Surveys: Hundreds of Design Professionals See Big COVID-19 Business Impacts
As more states, counties and cities call on non-essential businesses to shut down to help ease the effects of the coronavirus pandemic, design professionals already see major workload impacts from the economic slowdown, according to three new association surveys of members and one of CEOs by a financial consulting firm.
Half of architecture firms reported fewer new design projects than expected for March, according to a report released on March 27 by the American Institute of Architects.
Architects See 'Uncharted Waters'
The report, based on a survey taken on March 23 of 387 design professionals, also found that 83% of the respondents anticipate a decline in revenue for March compared with an earlier projection. More than one-third estimate that their firms' revenue will be at least 10% below expectations.
A majority—59%--expect inquiries for new work to decline in March and 67% say that they have already seen prospective projects slow or stop.
“Like most other businesses, U.S. architecture firms are heading into uncharted waters regarding what the economy holds in store for them as the COVID-19 pandemic plays out globally,” Kermit Baker, AIA chief economist, said in a statement.
Looking ahead, architects expect the situation to worsen in April, with 94% of respondents anticipating revenue to drop. Most expect that their firms' April revenue will decline more than 10% from previous projections; one-quarter of respondents expect losses of 25%.
AIA also surveyed staff work habits, with 48% of respondents indicating that all, or almost all, of their company staff now work remotely, while 31% reported that just some staff are doing so.
About 15% of respondents said some employees are currently unable to work at all.
Most respondents—79%— note restrictions on in-person client meetings, and/or moving those to virtual platforms.
While nearly half of firms have implemented temporary work-related travel restrictions, just 19% have implemented a strict no-travel policy for work for the foreseeable future, respondents report.
ASCE: Impact, But 'Interesting Adjustment'
A March 24 survey that included about 1,150 American Society of Civil Engineers members among 2,762 respondents from retail, manufacturing, distribution and service firms, notes a "direct negative financial impact" reported by 50% of those providing services to other companies.
The analysis says 8% of respondents work in firms of up to four employees, 20% in those with 100 to 499 staffers and 11% in companies with more than 500 employees.
About 32% of respondents report supply-chain delays, with 65% of them also citing negative financial effects because of chain disruption.
While 39% of all respondents noted just "mild concerns" about long-term post-virus company viability, about 20% in firms of 1 to 4 employees "question whether they can remain in operation after the crisis," says the analysis by research company Industry Insights Inc. About 49% of ASCE-only respondents voiced no concern about their employer's long-term viability, with 32% reporting mild concern.
Only 6% of respondents report more than 75% of their company's employees working remotely in the last year, with 36% stating that no employees had done so in that period; about 41% said a "partial mandate" to work from home now is a "new action" taken by their employers as a result of the virus.
More than 40% of ASCE-only respondents said they expect a moderate or major hike in technology investment in their firms.
Among ASCE respondent anonymous comments, also without detail on their firms, one noted that about 55% of company staff now work remotely. "This is new on such a scale for us," said the respondent. "It's an interesting adjustment."
But another said it was "difficult to complete design tasks while at home. I do not have the same capabilities as you would working at the office with all the technology available," such as the company's VPN network.
An ASCE member in a small firm reported difficulty now in "work for industrial plants that are not allowing non-employees on site. We acquire a majority of our jobs during site visits so this is a major concern to us." The respondent added that "as a small business, this could be detrimental but our goal is to be flexible and still keep our business open."
Another respondent points to the virus impact on "morale issues as people are concerned about their health and the possibility that it will result in slow downs and huge budget impacts that will cause staff reductions and/or furloughs without pay."
But one association member noted that the work slowdown "has enabled us to have time to focus more on better projects ... accomplish some of our training goals and implement new procedural ideas." The respondent adds, "This may come to feel differently if it goes on for too long and breaks the financial backs of our clients."
about 23% of ASCE-only respondents said their employer has a "formal plan" to address major COVID-19 employee absenteeism and 20% said the plan also addressed extended sick pay, but more than half reported their workplace has no such formal plan.
ACEC: Firms Seek Relief
A March 27 survey by the American Council of Engineering Cos., found that 40% of about 794 firm respondents reported delays in request for proposals or request for qualifications awards, and a majority—58%—report project delays or cancellations due to COVID-19. Given the economic uncertainty, design firms are looking for relief from public and private institutions.
The survey found that 87% of responding firms have not received any assistance from creditors.
The newly enacted stimulus legislation—the Coronavirus Aid, Relief and Economic Security Act (CARES)—has some assistance that engineering firms had sought. It includes a provision allowing small businesses to stop paying payroll taxes through the end of December, which is expected to bolster firms’ cash flows.
The legislation also includes another ACEC recommendation—providing funds to extend and increase unemployment insurance payments.
Social distancing and virtual work are the top work-continuation methods, with 84% of respondents reporting each, according to the survey.
“The global response to the coronavirus pandemic is unprecedented in its scope and we are still in the early days of measuring its impact on the engineering industry,” said Linda Bauer Darr, ACEC president and CEO.
"One of the most important business concerns our members have is the issue of cash flow," she added. "Congress addressed some of these issues in the CARES Act, but more must be done to protect engineering firms from the impacts of long-term disruptions resulting from COVID-19 response actions.”
CEOs: Revenue At Riak?
Meanwhile, in an analysis of COVID-19 impact responses from 128 mostly design and design-build firm CEOs by New York City-based financial management consulting firm AEC Advisors Inc., chiefs said a median of 2% of their firm's projects now are delayed.
About one-third of respondents are CEOs of firms that rank among the leading 100 companies on ENR's Top 500 Design Firms list, says AEC Advisors senior principal Josh Lahre.
About 54% of CEOs also say at least 5% or more of projects are expected to soon face delays, with 70% of respondents expecting COVID-19 issues will "negatively impact" 2020 revenue by between 5% and 20%.
"We expect this number to increase in our subsequent surveys in the coming weeks," says Lahre. "While a 10% reduction in top-line revenue does not sound like much, without reducing any costs, this would wipe out 100% of profit margin, assuming 10% profitability on gross revenue."
Respondents said project delays were worst in private sector work, noted by 52% of respondents, with state and municipal sectors next at 29%, but few delays for those with federal clients. Projects in New York, California, Massachusetts, Washington state and Texas were most delayed, the CEOs said. California ranked at the top, with 28 respondents ranking it first and 42 ranking it among the top three worst states,
About 10% of the CEOs have implemented layoffs, and 9% said staff furloughs are under way, with about 25% stating that one or both of the strategies are planned.
AEC Advisors says that the majority of respondents who report no current layoff or furlough plans "could be waiting for more significant [project] delays" that would exceed 5% of their total
"This is probably one of the most complicated problems we've had to face in leadership," says one global design firm CEO surveyed. "Everything is connected. It's hard to isolate one thing. You have to scrub every aspect of backlog and prepare staffing plans for what will happen next," which he said could be "a four-month or two-year exercise."
The CEO also urged peers "to be wary of the lag for our industry," which could generate "a false sense of security. At the end of the day, our worst year may be next year—you have to assume that."
He added, however, there are "lots of things to do now," including review of underperforming parts of a firm that are "hard to purge during a boom."