The past year and a half have been a frightening ride for international contractors. The terrorist attacks on New York City and Washington, D.C., and the uncertainty over the U.S. response only compounded existing concerns about a softening U.S. economy and the effects on the international market.

For ENR's Top 225 International Contractors, 2001 was a down year. International revenue for the Top 225 fell 8.1% to $106.5 billion from $115.9 billion in 2000 and 11.5% from 1999's high of $118.7 billion. Part of this drop-off can be explained by the absence of German giant Philipp Holzmann AG, which now is in bankruptcy, and Dutch giant HBG, which is in the process of being acquired by Royal BAM NBM nv, Bunnik, The Netherlands. These two firms ranked eighth and ninth on last year's Top 225, accounting for $7.14 billion in international revenue. Not counting Holzmann and HBG, international revenue for ENR's Top 225 fell only 2.1%.

While some markets were down in the wake of Sept. 11, many large firms report the economic impact on international construction was much less than feared. Bechtel is one such firm. "We didn't have any projects canceled [but] some of the projects slowed down," says Lee McIntire, London-based executive vice president in charge of global civil engineering. While the telecommunications sector remains uncertain, railroad infrastructure has grown in importance, especially in North America and Europe, he says.

For Skanska AB, "business is down," says Stuart Graham, executive vice president and president of Skanska USA. He cites weakening Scandinavian high-tech industries as a cause of the firm's soft market. In two other major markets, the U.K. and U.S., public agency spending remains strong. But the U.K.'s private sector is slowing and "corporate America is not spending capital," he adds.

For Amec plc, "the strongest market we're enjoying at the moment....is the oil and gas market, particularly upstream and offshore," says CEO Peter Mason. The firm is active off West Africa and in the North Sea, and is bidding for work in the Caspian Sea. Having acquired Toronto-based AGRA Inc. two years ago, Amec has "started to see synergies," he says.

Like many large contractors Germany's Bilfinger Berger is increasing its share of building and facility services. "At least 30% of our profit comes from that kind of business," says Executive Director Carlos Möller. As part of this move, Bilfinger announced on Aug. 14 that it had acquired HSG Group, a German-based integrated facility management company, from the insolvent Philipp Holzmann. HSG had revenue of about $175 million in 2001. Möller says smoother profit curves and higher margins are the main attraction of facility management.

German rival Hochtief AG, reports sales of its facilities management division rising more than 30% a year. Airport management, another route into services, also is growing. The contractor recently acquired a share of Australia's Sydney airport, and has interests in Greece and at home, in Düsseldorf and Hamburg.

Hochtief also is planning a reorganization to put all operations into three divisions covering Europe, the Americas and Asia/ Pacific. Hochtief Construction will run Europe, while The Turner Corp., New York City, and Australia's Leighton Holdings Ltd. will anchor work in their regions.

For Europe's biggest contractor, Paris-based Vinci Group, foreign business is growing marginally, says Philippe Ratynski, head of international operations. "We are looking more for profit than turnover," he says. International projects are declining partly because local contractors are increasingly able to do them, says Ratynski. "But there are still, everywhere, very technical projects with a lot of added value," he adds. And competition for international projects from the big international players has "considerably reduced" in recent years. U.K. and U.S. contractors are less active and the collapse of Philipp Holzmann knocked out another rival, he says.

Regionally, Southeast Asia and Australia are picking up, says Hans-Wolfgang Koch, an executive director of Hochtief. China remains attractive, but strong local competition makes entry difficult, he says. But several big contractors report slow recovery in Asia-Pacific with only flashes of activity here and there.

"I don't see [Asia] bouncing back strongly yet," says Ross Taylor, head of Bovis Lend Lease's operations in London. Since absorbing U.K.-based Bovis to create BLL in 1999, construction now accounts for about 70% of group profits, with development providing the rest.

Vinci will maintain a presence in Asia, but "it's not a place we want to develop strongly," says Ratynski. Bechtel is focusing on Australia, China, Korea, Japan, Hong Kong and Taiwan. "We think that's a good market," says McIntire. But with many infrastructure contracts already awarded, Hong Kong is "less attractive" to Amec's Mason. Bouygues is still busy on Hong Kong infrastructure, but commercial building is "very depressed," says Michel Cote director for international civil engineering and building work. And making things worse, "the competition from mainland Chinese contractors is getting tougher and tougher," he adds.

One such Chinese contractor is China Civil Engineering and Construction Corp. "Southeast Asia, especially Hong Kong, is where our company is finding success in gaining new work," says Tian Wei, CCECC director and vice president. The company also has just opened a new office in Singapore, he says.

However, China's attraction remains strong because of its membership in the World Trade Organization, continuing economic growth and the 2008 Olympic games. AMEC recently boosted its long-standing presence by setting up a company in the Pudong district of Shanghai, offering everything from design to maintenance in oil, gas, petrochemical, chemical and pharmaceutical work.

And Bilfinger this year established an equal joint venture with a city-owned Beijing contractor to bid for transportation, fueled by preparations for the Olympics. But apart from some prestressing subcontracts by its specialist subsidiary, Bouygues is finding China a difficult market. "We are still looking," says Cote.

India's warlike relationship with Pakistan adds to its perceived difficulties. Vinci has no plans to move in, while Hochtief's Koch says: "I can't see that we will have an office there." India's emerging highways build-operate-transfer market is attracting Bouygues. But first "we have to understand how the Indian system works," says Cote. McIntire believes opportunities exist for Bechtel, but he says India remains mainly a large engineering base for external projects.

Meanwhile, business in the Middle East is causing Bechtel to recruit more staff, says McIntire. He feels "comfortable" about the region, but says "some of the competition is taking a hard look at the Middle East trying to determine if that's strategic for them or not." In North Africa, "we still find opportunities" in petrochemicals, power, civil construction and building, he says.

Megaprojects are keeping Vinci busy in North Africa. The firm is building pumping stations for Libya's Great Man- Made River program, and more recently won a River Nile dam in Egypt. Elsewhere on the continent, "the market is the same," says Ratynski. But the "rhythm of projects is variable"

In Africa's biggest economy, Nigeria, Bilfinger's Möller expects "a stable production rate with good result." But he adds: "Obviously it depends on the oil price." Libya's oil-fed budget also should generate good business, but Möller is "waiting to see what happens."

Some firms are using long experience in the region along with cultural affinities to build their African project list. "The eastern cultural tradition is more acceptable to the people in the developing countries," says Wei of CCECC, which has much experience in Africa. This has helped the company win major railway projects in Nigeria and Libya, he says. CCECC also has recently established a new office in Uganda, he says.

After some difficult years, Southern African construction is recovering, says Koch of Hochtief. Its local affiliate, Concor Ltd., Johannesburg, continues to target work in surrounding countries. But Hochtief has yet to decide what to do with the medium-size firm.

In Europe, Bouygues is tracking build-operate-transfer work in Norway and Germany, where Cote expects highway contracts to start emerging next year. In France, construction "is near the peak," says Ratynski. He says prospects also are good in the U.K. where "bidding is not too aggressive." But Germany is still at low ebb "and I don't see the end of it."

With its army of regional contractors, Germany's frail market remains tough. Giant Holzmann accounted for under 1% of the country's contracting capacity, so even its collapse will make little impact on fierce bidding, says Möller. Operating "like a flee on an elephant," BLL is picking up project management work in the niches of Germany's depressed market, says Ross.

Though strong in the U.K., Bechtel's profile is much lower elsewhere in Western Europe, which is now "an important target" for McIntire. "We are looking at countries with large infrastructure projects, like Italy," he says

Eastern Europe's dominant market, Poland, also is in trouble. "Poland is in a significant recession," says Graham. Skanska is still trying to get its Polish division into shape, "but the major problem today is the market," he says. The market may have "found the bottom now," says Koch. After a loss in 2001, Hochtief's local operation now is about break even.

Elsewhere in Eastern Europe, Bouygues hopes to start work on an extension to its Istrian highway project in Croatia, under a build-operate-transfer contract worth an estimated $125 million. Bouygues also expects to begin negotiating sometime this fall for an extension of its M5 BOT contract in Hungary with the new government.

Japan's Penta-Ocean is finding success in port work in Eastern Europe. It recently won contracts for the Romanian Port of Constantza South Container Terminal project and the Bulgarian Port of Bourgas expansion project, says Katsuyuki Imaizumi, joint general manager of the international division. He is concerned that the general dredging and reclamation market is off. But he believes that environmental marine projects are on the rise.

Meanwhile Russia remains enigmatic. "We've got a solid business in Moscow and other regions of Russia," says BLL's Taylor. "It seems to be picking up." Bilfinger's Möller has a different perspective. "I was a bit more optimistic last year than I am today," he says.

For European-based contractors, North and South America present different faces of the market. For example, North America already accounts for about 60% of Hochtief's business through Turner Corp. And now, Hochtief may target U.S. infrastructure as well, possibly from its German headquarters operations, but with Turner's help. But Koch sees little prospect of acquiring a U.S. company, partly because they are "too expensive," he says.

In Latin America, meanwhile, Hochtief is "doing well" in Brazil, but is winding down its Argentine business, says Koch. BLL still has a business in Argentina and also in Brazil. "We follow our key customers doing [for example] bank, retail and telecom roll outs," says Taylor. "While we don't have a business in Argentina, we do have business in other countries," adds Graham. But "most of our customers are multinational corporations and they are not totally affected by events."

Bouygues has won port and highway work in Central America and the Caribbean, but is less active further south, where competition from Spanish, Italian contractors is fierce, says Cote. "They have taken a huge amount of risk, sometimes in BOTs, and I'm glad not to be involved," he adds.

Click here for the List: Top 225 International Contractors>>