As Markets Slow A/E Firms Speed Up Ingenuity

A/E firms are struggling in the prolonged soft market in which the demand for transportation-related projects has been slow due to the stalled federal funding bill. As a result, salaries and bonuses generally have remained the same or declined, and some industry leaders fear that the profession will eventually suffer from lack of talent.

Such concerns were among the issues and challenges discussed by more than 150 top A/E firm executives on November 30, 2004 at a conference sponsored by Engineering News-Record . The following observations highlight industry leaders' perspectives:

• Firms must “reinvent themselves” to become a “life-cycle, value-adding investment” for clients.
• The effectiveness of owner-engineer alliances has diminished.
• Risk management is a key challenge.
• “Rightsizing” should focus on client effectiveness rather than merely to make the firm larger through acquisitions and mergers. Engineers must develop a business focus.
• Human resources are critical.

In the current political climate where defense, anti-terrorism, and homeland security dominate federal spending, major A/E firms are employing new business strategies to expand profitability and growth from federal contracts. Recruitment of former government officials into the private sector is not uncommon.

In November 2004, Robert Card, former Under Secretary of Energy, was named President and Group Chief Executive of CH2M Hill International. The company has several Department of Energy contracts for the cleanup of former waste sites. Another major firm, HNTB, recently hired eight senior executives with extensive military and government experience in its effort to increase federal contracting opportunities, especially defense and homeland security-related work such as strengthening bridges against terrorist attacks. Among the eight executives hired in the past year include retired Lieutenant General Robert B. Flowers, former chief of engineers and commanding general of the U.S. Army Corps of Engineers, and retired General Barry McCaffrey, former commander of the U.S. Southern Command. With close contacts and knowledge of the federal government, these executives are expected to bring in federal contracts worth $16 million this year and eventually $300 million of the public sector market in ten years.

Within the A/E industry, efforts such as those made by HNTB are increasingly viewed as critical for business success. In addition to expanding the client base, some firms also are looking inward to improve business practices and policies. Non-technical skills such as communications, human resources management, negotiation and contracting, and risk management are seen as important factors in increasing profits and minimizing risks.