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Turning Point: EC&M’s 2014 Top 40 Electrical Design Firms Special Report

April 18, 2014
Market slowdown ignites need for infrastructure upgrades worldwide.

Project owners delayed and canceled projects in 2012, creating significant pent-up demand. A year later, as some projects began to be released, some work rushed in like a tidal wave, while other jobs never quite washed up on shore.

Despite varying market conditions nationwide, 25 out of the 40 companies on EC&M’s annual proprietary 2014 Top 40 Electrical Design Firms listing experienced year-over-year revenue increases, and 17 of the companies reported at least a 10% jump.

Sunrise at the Energy Systems Integration Facility (ESIF) at the National Renewable Energy Laboratory (NREL) in Golden, Colo. (Photo by Dennis Schroeder/NREL)

For example, Morris Plains, N.J.-based Triad Consulting Engineers, Inc. (No. 18) posted a 14.1% increase in electrical design revenue due to work opportunities in the data center, pharmaceutical, and power industries, as well as  growth in overseas markets. Ronald Regan, president of Triad, says 2013 was a very strong year for his company.

“When the economy was dragging, a lot of our clients postponed their projects,” he says. “It got to the point where their power systems were overloading and crashing, and they had to release work to patch things up due to growth.”

Oregon Nanoscience and Microtechnologies Institute (ONAMI) is an award-winning signature research center in Corvallis, Ore. With a relatively modest budget of $9.5 million, a warehouse was converted into advanced research space with laboratory HVAC and exhaust, process piping, expanded electrical service, central mechanical equipment room, laboratory sanitary waste system, energy-efficient lighting upgrade, and other improvements (Photo courtesy of CH2M Hill).

Tim Cutshaw, executive vice president for Madison, Ala.-based Mesa Associates, Inc. (No. 7), agreed, saying many customers held back on their typical spending due to uncertainty with the elections and the economy. When they had more of a clear direction, however, they began releasing funds — and the market went back to normal.

“Last year was a year of growth for us and also a year of optimism,” he says. “We saw growth across all of our market sectors and regions, with the exception of government.”

Fig. 1. Nearly 60% of Top 40 firms met revenue expectations for 2013 as compared to 37.5% in 2012.

For some firms, 2013 was a year when many project opportunities moved off their backlog pile to the “active” stage, and their clients began investing in new construction and renovation projects. About 22.5% of the electrical design firms exceeded revenue expectations (Fig. 1) in what 35% of the respondents characterized as a “strong” business climate and 5% deemed as “weak” (Fig. 2). About 60% of the respondents considered 2013 as a fair business climate, including Madison, Wis.-based Affiliated Engineers, Inc. (No. 10).

“Depending on the market, we found a lot of variability,” says Greg Quinn, managing director of external operations. “It wasn’t a robust market, but it was better than 2011 or 2012.”

Fig. 2. A total of 60% of Top 40 firms characterized the 2013 business climate as "fair" as compared to 72.5% in 2012.

While the top four firms on last year’s listing held on to their respective spots, more than half of the other companies slid down in the rankings — and only a few climbed up the list. In addition, four new firms were added including Augusta, Maine-based TRC Engineering (No. 5); Muscatine, Iowa-based Stanley Consultants (No. 6); New York-based WSP (No. 11); and Omaha, Neb.-based Leo A Daly (No. 25).

Out of the companies listed from last year, five companies posted more than a 40% increase in electrical design revenue. These companies included Englewood, Colo.-based CH2M Hill Companies, Ltd. (No. 2) with 47.1%; Wheat Ridge, Colo.-based M-E Engineers (No. 12) with 42.3%; Harrisburg, Penn.-based Gannett Fleming, Inc. (No. 13) with 68.1%; Walnut Creek, Calif.-based Carollo Engineers, Inc. (No. 16) with 58.5%; and Long Beach, Calif.-based P2S Engineering, Inc. (No. 23) with 93.2%.

Fig. 3. Three-fourths of the firms on the Top 40 list experienced an increase in backlog in 2013.

Many of these firms experienced an increase in revenue due to hot market segments and a healthy backlog of projects (Fig. 3). For example, CH2M Hill attributed its growth in electrical design revenue to strength in its industrial and advanced technology business group.

“The fourth quarter of 2013 was the best in our history,” says Ted Johnson, Facilities & Urban Environments, CH2M Hill. “Even though we had hoped to do better, we’ve always been confident of our ability to read changing market conditions and respond quickly to those changes.”

While some respondents exceeded expectations, the majority of the firms generated their expected revenues. In fact, about 57.5% of the respondents earned their expected profits (Fig. 1). For example, Dublin, Ohio-based Varo Engineers, Inc. (No. 35) met revenue expectations despite working in what it considered a “fair” business climate.

The new Education Center at Portland Community College Newberg is the first higher education building in Oregon to become net-zero and LEED Platinum certified. (Photo by Stephen Miller/ourtesy of Interface Engineering).

“We had several large jobs that started in 2011 and were still in progress through 2013,” says Jim Schlunt, vice president of electrical engineering. “We continued to receive a large portion of the capital projects from some of our major clients due to our performance.”

At the same time, however, some of the firm’s clients cut back on total work and canceled jobs, preventing the company from increasing its electrical design revenue even further, Schlunt says. Other firms on the listing also faced challenges in the market. Eleven firms reported a decrease in electrical design revenue, and two of those companies reported more than a 15% drop including Nashville, Tenn.-based Smith Seckman Reid, Inc. (No. 14) with a 25.1% decline and Gaithersburg, Md.-based Shah & Associates, Inc. (No. 33) with a 16% decline in revenue.

Shreedhar Shah, president of Shah & Associates, attributed the drop in revenue to continued project delays in 2013 and project owners’ focus on price, rather than value, when it came to selection of design firms.

Fig. 4. Significantly more Top 40 firms added rather than laid off employees in 2013. The average number of employees added was 99 (three firms added between 400 and 550 workers) while the average number of laid off employees was 72.

“As the business has grown, we’ve seen delays across different geographies and almost every market,” says Shah. “There have been so many one-off delays with RFPs and the government shutdown, which has gummed up the process. Now that some of those issues have been resolved, we think some of these things will soon be cut loose.”

Despite facing project delays and other challenges,  the firms on the annual listing reported higher revenues than the year before. In fact, the respondents posted total electrical design revenues of $1.808 billion in 2013 — up from $1.348 billion last year (see PDF version of Top 40 Electrical Design Firms List).

Preparing for future growth

To handle the increased workload and to cover geographical and vertical markets, some of the nation’s largest electrical design firms are hiring new employees (Fig. 4) and opening branch offices (Fig. 5). Twenty-two firms added employees while seven companies laid off employees, and 12 didn’t make a change in their staffing levels. (Note: The total is greater than 40 because some firms added and laid off employees in the same year.)

Fig. 5. About the same number of Top 40 firms opened or closed branch offices in 2013 as stayed the same. Although most of the firms making additions added one office, one firm added 25 branch offices.

For example, Kansas City, Mo.-based Burns & McDonnell (No. 1), which topped the list again this year, hired 500 new employees in 2013 and plans to continue adding more new hires this year. Other firms are also following suit by making plans to hire more staff rather than focusing on reducing head count (Fig. 6).

For example, Varo Engineers is boosting staffing levels to handle increased work from its manufacturing clients, growth in the petroleum, gas, and transmission and distribution industry, and upcoming opportunities in the design-build sector. Alameda-Calif.-based The Engineering Enterprise (No. 37) is also planning to hire employees for its Bay Area office, which has seen increased activity over the last year.

Overall, about 18 firms opened or closed branch offices while 20 companies had the same number of branch offices in 2013 (Fig. 5). The majority of the firms added five or less new branch offices, but Stantec (No. 3) added 25 new branch offices with 13 in the United States, 10 in Canada, one in Puerto Rico, and one in Qatar, says Glenn Stowkowy, vice president of Stantec.

Fig. 6. Only one firm on the Top 40 list indicated it will reduce head count in 2014.

Other electrical design firms are maintaining a global presence by establishing offices in other countries rather than outsourcing electrical design work (Fig. 7 and Fig. 8). For example, Triad has leveraged opportunities in the resort industry with its offices in Puerto Rico, the Bahamas, and the Dominican Republic, and San Francisco-based Glumac (No. 21) collaborates on work with its office in Shanghai, China.

CH2M Hill, which has 26,000 employees in 122 countries, serves not only the United States, but also Asia, Australia/New Zealand, Canada, Europe, northern Africa, Latin America, and Europe. The company posted a 47% increase in electrical design revenue due to increasing global activity and economic recovery worldwide, says Johnson.

Fig. 7. All but 5% of Top 40 firms did not outsource any of their electrical design work to companies outside of the United States in 2013.

“As a company with many years of global project experience and resident staff resources in many parts of the world, we’ve all been well positioned to react quickly to new project opportunities as they surface internationally,” he says.

Zoning in on hot markets

When working internationally or in the United States, market diversification was the key to success for the nation’s largest electrical design firms. For example, Portland, Ore.-based Interface Engineering, Inc. (No. 27) posted a 35.4% increase due in part to its focus on a number of different market segments.

“We are very diversified and work in many markets,” says Joel Cruz, principal for the San Francisco office of Interface Engineering. “When something is not up to par in one market, the other one helps out.”

Fig. 8. As in 2013, the trend toward keeping electrical design work inhouse remains the plan for most Top 40 firms in 2014.

About 56% of the respondents listed general building (commercial, educational/institutional, health care, and housing) as their prime area of expertise (Fig. 9). P2S Engineering is currently experiencing a surge in both the health care and higher education markets. To cover these segments, the company recently opened a new branch office in San Diego. President Kevin Peterson attributes the growth in the education market to the passage of local and state bonds.

“The funding continues to expand the educational market and present great opportunities for us in terms of helping the campuses upgrade their infrastructure, their old and aging equipment and systems and provide design for new energy-efficient facilities,” says Peterson.

Fig. 9. The majority of firms on the Top 40 list worked mostly in the general building category, which included commercial, institutional, health care, and housing work.

Other firms are also finding strength in the education market (Table). In California, Scott Wheeler, principal in charge of the Sacramento, Calif., office of Engineering Enterprise, says hospitals are investing in state-mandated structural upgrades. In the San Francisco area, health care providers are building new hospitals to meet requirements for seismic upgrades, and they’re transforming existing hospitals into outpatient clinics, Cruz says.

Affiliated Engineers has also noticed a shift toward more ambulatory and outpatient care as well as a move by hospitals to invest in infrastructure for the future. While the company hit a low in its health care practice last year due to industry consolidation and uncertainty about patient reimbursements, Quinn sees the market rapidly changing.

“It was slower than past years last year, but in the first quarter of 2014, health care has been one of our busiest markets,” Quinn says. “The pent-up demand is creating a situation where people need to do something.”

Although education topped the list last year, the power market made its debut this year as a hot market in 2013. Retail and public building tied for the slowest market among Top 40 firms in 2013.

Firms are also discovering a wealth of opportunities in the electric utility market, especially the transmission and distribution segment. For example, Varo was one of 14 firms that reported power as one its three hottest markets. Schlunt attributed the strength in this market to the general increase in the population, growth in manufacturing and office facilities, and reliability issues. In the Midwest, he says coal is the primary source of energy for electrical generation, and environmental issues are driving much of the work in this sector.

As more plants are decommissioning their fossil plants and replacing them with more environmentally friendly options, firms now have the opportunity to help upgrade existing plants or build new facilities. In addition, the aging infrastructure in the power industry is providing opportunities for the nation’s largest electrical design firms.

“The infrastructure is to the point where it is getting tapped out and aging, which all plays well for our industry,” says Shah.

At the Olinda Landfill project in Brea, Calif., Stantec merged technical expertise in power plant design with state-of-the-art technology to develop one of the largest landfill gas-to-energy projects in the United States at 32.5MW. (© 2012 freshpageimages / Alan Sisto).

Other opportunities stem from the need for electric utilities to upgrade or rebuild equipment to prepare for or handle a natural disaster. Case in point: Following the Fukushima incident in Japan, U.S. nuclear plants are hiring design firms like Mesa Associates to specify equipment and adhere to new processes. In addition, companies like Triad are lending a hand to electric utilities and plants following Hurricane Sandy, which destroyed infrastructure throughout the Northeast.

New building for Fukushima Response at major southern utility (Photo courtesy of Mesa Associates).

Design firms are also helping data centers to guard against severe storms by raising equipment to higher elevations, building collocation centers to handle the growth of data transmission, and upgrading and constructing new data centers.

“Many data centers were built in the early to late 1990s, and they are very outdated,” says Cruz. “They are renovating their facilities to integrate the changing world of electronics, data, and technology.”

Along with data centers, a lot of the top firms also discovered a lot of opportunity in the manufacturing arena, especially when it came to automobile plants.

“Some plants are increasing their capital spending plans due to the new gas mileage requirements for new automobiles, and as they prepare to meet this requirement, it has an impact on manufacturing,” says Cutshaw. “Aluminum plants are expanding production for the automotive industry, which will decrease vehicle weight and increase their fuel efficiency.”

Carollo Engineers specializes in design work for the wastewater treatment plant market (Photo courtesy of Carollo Engineers).

Another market that 13% of the respondents listed as one of their main areas of focus was the water/wastewater market (Fig. 9). Carollo Engineers jumped five spots up in the rankings due to its electrical, instrumentation, and control system consulting services in this sector. Clients are hiring the firm to conduct electrical and arc flash studies, make SCADA improvements, and replace antiquated equipment. In addition, the plants hired the company to try to achieve net zero status by using digester gas for cogeneration or peak shaving.

NuSkin’s Innovation Center is an $85-million, 164,000-sq-ft expansion of the company’s global headquarters currently seeking LEED Gold certification. The space was designed to offer employees connection to nature and the outdoors via the building’s all-glass “skin.” (Photo courtesy of Spectrum Engineers

“The infrastructure is aging across the country, and we saw more of our clients improving and replacing the infrastructure, not for capacity sake, but due to new regulations,” says Anthony Morroni, senior vice president and national director of discipline engineering for Carollo Engineers.

During construction of the IRS Enterprise Computing Center in West Virginia, H

Enhancing energy efficiency

As project owners invested in upgrading their aging infrastructure, they strived to save energy through renewable energy technologies and energy-efficient equipment.

Triad Consulting Engineers, Inc., worked on this 20 MW ground-mount, utility-scale photovoltaic farm in New Jersey. It is the largest private photovoltaic farm on the East Coast (Photo courtesy of Triad Consulting Engineers).

The Engineering Enterprise reported that 80% of 2013 projects had a renewable energy component last year, and 85% will feature a renewable energy component this year. To help its clients save energy, the firm evaluates the use of renewable energy on every project and has designed PV systems for office facilities, schools, and public buildings.

Varo did the power distribution design work at this landfill gas-to-energy project in Ohio. The team’s design stepped the generator output voltage up to electric utility distribution voltage levels and incorporated communication systems between the 1,100kW generator and the gas conditioning unit on this green project (Photo courtesy of Varo Engineers).

When Title 24 goes into effect on July 1, however, Engineering Enterprise, as well as all other firms in the California market, will be mandated to design for future solar installations on every project. The firms must not only provide dedicated roof space for solar — and a pathway to this space — but will also face increased requirements for lighting controls, occupancy sensors, metering, and distribution systems.

Because Title 24 could increase building costs by 10% to 15%, Wheeler expects that some owners may not have the money to include certain renewable energy systems in the near future.

WSP provided high-performance building, MEP, security, and measurement and verification services on the Conrad N. Hilton Foundation facility in Agoura Hills, Calif. (Photo courtesy of WSP).

“There will be some hefty mechanical and electrical requirements, and it may potentially cause owners to move slower, not build, or move outside of California,” says Wheeler. “At the same time, we have put so much time into getting all of our people up to speed with the new energy code, and we are, in turn, educating all of our clients, architects, and contractors.”

Some California firms are already actively involved in solar including P2S Engineering, which plans to double its work in this area this year. The company is currently working on several smaller solar projects for higher education clients, and it is also supporting large solar installations with substation and utility interface designs.

Fig. 10. Average percentage of work that included a renewable component this year and projections for next year in the wind and solar space.

According to the Top 40 respondents, about 11% of their work included solar and 5% included wind in 2013. These numbers reversed course to 8% for solar and 13% for wind in 2014 (Fig. 10). One reason for the dip in solar work is due to the limited access to carbon credits and solar renewable energy credits, notes Regan. Up to this point, solar or wind has not comprised a significant amount of Triad’s workload in the United States, and the same has been true for Varo Engineers.

Gannett Fleming provided construction management and commissioning services for the installation of a 5,148-panel photovoltaic solar array for the Cumberland Valley School District in Mechanicsburg, Pa. To maintain the lawn areas within the solar panel array fields, CVSD implemented a sustainable solution by bringing a variety of grazing animals to the site after the system was installed (Photo courtesy of Gannett Fleming).

“There simply is not enough projects to require additional resources outside of the primary firms involved in the solar design itself,” says Schlunt. “We can see potential, but there would need to be a leap of great magnitude in the demand for solar.”

Until the solar market heats up, the majority of the nation’s largest engineering firms are focusing on other types of green design. For example, Varo has increased the use of variable-speed drives (VFDs) and high-efficiency motors, Shah & Associates is focusing on installing motor control centers and VFDs, and Mesa Associates is conducting studies and performing upgrades for hydro plants. In addition, Affiliated Engineers is designing solar water heating, geothermal, and building automation systems.

“Almost every building that we touch has some degree of sustainability in it,” says Quinn. “Even risk-resistant institutions are much more mindful of how they approach renewable energy opportunities.”

San Diego State University’s Student Union features a 300 fixed-seat multipurpose theater as well as indoor and outdoor lounges and seating areas for studying, meeting, relaxing, and enjoying outdoor entertainment. (Photo by Carlo Sese)

Dealing with down markets

Along with leveraging opportunities in hot markets, the nation’s top electrical design firms saw some markets that did not fare well in 2013, including retail, public building, residential, and hospitality (Table).

While the hospitality and retail markets have been down for several years, Peterson says his company is starting to see some activity in the hospitality market with some very large international developments. Similarly, Cruz says he’s seeing an uptick in this sector following the slowdown due to the recession.

HEI provided mechanical, electrical, plumbing, and fire protection design services for the $60-million renovation and expansion of the 200,900-sq-ft Bill Snyder Family Stadium at Kansas State University (Photo courtesy of Henderson Engineers).

“If people don’t have work, or they’re afraid to spend money, they won’t go on vacation or splurge, and that hurt the hospitality industry,” he says. “Now that the economy is getting better, people are starting to spend money, and the hospitality industry is investing in modernizing or renovating their hotels.”

One market that has tended to be down nationwide, however, is government and public works. When the federal government shut down for two months, the ripple effect lasted for close to eight months, Shah says. In turn, the lack of government money hurt the public works market.

The Engineering Enterprise provided design services for the Sacramento International Airport’s new terminal, which includes a landside terminal, baggage system, central utility plant, parking garage, toll plaza, remote central receiving facility, pedestrian bridges, and an airside gate (Photo courtesy of The Engineering Enterprise).

For example, the city of Sacramento, Calif., is often heavy into public works because of the number of state buildings. Last year, however, the public works market was little to nonexistent due to the economy and the public entity budgets, Wheeler says. As a result, the company experienced a “mixed bag” business climate with a strong year in the Bay area and a slowdown in its Sacramento office.

Forecasting the future

Despite facing a drop in certain market sectors, many of the nation’s top electrical design firms experienced steady to growing revenues in 2013, and the majority expect this trend to continue. For 2014, five respondents expect more than a 10% increase, 10 firms predict a 6% to 10% increase, and 14 companies anticipate a 5% or less increase (Fig. 11). Only five respondents expect a decrease in sales this year, and six companies think their revenues will stay the same.

Fig 11. The vast majority of firms on the Top 40 list are forecasting solid growth rates in 2014.

For example, Varo expects to see a 6% to 10% bump in revenues this year due to its clients’ strong budgets and need for engineering and design work in electrical generation and the glass manufacturing sector. The firm faced a decreased backlog in 2013 but expects its backlog to increase this year through the efforts of its lead engineers.

Fig. 12. Only one out of 40 firms on this year's list expects a decrease in backlog for 2014.

“We spent much of 2013 developing new clients, and they appear to have many small to medium projects in hand,” says Schlunt.

While 75% of the firms saw increased backlog in 2013 (Fig. 3), 90% expect to have increased backlog for 2014 (Fig. 12), including Interface Engineering. While Cruz says it’s hard to forecast what the future holds for electrical design firms, at this point, he’s seeing more opportunities for electrical design firms.

“We are hoping that since the economy is getting better, the banks will loan money, the developers will start developing, and we’ll see things start picking up,” says Cruz. “There are more projects out there than there were before.”      

Fischbach is a freelance writer based in Overland Park, Kan. She can be reached at [email protected].

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About the Author

Amy Florence Fischbach

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