Architecture, engineering, planning (A/E/P) and environmental consulting firms offer a broad spectrum of services within the engineering design and construction industry. For civil engineering (and many multi-discipline) firms, important markets include transportation, water/wastewater, environmental, and power and energy. Following are brief summaries of these market sector outlooks excerpted from ZweigWhite's "2012 A/E/P and Environmental Consulting Industry Outlook."
A long-delayed highway/transit reauthorization bill remains a major wild card for the transportation industry. If Congress passes a multi-year bill in early 2012 maintaining current investment levels, it would bring stability to the market. Current Senate and House proposals also contain language to expand the Transportation Infrastructure Finance and Innovation Act (TIFIA), which also offer the possibility of a market upswing.
For now, uncertainty prevails, and the 2012 transportation construction market outlook is mixed, according to the American Road and Transportation Builders Association (ARTBA). Nevertheless, the transportation construction market sector will remain the most stable industry sector, ARTBA said, as it has been for the last five years. Between 2007 and 2011, the real value of highway and bridge construction, adjusted with the ARTBA Price Index for material prices, wages, and inflation, fell 10 percent; during the same period, the real value of total construction work in the United States fell by one-third from $1.1 trillion to an estimated $769 billion.
Despite the national downturn in market activity, 18 states are poised for growth, said ARTBA Senior Economist Alison Premo Black. In these states, the value of state and local government highway and bridge contract awards for 2011 is higher than it was in 2010. This indicates the value of work in those states will likely increase in the coming year as those projects are underway. The value of contract awards is down in 24 states and Washington D.C. In the remaining eight states, contract awards were relatively stable, either up or down within 5 percent. Black expects the highway and bridge construction market to decrease by 6 percent to $72.6 billion from an estimated $77 billion in 2011.
In other transportation markets, ARTBA forecast:
- the value of airport runway work to decrease 4 percent from $4.9 billion in 2011 to $4.7 billion in 2012, primarily because of flat funding for the Airport Improvement Program and continued failure by Congress to pass a new aviation bill;
- the value of construction for ports and waterways to grow by 6 percent, driven by work on both coasts in preparation for completion of the Panama Canal expansion in 2014; and
- the railroad market to increase by nearly 4 percent, driven largely by private-sector investment.
In 2010, the U.S. Environmental Protection Agency (EPA) estimated the annual capital investment required to maintain and upgrade drinking water and wastewater treatment systems across the United States as $91 billion. However, only $36 billion of this $91 billion was funded, leaving a capital funding gap of nearly $55 billion. Water infrastructure in the United States is clearly aging, and investment is not able to keep up with the need.
According to the EPA study, if current trends persist, the investment required will amount to $126 billion by 2020, and the anticipated capital funding gap will be $84 billion. Moreover, according to a 2011 American Society of Civil Engineers report, "Failure to Act: The Economic Impact of Current Investment Trends in Water and Wastewater Infrastructure," by 2040 the needs for capital investment will amount to $195 billion and the funding gap will have escalated to $144 billion, unless strategies to address the gap are implemented in the intervening years to alter these trends. Even with financial difficulties, the nature of the water/wastewater market as a necessary component for life makes it one which will never be cold in the near future.
As one of the top trends for 2012, a focus on the environment and creating a green/sustainable built environment is supported by government incentives, public concern, and the economy. The demand for clean air, water, and land will not diminish.
While environmental regulations were developed with the best intentions —¬Ä¬” preserving and protecting our most valuable resources —¬Ä¬” they can also create additional challenges. Navigating these challenges can be a major source of income for certain types of A/E/P and environmental consulting firms, when used as a niche market or specialty service. Niche markets include stormwater management, as well as brownfields remediation/development and solid and hazardous waste recycling and disposal.
Nevertheless, environmental public works starts, like many other public works, are expected to drop from historic highs. Since tallying $38.3 billion in starts in 2008, activity has been in decline. It is forecast to decrease 5 percent in 2012 to $27.3 billion, according to McGraw-Hill Construction. However, the EPA's Brownfields Program continues to look to the future by expanding the types of properties it addresses, forming new partnerships and undertaking new initiatives to help revitalize communities across the nation.
Power and energy
No matter how bad the economy gets, electricity and forms of power are absolutely necessary and therefore stand strong against the adverse effects of the recession. Both renewable (solar, geothermal, wind, biomass, and hydropower) and nonrenewable (petroleum, coal, natural gas, and nuclear) energy provide viable markets for the A/E/P and environmental consulting industry. For example, engineering firms are gearing up in some areas to serve shale gas producers. New drilling techniques, notably in shale formations, have led to increased discovery of natural gas. Shale natural gas already accounts for 22 percent of the nation's supply. According to U.S. Energy Information Administration estimates, it could supply as much as 14 percent of all the gas in the world by 2030. Increasing availability, new techniques, and increasing demand make the natural gas construction market a hot one for 2012.
Purchase ZweigWhite's complete "2012 A/E/P and Environmental Consulting Industry Outlook" (sponsored by the American Council of Engineering Companies) at www.zweigwhite.com/storehome.aspx.