Many firms working in the public sector worry that many public agencies tend to have an inefficient mind-set. They tend to be very conservative and decide by consensus, rather than acting decisively, says one designer. The shortage of funding has many public agencies rethinking their approach to their capital assets. “We are doing a series of roundtable discussions with public utilities on economic realities, and we are finding many moving toward a more private-sector business model in planning,” says McCarthy.
Some designers are applying private-sector processes to public agencies. “We understand government agencies' needs and show them solutions drawn from the private sector,” says McGinty. But that's not a one-size-fits-all solution, she notes, saying, “You can't sell a cash-strapped utility with a Fortune 500 approach.”
Alternative Financing
Thus, many designers are looking to alternative funding approaches. “The debates currently occurring in Washington, D.C., and many state capitols is not whether to build and maintain our infrastructure resources but how to fund these necessary programs,” says Tony Bartolomeo, CEO of Pennoni Associates. He says the public-private partnerships and innovative technology will have to be relied on to “do more with limited resources.”
Dionisio agrees that private financing is needed and beneficial to the building and maintenance of the nation's infrastructure. “What most people don't realize is that the New York City subway system and most of Los Angeles' early infrastructure was built by private companies. We need to revisit that approach.” He says most of the resistance to private financing is political, but the recession is changing that. “You are now seeing governors and state legislatures exploring public-private partnerships enabling legislation,” he says.
Yarossi points out that reliance on purely public funding to answer the nation's infrastructure needs is a problem. “There has to be a recognition that there are a variety of alternative funding sources available to finance infrastructure,” he says. He notes that the deal flow has not been very high in the U.S., but he remains optimistic. “Public agencies are taking a more business-like approach to their capital programs.”
Martin agrees. “We are not seeing a breakthrough on public-private partnerships, just a few projects here and there,” he says. “Private financing is not the answer to our infrastructure need. It is just one element of the overall answer.”
Many firms have worked to help their public customers with alternative financing. For example, Parsons Corp. is in the process of setting up an alternative financing consultancy, Parsons Enterprises, which will examine its options to provide equity financing on its own toward select projects (see page 62). On April 7, it named Dean Harwood, formerly vice president, as president of the new group.
The environmental markets have felt the strain, as well. “A lot of the work we are seeing is regulatory- driven,” says Goehring, which creates its own challenges. He says wastewater technologies are scrambling to keep up with regulatory demands. “The easy stuff has already been completed. We are now in a position of determining how to improve existing technologies and validating new technologies to meet clients' needs,” he says.
Goehring thinks design firms have a new challenge: making sure the public understands the need for funding infrastructure projects in a tough economy. “Once you get beyond federally funded programs, you have to be able to make the case to the ratepayers.”
Greener Pastures
The recession in the U.S. has more design firms looking abroad. One of the questions on the ENR online survey form was whether designers anticipated increasing their international presence in the next three years. Of the 426 Top 500 firms responding to this question, nearly two-thirds, or 66.0%, said yes.
Of that group seeking international growth, Asia was the destination of choice, with 165 firms, or 63.2%, saying they believed that region would be their focus. Other regions gaining attention from Top 500 firms were the Middle East (51.3%), Canada (42.1%) and Latin America (37.9%). Only 25.3% of companies said they are looking at Europe.
The interest in international work is a natural reaction to slow domestic markets. “Recessions always result in designers shifting their priorities to international work,” says Perkins of Perkins Eastman. During the recession of the 1970s, for example, firms turned toward the Middle East, while in the 1980s, they looked to Europe. Then, early in this decade, attention turned to Asia, he notes. “Among international designers, if they were doing 15% of their business abroad in 2007, they are probably doing 30% now,” he says.
The Middle East has continued to be strong for the most part, except for some markets. “We have seen some disruptions in the Middle East market from political unrest, but that is mostly localized,” says Dionisio of AECOM. “The markets in most of the region are strong. For example, we just won a major light-rail program management contract in Qatar.”
Paul Steelman, CEO of Steelman Partners, says the most desirable international region for U.S. firms is Asia. This area is where the firm's market is going to be over the next two years, he notes, saying, “In 2011, I project that 88% of our gross revenues will originate from Asia.”
The biggest targets for design firms are China and India. “The growth rates in India and China and the demand that they are creating is part of the upside of the international market,” says Martin. The more that India and China grow and prosper, the more their firms lose their cost competitiveness, he says.
“China is a market that never slowed down,” says Roehling of SmithGroup. “We weren't the first design firm in, but we are pursuing projects selectively. SmithGroup now is working on a 428,000-sq-meter research and development center for Chinese automotive giant FAW in Changchun.
India also is a major target for design firms. “We are helping the Indian Dept. of Environment & Forests design an approach to remediation and hazardous- waste handling,” says McGinty of Weston Solutions. Weston is helping to plan sustainable cities in India that aim for zero-net energy and water use, she says.
One country that has gained a lot of attention recently is Vietnam. For example, Paul Steelman Associates is designing a new $2-billion park in Vietnam called Happyland Theme Park as well as Happyland Central, an associated retail complex, about 20 miles from Ho Ch Minh City.
Perkins recently completed a master plan for the city of Hanoi. “You are seeing a lot of Japanese and Korean firms investing in Vietnam,” he says. The country is becoming a major focus for development because it has a large, prosperous, literate population and a stable government, he says.
Some designers worry about the impact of future potential economic crises on the industry. “With all the talk about the deficit and inflation, the current situation is beginning to look a little like the recession of the 1970s,” says Cryer of PageSoutherlandPage. “We went through a period of inflation and spiking oil prices that caused us all to struggle even after the recession ended. I hope we do not see that again.”
As the market continues to struggle, design firms continue to fight to prosper. Firms are innovating, exploring new markets and expanding through acquisitions. The successful firms are not standing still. “If you continue to do traditional things in a traditional way, you will have a hard time growing in the market,” Grumski of SAIC concludes.
Post a comment to this article
Report Abusive Comment