How will COVID-19 affect the business of engineering? Hear from CannonDesign’s Paul R. Kondrat

The business aspects of COVID-19 are important to every engineering firm. Paul R. Kondrat, PE, LEED AP BD+C, Principal, Co-Director, Engineering, CannonDesign, Boston, discusses these topics virtually with Consulting-Specifying Engineer.

Do you anticipate your firm’s professional office spaces will change in the next six months? Be redesigned or changed in size?

Paul R. Kondrat: Just before the pandemic, we completed a number of real estate transactions to consolidate and gain operational efficiency. As a result, we don’t anticipate an immediate change in the size of our spaces. That said, with social distancing measures, we can only accommodate about one-third of the number of people that we did previously so we are making adjustments accordingly. Some of those changes are policy-based (i.e., work from anywhere) or simple things like creating sign-ups for hoteling space in an office.

How are engineering or technical aspects of the job being completed remotely?

Paul R. Kondrat: We operate under what we call a (single firm, multi-office operational strategy and have been completely cloud-based for many years, so the shift to 100% remote work was simple. Our management team made the decision to go remote on a Monday and we were 100% remote the next day. That transition for the design portion of our business went really well.

With regard to meetings that required us to be on-site and we could not travel due to government restrictions, we have used virtual walk-throughs, pictures and other electronic means to remain effective. On one project, the construction manager flew a drone through the jobsite and sent us high-definition videos.

Is your firm conducting any travel to visit clients or projects? If so, what types of projects are you working on?

Paul R. Kondrat: Initially, when local government travel restrictions were mandated, we adopted a policy that we would attend in-person site visits that were within driving distance of our offices. We have offices across the United States, so we were able to accommodate this fairly well. We did not get on airplanes for a while but have since resumed travel by air.

Many of our projects continued construction, especially in health care, where our involvement was considered essential. When we made site visits, we followed government and organizational protocols, which included the use of proper personal protective equipment.

What supply chain issues are you experiencing? Is your firm dealing with any challenges with materials or products from manufacturers or suppliers?

Paul R. Kondrat: We have had isolated impacts on construction sites due to material and product availability. We had some tile that was imported from Italy get caught up in customs, we have seen lengthy lead times for air handling equipment from some manufacturers and recently had an issue obtaining specified brick products for a project. In all cases, we have been able to find substitute products and maintain project schedules.

What financial implications do you think COVID-19 will have on the engineering industry in the next three months? Six months? Twelve months?

Paul R. Kondrat: In general, this is hard to predict, the virus will control the outcome. But looking into my crystal ball:

Three months: Q3 of 2020 will be very telling for how the economy will rebound. We will have to react to that change. For us, we are seeing a slowing in our education market, health care is holding steady and the other markets are highly unpredictable at the moment.

Six months: By mid to end of Q4, we should have a better idea if the virus spread will have further economic impact due to resurgence. We will also know who the president will be for the next four years. Those two events will dictate what happens in Q1 of 2021. If we have a resurgence and have to go back into isolation, I fear the economy won’t be able to take it and the industry will have a very tough 2021. For firms that had to rely on government assistance to stay viable, a resurgence will be catastrophic without further stimulus. Firms that maintained good financial health and have adequate cash will likely be able to take advantage and acquire talent that they may not otherwise

Twelve months: I honestly don’t think anyone can answer this with any certainty at this point in time. I do, however, remain optimistic in the human condition. We are social creatures and the pent-up demand to do the things we love will create a surge in the future. Whether that is 12, 18 or 24 months from now, we will have to see.

In down markets, retrofit/renovation and maintenance/repair/operation tend to increase. How is your firm working with clients and building owners to keep this conversation going (and keep the money coming in)?

Paul R. Kondrat: While in past economic downturns investment in repairing and renewing assets has gone up, this economic downturn is far deeper and widespread than any of us have seen in our careers. I do feel, however, that because the economy was relatively healthy going into the pandemic and it appears we are starting to reopen the economy, it should rebound. Again, the virus will determine the trajectory.

As far as keeping the revenue flowing, we have a very successful facility conditions assessment service line called facility optimization solutions, which is driven by our own subscription-based software platform that generates a continuous revenue stream. Many of our boots on the ground professionals in that service were sidelined when governmental travel restrictions were in place. They are getting back to work now and things are moving forward.

For large projects, if an organization is healthy enough to do so, continuing with design is a great investment right now. Planning and design fees for larger projects are small in comparison to the overall cost, so investing the design time now may give a business competitive advantage coming out of the downturn. In the meantime, there are air handling unit replacements, central plant upgrades and other similar infrastructure projects that are forging ahead, especially when those projects serve essential functions.

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