The Top 40 electrical design firms report record highs and a clear economic climate
Revenue for overall design services remained hot for the majority of engineering firms in EC&M's 2007 Top 40 list. Commanding a sunny average year-over-year gain of 15%, these 40 firms reported a total of close to $20.4 billion in design services revenue for 2006 — eclipsing last year's ceiling by almost $1.9 billion. Nine firms achieved a percentage increase of more than 20%. At the apogee of year-over-year percentage gains, POWER Engineers, Inc. (No. 20) leads with 54.7%, followed remotely by Hankins and Anderson (No. 33) with a 37.3% increase and Stantec (No. 8) with a 34.1% rise. Only three firms reported stormy weather with a drop in revenue for overall design services. Leo A Daly (No. 19) suffered the largest decline at -12.5%, followed by Peter Basso Associates, Inc. (No. 36) with -6.5%, and FBA Engineering (No. 40) with a straight 6.0% decrease.
URS Corp. (No. 1), Jacobs Engineering Group, Inc. (No. 2), and Fluor Corp. (No. 3), stayed in the clear, holding steady to their respective top spots from last year. Seven firms not listed last year — ARCADIS (No. 5); Washington Group International, Inc. (No. 11); VECO Alaska, Inc. (No. 12); Mesa Associates, Inc. (No. 30); Sparling (No. 32); Mazzetti & Associates (No. 35); and DL Engineering & Controls, Inc. (No. 39) — increased their visibility and joined this elite group (click here to see Top 40 Listing)
Taking a closer look, of the 29 firms that reported electrical design services revenue, 17 succeeded in producing gains in that division, boasting almost $1.2 billion in electrical design services revenue — a shining 28% year-over-year average increase. CH2M Hill Companies, Ltd. (No. 4) is out of this atmosphere in year-to-year percentage gains, whereas Black & Veatch Corp. (No. 7) is the clear revenue leader of this group, maintaining its top spot with $320 million in electrical design services revenue for 2006 (click here to see Electrical Services Listing).
The cynosure of this year's list, however, isn't tied to revenue numbers but rather employee gains. More than half of the Top 40 firms reported an increase in the number of full-time employees working for them in 2006, whereas only two — Leo A Daly (No. 19) and Spectrum Engineers (No. 38) — reported a decrease. Six firms — FBA Engineering (No. 40), Gannett Fleming, Inc. (No. 14), Peter Basso Associates (No. 37), Proteus Group (No. 38), Sparling (No. 32), and Washington Group International (No. 11) — maintained current staffing levels from year-to-year. Four firms increased their employee base by more than 20% (Table 1), which marks somewhat of a feat because nearly half the firms in the Top 40 employ 500 or fewer employees (Table 2).
Heavy gains in staffing seems to contradict the Top 40 firms' complaint that recruiting and retaining qualified personnel are two of the most pressing challenges haunting design firms now and most probably into the future (Tables 3 and 4). Although firms are able to find qualified employees, they must cast a wide net.
For the first time since outsourcing became a hot topic, investing in technologies to foster long-distance relationships with offshore contractors, as well as overcoming the language barrier while working on shared projects, beat out any fears that overseas designers will take away valuable jobs. The rising cost of health-care benefits for employees is also a top concern. In addition, many of the Top 40 firms worry that clients are seeking faster project delivery times. Therefore, several firms have increased their adoption rate of the design/build delivery method.
During most of 2006, the big news in construction was the slowdown causing overcast skies in the housing market. Luckily, most design firms — even those that work in the residential sector — were spared this drop in revenue that has been plaguing contractors nationwide. Why? Mixed-use buildings and condominiums, the kind that require designers, are still on the rise.
With plenty of projects to go around, firms are optimistic about their 2007 revenue numbers. Only four firms predict a decrease in overall and electrical design services revenues in 2007, whereas 27 forecast increases of 6% or more (Figure on page 50). Future growth, however, may depend largely on leveraging technologies that just a few years ago sounded like they came straight from a sci-fi novel: intelligent building products, nanotechnology, and “4D” processes (Table 5). The firms that are best able to incorporate these technologies into their workflow, pipelines, and processes will be the ones who maintain sunny forecasts.
Note: The information used to generate this report was obtained through an exclusive EC&M survey, telephone interviews, and company press releases. If you would like your company to be added to our survey mailing list, please contact Beck Ireland at email@example.com.
“Everybody's facing a shortage of personnel,” says Steve March, marketing manager for Phoenix-based DL Engineering & Controls, Inc. (DLEC) (No. 39). “It's a big problem.”
Offering a good benefits package is one way to retain and recruit personnel, but it may come at a hefty price. At DLEC, the firm pays 100% of the employee coverage and 50% for dependents of employees. Instead of paying higher premiums, some firms look for ways to get the most from their money.
Denver-based CH2M Hill Companies, Ltd. (No. 4) recently introduced a “consumer-driven” health plan, meaning it decreased the cost of the plan by increasing deductibles but then added wellness components, such as reimbursement accounts, health education, and 24-hour nurse hotlines. “It's designed to make people think more about their health and wellness before they get to the point where they start using the medical insurance,” says Rudd Little, director of benefits for CH2M Hill Companies Ltd.
Health-care isn't the only benefit employees desire in an employer, though. “We feel very strongly that rather than focusing first on the bottom-line profit — or even focusing first on client or customer satisfaction — it pays to focus on employee satisfaction,” March says.
DLEC sponsors events such as picnics, as well as a “thank you board” in the form of a flat-screen television in the headquarters lobby that sports a slideshow with messages thanking employees for jobs well done. But what may be most important to employees are the opportunities available through mentoring. “Sometimes we find that a person with the right attitude and the right aptitude is worth their weight in gold because we can train them in-house,” says March says, citing as an example the former receptionist who was recently promoted to Designer II. “We've been growing 25% per year since 2003,” says March. “The growth of the company feeds into the opportunity for advancement.”
Not all employees can be found in a firm's existing ranks, however. Recruiting qualified candidates is a major part of running a successful firm and can be difficult, especially if your firm is highly specialized. “You don't find a lot of people out there that have that EE/PE experience that have designed electrical control systems for water treatment plants,” March says.
To find the right candidates, DLEC recruits all across the country, placing ads in national publications for its offices in Irvine, Calif., Las Vegas, and Phoenix. “We've hired people from New York, Ohio, and Virginia,” March says. “Of course, we benefit from the fact that a lot of people want to move west.”
But why even limit your firm's search within the nation's borders? Offshore outsourcing, once a taboo subject in design firms, is now being used to match qualified workers with projects in need of team members. “Companies are outsourcing more across the board,” says Tim Cutshaw, vice president of Madison, Ala.-based Mesa Associates, Inc. (No. 30). “They're capable people, but the terminology and the language poses a barrier.” In order to improve communications, Mesa has brought foreign workers into their U.S. offices temporarily. “They're here as a liaison between their office and our office.”
Another approach to finding good candidates may be to broaden the initial qualifications for candidates, much like with its internal mentoring program. “In some cases, people with graphic or Web design experience have that aptitude where they can program HMI screens that the operators use to interface with the system,” March says. “If they can start out designing those screens, they can get a good view of what it is and how that piece of it relates to the programming that makes the PLC work. And then ultimately they may have the opportunity to grow into a full programmer mode.”
Brian Dolan, P.E., senior project manager for Oklahoma City-based The Benham Companies (No. 22), agrees that in-house mentoring works for maintaining a full staff of qualified personnel. In his experience with the design/build method of delivery, however, it's less the technical side of the work and more the project management skills that employees require. “Students are certainly coming out of school with good general technology skills, but not the skills for project management,” Dolan says. “We need to take those people with the good technical skills and make them understand the construction side of it — the business aspect of it — so when they make their technical decisions they understand the broader implications.”
Making changes or corrections during the construction phase is much more costly and time-consuming than during the planning stages of a project. “You have to understand that the pieces fit together a certain way; otherwise, some of your basic objectives won't be met,” Dolan says. “Our technical people need to have a better appreciation of the impact technical decisions have on cost and schedule — and other things that are typically related to the construction activities. We rely on them to help guide our construction execution team in the pre-construction phase, the design phase, and then into the construction phase. We count on them for more things than engineers might typically be called upon to do. To get people that can operate in that front-end part of a project is going to be our real challenge to sustain our business and make it grow in the future.”
More than 25% of respondents to EC&M's Top 40 survey report that they use a design/build method of delivery for their construction projects. Although risks may be higher with this approach, so are the payoffs. “Because we're an integrated design/build firm, our senior company management can set priorities for our design team,” says Dolan. “That means construction issues may get the highest level of attention if that's where we're seeing the highest level of risk. The risks that we assume really demand that we focus our attention on those issues right away.”
Benham executes design/build projects for a variety of markets, including refinery expansions and plant construction for the oil and gas industry, hospitals, food and beverage, and the industrial sector. The advantages of this increasingly popular delivery method are a single point of responsibility for the owner, schedule compression, and earlier fixed costs. “Design/build is becoming a much more predominant delivery method,” Dolan says. “Things like that make it attractive across the sectors.”
In fact, in the federal government sector, many projects are procured with the design/build method. In the private sector, however, it may be up to the individual firm to sell the owners on its advantages. “One of the things we use to set us apart from our competition is the fact that we are an integrated design/build team,” Dolan says. “We can take these projects on at risk and find ways to mitigate cost risk for the owners sooner in the process so they can commit funding levels much more quickly.”
Benham uses the same method in other ways too, such as performance contracting where the firm takes a performance risk on energy savings-type projects and then uses that savings to pay for the capital costs of the project. “Not only will we design it, but we'll build it and finance it as well,” Dolan says. “That really gives us an opportunity to create projects where they might not otherwise exist.”
More control of systems control seems to be what quite a few design firms were reaching for in 2006. Along with the electrical design for facilities, firms now want to be able to offer control system expertise to their repertoire. For example, in its work with water treatment facilities, DLEC takes what it calls a “lifecycle approach” to providing systems. “Ultimately, we will design a system, procure the equipment for it, manage the construction, provide the programming and integration, train the facility personnel, and provide support services,” says March.
In keeping with the philosophy of one point of contact per project, in addition to its electrical division Benham also has a systems division that specializes in automation and technology projects, such as manufacturing and network controls. The systems division develops the software and procures the hardware. “Having in-house personnel allows us to make decisions based on what's best to the project as a whole as opposed to looking out for the business interests of just our piece of the project,” Dolan says.
In some cases, electrical engineers are expected to design the control systems, but at most firms the electrical division is separate from the low-voltage controls work.
“What our information technology group does is provide infrastructure, cabling, and they specify equipment on many different scales,” says Neil Gammon, E.E., Affiliated Engineers, Inc., Madison, Wis., (No. 24). “We found over the years that it became so difficult to keep up with the technology that it made more sense for a group of individuals who were very interested in that technology to be the ones that spearhead that effort on every project. So that's how we staff our projects. They're part of Affiliated Engineers, but they can even market their own services separately from us.”
The division is an offshoot of the electrical department, often working simultaneously with electrical engineers on projects. The added expertise can often be a selling point to clients. “We try to make sure that the clients understand we have them here in-house,” Gammon says. “Basically, they're the fourth engineer on the team.”
Therefore, it's critical that the electrical and information technology groups have clear communication with one another. “Anytime there are meetings regarding general building, programming, and function, we try to get them involved right along with the rest of the engineers.”
Sidebar: Moves, Adds, and Changes
After 22 years in the same South Orange Avenue location, Orlando, Fla.-based TLC Engineering for Architecture (No. 26) moved its corporate offices downtown and now occupies three floors of the Citrus Center Office Tower. The firm signed a 10-year lease to occupy 51,558 square feet of the office tower, which is also known as the BBT Building. “In addition to putting us in the heart of Orlando's central business district, the move will bring us closer to some of our key clients and major downtown projects,” says Debra Lupton, AIA, CEO.
DL Engineering & Controls, Inc. (No. 39) opened its new Irvine, Calif., office, located in the Tripointe Business Center in the Irvine Spectrum area. The firm signed a three-year lease for 2,277 square feet. “The Irvine office will enable us to provide even more comprehensive local service to our clients,” says California Director of Engineering Gene Heyer, P.E. “ We needed more space to accommodate our growth.”
Portland, Ore.-based Mazzetti & Associates (No. 35) signed a five-year lease for office space in the Cascade Building. To show its commitment to sustainable design, the firm installed a minimum number of high-efficiency overhead fixtures augmented with task lights employing photocell-controlled dimming near exterior windows, and using occupancy sensors to shut off lights when not required. The relocation follows the firm's 2005 merger with Portland's CBG Consulting Engineers. “This is a terrific location for both our employees and clients,” says Karl Atteberry, managing principal of the Portland office. “Our new location enables us to be more accessible to our clients, providing them with more efficient service.”
Stanley Consultants (No. 17) moved its Phoenix headquarters into a larger building, comprising 50,000 square feet of office space. Its Austin, Texas branch moved into roomier quarters. The firm also opened a new office in Baton Rouge, La. The branch office offers engineering, environmental, and construction management services to federal, state, and municipal clients in the transportation, water resources, and water/wastewater markets.