There is no doubt that the single most important factor affecting engineering firms at this time is the sluggish economy. The market, however, has shown some signs of improvement toward the end of 2009, and projections are that this trend will continue, gradually bringing business in line with before-bubble levels. While many firms have been focusing primarily on riding out the storm, their more sophisticated counterparts have been positioning themselves for the upswing.
The $787 billion American Recovery & Reinvestment Act of 2009 (ARRA) signed by President Barack Obama on Feb. 17, 2009, was designed to help improve the nation’s economy. As reported in CE News December 2009, “Firms talk stimulus,” “Six months have passed since the first round of ARRA obligations, and of the $48.1 billion allocated to transportation infrastructure, $30.6 billion has been obligated to more than 10,000 approved projects, according to an early-November announcement by the U.S. Department of Transportation.” To further shore up the economy, the federal government also instituted plans to bolster U.S. financial and auto industries.
While these efforts did help to stave off severe economic turmoil, engineering firms need to develop strategic initiatives to thrive in this ever-changing business climate. According to FMI Corporation’s 2009 Construction Industry Strategy Survey, the majority of the large international mega-firms are basing these decisions on comprehensive, data-driven market research of economic, industry, and regulatory trends that have an impact on the firm. Mid-size and larger regional firms tend to use the knowledge of managers and informal networking as their base of information.
As firms look to 2010, some of the issues they seem to be following include:
Talent and technology
During the downturn, severe cost-cutters reduced their top talent or, in some cases, eliminated leadership development and succession plans. Ted von Rosenvinge, P.E., president of GeoDesign, Inc., a mid-sized geotechnical, environmental, and construction engineering firm based in Middlebury, Conn., disputed this thinking. “Talent continues to be an issue even if the firm is not in a position to hire at the moment. The long-term supply of engineers is well below demand, especially considering boomer retirements, which are just beginning to come into play.”
As has been the case for years, technology will continue to affect the industry, whether it be BIM, field data capture, or other productivity-enhancing equipment and software. Not too far off on the horizon is artificial intelligence programs that, as reported in FMI’s 2010 U.S. Markets Construction Overview, “combine the mechanics of design with real-time GPS and geotechnical information, engineering requirements, building codes, projected delivery times, energy-saving site orientation, and so forth.” The most talented engineers and leaders will need to be on your management team to respond to these rapid changes,
As demographics change, so does the workforce and its needs. Some of the most qualified candidates may choose to live in a particular part of the United States or even in another country. And many foreign-born engineers are returning to their countries of origin, especially as the middle class expands to new parts of the world. U.S. companies should start putting technology and mindsets in place now to embrace a geographically spread workforce or face increased foreign competition for talent.
Along these lines, social networking, while still in its infancy for business purposes, will likely play a role in relationships with employees, clients, and referral sources.
President Obama, holding to his campaign pledges on supporting sustainable design, products, and processes, signed in October 2009 an Executive Order on Federal Sustainability, which called for agencies to set a 2020 greenhouse reduction goal. It also set targets for efficient and sustainable buildings, reduced petroleum use, smaller fleets, water efficiency, waste minimization, green technologies and products, and sustainable communities. Spending more than $500 billion per year in goods and services, the government’s procurement in these areas is bound to make a difference. Moreover, private industry will see incentives to go green, as well.
On Dec. 8, 2009, the President introduced his next initiative on Job Creation and Economic Growth. Obama is proposing tax incentives to help small businesses grow and improvements to the lending arena. More importantly to the design industry, the plan includes a boost in investment in the nation’s infrastructure beyond the ARRA. It calls for modernizing transportation and water systems, cleaning up contaminated properties, and promoting clean energy projects. Additionally, the proposal includes an incentive to promote energy efficiency and clean energy jobs.
According to an American Council of Engineering Companies web post, “Early reports show that the Administration is looking to spend about an additional $50 billion on roads, bridges, aviation, and water projects, while on Capitol Hill lawmakers are discussing spending as much as $70 billion in additional infrastructure funding.”
A tilt toward transportation
With the release of the American Society of Civil Engineers’ (ASCE) 2009 Report Card for America’s Infrastructure, there is renewed interest in getting congressional approval of funding for transportation and water/wastewater projects in particular. Grades ranged from a high of C+ for solid waste to a low of D- for water, levees, roads, and wastewater. The grade for surface transportation and aviation systems declined during the last four years, with aviation and transit dropping from a D+ to D, and roads dropping from a D to a D-. ASCE estimates that $2.2 trillion needs to be devoted over five years to bring the condition of the nation’s infrastructure to a grade of C. That means that the United States must invest an additional $1.1 billion annually above its current spending levels for five years.
The $244.1 billion Safe, Accountable, Flexible, Efficient Transportation Equity Act: A Legacy for Users (SAFETEA-LU) expired in September 2009. In June, Chairman James L. Oberstar and the House Committee on Transportation and Infrastructure submitted The Surface Transportation Authorization Act of 2009 to Congress, with the intent of taking the U.S. transportation system to the next level. It calls for $450 billion in spending over six years. But, with health care issues taking center stage, the bill is at least temporarily stalled.
States, awaiting word on new funding to handle long-term financing needs, have had to the limp along with continuing resolutions authorized by Congress that stingily piece-meal out monthly funding allotments. Paul Brady, executive director of the American Council of Engineering Companies-Connecticut, explained, “Before proceeding on larger transportation improvements, states must have guaranteed federal funding in place. Usually 80 percent of the cost of a transportation project is funded from federal dollars, and 20 percent must be borrowed. Without the approved long-term federal fund in place, lenders are reluctant to put up the additional 20 percent, so projects are at a standstill.”
David Ball, president of BL Companies, a full-service design and engineering firm with offices throughout the Northeast and Mid-Atlantic, confirmed these sentiments, “Many significant transportation projects are on hold because of the lack of a sufficient, long-term federal funding program. There has been no real increase in engineering opportunities, and additional support is needed for a well-planned transportation infrastructure to keep people and goods moving efficiently throughout the region.”
As a hopeful interim measure, Transportation and Infrastructure Ranking Member John Mica and Highways and Transit Subcommittee Chair Peter DeFazio have submitted a two-year plan that would authorize surface transportation projects up front totaling about $200 billion in highway and transit funding to alleviate some of the piece-meal funding effects while Congress deals with health care.
The U.S. Environmental Protection Agency’s (EPA) Clean Water and Drinking Water Infrastructure Gap Analysis estimates that the capital needs for clean water from 2000-2019 will approach $388 billion. The capital needs for drinking water during the same period will total almost $274 billion. According to the EPA, of the nine agencies that provide water/wastewater funding, 57 percent of the funding comes from the EPA’s clean water and drinking water state revolving funds (SRFs).
Like its transportation counterpart, the SRF bill (S1005), which calls for $38 billion to be spent over five years, has strong bipartisan support but is awaiting Senate floor time for approval. Susan Bruninga, director of public affairs for the National Association of Clean Water Agencies, added, “This bill offers a significant increase compared to past years’ spending for both clean water and drinking water. In the meantime, states are working with $4 billion in current SRF funding, an increase of more than $2 billion from the previous year, and the $6 billion one-time infusion of Recovery funds that they received in early 2009, with projects continuing through 2010.”
Other longer term issues that engineering firms are keeping a watchful eye on are the 3 percent withholding requirement for federal, state, and local government work; a renewed interest in promoting Qualifications Based Selection; and maximizing private-sector innovation versus sole-use, in-house agency engineering staff.
Theresa M. Casey, FSMPS, CPSM, is a communications and marketing specialist for the A/E/C industry and principal with On Target Marketing & Communications, LLC, Columbia, Conn. She can be reached via e-mail at email@example.com.