A/E/P industry has no great expectations for 2011

FAYETTEVILLE, ARK. — Many leaders in the architecture, engineering, planning, and environmental consulting industry don’t see a solid recovery in the cards in 2011. There is so much uncertainty economically, that Larry VanHorn, senior vice president/CFO of GLMV Architecture, a 130-person architectural, interior design, and planning firm based in Wichita, Kan., predicts there will be worse gridlock — and not cooperation.

“All I read, hear, and see is slow recovery,” VanHorn said. “Not all bad considering the unsustainable euphoria and greed up to mid-2008. However, it’s not good for construction and architecture. There may be cash out there, but where would one invest it? We are shipping jobs overseas or cutting back employment. Good for bottom line, but who is going to buy the goods?” Companies have held on to their people, but have frozen compensation. “Our backlog has been very good, but now is down,” he said. “We have lots of proposals out, but it’s hard to pay bills with proposals.”

Glenn Bell, CEO of Simpson Gumpertz & Heger Inc., a 420-person national engineering firm based in Waltham, Mass., said overall the architecture engineering construction view, as well as the company, is that 2011 will be a relatively flat year for activity with continued intense competition and downward fee pressure.

“A return of growth should occur from 2012 to 2013, but with a continued eye toward value and bringing new services to the table,” Bell said. The 2011 strategy for Simpson Gumpertz & Heger Inc. will be to remain lean in its operations with an emphasis on bringing superior value to its clients. At the same time, though, it will begin to make investments in expansion.

Company leaders think the current environment is providing opportunities to build strength and capacity. “The areas we are targeting are acquisitions of high-quality, small niche firms; further geographic diversity in the United States; bringing more collaborative, integrated services to our clients; adaptive re-use and renovation of existing structures; and almost anything related to energy,” Bell said.

Donald Benvie, president and CEO of Tectonic, a 400-person planning, engineering, construction, and program management firm based in Mountainville, N.Y., said during 2009 and 2010, the company benefited from multi-year backlog on public sector projects that were in place prior to the financial calamity of 2008. This backlog, combined with some of the federal stimulus spending and the company’s focus on construction engineering and inspection services, gave the firm two of its best years with regards to revenue growth and profitability.

Heading into 2011, the business is a little more guarded but still optimistic about opportunities on the public side. “Our reservations stem from the reduced budgets that state and local governments are working with because of the drop off in tax revenue and also because of the winding down of the federal stimulus program,” Benvie said. “With that being said, there are select areas that still present opportunities for growth. High-speed rail and mass transit spending are areas where we see growth. Public building spending on institutional and education (K-12) also offers potential for new work.”

On the private side, higher education spending seems to be increasing and services for planning, design, and construction support are increasing in demand, he said. The company’s long-term involvement with wireless telecommunications has steadily grown in the last year, and it appears that growth will continue into next year. The firm’s workload in the residential and commercial sectors has historically been nominal, but it is seeing a couple of projects that were put on hold being considered for reactivation.

Kevin Phillips, CEO of FPM Group Ltd., a 100-person full-service environmental and traditional engineering firm based in Ronkonkoma, N.Y., said he is expecting 2011 to be a banner year.

“We enter it with more backlog than any other time in FPM history,” Phillips said. “In addition, we have been preparing for a year to get certified as a Small Business Administration HUB Zone, and we expect that certification to become effective in early 2011.”

Once that HUB Zone certification takes place, the company is expecting its proposal success rate to double for 2011. In addition, FPM will be actively seeking a merger or acquisition during the year once some milestones fall into place. This year will be busy, filled with hard work and multiple opportunities. FPM will be a different firm in 2012, he added.

For more information, contact Sonya Stout at 479-582-5700, or sstout@zweigwhite.com.