However, this surge in market activity comes with a price. "These companies are investing part of the capital reserves they have built over the past couple of years. As a result, these owners are looking at very aggressive time-to-market schedules," says Kevin C. Bean, CEO of O'Neal. He says much of the work is not in green-field projects but in efficiency upgrades and in the redeployment of existing capacity.

Another reason for the increase in industrial and manufacturing work is that foreign manufacturers believe that now is a good time to build in the U.S. "We are seeing a significant amount of foreign direct investment," says Bean. The current U.S. economic conditions are attractive for manufacturing companies looking to make capital investments here, he says.

Many firms are excited about the potential boom in shale gas using hydraulic fracturing. "The energy market clearly is the driving force in the overall uptick in business," says Chris Vincze, CEO of TRC Cos. He notes that the shale-gas fields around the country are at an early stage of development: Environmental issues will have to be assessed and worked out, storage and transmission facilities will have to be built, and the infrastructure will have to be hardened. "This is a great opportunity for us," says Vincze.

The fracking boom is giving firms with the right experience a boost. RETTEW Associates was the fastest-growing firm on the Top 500 this year, thanks to its work on the Marcellus shale formation in Pennsylvania (see p. 53). "Anything related to fracking is taking off," says Giorgio. He says that, once extraction from these shale formations begins in earnest, there will be a need for new storage and refining capacity.

The domestic power market is beginning to settle after a few years of regulatory uncertainty. "Over the last several years, we've seen a growing interest in combined-cycle natural-gas units, principally driven by the low price of natural gas in the United States, as well as the development of the shale-gas market," says Jeff Merrifield, senior vice president in the power division at The Shaw Group.

The nuclear power market also is stirring despite concerns over last year's nuclear disaster in Fukushima, Japan. "We are incredibly excited about the Nuclear Regulatory Commission's decision in early February of this year to approve the combined operating license for Southern's Plant Vogtle [Units] 3 and 4 in Georgia and, in late March, the approval of the combined operating license for V.C. Summer [Units] 2 and 3 in South Carolina," says Merrifield. These approvals will allow Shaw to move quickly toward full nuclear construction at these sites, he says.

On the other hand, coal has taken a series of body blows in the past few months. The U.S. Environmental Protection Agency's proposal that would require new powerplants to cut carbon emissions by 50% will virtually halt the construction of new coal-fired plants. "There is the major shift to natural gas as a generation fuel. The drivers are the long-term prognosis for the lower cost of gas and the effects of the new EPA air emissions and water regulations," says Dean Oskvig, CEO of Black & Veatch's energy group.

Oskvig says Black & Veatch works closely with owners to navigate the regulations governing energy issues. "We take a more systems approach to clients, rather than focusing on construction," he says. The firm has hired new people with more consulting and enterprise-planning expertise to provide clients with long-term planning of capacity issues, Oskvig says.

Vincze is concerned about the EPA regulations' affect on the electric utilities. "The EPA is slamming the coal industry. About 30% to 40% of coal plants could be shut down," he says. While Vincze concedes the regs could generate work by forcing utilities to build new powerplants and decommission old plants, he sees the EPA compliance timelines as being overly aggressive. "We can't have a regulatory environment that ignores the market or that pays more attention to counting molecules than developing an energy policy."

The alternate-energy market has hit a stumbling block. "Alternative energy lost a major driver when the major tax credit provisions in the tax code expired," says Vincze. He says TRC is working on permitting transmission and distribution from major wind farms in the Southwest. But he fears alternate energy may not be able to compete with traditional energy sources without further federal or state incentives. "Now all that is left to help alternate-energy programs is accelerated depreciation provisions in the tax code," he says.

Traffic Jam

If there is an overriding issue among designers in the transportation sector, it is the lack of a federal funding bill. "That is the one thing we are focused on. Everything else seems to pale beside this issue," says Paul Yarossi, HNTB Holdings Ltd. president. "The deficit concerns us all, but there seems to be an inability in Washington to see investments that bring a return to the economy—and that is what investing in our infrastructure does," he says.

Many firms in the market are resigned to a lack of a funding bill. "I doubt that there will be a funding bill before the presidential election in November," says George Pierson, CEO of Parsons Brinckerhoff. "The closer we get to the election, the less of a chance we have for a bill," he observes.

But many firms say a federal transportation bill is not a panacea. State and local budgetary shortfalls may hurt the chances of major projects in many states. "Even with a federal bill, I do not see how the market can rebound without significant contributions on the state and local end," says George Little, CEO of HDR. He is not optimistic about a funding bill passing this year. "It is very political out there," he notes.

Pierson says there are some major transportation projects on the boards that are being pushed ahead despite the hesitancy in Congress to pass a major funding bill. "There are some courageous people on the state and local level that are not willing to wait for federal funding," he says. He cites as examples New York Gov. Andrew Cuomo (D) supporting the Tappan Zee Bridge replacement and California Gov. Gerry Brown (D) pushing for a high-speed-rail line. PB is the lead program manager on the California project.

Parsons also is seeing some stirring in the transportation market, despite the federal funding gridlock. "In the transportation [sector], we've been seeing chronic procurement schedule slippage over the past few years. We're now beginning to get a sense that procurement schedules are starting to firm up," says Gary Adams, executive vice president at Parsons.

State and local budget shortfalls also are taking their toll on the water, sewer and wastewater markets. "Most of the work in the water and wastewater markets is being driven by regulatory compliance," says Little. He says major new work will be slow until the housing market recovers and the demand for new connections increases. "The housing market is the tail that wags the dog in these markets."

Some firms believe the water and wastewater markets are beginning a slow recovery from the recession. "Many clients had stopped all their capital projects because they had no idea where the bottom of the recession was," says B. Narayanan, CEO of Carollo Engineers. "Now, it looks like they have better-adapted to the new financial reality, and many have begun to slowly release selected projects and programs." However, he says most growth-related work is "dead."

For many large design firms working in the public sector, finding financing for their clients is becoming an issue. More firms are taking a financial interest in the projects they are pursuing, says Della Rocca of AECOM. He says AECOM is participating in more than 100 projects in which there is some sort of alternative financing or project-delivery arrangement. "We used to be just a service provider, but we now are more willing to invest in projects," he says. "We are moving forward in strengthening our ability to participate in financing projects."

Not everyone sees public-private partnerships increasing at a meaningful pace. "There is a lot of talk about P3s, but I don't see many new ones on the street," says Yarossi. He says that, culturally, the U.S. is not used to private financing of public infrastructure. "It is going to take a while for public agencies to get used to the idea," he says.