...high of $5.6 billion in 2002 to $4.2 billion. That slippage alone accounted for practically all of the difference for the Top 200 between 2002 and 2003.

Not to worry, says Andrew Seidel, president of the American arm of France’s Veolia Group, formerly Vivendi S.A. While French authorities were moving in on former Vivendi Chairman Jean-Marie Messier—he was arrested June 20 in connection with alleged stock manipulation—Veolia was moving on.

In the past two years, the French parent company has been divesting itself of several non-core U.S. Filter assets that Seidel’s predecessor, Richard J. Heckman, rolled up in the 1990s before Vivendi took over. These include Filtration & Separation, Plymouth Products, Everpure and Culligan.

REPOSITIONING With public works spending tight, many firms are concentrating on industrial client base. (Photo courtesy of Montgomery Watson Harza)

Veolia’s annual report, filed in May, shows a $2.7-billion write-down in 2003 for the sale of U.S. Filter assets. Veolia’s dispersal of U.S. Filter’s water and wastewater works business reduces the North American presence to 7.5% of the company.

Yet another dramatic change is in store. Frankfurt-based Siemens AG expects to close its $993-million purchase of U.S. Filter’s water systems and services division by July 31. The unit generates about $1.2 billion in annual sales.

“I think it’ll be very good for U.S. Filter,” Seidel predicts. “Overall, water just remains a great market. What other market grows at 3 to 4%, regardless of economic conditions?” He points to the 2002 U.S. EPA study that identified a $535-billion gap in water and waste-water funding over the next 20 years (ENR 10/14/02 p. 12).

The race toward public-private partnerships has cooled, dropping from a 15% annual growth rate to a still respectable 8 to 10%, Seidel notes. For various reasons, several municipal systems have scrapped privatization deals, although the renewal rate for privately operated systems approaches 100%, he says. Major players such as Suez, CH2M Hill’s OMI, Thames Water and Veolia “have taken a step back to focus more closely on existing operations,” Seidel says.

“The U.S. market is so fragmented and so political,” says Richard Kuchenrither, senior vice president for Black & Veatch. “This doesn’t fit the British model, where the entire country is divided among five or 10 companies. There are 15,000 wastewater systems and another 15,000 water systems” and foreign competitors are likely to find the going tough, he says.

Black & Veatch’s annual revenue slipped 5% in 2003 to $665 million, which dropped it one spot on the overall list to No. 13. A healthy backlog is bolstered by major jobs such as the Lake Pleasant design-build-operate water treatment plant in Phoenix and expansion of Chicago’s Stickney Water Reclamation Plant. Greeley and Hansen (No. 84) and Black and Veatch are designing a master plan to expand the 65-year-old 1,200-mgd wastewater treatment plant.

High-profile work with major clients is backstopped by a broad customer base among mid-range customers—systems that serve populations of around 500,000. Kuchenrither says many big cities are spreading their work out over 15-year periods and others are opting to fight consent decrees to delay mandated improvements for as long as legally possible. The company is growing business not through acquisitions, but organically. “We’re on track for double-digit growth this year,” he says.

CH2M Hill Cos. held the No. 3 spot overall, adding nearly 7% in annual environmental revenue. Over half the firm’s business is in the water and wastewater treatment sectors. It trails only U.S. Filter in each of those categories. In the domestic market, the drivers are population growth, aging infrastructure, security concerns since 9/11 and emerging water-quality issues such as trace pollutants and endocrine disruptors, says Thomas Searle, president of CH2M Hill Cos.’s water group. Prolonged drought also is putting pressure on water systems in the Southwest and parts of the Southeast and last summer’s blackout raised questions about reliability, he adds.

The recent economic turnaround has not trickled down to the water and wastewater sectors. With an overriding national perception of laissez-faire compliance and no major regulation on the horizon, “big systems have not yet shown a willingness to invest in upgrades,” says Searle. “We’re seeing a just-in-time approach of staged phasing of improvement [and] we’re also seeing substantial project delays between the award announcement and the notice to proceed.”

In a relatively flat domestic market, CH2M Hill is trying to capture a larger market share by diversifying project delivery offerings. “We’re willing to provide design-build, DBO, DBOF—whatever it takes,” says Searle. “We’re willing to take an equity stake in a project if that’s required [and] we’re concentrating on high-end programs...to prevent profit margins from eroding.”

“We’re going to have a pretty flat year,” says Robert Uhler, president and CEO of MWH. It moved up to No. 6 from No. 10 last year despite a 1.3% slip in revenue to...