Super Sized Firms
While half of all Canadian consulting engineering firms have fewer than 100 staff, corporate mergers and acquisitions continue, with the result that many people in the industry are now working for gig...
While half of all Canadian consulting engineering firms have fewer than 100 staff, corporate mergers and acquisitions continue, with the result that many people in the industry are now working for gigantic, international corporations with offices throughout the world.
Canadian Consulting Engineer interviewed executives from four of the largest consulting engineering firms operating in Canada and asked them what recent changes have occurred in their companies in the past two years, and what trends and challenges they predict for the next two years.
Rob Andrews, P.Eng.
Earth Tech Canada, Toronto
Earth Tech Canada resulted from Earth Tech’s acquisition in 1999 of Proctor & Redfern in Ontario and in 2000 of Reid Crowther & Partners in western Canada. With 1,000 employees, it is part of the Earth Tech Inc. global consulting engineering and construction company, which in turn is part of Tyco International. Earth Tech Inc. employs 8,500 people in 130 offices in 17 countries and is headquartered in Long Beach, California. It operates in the water, environmental, transportation and construction sectors.
“In a lot of U.S. and global firms, Canada ends up being more of a branch operation, but Earth Tech Inc. has integrated the Canadian companies and recognized a lot of our strengths. They look to Canadian engineering expertise to help out particularly in the areas of water and wastewater, facility design and building design.
“In the past two years we’ve definitely been able to take a more global approach, particularly in places like Vancouver, where we’re providing engineering support to the Pacific Rim. For instance, we’re commissioning a large wastewater treatment plant in Xi Lang outside Beijing. It’s a $100-million treatment plant that Earth Tech actually owns. Earth Tech was responsible for the financing, design-build and operations. The Vancouver office did all the design engineering.
“The other change is a focus on larger and more complex projects. Being part of Earth Tech Inc. in an environment of 8,500 employees backed by Tyco with annual revenues of over $40 billion has allowed us to become very competitive in large projects. For example, we did virtually no airport work three years ago, but since we became Earth Tech we won the project to design the people mover at Toronto International Pearson Airport, and recently we won two projects for the Winnipeg Airport Authority.
“In Canada we restructured this year. We are organized as geographic profit and loss centres. Now we have brought in the other side of the matrix, what we’re calling the technical practices groups: water and wastewater, transportation, environment, facilities. We’ve reorganized these groups to overlay on top of the geographic structure and we’ve hired national directors: Mike Adkins in Vancouver to lead the Water group, Bob Hindle of Toronto for Facilities, and David Wilson of Toronto to head the Environmental group. We’re still hiring for the Transportation group.
“Our financial performance is solid and improving. After some challenges, Tyco’s shares have gone from $7 to $30 in two years — a huge success story in itself.
“Are we optimistic? Absolutely. Aging infrastructure has to be replaced, and as air and water regulations get stricter, we need additional infrastructure. The other factor is that the whole water and wastewater business has shifted to user-pay, which means improvements are being 100% financed from a long-term revenue stream. The industrial sector is another of our growth areas. It is solid in Canada and is coming back in the U.S.”
Rick Firlotte, P.Eng.
Golder Associates Corporation Montreal
Golder Associates Corporation is a global group of companies founded in Ontario in 1960, specializing in ground engineering and environmental services. It employs 1,600 people in Canada and 3,700 people worldwide, located in 23 countries spread between Europe, Asia-Pacific, South America and North America. The corporation is employee-owned, and no one shareholder has more than 1% of the holdings. At age 65, shareholders are required to sell their shares.
“The big changes over the last two years have been growth: we have grown by about 800 people across the world, and our net revenues have grown by 50%. In Canada, we have 400 new employees. Europe, South America and Asia-Pacific have also been very strong. Part of our business plan is to expand geographically into new market areas — Africa, for example.
“Oil and gas has become a very important sector. It’s 15% of our business now, whereas it wasn’t as important to us even five years ago. Mining is about 25% of our business. The commodity prices have really helped. The mining companies are getting more money for nickel and copper and so forth, and so they’re developing projects and need engineering.
“Another change is that we’ve begun to do more specialty contracting. Traditionally our role as environmental consultants involves evaluating contaminated sites. Now we actually help clients to clean up the sites. It’s not a huge part of our business yet — 5-10% of our business volume in Canada.
“What challenges do we see ahead? One of them is related to people. As we grow, especially in the niche markets that we work in, it’s getting more and more difficult to find good qualified engineers and scientists.
“Geopolitical issues in the last few years have increased the safety risks of working internationally. Also, if you’re a North American, then you have a certain idea of how business should operate, with rules and regulations and so forth that aren’t as well established in some other parts of the world. You have to be aware of that.
“What gives us an advantage is our global reach — and our culture, which is helped by the ownership structure. For example, when we work in Italy, it isn’t people from Montreal or Toronto or Vancouver working there, it’s actually an Italian company with a local image and a local presence. But they’re also Golder, held together by a common culture and common values.
“The only significant change in our management structure over the past two years is that John Boyd, P.Eng. stepped down from his position of vice-president of operations of Golder Associates Corporation and is currently a senior principal in the Mississauga office. Dave Horsfield, P.Eng., who is based in Calgary, replaced him.
“Profits have been growing steadily for the past five years and 2004 will be a record year.”
Tony Franceschini, P.Eng.
President and Chief Executive Officer
Stantec is a publicly traded Canadian corporation, based in Edmonton, Alberta, with 4,000 employees in over 50 locations in North America and the Caribbean. Founded in 1954 by Dr. Donald Stanley, the company has been expanding steadily by acquiring over 50 firms since 1976. It is now a multi-disciplinary company providing design and consulting services in engineering, architecture, interior design, planning, surveying and project management. Within Canada, Stantec employs 2,800 people.
“Changes in the last two years at Stantec are part of the 10-year plan we set in 1998 to be one of the top 10 global design firms. It’s not so much a matter of size. Our definition of being among the best is to have the depth of skill to be considered for any project that comes up for design in any of our marketplaces. So if there were to be a new light rail transit system, a wastewater treatment plant, an airport facility somewhere, we would have the capability to do the project.
“Most importantly, if you are one of the top firms you can attract and retain the best staff, because ultimately we’re going to be measured by the quality of our staff. It’s a chicken and egg situation.
“We recognize that to be one of the top firms you need to have a certain depth of
service, but you also need a certain breadth in geographic coverage. Our focus is to grow geographically in the U.S. That’s our primary target. By 2008 our plan is to be $1 billion in fee revenue and about 10,000 employees. It’s an indirect measure, but it isn’t the driver.
“Since our focus is design, and exclusively design, we have become more of a multidisciplinary firm with engineers and architects, interior designers, environmental scientists, biologists and so forth. Engineers now make up about 60% of our professionals. Probably seven years ago engineers would be 90%.
“In the last two years we have gone into two new markets. One is in power and resources, the Alberta oil sands. The other is the bio-pharmaceutical industry. That work is predominantly in the northeastern U.S. and Puerto Rico.
“At one time we had an interest in design build and would take the projects at risk. We’ve decided to focus exclusively on design services now. We’re a publicly traded company, and investors want to know the kind of risk profile that they’re investing in.
“Are we happy with our financial performance? Absolutely. Since 1998 our shares are up about 500%. I’m hoping that’s good enough for the investors.
“The biggest challenge in our industry — and I hope I can say this in a way that doesn’t sound condescending and doesn’t offend anybody — is that there are too many players who don’t understand the business side. When you consider the risk that we take and the types of fees that we charge for that, particularly in comparison to other professions, we are continually underselling our services.”
Vice-President of Communications and Government Relations
AMEC, Oakville, Ontario
AMEC is a U.K.- based international engineering and project management company with 45,000 employees. Its Canadian operations are a result of its acquisition four years ago of the large consulting firm AGRA of Toronto. In Canada, AMEC employs more than 4,000 staff in 77 offices, and has its headquarters in Oakville, Ontario. It operates in the transportation, oil and gas, power, industrial, commercial, earth and environmental sectors.
“The biggest change over the past two years has been our focus on meeting our clients’ needs. We’re looking at different tools, like alliancing, which means we’re entering into “pain-share/gain-share” arrangements with them. Instead of having a relationship where you are on one side of the table and your client is on the other, we come together and operate as one.
“In general the Canadian market for AMEC has been strong and it’s been stable. We’ve seen a growth in the energy and mining business, particularly in the Alberta oil sands. And we’ve seen sustained growth in our environmental business.
“The global mining unit is in Vancouver, and since commodity prices have increased, it has been doing a lot of work in South America and Asia. The diamond industry has been a huge growth area for us. We are in an alliance with De Beers to develop all their diamond mines in Canada, including Snap Lake in the Northwest Territories and the Victor Diamond mine near Attawapiskat in Northern Ontario. The dynamic structures unit based in Vancouver has a worldwide mandate for telescope enclosures and amusement rides. We’ve seen a huge growth there.
“Our Canadian employee numbers have increased to reflect the growth, especially in the resource-based industries in Alberta and B.C. Almost half of our Canadian employees are in those provinces.
“AMEC recently opened an office in Washington D.C. to be our U.S. headquarters. We had operations in the U.S. before, but not a designated headquarters. It is in Washington because AMEC is doing a substantial amount of work with the U.S. federal sector, including work in Iraq on reconstruction and in power and water. There are almost an equivalent number of employees in the U.S. as in Canada — about 3,500 in the U.S.
“I see a couple of challenges ahead. First, how will the rise in the Canadian dollar currency rate affect our clients, particularly the manufacturing and export sectors? Because that in turn will have an impact on us.
“Second, we need to find project managers to run large complicated projects. The talent pool is fairly limited, and in a company of our size, we always need to be looking for more.
“I still think that there’s a lot of opportunity right here in Canada. In B.C. for example, the Olympics will be in 2010, which creates a huge opportunity. We were in a consortium that was one of the final two bidders on the Richmond-Airport-Vancouver Rapid Transit project. So we are prepared to invest in public-private initiatives and put our own equity into the deal.”