Power-Plant Projects Buffer Engineering Firms From Downturn; No. 1 Fluor Up 10%
A surge in power-plant projects brought on by California’s energy crisis buffered local engineering firms from slowdowns in other sectors, according to the Business Journal’s list of the largest local engineering operations.
In the 12 months ended June 30, the 30 biggest engineering firms here saw billings generated through OC offices grow by 11% to $4.4 billion from the previous period.
Aliso Viejo-based engineering titan Fluor Corp., which dominates the list, increased its billings 10% to $3.8 billion (see related story on page 48). The remaining 29 firms grew billings by 15% to $690 million.
The list ranks engineering firms based in OC or with operations here by local billings. Two firms’ billing figures are Business Journal estimates.
In addition to the rise in billings, the firms grew their collective backlog for future work by 10% to $10.2 billion from the year before. Fluor accounted for most of this gain, with pickups in the energy sector. Setting aside Fluor, the remaining firms that disclosed backlog numbers saw a 5% increase to $245.2 million compared to the previous period.
For Fluor, this year’s backlog figure contrasted sharply against last year when the engineering titan had reported a 30% drop in contract backlog,a reflection of the company picking and choosing fewer contracts and focusing more of its efforts on higher-yield contracts.
“The company at that time decided on a policy that said, ‘don’t chase work at any price,’ ” said Richard Rossi, a New York investment analyst with ABN AMRO.
Most of the increase in backlog is due to power plant contracts the company picked up during the 12-month period. Duke/Fluor Daniel,a 50-50 joint venture between Fluor and Charlotte, N.C.-based Duke Energy Corp.,won about 10,000 megawatts worth of power plant projects in the U.S. and in Mexico in that time.
Analysts estimate powerplant contracts alone added just more than $1 billion to Fluor’s backlog, helping offset slowdowns in the mining, telecom and manufacturing sectors, where Fluor also does work.
“The power segment of their business is the most important part of this,” Rossi said. “Fluor and the whole industry was beginning to see some general improvement in their client base demand,there was an upward tilt to things since the Asian crash in the late 1990s. But engineering companies are tied closely to the energy sector, and the energy sector in general also has picked up.”
Other companies showing big backlog increases included the Santa Ana office of No. 4 San Francisco-based URS Corp., which saw backlog jump 43% to $40.0 million from $28.0 million last year.
The Orange office of No. 9 Omaha, Neb.-based HDR Engineering Inc., paced by some rail project wins, recorded the biggest percentage increase in backlog on this year’s list,a whopping 143% increase to $11.0 million.
The biggest percentage increase in billings on the list also was reported by HDR, which has an office in Orange and saw its billings increase 149% to $23.9 million.
“The business climate here continues to be strong and we’ve managed to get some large capital projects for public sector clients,” said HDR area vice president James Owens. “And that has resulted in a significant increase in our fees.”
These clients include the California High Speed Rail Commission, which for HDR,a start-to-finish design-and-build firm,includes project work on inter-city commuter Metrolink and Amtrak projects in Orange and Los Angeles counties as well as the Inland Empire.
Other high-growth companies included No. 16 Littleton, Colo.-based Washington Infrastructure Services Inc., which has an Irvine office, up 83% to $12.6 million from $6.9 million last year; and No. 10 Pasadena-based Tetra Tech Inc., which also operates out of Irvine, up 67% to $20.0 million in billings.
Firms posting declines in billings included: No. 26 Cleveland Ohio-based Austin Co., with its Irvine office’s billings down 35% to $6.5 million; No. 28 San Diego-based Ninyo & Moore, also with an Irvine office, down 28% to $5.7 million; and No. 25 Dallas-based Huitt-Zollars Inc., with a Tustin office, down 20% to $8.2 million.
Austin Co. attributed its 35% decline to the economic slowdown hitting its manufacturing sector clients, which make up a big part of its business.
“There has been a tremendous drop in the volume of work that we can chase and get,” said Austin senior vice president and general manager Raj Gopalan. “Come Jan. 1, things took a nosedive for us,we even had contracts that we already had won cancel on us.”
Tetra Tech also showed a big backlog gain. Douglas Reinhard, the Irvine-based operations manager for Tetra Tech, attributed its bigger backlog to the full integration of engineering companies Tetra Tech has acquired over the past couple of years. These include: Pasadena-based ASL; hydrological engineering firm Simons Li & Assoc., formerly based in Costa Mesa; Irvine site development engineers CDC; and water and transport engineers IWA, formerly based in Orange.
“This past fiscal year was our first-ever full fiscal year with all those companies fully integrated,” Reinhard said. “We’ve been doing a lot more work because we now have a lot more employees than we did before.”
The number of engineers employed by the largest 30 OC firms grew 5% to 1,513 from last year’s engineer headcount of 1,438. The gain came without any help from the top company on this year’s list, Fluor, which has 400 OC-based engineers, the same as last year.
The firms on this year’s list collectively employed 6,211 in OC,a 2% increase from the year-ago figure. Fluor reported no change in local employment. The remaining 29 firms increased employment 4% to 3,711.
The top three firms each held the same position as last year, but there was movement among firms in the rest of the top 10.
No. 5 Costa Mesa-based Keith Companies Inc. gained ground, moving up from No. 6 last year. Keith Companys grew 22% to $49.2 million in billings against the previous year’s figure of $40.4 million.
The Keith Companies’ rise pushed RBF Consulting down one slot to No. 6. RBF grew billings 4% to $45.0 million from $43.1 million last year.
The big gainer in the top 10 was HDR, which rose 10 spots on the basis of its big gain in billings.
Newcomers to the list include: Fountain Valley-based SPEC Services Inc., appearing at No. 14 with $13.5 million in billings; and San Francisco-based Kennedy/Jenks Consultants, which also operates out of Irvine, appearing No. 26 with $6.5 million in billings. n
