Top 100 Professional Service Firms: Firms Fill in Owner Gaps
The market has returned to health, which should be good news to professional services firms like construction and program managers. However, many CMs and PMs are seeing the market as a mixed bag, with owners having to be convinced that CM services are worth the price and that experience and expertise, not price, should govern their hiring choices.
The steady if uncertain market for professional service firms can be seen in the results of the ENR Top 100 Construction Management-for-Fee and Program Management Firms list. Revenue for the CM-PM group rose 2.6%, to $19.91 billion, in 2014. Domestic revenue from CM-PM work rose only 1.4%, to $14.83 billion. CM-PM revenue from projects and programs abroad fared a little better, rising 6.1%, to $5.08 billion, after declining 1.6% in 2013.
The overall market is strong. "If we didn't have the oil and gas sector slowdown, I don't know whether we could find enough people to do all the work," says Bruce D'Agostino, CEO of the Construction Management Association of America (CMAA), McLean, Va. He notes CMAA has grown to 14,000 members.
The public sector market is growing for many CM firms. "With the increase in number and size of opportunities, many owners are seeking assistance from the private sector for programmatic support for implementing their increased portfolio of work," says Mike Orth, senior vice president of Black & Veatch's water business. He says public agencies also are seeking more construction management support to augment their staff for increased oversight during construction.
One firm that is benefiting from a growing international interest in CM and PM is Hill International. Hill has had a huge presence in the Middle East and that is increasing with its acquisition on April 15 of IMS, an Istanbul-based CM firm. "We went from 50 people to 150 in Turkey with that acquisition," says David Richter, Hill's CEO. He says Turkey is a growing market for both infrastructure and buildings.
However, Hill's big target now is Asia. "We are looking at a major acquisition in Asia and hope to have some news in the next month or two," Richter says. While Hill has some work in Asia, Richter says the acquisition will help the firm increase its presence in the Chinese, Indian and Australian markets.
Hill also is expanding in U.S. markets. Its 2014 acquisition of Boston-based Collaborative Partners Inc. gives Hill an expanded presence in the education and health care markets. "And we finally got a significant presence in New England," Richter says, noting that Boston is one of the nation's hottest markets.
Some CM firms are enjoying a significant uptick in their local core markets. For example, many local school bond issues gained voter approval this past November throughout California. "Our sweet spot is managing the construction process for school districts," says Lisa Larabee, CEO of Harris & Associates. She says Harris is gaining new work in the state in the K-12 market, for community colleges and in the University of California system.
On the other hand, California is struggling to fund infrastructure projects. "Most infrastructure projects are funding on the local level, so we have launched a new initiative to aid local agencies in finding funds to pay for needed infrastructure upgrades," says Larabee.
The market for professional services may be growing, but it is not booming. "I see a trend where the owner's decision-making process for bringing on outsiders is driven by the perception that there is insufficient budget to hire a full-spectrum program manager," says Randall D. Martinez, executive vice president and COO, Cordoba Corp. So owners procure services in a variety of hybrid management structures, including staff augmentation and program manager with individual construction managers, among other variations, he says.
