open-ended master agreement with McKenzie Bay International Ltd. — the Michigan-based owner and operator of WindStor, a wind energy generation, storage, and distribution system for urban environments — for architectural, structural, and electrical engineering design services and installation of wind turbines across the United States.




    Sidebar: Future Technologies

    Future Technologies. The Top 40 responses to our question about what technology they felt had the greatest chance of changing the landscape of electrical design work in the next three to five years was almost evenly split among 3D CAD software, integrating low-voltage systems in the design of buildings, and the increasing demand for energy-efficient products and technology. Smart buildings, real-world nanotechnology applications, and LEED certification weigh heavily on the minds of our Top 40 firms, including the advances in software that will make it easier to integrate these new technologies in the early design phase.

    Phrases such as “daylighting,” “clean coal technology,” and the “new nuclear energy” are all evident of the impact the Energy Policy Act of 2005 (EPAct 2005) has had on the design services industry. Signed into law on Aug. 8, EPAct 2005 contains increased goals for federal energy efficiency, encourages standards for state government buildings, funds R&D for energy-efficient technology, and offers tax breaks for efficient commercial property. The new policy also contains benefits for manufacturers of electrical products. The energy bill pre-empts any future state-legislated standards for products covered by federal legislation, meaning that product efficiency standards brought into state legislation by interest groups are moot. But it also contains provisions for developing coal-fired and nuclear power plants and incentives for oil refineries to expand their capacity. This is good news for firms banking on the increased demand for energy.




    Sidebar: Present and Future Challenges: Déjà vu.

    Again, when asked what challenges they face for the remainder of this year and into 2007, the Top 40 firms were almost unanimous in their focus on the trouble they have finding and retaining properly trained and experienced design and construction professionals. This concern goes hand-in-hand with the second biggest concern of Top 40 firms: the rising costs of health-care and other benefits for their workers. How can a firm afford to keep qualified professionals as the costs of doing so rise? Add to that the hectic pace of fast-track delivery, the increased pressure to lower fees, and the clients' expectations of one-stop shopping, including low-voltage work, and it's no surprise that it's difficult to find workers willing to train on the new software and manage multiple projects with almost impossibly fast turnarounds, all on an ever-tightening budget.

    But don't look overseas, say our Top 40 respondents. Outsourcing of professional engineering work is yet another concern for U.S. firms. Even with faster Internet connections, along with enhanced engineering software, clients shouldn't expect more bang for their buck. Respondents say that clients may save in health-care and benefit plans cost, but it's harder to get the results you want. More importantly, this practice is a far cry from fostering a sense of fair competition in an open market, and may weaken the overall U.S. economy by preventing U.S. engineers and designers from finding work.

    About the Author

    Beck Ireland | Staff Writer

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