View from the top
The 2010 MEP Giants provide insight on the state of the engineering industry and what to look for in 2011.
- Lance Benham, PE, Corporate Vice President, Benham (an SAIC Company), Oklahoma City, Okla.
- Gary Brennen, PE, LEED AP, CRM, Co-Chief Executive Officer/Co-President, Syska Hennessy Group Inc., Los Angeles
- Vincent DiPofi, PE, Sr. Vice-President, SSOE Group, Toledo, Ohio
- Roy Gifford, Vice President, Director of Engineering, HDR Architecture, Inc., Pasadena, Calif.
- Geoff McMahon, Principal, Affiliated Engineers Inc., Seattle
- Greg McPhee, MBA, PE, LEED AP, Vice President, Buildings Engineering, Stantec Consulting Ltd., Edmonton
- Rich Smith, PE, LEED AP, Executive Vice President, Henderson Engineers, Inc., Lenexa, Kan.
- Dan Tollman, President, Sebesta Blomberg, St. Paul, Minn.
CSE: What part of your engineering firm is growing the most quickly? Do you think this trend will continue?
Rich Smith: I see healthcare, commissioning, government, and retail sectors growing most rapidly.
Dan Tollman: Energy Performance Services serves both the needs of owners to reduce their operating and maintenance costs, extend the useful life of their facilities, and do so in a manner that reduces their carbon footprint. Owner’s constituencies are increasingly demanding both of these outcomes continually improve and this should drive demand for this bundle of services over the next 10 or so years.
Gary Brennen: The financial sector has rebounded considerably, driving new data center infrastructure work. We see this continuing into 2011.
Lance Benham: Opportunities related to energy-savings, ranging from conventional building or campus-wide energy assessments to design and implementation of alternative energy systems such as biomass, wind, geothermal, and solar. Yes, we think there is a wide range of opportunities, given the sentiment across the country to reduce energy consumption, minimize greenhouse gas emissions, and transition energy sources to include a higher mix of alternative and renewable sources.
Greg McPhee: Currently, our areas of specialty services are growing faster than our basic MEP design services. Security system design, energy analysis and implementation, facility assessments, commissioning and retrocommissioning, lighting and daylighting, and sustainable design services are all in a positive growth mode at the moment. This trend will definitely continue in the short term, as the North American marketplace looks to get our economy back on its feet. In the meantime, building owners are looking for every advantage they can find to make their existing individual assets or portfolio of buildings more attractive to the leasing public and more operationally cost-effective from an energy use perspective.
Roy Gifford: As a large international A/E/C Firm, HDR maintains a backlog of projects in various business groups—healthcare, science and technology, and civic—that fluctuate with current market conditions. Our federal program has been the area of most growth this past year and has provided a strong backlog of healthcare projects throughout the nation and internationally as well. This trend appears to be continuing as the federal government’s stimulus funds are applied to aging infrastructure and facilities.
Vince DiPofi: Over the last few years, our process-driven businesses (chemical and food) have shown the most growth. These industries have not been immune to the recession, but have weathered it well. Capital investment with our core clients in these areas has remained strong, and our long-term relationships have served us well. While we expect them to remain strong, we see our future growth tied much more closely to energy, be that power infrastructure upgrades; alternative energy installations such as solar, wind, and biomass; or energy savings projects such as reducing water and other utility usage. Our last two acquisitions focused on firms with power and alternative energy capabilities. We expect this to become an ever-increasing part of our business over the next five years.
CSE: Moving into 2011, in what types of buildings do you anticipate the most engineering work? (This may include building types like hospitals, schools, mixed-use, etc.)
Smith: We anticipate retail, commissioning, and government buildings to offer the most work.
Tollman: Two examples: health science and data centers.
Brennen: We anticipate that hospitals and public sector infrastructures such as courthouses and prisons will keep us busy.
Benham: Data centers, as customers are consolidating their operations among multiple sites. Hospitals, because healthcare providers must find more cost-effective ways of delivering services and managing their bottom line. We believe this market will continue to provide robust design and construction opportunities.
McPhee: Healthcare will continue to provide the greatest opportunity for engineering work, however, the number of brand-new projects will be down considerably compared to recent historical opportunities. Renovation and renewal projects will likely drive the bulk of engineering services in the healthcare market for the next few years.
Geoff McMahon: In the early part of the year, we will continue to see healthcare and higher education laboratory projects to be the bulk of our work effort firm-wide. With uncertainties surrounding healthcare reform and struggling state budgets, we anticipate those markets will slow in the U.S. as the year progresses. We anticipate that toward the end of the year we will see more opportunity in the private sector research and development market.
DiPofi: We think the industrial plants will see a rebound, and in particular we have started to see our automotive business rebound on the facilities side. We’re seeing a downturn in K-12 school facility work due to the budget tightening in many communities; however, we are seeing higher education investing in more energy-efficiency and energy-savings projects for their facilities.
CSE: What new markets has the economic downturn pushed you into? Do you see a continuation of this trend?
Smith: We have started to focus more on government and commissioning work and will most likely continue our focus when the economy recovers.
Brennen: Markets we have been pushed into include public sector at all levels, including local, state, and federal.
McMahon: We are always looking at a variety of new technical and geographic markets to diversify our practice and provide opportunity for growth. While the economic downturn has not pushed us into new markets, we continue to look for those opportunities. At this point many of the new geographic markets are overseas where clients are looking for strong expertise on highly technical facilities.
Benham: Energy-centered projects have come into focus, and we see this as a market that will continue to offer opportunities. Our national energy security will be realized best by a balanced approach that addresses efficiency improvements in generation, transmission, and distribution to the end customer as well as broader use of alternate fuels and renewable energy sources. In this regard, the exploration, production, and refining of conventional fuels is part of that balance as our country continues a measured transition from traditional fuel sources to a higher percentage mix of alternative and renewable energy options. Many opportunities exist for customers to engage others to finance, design, build, and even operate their facilities. The concept of net zero energy use for a building or campus creates new business opportunities. SAIC has also been helping utilities, municipalities, and state agencies apply for funding under the American Recovery and Reinvestment Act to fund and subsequently implement electric grid upgrade and modernization programs, energy assurance planning, and other energy-efficiency programs.
McPhee: Stantec has always been able to provide a wide variety of specialty and niche services. However, the changing economy has warranted a refocusing of our efforts into a number of these specialty services where we see greater opportunities existing for the next few years. This trend will likely continue for a number of years, as building owners and operators look to refine and improve the business model associated with their current building assets and portfolios.
Gifford: The economic downturn has brought about a “return to basics” attitude for most of our clients. In this market, HDR is strengthening our sustainable design initiatives and has provided advice and solutions through our proven Sustainable Return on Investment (SROI) process. Owners are able to select programs and projects that provide economic, social, and environmental value.
Sustainability is gaining momentum in the design industry because the process strengthens the outcome. HDR offers our clients the best possible value by delivering integrated and sustainable solutions.
DiPofi: As mentioned earlier, the energy market for sure. Additionally, we have made investments into projects driven by federal government funding. Obviously, the funding in this market has increased significantly and has affected many of our core sectors such as healthcare, where the government is upgrading VA facilities.
CSE: What is the biggest soft skills challenge your engineers face? (Soft skills are defined as communication, business, finance, etc.)
Brennen: Communicating high-performance, sustainable opportunities and strategies in business terms is a big challenge for our engineers. We need to simultaneously relay to our clients our firm’s passion for high performance and sustainable design, but also communicate that this method is highly beneficial for them in terms of cost and energy-savings.
McPhee: In our changing marketplace, understanding the needs and requirements of our clients is the biggest issue we all face. As engineers, we like to solve problems and design solutions. However, the needs of our clients in the marketplace are evolving, and it is imperative that before we start designing the MEP systems that we have historically provided, our engineers must spend the necessary time with our clients to understand what they truly need, and how they define success.
Smith: Conflict resolution both within the office and with outside entities is the biggest challenge.
Benham: Oral presentation skills, writing skills, and financial skills needed to assess a project’s feasibility.
McMahon: The ability of engineers to think critically in all aspects of their work, both technical and nontechnical, is a challenge many young professionals face. The ability to effectively assess all the information available at their desktop and beyond and synthesize it into a cogent concept, presentation, project approach, etc. is key to their development as professionals.
DiPofi: Understanding international cultures has risen to the top of our list for soft skills training. We have two offices in China and are working extensively in India as well. We have made significant investments in training our people to work with our counterparts, be it clients or colleagues. Our international business has grown from 5% two years ago to 10% this year and we expect it to reach 30% in the next three to five years. We still feel there is a gap and are working hard to get our U.S. personnel exposed to more international assignments. Construction in the U.S. will account for a continually decreasing share of the world construction market over the next five years, and we are preparing for that now as well.
CSE: How will the new energy-efficiency regulations push your business?
Smith: New energy-efficiency regulations will cause us to think more strategically in the early design process; consequently, more value will be placed on the mechanical/electrical/plumbing design team members.
McPhee: While Stantec has been providing energy-efficient designs for years, including a number of zero-energy buildings, new energy-efficiency regulations will drive our engineers and designers to find new ways to meet the more stringent and challenging requirements. This will include the need to educate many of our clients regarding what the ramifications of meeting the new energy-efficiency regulations will have on the design, construction, and long-term operational requirements of their facilities.
DiPofi: Certainly, as I mentioned earlier, our clients will continue to invest in [U.S. Green Building Council (USGBC)] LEED facilities and energy savings projects to meet those guidelines. Specific geographic and tax incentive considerations may drive them to solar or wind or biomass, depending on the investment environment.
Benham: Two things we think will help push our business:
- More turnkey opportunities to finance, design, and build projects
- More robust community planning protocols, emphasizing sustainable communities from the outset of zoning, land use, energy planning, etc.
CSE: Looking forward, what’s the most important thing a mechanical engineer needs to know? Electrical engineer? Plumbing engineer? Fire protection engineer? (Please select one or several to focus on.)
Smith: BIM, communication skills, and energy modeling.
Brennen: For mechanical engineering, it is parlaying expertise into a much more collaborative and consultative role with our clients to develop high-performance building systems.
Benham: All the below apply equally to each of the engineering professional categories:
- Interpretation of client requirements
- Code compliance/safety considerations
- Cost analysis
- Efficiency analysis
- Appreciation of the holistic design process so that well reasoned, environmentally sound design decisions are made that promote cost and energy efficiencies.
McPhee: For every discipline, the single most important thing is knowing how to communicate effectively with our clients, and then doing so throughout the life of a project.
McMahon: We believe the answer to be the same for all engineers; they will need to know how to innovate in their respective disciplines and be able to translate those new ideas into strong, applicable technical concepts. Engineers today must recognize changes in technical design, project delivery approach will continue throughout their careers, and they must develop the ability to thrive in that environment.
Gifford: As technology continues to advance, HDR engineers work collaboratively with each other to integrate their knowledge and expertise within the entire design team. Our clients are very involved with decisions about sustainability, and HDR engineers need to know how to communicate the intent of their designs with the clients’ requirements as well as those of other design team members in order to meet operational goals, budgets, and timelines.
DiPofi: Certainly for our mechanical and electrical engineers, where capital is intensive, our clients want the highest value service and the highest value installation for their capital. Lingering effects of the current economy will be felt for years, and we expect the current focus on cost reductions to continue into the foreseeable future. Our engineers are constantly challenged with driving scope towards budget with no sacrifice in safety or performance. Innovation will be key to that goal, and we look for that quality in the people we assign to lead projects and interface with clients.
CSE: How is your firm handling succession planning, or filling seasoned engineers’ positions once they leave/retire?
Smith: Through ongoing strategic planning and the identification and promotion of young talent we hope to experience continued growth and success.
Brennen: We have formalized the succession planning process, governed by our Board of Directors. We are also aggressively recruiting in this down market to attract the best and brightest engineers.
Benham: We are placing young, talented engineers in positions where they are mentored by experienced senior engineers. We make sure these young engineers are exposed to a variety of technical challenges and are involved in both the business/cost aspects of projects as well as aspects of the overall business. SAIC has an active college recruiting program and University Relations Council under which we develop strategic relationships with engineering and technical universities to help develop talented engineers and recruit them to our company.
McPhee: Stantec hires many university and college summer students each year, as well as many students through co-op work-experience programs. We have been doing this for many years, with the obvious long-term advantage that many of these students ultimately come back to Stantec once they graduate, with many having very successful and long-term careers with us. We are also finding that many of our senior engineers are not looking to retire cold turkey any more. Reduced work weeks, specific assignments, taking the winter or summer off to travel—these are all things we have been doing with many of our senior staff who have reached “retirement” age, but who still want to keep active and stay involved in projects. It provides great mentorship opportunities and keeps our senior people active and engaged, while extending the benefits our clients realize by having the skill sets and expertise that these senior staff bring to the table available for a longer period.
Gifford: Because we are a large international employee-owned A/E/C firm, HDR’s core values include certain responsibilities for our staff to help build HDR into “One Great Sustainable Company.” We are dedicated to growing broad-based employee ownership and building a legacy firm by coaching, mentoring, and empowering employees.
Our engineers often work share within local and regional offices. This provides opportunities for advancement for our top performers. Relocation opportunities, recruitment, and key acquisitions of other firms allow engineers to fill key positions.
DiPofi: The baby boom demographics are affecting every company; ours is no different. We have instituted a very strong internship/co-op program with the University of Toledo with the goal of hiring these engineers after their internship has been completed. In fact, over the last five years, we have hired over 30 student interns as full-time employees upon graduation. Several years ago we also instituted a stock purchase program that extended much deeper into the company to allow early ownership by key engineers and future leaders. This solidified our future leadership and succession planning by identifying leaders earlier and bringing about mutual commitment to a long-term stake in the company. We have already started to see the retirements occurring and have had strong replacements on the bench, ready to go.
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