Engineering Services
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Industry Overview
The US engineering services industry includes over 45,000 companies with combined annual revenue of about $135 billion. Large companies include Jacobs Engineering Group and URS Corporation, and the engineering divisions of large construction companies like Fluor and Bechtel. Half the firms in the industry are small with fewer than five employees; less than 5 percent of engineering services firms have more than one office or location. The industry is highly fragmented: the 50 largest firms account for only 35 percent of industry revenue. About 100 firms have more than $100 million of annual revenue.
Competitive Landscape
Demand is driven largely by the construction needs of companies and governments and the desire of industrial customers to improve the efficiency of operations. Profitability depends on the ability to accurately predict costs for a project. Small firms, which can effectively compete with larger ones by having expertise in a particular field, are often hired as consultants on larger projects if they have special expertise. Large firms are advantaged in designing and managing large projects. Average revenue per employee is about $200,000 for large firms, $115,000 for small ones.
Products, Operations & Technology
Major engineering services include product and industrial process design, construction design and management, systems engineering, and maintenance and operations. Engineering companies may be involved in projects that require skills in analysis, design, project management, operations, or all four. Most firms specialize in a particular type of engineering. Most engineering work is per project, such as designing and constructing a highway or formulating an environmental plan for a wetlands area.
Engineering firms basically sell the knowledge of their employees. The work is labor-intensive. Attracting and retaining qualified engineers is an ongoing concern. Due to the complexity of many jobs, engineering firms often hire subcontractors and consultants to perform specialized work. Material inputs are provided by subcontractors.
Computer systems are used extensively for analysis, design, budgeting, project planning and control, accounting, and communications. Nearly all engineering companies have a centralized IT staff. Wide-area networks with engineering software that enable firms to balance workload among locations and ultimately improve productivity, and CAD, which allows instantaneous information sharing between engineers, architects, and planners, have become staples.