Worry Despite Strong Markets the Markets Continue to Grow, but Design Firms Are Concerned About Infrastructure Funding, Tariffs and Staff Shortages
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Overview p. 42 // Profitability p. 42 // Top 500 Volume p. 42 // Backlog p. 42 // Past Decade’s Design Revenue p. 42 Markets’ Share of Total Revenue p. 43 // Domestic and International Staff Hiring p. 43 // International Market Analysis p. 44 IPS: Speed-to-Market Solution p. 45 // Top 20 Design Firms by Sector p. 46-48 // Top 50 Designers in International Markets p. 49 // Woolpert Restores a Classic Hotel p. 49 // Top 100 Pure Designers p. 50 // AKRF: Low-Key Firm Has a Critical Niche p. 51 // Top 500 Dialogue p. 52 // A Delicate Foundation Job p. 53 // How To Read the Tables p. 53 // Top 500 Design Firms List p. 54 // Where To Find the Top 500 p. 66 NUMBER 29 NUMBER TRIANGLES Perkins+Will is designing the School of Continuing Stud- ies at York University, North York, Ontario. PHOTO COURTESY PERKINS+WILL PHOTO COURTESY Worry Despite Strong Markets The markets continue to grow, but design firms are concerned about infrastructure funding, tariffs and staff shortages. By Gary J. Tulacz 0430_Top500_Intro.indd 41 4/24/18 5:09 PM THE TOP 500 DESIGN FIRMS 2017-2018 at a Glance NUMBER OF FIRMS VOLUME TOTAL NUMBER OF FIRMS DOMESTIC REPORTING PROFITABILITY REVENUE REPORTING PROFITS $ BILLIONS $93.9 HIGHER 432 SIZE OF BACKLOG 271 DOMESTIC INTERNATIONAL REVENUE PROFITS $74 117 SAME INTERNATIONAL REVENUE 96 DOMESTIC INTERNATIONAL $19.9 LOSSES LOSSES LOWER 20 54 41 COMPARING THE PAST DECADE’S $90.6 $80.0 $79.8 $85.1 $90.2 $92.69 $92.31 $91.81 $92.84 $93.90 DESIGN REVENUE 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 $ BILLIONS SOURCE: ENR The market for major design fi rms is growing and is billion in 2017 from $71.69 billion in 2016. However, poised to continue to grow for the foreseeable future, revenue from projects outside the U.S. continued to but the sense of euphoria seen last year has faded. One fall, dropping 7%, to $19.93 billion. year ago, most fi rms expected a burst of new business The international downturn in revenue largely re- from tax cuts, deregulation and a promised infrastruc- sulted from a drop in design work in the oil and gas ture bill in the wake of the election of President Don- sector, which fell 13.0%, to $4.7 billion in 2017 from ald Trump. Now, design fi rms are focusing more on “Our CH2M $5.4 billion in 2016, and in the buildings market, their key markets and systems to deliver their services acquisition which fell 8.1%, to $3.7 billion in 2017 from $4.1 bil- as effi ciently as possible. brings a proven lion in 2016. However, oil prices have now risen to track record of This more focused attitude among large design delivering and nearly $70/bbl and there is speculation that they could fi rms stems from disappointment that the major infra- operating eventually top $100/bbl, giving some hope to fi rms in structure package originally proposed by the Trump world-class that market. administration has not made any headway in Congress. water systems, Further, there is some doubt about how much a bill so and we plan to The Big Get Bigger leverage that heavily reliant on local public contributions and private to bring water The continuing consolidation among fi rms remained funding will work over the long haul. to those who one of the biggest stories of 2017. However, the scale There also is concern about the impact that the need it.” of the companies acquired grew exponentially com- administration’s tariffs will have on the cost of con- Steve Demetriou, pared to the past couple of years. Jacobs’ acquisition struction and worry that technology will not blunt the CEO, Jacobs of last year’s No. 3 fi rm, CH2M, was enough to push impact of looming staff shortages on both the design it to No. 1 on this year’s Top 500, moving AECOM and construction sides. down to No. 2 for the fi rst time in nine years. However, the domestic market continues to grow, The acquisition was motivated by Jacobs’ intent to as can be seen in the data from ENR’s Top 500 Design expand and strengthen its position in the infrastructure Firms list. Taken as a group, the Top 500 fi rms had a markets. “Our CH2M acquisition brings a proven track record design revenue of $93.90 billion in 2017, up record of delivering and operating world-class water sys- 1.1%, from $92.84 billion in 2016. Market growth tems, and we plan to leverage that to bring water to those climbed on the domestic side, rising 3.1%, to $73.97 who need it,” says Steve Demetriou, CEO of Jacobs. 0430_top500_overview.indd 42 4/25/18 2:39 PM OVERVIEW 24.8% BUILDING $23,281.0 Markets’ Share of 23.4% TRANSPORTATION Total Revenue $21,985.2 $ MILLIONS 13.2% PETROLEUM 8.1% $12,367.1 HAZARDOUS WASTE 5.5% SEWER $7,612.3 3.6% AND WASTE 8.1% 1.2% OTHER $5,196.3 POWER TELECOM $3,388.0 5.8% $7,632.9 $1,128.1 4.5% WATER INDUSTRIAL $5,409.2 1.8% $4,207.9 MANUFACTURING $1,690.2 PROFESSIONAL PROFESSIONAL (MEASURED IN 309 INCREASE 58 FIRMS REPORTING) DOMESTIC INTERNATIONAL STAFF HIRING 46 DECREASE STAFF HIRING 14 115 STAYED THE SAME 72 SOURCE: ENR In another big acquisition, Wood Group bought Warren Inc., was acquired by Clive, Iowa-based in- last year’s No. 7 design firm, AMEC-Foster Wheeler. 472 frastructure engineering firm McClure Engineering The merger provides Wood with a broader geograph- Top 500 Firms Co. “The appetite of larger firms to grow through ical reach and gives it access to markets beyond its base that sent in acquisitions coupled with small and mid-size firms’ market in oil and gas. surveys last year. need for ownership transition have fueled this con- Canada’s SNC-Lavalin also made a splash, acquir- tinuing trend,” says Al Barkouli, CEO of David Evans ing Atkins plc. While SNC-Lavalin had a presence in and Associates. the U.S. market, Atkins North America broadens the 74.4% AECOM, one of the biggest acquirers in recent scope and depth of that presence. Saw revenue years, has been quiet. “We are always on the lookout CB&I was active on the M&A market as well. In increases for a brilliant company to add, but right now, we are February 2017, it sold its Capital Services business to between 2016 making the most of what we have,” says Steve Morriss, a private equity investment firm, New York City-based and 2017. group president for design and consulting services for Veritas Capital, for $755 million in cash. The new the Americas. company is now known as APTIM. And earlier this AECOM did make news in February when it year, CB&I announced it would merge with Houston- 25.2% outsourced much of its IT group to IBM. However, based oil-and-gas engineer-contractor McDermott Saw revenue Morriss emphasizes that the agreement affects mostly International. Shareholders of both companies will declines back-office networks. “We also hope to take advantage vote to approve the merger on May 2. between 2016 of IBM’s Watson data-analytics capabilities.” The bulk Many firms followed the acquisition trail. In 2017, and 2017. of the firm’s customer-based technology resources will over 70 companies on this year’s Top 500 Design Firms remain in house, Morriss adds. list acquired another design company, according to It is not just design firms buying other design firms. Morrissey-Goodale, a Newton, Mass.-based manage- The demand for alternate project delivery is driving ment consultant and M&A adviser. Further, eight com- many firms to strengthen their contracting capabilities. panies from last year’s Top 500 were acquired. AECOM’s acquisition of Shimmick Construction in The trend continues into this year. One firm on July 2017 already is paying dividends for the firm with this year’s Top 500 already has been acquired. On design-build infrastructure jobs, says Morriss. April 6, the No. 398 ranked firm, Shafer, Kline & A more recent example is Burns & McDonnell. It 0430_top500_overview.indd 43 4/25/18 2:39 PM THE TOP 500 DESIGN FIRMS International Market Analysis 27.8% $ MILLIONS EUROPE 28.9% NUMBER OF FIRMS IN $5,549.6 ASIA AND EACH REGION AUSTRALIA ARCTIC/ 22.5% ANTARCTIC $5,761.8 CANADA AFRICA 2 CANADA $4,478.7 72 152 12.7% ASIA/ MIDDLE AUSTRALIA EAST 158 $2,535.9 LATIN 4.8% AMERICA LATIN 124 AMERICA 2.6% 0.6% $956.8 AFRICA CARIBBEAN MIDDLE EAST 0.0% ISLANDS $521.2 110 ARCTIC/ CARIBBEAN $118.2 76 ANTARCTIC EUROPE $6.4 124 acquired Appleton, Wis.-based industrial contractor tries, working in more than 100 countries around the Azco Inc. in 2016. Now, “we just closed on the acqui- world. We believe in our unique ‘one-fi rm fi rm’ cul- sition of Ref-Chem [Odessa, Texas], an open-shop ture and so we will continue to stick to that moving contractor on the Gulf Coast,” says Ray Kowalik, CEO forward,” says Diane Hoskins, Gensler’s co-CEO. of Burns & McDonnell. He says the $100-million Some fi rms have found that putting together their oil services contractor gives Burns & McDonnell the unique services in new ways provides a major advan- ability to provide design-build and engineer-procure- “The appetite tage without having to be all things to all people. “Al- construct projects in both the union (Azco) and non- of larger fi rms though fi rms at our size and scale that offer a broad to grow union (Ref-Chem) arenas.