“Globally, we are seeing an increase in requests for environmental services, especially in emerging economies, driven by water availability, water quality, biodiversity and resiliency,” says HDR Chairman and CEO George Little, who steps down at year-end.

“We’re hearing a lot about building up and renewing America’s aging infrastructure. In addition to roads and bridges, water infrastructure is getting federal attention, and we’re optimistic that many critical investments will receive bipartisan support,” adds Craig Goehring, chairman and CEO of design firm Brown & Caldwell. “At the same time, there is a lot of uncertainty surrounding the future of environmental regulation at the federal level.

Changes from the [Trump] administration could impact project funding and schedules.” John Braccio, CEO of consultant Wright-Pierce, voices concern “that the new administration may turn back regulations too far,” with uncertain effects on future work and market growth.

Overall cautiousness last year likely slowed the pace of municipal decision-making, with Top 200 revenue down 1.1% among those reporting work for state and local governments. Revenue growth for water-supply and treatment facility design and construction also was off in 2016, by more than 10%, but that shows every sign of reversing this year and in the future. A recent survey of 340 U.S. water utilities predicted investments of $8.3 billion in smart infrastructure over the next 10 years to improve efficiency.

“We expect some stagnation in U.S. federal environmental services contracts under the current administration, while municipal spending on urban-resiliency and sustainable-city programs continue to be on the rise,” says a spokesperson for consultant Louis Berger.

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Stepping Up

Whether reacting to need, political realities or both, states are stepping up to the plate. “California has incredibly conservative environmental regulations, probably a world leader,” says Hirad Emadi, president of construction manager Innovative Construction Solutions, Santa Ana. “We don’t see Trump’s policies affecting us one bit.” He notes the firm’s $50-million project to clean up contaminated soil for a large defense contractor on a 996-acre site in Santa Clarita.

“Globally, we are seeing an increase in requests for environmental services, especially in emerging economies, driven by water availability, water quality, biodiversity and resiliency,” says HDR Chairman and CEO George Little, who steps down at year-end.

Motivated by a slow rise in oil prices, the faster-climbing Dow industrial average and more optimism, the private sector expanded as an environmental services client. Top 200 firms reported revenue up more than 2%, to nearly $25 billion, this year after almost no sector growth on last year’s list.

“Overall, we see our global markets as stable and/or recovering in calendar year 2017 in terms of the economic health of the clients we are serving,” says Keryn James, global CEO of London-based consultant ERM, which generated 97% of its revenue in the private sector. “Stock markets are at all-time highs, the cost of working capital and unemployment are near all time lows, and commodity prices—energy, base materials and platinum—have recovered at least 30% over the past 12 months.”

But other Top 200 firm executives voice concern that their corporate customers will be negatively affected by the Trump administration’s environmental compliance reversals, which could be too rapid or too severe.

“Although the new administration in Washington has made a number of changes to environmental policy, we have found that our clients dislike making large procedural swings in their business operations. Because they already invested money to meet more stringent environmental standards under the Obama administration, it doesn’t make sense for them to abandon those investments.” says Todd Perry, principal of PPM Consultants. “They also need to be prepared for the next administration to come, in case it resumes some of the former environmental standards.”

Market Watch

The Top 200’s largest market was still waste cleanup, although the proportion and growth rate of 2016 revenue for hazardous-waste remediation and management both fell as projects complete. But continued mothballing of nuclear power plants, spurring needed decontamination and demolition, may have been a factor in that sector’s 19% revenue bump.

At federal nuclear facilities, however, the looming administration change slowed activity, says one Top 200 market expert. In the U.S. Dept. of Energy, “there has been a slowdown of the procurement cycle for the entire nuclear complex,” says Dyan Foss, nuclear-sector managing director at CH2M. She says contract bids at DOE’s key Hanford, Savannah River and Los Alamos complexes have not been released. “We thought we would see them three months ago,” says Foss, noting that, at the Hanford nuclear complex in Washington state, there is $6 billion to $7 billion of environmental work still to be procured. 

While the Top 200 firms worry about U.S. Environmental Protection Agency Administrator Scott Pruitt’s moves to make program and regulatory cuts and changes, the newly installed chief has promised to continue and even expedite the federal Superfund cleanup program. But industry observers are following the numbers. “The Superfund market is too early to call,” says Leslie Shoemaker, executive vice president of Tetra Tech and president of its water, environment and infrastructure business. “The FY 2018 budget will show whether it is a material driver.”

She and others are also watching proposed federal changes to coal-ash disposal rules. “But it’s harder and more complex to roll back rules that have been on the books, adopted and pushed down to states,” says Shoemaker. Legal intervention also may play a key rule in how and whether cleanups continue. On Aug. 4, a Nashville, Tenn., federal court ruled against utility TVA over coal-ash leaks at its Gallatin power plant, ordering it to excavate and move the waste to a lined disposal site from a leaking, unlined pit.

List Shifts

Market nuances and economic pressures brought additional changes to 2017’s Top 200 list. Stantec’s acquisition of privately held water giant MWH last year moved the new parent into the ranking’s Top 10 for the first time. Also missing from this year’s list is Atkins, which did not file, pending its $2.6-billion purchase by SNC-Lavalin Group; however, that buy should significantly boost the Canadian firm’s environmental footprint and list ranking next year. And, after years of non-participation in the Top 200 ranking, Jacobs Engineering will occupy a leading position on the 2018 list, assuming the successful conclusion of its agreement to buy Top 200 leader CH2M, announced on Aug. 2.

Another new name could appear on next year’s list if U.K.-based Wood Group in 2017 completes its nearly $3-billion acquisition of No. 10-ranked Amec Foster Wheeler. At least 65 Top 200 firms on this year’s list said they were considering a merger or acquisition in the next 12 to 24 months.

Among those firms ranked for the first time is Bauer Resources GmbH, the water and environmental unit of German industrial-construction giant Bauer AG.

Other globally-based Top 200 firms include Ramboll Environ, which cited 2016 as one of its most profitable years, following the acquisition a year earlier by Copenhagen-based design firm Ramboll of US-based consultant Environ. The firm said it won a design contract for a 400-MW offshore wind farm in China, one of the country's largest, and it is advising New York City on climate change and stormwater management strategies. On Jan. 1, the firm will begin using the Ramboll name to reflect the Environ integration. "We are determined to overcome the continued challenging market situation due to the low oil price, Brexit and geopolitical instability," said CEO Jens-Peter Saul, in a note to employees earlier this year. "We have good reason to look positively at 2017."

Go With the Flows

The growing importance of water as a global population and business resource should accelerate growth for Top 200 designers, builders and others that provide needed supply and management services. Revenue for firms in the wastewater treatment sector rose nearly 13.7% last year; it now makes up nearly 17% of the list total.

After more than a decade, New York City’s Newtown Creek wastewater treatment plant last year completed its final phase of a $5-billion expansion to meet a state consent order and raise wet-weather processing capacity, to 720 million from 310 gallons per day. On the other coast, San Francisco got going last year on a billion-dollar effort to modernize its 60-year-old treatment plant, one of the first in the country to use the Cambi thermal hydrolysis process to boost processing efficiency for biosolids and biogas in a tight space. Design firm KCI, active in the design of plant upgrades to meet the strict nutrient reductions set for the Chesapeake Bay watershed, now sees its focus “shifting to failing infrastructure,” says Chairman Terry F. Neimeyer.

“Population changes have affected cities by adding pressures to the already-aging infrastructure,” says C. David Dickey Jr., executive vice president of the water business line at No. 1-ranked AECOM. “Cities with declining populations face the additional challenge of not having fiscal reserves or the ratepayer base to finance systemwide improvements.” Samara Barend, firm vice president and North America director of public-private partnerships, thinks states should use  more private activity bonds. “Any upcoming federal infrastructure bill should include a focus on PABs for water,” she says.

But sector firms worry about aggressive price competition. “We had a tremendous year in 2016 and … there are many opportunities available,” says Joe Godin, executive vice president of wastewater-plant builder American Contracting & Environmental Services Inc. “But there are still way too many contractors who are willing to severely underbid the work and then underperform.”

CH2M is advocating new infrastructure delivery models, such as its $190-million contract—finalized in May—to upgrade and manage deteriorating water-wastewater assets in North Miami Beach, says Brian Harvey, vice president and managing director of its international water business. Despite local controversies, he calls the approach “a unique contract that can be considered a new model for the water industry.”

According to Harvey, “There is a growing appreciation that water solutions will be different from in the past. We are at a tipping point and need to challenge legacy issues with innovation. Water is too precious now.” He cites analytics and data management that CH2M and others used to reduce risk on the $900-million Lee tunnel combined-sewer-overflow project under London’s Thames River that was completed last year. “If we can manage the risk, we can draw funding.” he says. “So, computing power is producing a new breed of engineers who are entrepreneurs.” ♦

With Gary Tulacz, Scott Blair, Cody Hall and Andrea Pinyan

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