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 45,200 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 just over $6 million in annual revenue.
- The engineering services industry consists of about 45,200 companies that employ over 1 million workers and generate $275 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
Mar 27, 2024 - Wage Growth Outpaces Price Increases
- Producer prices charged by engineering services firms increased slightly in the fourth quarter of 2023 compared to the same time in 2022, according to the US Bureau of Labor Statistics (BLS). BLS data show that wage growth in the industry over the same period has been a bit more robust. Pricing power not keeping pace with wage growth may suggest engineering services firms’ margins are under pressure from rising labor costs. In Q4 2023, industry employment increased slightly compared to a year earlier, according to the BLS.
- The total value of construction starts decreased a seasonally adjusted 8% in February from January, according to Dodge Construction Network. The drop was led by a 16% decline in nonresidential building spending. Within the nonresidential building segment, the value of commercial construction starts was off by 3% in February amid fewer warehouse starts, and institutional projects saw a 19% decline amid weakness in the transportation and education buildings segments. Nonbuilding construction starts were off by 3% in February as a 13% gain in utility and natural gas projects, and a 13% rise in miscellaneous nonbuilding starts were not enough to offset a 17% drop in highway and bridge projects, and an 8% decline in environmental public works starts. Residential construction starts fell 2% in February as single-family saw a 5% gain but multifamily was down by 12%. Dodge Construction Network chief economist Richard Branch said, “Construction activity was hit hard by higher rates and more restrictive credit standards. Starts struggled over the past several months as the lagged effect of higher rates impacted projects moving forward through the planning process. Additionally, the significant deficit of skilled labor led to further delays – especially in the manufacturing sector. While optimism should prevail in the second half of the year as the Federal Reserve begins to cut rates, some sectors like commercial, will make little headway over the remainder of the year.”
- North American construction and engineering spending in 2024 is expected to grow by about 2%, down from 10% growth in 2023, according to FMI’s first-quarter 2024 North American Engineering and Construction Outlook. Slower spending for residential and some other private sector construction segments will slow overall construction and engineering spending. Construction subsectors that are expected to see double-digit growth in 2024 include manufacturing (up 18% in 2024 over 2023), conservation and development (+13%), public safety (+13%), lodging (+12%), transportation (+12%), power (+11%), sewage and wastewater (+11%), and educational (+10%). Other pockets of steady growth include highway and street, water supply, and healthcare. High interest rates continue to put downward pressure on residential and commercial projects. Single-family construction spending is forecast to drop 5% in 2024 after falling 14% in 2023. Spending for multifamily is expected to decline 15% in 2024 after projects in development peaked at 1 million units in mid-2023. The only nonresidential building construction segments projected to post negative growth in 2024 are commercial (down 4% compared to 2023) and office (-2%).
- Global construction volume is forecast to increase by 1.2% in 2024 and then experience an average annual growth of 3% through 2030, according to London-based Global Construction Perspectives. In 2023, infrastructure led global construction growth with a rise of 6.3%, but infrastructure volume is expected to moderate to 3.6% growth in 2024. After China, the US is the second-largest construction market. The US’s share of the global construction market is forecast to rise to 15.1% by 2030 from 14.4% in 2023.
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