Engineering Services

Industry Profile Report

Dive Deep into the industry with a 25+ page industry report (pdf format) including the following chapters

Industry Overview Current Conditions, Industry Structure, How Firms Operate, Industry Trends, Credit Underwriting & Risks, and Industry Forecast.

Call Preparation Call Prep Questions, Industry Terms, and Weblinks.

Financial Insights Working Capital, Capital Financing, Business Valuation, and Financial Benchmarks.

Industry Profile Excerpts

Industry Overview

The 46,000 engineering services firms in the US provide evaluation, investigation, planning, design, and development services related to utilities, structures, buildings, machines, equipment, processes, or systems. Specialty areas include civil, mechanical, industrial, electrical, electronics, computer hardware, aerospace, environmental, chemical, health and safety, materials, petroleum, nuclear, and biomedical engineering. Firms work on specific projects for clients and must be adept at project planning and management.

Dependence on Highly Skilled Personnel

Engineering service firms rely on a highly-educated, professional workforce.

Liability

Work site hazards and the complexity and scale of engineering projects expose engineering services firms to liability.

Industry size & Structure

A typical engineering services firm operates out of a single location, employs 22 workers and generates just over $5 million in annual revenue.

    • The engineering services industry consists of about 46,000 companies that employ over 1 million workers and generate $241 billion annually.
    • Customer industries include general building, transportation, petroleum, power, hazardous waste, water, sewer/waste, industrial, and manufacturing.
    • The engineering services industry is fragmented: The 50 largest firms account for only about 35% of industry revenue.
    • Large companies include Fluor, Bechtel, and AECOM.
                                  Industry Forecast
                                  Engineering Services Industry Growth
                                  Source: Vertical IQ and Inforum

                                  Recent Developments

                                  Nov 22, 2022 - Civil Contractor Optimism Softens
                                  • Business optimism among civil construction contractors and engineers moderated in the third quarter of 2022 compared to Q2, according to The Civil Quarterly released by Dodge Construction Network, Infotech, and Hexagon in October. About 53% of civil contractors surveyed in Q3 said they expect their revenue to increase over the next 12 months, which was down from the 66% who had the same expectation in Q2. In Q2 2022, 51% of civil contractors felt their profits would rise over the next 12 months, but those expecting rising profits fell to 45% in Q3. Among civil contractors who expect revenue and/or sales to drop over the coming year, 60% believe an economic downturn will result in fewer private projects. More than 90% of survey respondents said their projects have been affected by rising construction materials costs.
                                  • Labor shortages in construction and related industries could blunt the impact of the Infrastructure Investment and Jobs Act (IJJA), according to a report released by consulting firm McKinsey in October. McKinsey estimates that by 2028, the contractor and subcontractor jobs shortfall could reach more than 160,000. The construction sector already suffers from a prolonged labor shortage, and other spending packages – including the CHIPS Act and the Inflation Reduction Act – will create even more demand for jobs in construction and related industries. To address the projected shortfall, McKinsey suggests recruiting among veterans and the formerly incarcerated, beginning apprenticeships and vocational training at younger ages, and upskilling workers from other fields.
                                  • Demand for engineering services is expected to slow in the next few years as construction is forecast to downturn slightly. Total construction spending is forecast to decline by 1% in 2023, 3% in 2024, and 1% in 2025 before rising by 2% in 2026, according to FMI. The FMI forecast was revised in the fourth quarter of 2022, assuming a 12- to 18-month recession and factors including shortages of materials and labor, continued global logistics strain, volatile markets (real estate, finance, equity), the strengthened dollar, foreign war and economic turmoil, and rising interest rates, wages, living expenses, and energy costs.
                                  • Engineering firms are working closely with project owners, architects, builders, and materials suppliers to smooth the design-build process and better manage risk across all parties. In October 2022, the American Council of Engineering Companies, in conjunction with the University of Colorado Boulder, published a report that highlights the benefits and challenges of design-build along with key recommendations for effective project delivery. The research and recommendations are expected to help all parties as the federal government looks to accelerate projects under the Bipartisan Infrastructure Law.
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