Friday, January 8, 2010

Brace yourself for a bumpy ride

Bill Siegel took over as president and CEO at Kleinfelder (San Diego, CA), a 2,000-person construction management, engineering and environmental firm on April 1, the day when the lead headline in The Wall Street Journal was "World economies plummet." At ZweigWhite's 2009 Mergers & Acquisitions Summit, he told attendees he expected the first six months of 2010 were "going to be ugly" for the AEC industry. Here, he expands on that notion, giving his reasons and a few tips on how to survive the first half of the year:

"For the last year I have been telling people within Kleinfelder that 2010 was going to be harder for our industry than 2009. I had several reason for this opinion. First, many of our markets, such as commercial development, were really hurting and I did not see a recovery any time soon. Second, I doubted that the stimulus package was going to result in real money being spent on design and construction of meaningful projects any time soon. Besides the fact that infrastructure was only one-seventh of the total package, the reality was that it is not easy to quickly get projects funded and moving.

"Finally, although the stimulus package might not result in projects in the short term, the direct aid to states portion was propping up state and local spending. I felt that eventually the full effect of the reduction in tax receipts at the state and local level would kick in, and deep budget cuts would follow.

"I have to say that now, one year later, I have not seen any evidence to change my mind from the original conclusion. I see 2010 as a tough, tough year for our industry. There are only a few states that are not facing budget challenges, and that is sure to be mirrored at the local level. We are seeing many governmental agencies push off or canceling needed infrastructure and other projects.

"It is not all bad news and there are still opportunities for growth. I am a believer that, regardless of the party in power, there is a push for expenditures surrounding election cycles. I see a real push this late spring into summer to get the unspent stimulus money working, and so some projects may finally get going. Further, there may be some additional stimulus, and this time there will be a focus on infrastructure. Entities supported by specific and consistent revenue streams are still moving forward, and we see some spending in 'long-cycle' industries and market sectors.

"So, buckle up for a tough year, but smart firms can still find work and prosper."

What do you think? How does 2010 look for your firm? What will you do differently than you did in 2009?

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