Engineering Inc. - March/April 2010 - 10

Survival Skills Hot Markets: 2010 may be a good time to shore up business development activities in energy (especially power transmission and renewable energy), water and wastewater treatment, highspeed rail, oil and gas and any state or local project funded by fees, not taxes. Plan Ahead: Develop a contingency plan now for the coming year and include strategies for addressing a variety of downturn scenarios from bad to worse. Cut Expenses Prudently, Part 1: Dialing back on unnecessary travel is a no-brainer. However, travel to maintain close ties with top clients should never be considered “unnecessary” during a time of heightened competition. But Richards and other industry leaders are well aware of the realities and know any good fortune enjoyed in 2009 isn’t likely to carry through 2010, where the hazards of a gasping economy await. Across the nation, project backlogs have run dry and state budgets are awash in red ink. Compounding matters, federal stimulus funds have provided little in the way of sustained relief. According to a survey conducted late last year by the Washington, D.C.-based Transportation Construction Coalition (TCC), nearly two-thirds of 571 nationwide transportation contractors reported that they had to lay off permanent employees during the year because of adverse business conditions. The U.S. Bureau of Labor Statistics reports that the A/E industry lost roughly Figure 1 Money to Spend $8.63B USDOT money spent $34.0B USDOT money to be spent � Cut Expenses Prudently, Part 2: Reduced training budgets might unintentionally hint to staff members that a firm no longer plans to invest in their future. Such doubts make star performers vulnerable to talent poachers. Optimize Staffing: Redistribute personnel among divisions to account for variations in demand. This will help avoid layoffs while ensuring that customers get the best talent available for their projects. Don’t Forget Inflation: Rising costs might seem like a distant threat, but mounting federal deficits and cheap money could change that quickly. Protect profits by including escalation clauses in long-term contracts. 10 The u.S. Department of Transportation has thus far doled out just south of $9 billion for stimulus projects, with another $34 billion still in the pipeline. Source: www.recovery.gov � than 20 percent in 2009 compared to 2008. (See Figure 2.) Despite further projected U.S. construction spending declines in 2010, many industry observers carry hope that the dismal economic pattern might yet improve as the midterm elections near. Bill Siegel, CEO of San Diego-based Kleinfelder, says funds for new projects could materialize by summer, as candidates aim to create some political goodwill among voters along the campaign trail. Still, he says, the uptick probably won’t be enough to overcome widening deficits in state and local budgets. “States are going to have to cut spending, and infrastructure will be one of the areas that get cut first,” he says. Even with recovery, few expect a complete return to the “boom” years that led up to the recession when engineering firms had more than enough work to go around. “Let’s be honest, it was a pretty easy ride for the industry,” says Rod Hoffman, CEO of S&H Consulting, a business management group based in Cold Spring, Ky. So easy, he says, that as a result, “some firms lost their competitive edge.” Getting that “edge” back today could be the difference between survival and failure. “If you are waiting for things to come back to some dependable workload on a day-in-and-day-out basis, you are going to be waiting a long time,” says Kleinfelder’s Siegel. Customer Is King 95,000 jobs between December 2008 and December 2009. Compounding matters, the American Recovery and Reinvestment Act still has yet to provide the shot of adrenaline that many—especially the engineering industry—had hoped for. (See Figure 1.) Only a relatively small fraction of funds was earmarked for infrastructure projects, and much of that remains in the bureaucratic pipeline. According to the U.S. Department of Commerce, spending for private commercial construction projects plunged more The day’s economic realities have forced many firms to rethink their business development plans. One strategy: Keep your prospects close and your existing customers closer. “Engineering firms will need strong client relationships to weather the competition when five new firms show up at a single customer,” says Gerry Salontai, principal at Salontai Consulting Group in Rancho Santa Fe, Calif. Strengthening ties with top customers means staying in touch, even when clients don’t have open RFPs. “We are much more focused on understanding the whole market, where our clients fit in and what pressures they are feeling,” Siegel says. “When things turn around, those customers are going to remember ENGINEERING INC. MaRCh / apRIl 2010

http://www.recovery.gov

Engineering Inc. - March/April 2010

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