Over the last 10 to 15 years, the shape of the consulting engineering sector has altered dramatically. Scarcely a week goes by without an announcement about an acquisition or merger. Numerous small and medium-sized firms have been absorbed by...
Over the last 10 to 15 years, the shape of the consulting engineering sector has altered dramatically. Scarcely a week goes by without an announcement about an acquisition or merger. Numerous small and medium-sized firms have been absorbed by Canadian or international corporations with thousands of employees.
The clearest picture of how intense have been the acquisitions is in Quebec. Johanne Desrochers, president and director-general of l’Association des ingénieurs-conseil du Québec (AICQ), explains that the number of companies the association lists as members has declined from 107 to 48 in the last 10 years. However, the number of people employed by the 48 firms today is 22,000. This figure represents a 400% increase compared to the 5,000 employed a decade ago. Engineering companies are evidently becoming fewer but much larger.
Canadian companies have acted as both purchased and purchasers. The Canadian publicly traded companies Genivar and Stantec have been especially active as purchasers.
What do clients say?
How do those who rely on consulting engineers to design their projects — clients like municipal engineers and planners, architects and design-build companies — feel about having to deal with giant multi-national corporations?
Kathleen Llewellyn-Thomas, P.Eng., is Commissioner of Transportation Services with the Regional Municipality of York, a region northeast of Toronto that includes the town of Newmarket. She believes the advent of larger firms is actually helping her department to deal with the growing size and complexity of their projects. Clients like her see the consolidation among consulting firms as marching in step with general changes going on in the construction industry.
“We know,” says Llewellyn-Thomas, “that the capacity of those smaller firms is now enhanced with their bigger, international partners. And that’s a good thing, because when I look at the next 10 years, I don’t see our demand for consulting engineers becoming any lower. We need the power of the large international firms to come in and help us to continue to deliver a massive program. York Region is spending $110 million a year just on roads.”
Llewellyn-Thomas does say that the advent of mega-corporations sometimes forces the municipality to go farther afield to find a consultant to provide them with independent advice. That is because on large projects that cover a wide geographic area, the local consultants are already providing their services to other parties involved.
Mitch Zamojc, P.Eng., Commissioner of Public Works with Halton Region to the west of Toronto, says he has no concerns about design quality whether the consulting firm is large or small. He has 30 years of experience in public infrastructure and says, “I haven’t seen a small consulting engineering firm provide anything less effective than a large firm.”
However, he too says that because the nature of projects is changing and becoming more complex, the procurement process demands firms with a pool of people and expertise. “In Halton we have some large projects that are complex, such as a $100-million wastewater treatment plant expansion. Could a small firm do it? There is an issue of pure capacity — not necessarily knowledge.”
He does say that you can get more personal attention with a smaller firm. “My experience has shown that with smaller firms you know the top two people and you probably deal with them.” But, he adds, “I’m not entirely sure that has to be the way it is. If the big firms focus on the client and are consistent with the people they use to drive the projects, then their service is as good as that of the smaller companies.”
Smaller firms defended
Others definitely prefer the personal service of small and medium-sized firms. John Haanstra, the vice-president of environment and business development with Maple Reinders Group, a design-build company based in Toronto, says unequivocally that if given the choice, he would choose to work with medium and smaller consulting engineering firms that are independently employee owned. With them, “I think I will get a more efficient design and I get a better design — a more buildable design,” he says.
Haanstra believes that under the influence of the U.S., consulting engineering firms have let the fear of litigation creep in. As a result, over-zealous risk management policies are “really hemming in personal initiative” and causing engineers to be too cautious in their designs. He explains,”We do a lot of civil work in water and wastewater treatment plants. Concrete thicknesses are getting bigger, and “over the last eight or 10 years we have seen reinforcing steel quantities per cubic metre of concrete increase by more than 50%.” Using more material, of course, costs money.
Haanstra also prefers working with smaller consulting engineering companies because he can be more certain of which individuals are going to be assigned to their projects. “We select consultants not necessarily because of the company name, but because of the expertise of the people.”
James Andalis of Sturgess Architects in Calgary agrees that personal relationships are the key. “The measure of success with respect to our consulting engineers is generally dictated by personnel,” he says. “Some have great guys — guys who you can really work well with on a number of different projects…. Some not so much.”
But he doesn’t see the company’s size as important. “Fundamentally, I do have to say that with respect to the question of whether one engineering firm is more successful than another based on size, the answer is No,” says Andalis.
Llewellyn-Thomas is happy working with larger corporations, so long as her department can still work with the individual engineers they know and respect.
“In some ways the consolidation of the smaller consulting firms into larger ones doesn’t make a huge difference because we’re still being offered as project managers the people that we worked with in the smaller firms,” Llewellyn-Thomas says. “They just have a different brand.”
“Frankly,” she continues, “if we get a proposal from a big company like AECOM, I’ll find myself asking, ‘Well, is it TSH-AECOM or UMA-AECOM?’ [Totten Sims Hubicki (TSH) and UMA were predecessor firms]. I want to know because engineering is still an intimate profession and we rely on the personal professional relationships that you build up with certain people.”
Does having fewer firms mean less competition?
Consolidation means fewer firms, and in Quebec, the media has been raising questions lately about why the same few engineering companies are being awarded public infrastructure projects. But Johanne Desrochers points out that there are 10 or so large firms that can handle the large projects. So while the same company names come up for projects, “there is still competition.”
Desrochers recalls that in fact in Quebec it was clients who first drove the consolidation of consulting engineer companies. For example, in the Saguenay region 20 years ago there were about 25 firms in the region who were working for Alcan, until one day Alcan called a meeting and said that on a five year term they would want to work with only five firms. It was during a time when businesses were focusing on “total quality management,” so Alcan explained to the firms what kind of expertise they would need to develop. As a result, Quebec became a global centre of expertise for consulting engineering in that metals sector. Similarly many years ago Hydro-Québec encouraged and nurtured several consulting engineering firms to acquire the expertise and capacity that the utility needed to rely on to do its massive construction projects.
“Consolidation really came from the needs of clients. We needed this critical mass in expertise and capital,” says Desrochers. cce