Competition on the Rise the Growth in the Global Market for Design Services Has Stalled, Spurring Firms to Broaden Their Search for Workby Peter Reina and Gary J
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Overview p. 2 // International Market Analysis p. 2 // Past Decade’s International Design Revenue p. 2 // International Region Analysis p. 3 // Domestic Staff Hiring p. 3 // International Staff Hiring p. 3 // Profit-Loss p. 3 // 2013 Revenue Totals p. 3 // How Design Firms Shared the 2013 Market p. 4 // Top 10 by Market p. 5 // Top 10 by Region p. 6 // Asian Market Stalls p. 6 // Backlog p. 6 // Jewel on the Caspian Sea p. 7 // CH2M Hill: Transferring Skills Abroad p. 8 // How To Read the Tables p. 8 // Top 225 International Design Firms List p. 9 // Top 225 Index p. 14 // Top 150 Global Design Firms List p. 15 // Top 150 Index p. 18 DUTCH BOUQUET Royal HaskoningDHV is the structural engineer on Dutch architect MVRDV’s design for the Markthal in Rotterdam. Slated to open in October, the 130-ft-high, 230-ft-wide arch structure will contain more than 200 apartments and house restaurants and food stalls. NUMBER40 PHOTO COURTESY OF ROYAL HASKONINGDHV ROYAL OF COURTESY PHOTO The Top 225 International Design Firms Competition on the Rise The growth in the global market for design services has stalled, spurring firms to broaden their search for workBy Peter Reina and Gary J. Tulacz enr.com July 28/August 4, 2014 ENR 1 THE TOP 225 INTERNATIONAL DESIGN FIRMS OVERVIEW 32.5% Petroleum International Market Analysis $23,270.1 Transportation 15.4% 6.7% $12,232.8 Buildings Other 17.1% 5.1% $4,832.4 $11,034.2 Sewer / Waste Water $ $ % 2,000.0 3,682.6 5.7% 9.6 2.8% Power 3.0% Industrial $4,115.8 $6,841.6 Hazardous Manufacturing Waste $1,099.4 $2,172.6 0.5% 1.5% Telecom $348.0 (Measured $ millions) SOURCE: MCGRAW HILL CONSTRUCTION/ENR. $24.16 $26.31 $33.06 Comparing the Past 2004 2005 2006 Decade’s International $42.99 $52.62 $52.45 $57.67 $65.30 $71.49* $71.35* Design Revenue 2007 2008 2009 2010 2011 2012 2013 (in $ billions) SOURCE: MCGRAW HILL CONSTRUCTION/ENR. * The 2012 & 2013 figures are revenue for the Top 200 International Design Firms. The expanded Top 225 list firms had a combined revenue of $71.63 billion. More large international design firms are going shop- market decline in Australia, fell 0.9%. The Africa mar- ping in emerging markets, looking for the kind of ket, hurt by political uncertainty in North Africa, fell robust growth opportunities that still elude traditional 1.6%. Revenue for international firms working in the markets, such as Europe. As a result, new competitive U.S. fell 1.3%, while Latin America was down 5.9%. hot spots are sprouting up in some global regions while Despite Canada’s thriving energy sector, international firms wait for better days in Europe and beyond. design revenue in that market fell 6.1%. The ENR Top 225 International Design Firms re- “Governments sults underscore these trends. The firms generated are committed Buying Spree $71.63 billion in design revenue in 2012 from projects to investing in A big development in the international design arena infrastructure outside their home countries, down 0.2% from $71.77 ... through over the past six months has been a surge in huge ac- billion in 2012. They also had $72.32 billion in revenue [public-private quisitions. “One growing trend is the increase in con- from domestic projects in 2013, up 2.8% from $70.38 partnerships] solidation across the industry,” says Michael Renshaw, billion in 2012. The total 2013 design revenue for the or direct CEO of Cardno, Australia. He says consolidation is group was $143.95 billion, up 1.3% from $142.15 bil- government being driven by changes in the procurement practices funding.” lion in 2012. of many global clients, which want service providers On the Top 225 International Design Firms list, Uwe Kreuger, that span the globe. “This provides opportunities for CEO, WS Atkins firms are ranked based on design revenue from projects a company [such as] Cardno that is currently working plc outside of their home countries, measuring their pres- on projects in more than 100 countries.” ence in international commerce. The ENR Top 150 After a quiet year for major acquisitions in 2013, Global Design Firms list measures design firms based several very large mergers have occurred this year. The on their total worldwide design revenue, regardless of biggest is the plan by U.S.-based AECOM to acquire where the projects are located. URS (see page 10). The U.K.’s AMEC is in the process On a regional basis, an otherwise economically of acquiring Swiss-based oil-and-gas engineer- sluggish Europe had, surprisingly, a 5.5% increase, to constructor Foster Wheeler AG. Canada’s SNC- $16.28 billion, among this year’s Top 225. International Lavalin agreed to buy Irish oil-and-gas engineer- design revenue in the Middle East was up 3.7%. constructor Kentz Corp. Ltd. for $1.95 billion. The Asian market, hit by a slowing in China and a Australia’s GHD acquired U.S.-based Conestoga- enr.com July 28/August 4, 2014 ENR 2 FUGRO is targeting Africa, acquiring firms based in Gabon and South Africa THE TOP 225 INTERNATIONAL DESIGN FIRMS #05 and opening new offices in Angola, OVERVIEW Mozambique, Tanzania and Uganda. International Region Analysis 24.9% Asia and (Measured $ millions) 22.7% Australia Number of Firms SOURCE: MCGRAW HILL Europe $17,852.7 Reporting Profit-Loss CONSTRUCTION/ENR. $16,278.9 Domestic Profits 7.6% 163 12.7% 148 Domestic Loss Latin Canada 14.1% America $9,084.7 Middle International Profit $5,413.4 East 10.4% 25 International Loss $10,132.6 18 United States $7,433.8 0.4% 7.2% Caribbean Africa Volume (in $ billions) Islands $5,124.9 $143.95 $274.0 Domestic Revenue International Revenue $72.32 $71.63 Total Revenue 98 98 Increase Professional Professional (Measured in Domestic 51 International 22 Decrease firms reporting) Staff Hiring Staff Hiring 55 62 Stayed the same SOURCE: MCGRAW HILL CONSTRUCTION/ENR. Rovers Associates, a 3,000-person engineer. And business “is picking up again,” says Chairman Erik Cardno acquired Houston-based PPI, a 760-person Oostwegel. Planning and design of airports and associ- oil-and-gas engineering firm. 202 ated infrastructure is “booming.” of the Top 225 The uneven global design market has made many While demand for design services grows, firms are sent in surveys large international designers more aggressive. Business under pressure to cut costs. Investing in operations last year. is at an all time high and “still growing” for Denmark- away from its high-cost base, COWI has centralized based COWI Group, says CEO Lars-Peter Søbye. back-office operations in Lithuania and increasingly is COWI is sharpening its geographic focus on Scandi- 59.4% using its India-based engineering payroll, says Søbye. navia and North America while offering key engineer- had increased Oostwegel does not see Royal HaskoningDHV’s ing skills where opportunities arise globally, he says. international Indian operation as a way of cutting costs. To improve U.K.-based Mott MacDonald Group has had “quite revenue in margins, “we concentrate on … the kinds of services a good year,” with profits up 15%, says Chairman 2013. where we are more innovative,” he says. Keith Howells. The home market is growing more Arup Group, London, benefits from the “range of slowly than expected, while the company is “seeing the cost bases” across the globe, says Chairman Greg U.S. picking up and Asia staying stable.” 39.6% Hodkinson, who, nevertheless, rejects offshoring as a Uwe Kreuger, CEO of WS Atkins plc., London, is had lower strategy. Arup is increasing the proportion of fee- encouraged by economic trends. “Governments are international earning time done by staff, including “our most senior committed to investing in infrastructure … through revenue in people,” says Hodkinson. He aims to raise profits [public-private partnerships, or P3s] or direct govern- 2013. margins to the “double digits” from the current level, ment funding,” he says. Global demand for railroad which just exceeds the firm’s 20-year average of 6%. and mass-transportation projects is “truly amazing.” Margins are needed to accommodate the increasing In the Middle East and Southeast Asia, “we feel that risks shifted to designers by contractors and owners, there is a huge development in urban transport that says Hodkinson. Funds are so constrained that “even makes us optimistic. P3 projects will play a big role in institutional owners, who should know better, are not this trend,” adds Jose Luis Manzanares, executive vice providing sufficient contingency in the budgets.” president of Spain’s Ayesa. “Across the industry, there has been an increase in For Netherlands-based Royal HaskoningDHV, the devolution of risk from clients and contractors to enr.com July 28/August 4, 2014 ENR 3 THE TOP 225 INTERNATIONAL DESIGN FIRMS OVERVIEW consultants,” says Renshaw. He says design firms are markets from European consulting firms,” says Andy being forced to foster more strategic partnerships with Goodwin, CEO of Australia’s SMEC. “This has contractors and service providers to counter this risk. reduced margins on projects and almost eroded profit- Further, pressure on construction costs is a conse- ability in certain regions.” quence of the “heightened attention” of governments Another worry is the preference for local competi- on how they procure services, Kreuger believes. In- tion. “International financial institution policy and the creasingly sophisticated approaches include the U.K. “If the clients growing tendency to provide budget support to coun- government’s adoption of BIM on all its projects.