Lee McIntire, CEO of CH2M Hill, added that firms are challenged now to “spend enough time on safety, ethics and sustainability.” He said that “quality is losing its place” to more time spent on profitability and growth.
According to McIntire, a strong safety record was key to the success of the firm’s work in managing construction of facilities and infrastructure at the summer Olympics in London, which had a 14,000-person workforce.
Noting his firm’s 13% voluntary turnover rate, MWH CEO Alan Krause pointed to talent management as a “chronic concern.” “We’re losing 1,000 people a year,” he said. “This drives efficiency.”
Krause noted added competition in the “traditional engineering space” from “upstream” management consultants in areas such as asset management advice to clients and from contractors “doing design.”
Stantec CEO Bob Gomes echoed the talent issue as a key challenge, as firms compete with each other and with clients “for the same people. We have to provide them with a better reason to come to work.”
How to adapt global “knowledge management” to fast-changing markets is another key challenge, said PB's Pierson. “We have to keep it moving virtually around the world,” he said. “This is not a package of work, but someone’s unique expertise.”
Pierson noted the challenge in planning for global projects, with shifts in China’s economic growth patterns that have led to recent cancellations in mining and other industrial projects in Australia.
The ability to “adapt to the huge amount of uncertainty” is a future issue for Dan Batrack, CEO of TetraTech. “It could fundamentally change your clients,” he said.
Batrack noted the risk of added internal bureaucracy as the firm becomes larger. “We have to be big to respond abroad, but also nimble. How can these live side by side?”
The executive noted that while firms need a good chief financial officer to keep costs in check, the person in that role could become “an enemy of the CEO and could paralyze the firm.”
PB's Pierson said firms need to adapt to new "paradigm shifts," delivering "solutions, not contracts" and engaging clients earlier. "It's the beginning of a fundamental shift in the way we do business."
Markets—Good, Bad and Ugly?
Firms with at least 50% of revenue in the transportation sector have struggled, reporting the lowest three-year growth and profit numbers among markets tracked by EFCG (see slide show). CEOs were optimistic that new federal highway legislation (MAP-21) would improve the situation.
"It will be transformational hopefully," said Robert Slimp, HNTB division president. He said its elimination of earmarks should speed up spending and the tenfold increase in TIFIA loans "is a potential game-changer." Slimp also pointed to its national freight policy emphasis and expanded tolling options.
But tolling may have limited appeal in rural areas, said Volkert CEO Perry Hand. He said a plan to roll US 280 near Birmingham, Alabama, "the busiest road in the region," was rejected because "the numbers would add up to only a 50% payoff for the capital cost projected."
Michael Della Rocca, AECOM's North America CEO, said the number of public-private partnerships is flat, but "the quality of decisions being made on P3 projects is improving. At first, a lot of those who wanted P3s to work didn’t understand the realities of making deals."
Firms in the power market were more optimistic, reporting growth up 8.4% and profits up 17.4% for the three years, although only seven sector companies reported numbers to EFCG.
J.T. Grumski, president of SAIC's infrastructure unit, said a strong energy market for the firm, "and a big chunk of the work is actually happening." He said that with low gas prices, "renewables will take much deeper dive."
But MWH CEO Krause noted the lack of a federal energy policy limiting growth in the firm's hydropower work, although he noted that state officials in Alaska now are beginning the process for a federal license for a new 600-MW project.