By Shelby O. Mitchell and Victoria K. Sicaras

In the midst of a weak public construction market and uncertainty about federal infrastructure spending, public agencies are still retaining architecture, engineering, and construction (AEC) firms at a steady rate. In 2011, many of these partnerships may have been held together by our readers' sheer determination to get the job done — resorting to more outsourcing and unconventional project delivery methods.

In PUBLIC WORKS' exclusive annual reader survey, 86% of respondents told us their departments worked with AEC firms in 2011 — only one percent less than in 2010. Of these, 61% completed 10 or fewer projects with the help of firms, down from 64% the previous year. These changes make sense, in light of the 2011 public construction spending trend, which was down 2.6% — about $1.3 billion — from 2010, according to the U.S. Department of Commerce.

Nearly 60% of public works departments represented in our survey spent less than $500,000 on AEC services in 2011, while only a quarter spent more than $1 million. A third are optimistic about their budgets and expect to spend more in the coming year; only 20% say they expect to spend less. The rest anticipate their spending will stay the same (35%), or aren't sure what the future holds (19%).

Layoffs and outsourcing continue

Readers are retaining firms to cover specific gaps — “[We need help securing] environmental permits for repair of existing systems. Too many permits! Too many agencies!” — as well as broad needs — “We don't have the ability to do any AEC work in-house; it's all done by outside firms.”

The outsourcing trend seems to be growing as public-sector downsizing creates leaner staffs across the country. President Obama made headlines this summer with his remark that “the private sector is doing fine,” in terms of employment. Many news outlets failed to emphasize the rest of his message, which was essentially, “compared to the public sector.” While private employment has begun to pick up — 1.6 million jobs were added in 2011 — public-sector losses continue.

In 2011, around 66,000 state government jobs and 90,000 local government jobs were cut, excluding education (a drop of about 2.4% and 1.2% in employment, respectively). According to one outplacement firm, Challenger, Gray & Christmas , more jobs were lost in the government sector than any other industry in 2011 — accounting for nearly a third of the year's layoffs. And those are just a fraction of the 600,000 jobs the public sector has lost since the beginning of 2009.

This prolonged trend may explain the frustrations some of you feel about having to rely on outside resources. One respondent vents, “[I'm] tired of training idiots who make more than public-sector engineers, have contracts with guaranteed 5% salary increases, get paid higher mileage rates, and sit in offices with phones and computers supplied by the state. As long as consulting firms keep contributing to politicians, they will continue to get more work at a greater and greater cost to taxpayers.”

Forming partnerships

In a recent report, Infrastructure 2012: Spotlight on Leadership, the Urban Land Institute and Ernst & Young LLP discuss creative ways in which state, county, and local agencies are planning to repair and expand infrastructure. According to the authors, public-private partnerships have become an important tool that “can help realize development and operating efficiencies, achieve proper risk transfers that protect taxpayers, and enable more cost-effective financing for new projects.”

The report estimates that half of U.S. states have used public-private partnerships over the past decade to complete nearly 100 transportation projects — accounting for about $54 billion in construction spending. However, 65% of these projects took place in only eight states, and 26 states have yet to attempt such partnerships.

In Omaha, Neb., several city departments — including Planning, the Mayor's Office, Parks, Recreation and Public Property — have used public-private partnerships to complete projects. “Our department has done projects with quasi-public entities, such as joint contracting with our Public Utility Board,” says Heather Tippey Pierce, general services manager for the Omaha Public Works Department, “but we have pretty strict rules requiring the design-bid-build model with city funding.”

Exploring alternatives

Pierce is among a quarter of PUBLIC WORKS readers who report they haven't been able to use alternative project delivery methods. A 65% majority say they have tried at least one type (see chart).

Comments are generally more positive than negative, especially concerning design-build, construction manager/general contractor, and construction manager-at-risk. “Design-build works well with the right team,” says one reader. “We prefer construction manager-at-risk to the traditional construction manager as agent.”

But not everyone's experience has been positive. “[Design-build] has not been as productive as the design-bid process for us,” says one reader. Another respondent says the construction manager/general contractor partnership was “costly, difficult, and did not yield the quality we are used to. We probably won't pursue this again.”

In the category of “lessons learned,” Steve Gurzler, PE, water and sewer superintendent and city engineer for Glens Falls, N.Y., reflects, “Our experience with performance contracting could have gone better if we were able to approach the project more slowly, and if we had hired another engineering firm as an owner's agent to assist in implementing the process.”

Others indicate their biggest hurdles with nontraditional partnerships are in-house. “Our biggest challenge is with getting alternatives through purchasing and legal,” shares one respondent. Another says, “Job-order contracting arrangements have been very successful ... but our budget people don't like them.”

Whether or not they are popular with procurement departments, alternative project delivery methods seem to be here to stay, as cities, counties, and states negotiate the uncharted waters of the new U.S. economy — and enlist help from the private sector.

Click here for the Top AEC Firms


2011 consolidations rose as firms anticipated infrastructure projects and public-private partnerships.

No matter the economic situation, merger and acquisition deals seem to be the norm in the AEC industry. In soft economies and challenging market environments smaller firms struggling to hang onto their profits are more willing to sell or merge to avoid a shutdown of operations. In growing economies, buyers and investors confident in their respective markets make moves to diversify and expand service areas.

According to AEC management solutions firm Morrissey Goodale, 2011 saw a 13% increase over 2010 in both U.S. and global AEC mergers and acquisitions — a return to levels not seen since 2007. One reason for the surge was investor/buyer confidence in a stabilizing post-recession industry. “Specifically, they anticipated greater clarity around connecting massive domestic infrastructure development and rehabilitation needs with a public-private financing model,” says Mike Cauley, principal consultant with the firm.

However, with both confidence and first-quarter consolidation activity down this year, it remains to be seen whether 2012 keeps pace with last year's rate of increase.

What does it all mean for public works departments? We asked about your experiences working with AEC firms going through mergers and acquisitions.

Almost half of survey respondents say they had worked with an AEC firm while it had gone through a merger or acquisition; 2% are working with a firm undergoing the process now. The good news: Most departments report their projects were not affected by firms' restructuring activities.


They were able to do a complete job instead of us having to utilize several engineering firms that had the capabilities we were looking for.

Uncertainty in the company by staff led to delays in getting answers and direction any time services were required outside the general consultant or general contractor.


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They had growing pains figuring out their internal communications, but the project construction didn't miss a beat.

Depends on the specifics of the deal.

Some firms handle it better than others. If a firm was already having problems, then [the merger or acquisition made it] worse.

Although it did not affect our project, it eventually brought the AEC company down after four years.

Most popular AEC services

Help wanted (water expertise preferred)

The top five services most popular services provided by AEC firms hasn't changed in several years (see 'Technology trend' graphic), and likewise the remaining top 10 answers are no surprise: watersheds/water resources (23%), water treatment (21%), traffic control (21%), maintenance of public buildings (18%), asset management (15%). Readers also added a few of their own categories: transit engineering, sign inventory, environmental permits, and buildings.

Last year, we began asking if departments were using AEC firms for certain services more than they had in the past. While a third of respondents aren't relying more on outside expertise, water-related services topped the list for those who said they were. This year, wastewater/stormwater treatment, watersheds/water resources, water treatment, and pipeline construction/rehabilitation accounted for 57% of responses (56% in 2011).