Long-Term Viability of Midsize Engineering Firms

Abstract

The consulting engineering industry focusing on the built environment is characterized by a large number of small firms distributed across the United States. With over 55,000 firms and over 800,000 employees, the industry accounts for over $116 billion in revenue based on the last official census. However, this overall perspective provides little insight into the complexity of the individual sectors, trends, and long-term outlook that characterizes this diverse industry. Of particular interest in this study is the long-term success and viability of the midsize engineering firm. This study addresses the question of midsize firm viability from a new perspective, an analysis of 35 years of data to study the trends that are affecting the industry as a whole and the midsize firms specifically. In this analysis, it is found that the mega firms have increased their percentage of Top 500 income from 10% in 1986 to 41% in 2011. To facilitate this increase, the mega firms have gained revenue percentage from the large and the midsized firms. The very large firms have remained static over time, garnishing 20% of the revenue in 1981 and 2011. In contrast, the large and midsize firms have lost 12 and 21% of their relative income since their high points in the time series. Although this overall perspective leads to the documented conclusions that midsize firms are demonstrating reduced viability in the economy, a closer look at the midsize firm perspective reveals a different story. Specifically, it is at the individual sector level where the midsize firms demonstrate strength. In these sectors, the general building and transport clusters are led by midsize firms. Although midsize firms in clusters such as power or industrial may be seeing a redistribution of work, the traditional strengths of midsize firms remains strong.