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 25 workers and generates around 6.6 million in annual revenue.
- The engineering services industry consists of about 46,000 companies that employ over 1 million workers and generate $303 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
Recent Developments
Aug 26, 2024 - FAA Announces Funding for Airport Upgrades
- In August, the Federal Aviation Administration (FAA) announced $636.1 million in grant funding for improvements to US runways, taxiways, and other airport infrastructure, According to Engineering News-Record. The funding, which was made available through the FAA’s Airport Improvement Program, will provide 320 grants to airports in 46 states and American Samoa. Some of the largest grants are for airport improvements in New York, Michigan, Pennsylvania, Hawaii, Georgia, Illinois, and Texas.
- The Associated Builders and Contractors (ABC) Construction Backlog Indicator was unchanged at 8.4 months in July 2024 from June and was down 0.9 months compared to a year earlier. The commercial and institutional backlog in July was 8.6 months, up 0.1 months over June, but was 1.2 months below July 2023. The heavy industrial backlog grew by 1.5 months in July to 11.1 months and was 5.9 months higher than a year earlier. The infrastructure backlog fell 0.7 months in July to 7.5 months and was also down 0.7 months compared to July 2023. The ABC’s Construction Confidence Index for profit margins dropped to 50.6 in July from 53.6 in June. A Confidence Index sales reading of 50 or more indicates most contractors are optimistic about sales. ABC Chief Economist Anirban Basu said, “Contractor confidence regarding profit margins now stands at the lowest level since November 2022, which comes as little surprise. There are now strong indications that elevated interest rates have finally taken their toll on a number of privately financed construction segments as well as the broader economy.”
- Demand for building design services improved in July over the prior month, but architectural billings remain soft, according to an August report by the American Institute of Architects (AIA). The AIA’s Architecture Billing Index (ABI) rose to 48.2 in July from June’s reading of 46.4. Any reading of 50 or more indicates growth in architectural billings. The score for new project inquiries rose to 52.4 in July compared to 51.6 in June, and the index for the value of new design contracts increased to 46.5 from 45.6. The AIA’s Chief Economist, Kermit Baker said, "Architecture firms continue to face a billings slowdown. However, the emerging prospects of lower interest rates coupled with a modest uptick in project inquiries suggest that some dormant projects may be revived in the coming months.”
- Total nonresidential building construction spending is projected to rise 6% in 2024 over 2023, according to FMI’s third-quarter 2024 North American Engineering and Construction Outlook. With growth of 28%, public safety will lead 2024 nonresidential building construction, followed by manufacturing (21%), educational (7%), and religious (7%). Some other segments of the nonresidential building sector face headwinds. Commercial construction spending is expected to decline 7% in 2024 amid weaker demand for warehousing space, high interest rates, and tighter lending standards. Lodging construction spending is forecast to drop 6% as consumer budgets tighten and hotel occupancies wane, especially near the market's lower tier. Stubbornly high office vacancies will continue to weigh on new office construction, which is projected to see flat spending in 2024. Despite high interest rates, single-family construction spending is forecast to rise 7% in 2024 as homebuilders reduce home sizes to improve affordability. Spending for multifamily is expected to decline by 1% in 2024 after projects in development peaked at 1 million units in mid-2023. Home improvement project spending will rise 4% in 2024 as homeowners primarily focus on maintenance and repairs amid high materials costs and interest rates.
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