Engineering Services
SIC 8711
NAICS 541330
Engineering firms provide professional engineering services on a contract or hourly basis. Such services include system and structure analysis, specification, design, and project management. Many engineering services are integrated with construction activities. For discussion of the construction industry, see also the chapter entitled Construction Materials and Services.
Among the many changes taking place in the engineering services industry — such as consolidation and pricing structure shifts— diversification emerged as one of the most important, particularly due to the economic downturn and construction slump of the early 2000s. The number of design-build firms, those which offered both engineering and construction services, grew throughout the late 1990s and early 2000s as clients, including those in the public sector, became increasingly comfortable with the design-build concept. By 2003, many companies in the industry were looking to diversify not only products and services, but also location, expanding their focus to international markets. Globalization had become almost a prerequisite for participation and success in the industry.
The forecast for design-build firms beyond the mid-2000s was for growing demand from sectors as diverse as transportation networks, water treatment plants, and automotive manufacturing. Ranked for 2003 by Design Build, the top U.S. companies in the industry were Bechtel, Fluor, Jacobs, Foster Wheeler, CB&I, KBR, and Parsons. Engineering News Record 's 2004 list of the top global design firms, ranked by total revenue, put eight U.S. companies in the top ten, and six of those were based in California. The other two countries represented were Canada, in the number two spot with SNC-Lavalin International, and the United Kingdom, in the number seven spot with Atkins. Altogether, the top ten firms collectively posted total 2003 revenue of US$18.5 billion.
The leaders in the construction industry continued to be VINCI and Bouygues of France. Employing engineers in almost every category, the leading engineering firms were involved in major projects around the world. This sector had become truly internationalized.
Engineering encompasses a variety of disciplines concerned with the design of structures, devices, machines, and other elements of modern industrial society. Major sectors of the engineering industry include civil engineering, mechanical engineering, electrical engineering, petroleum engineering, and industrial engineering.
The civil engineering field is primarily concerned with the design and construction of public works such as bridges, dams, and other large facilities, while mechanical engineering tackles the area of machine, system, and tool design, including plumbing and ventilation systems. A somewhat related discipline is industrial engineering, which studies designs, methods, and processes for effective and efficient production. Electrical engineers, on the other hand, study the technology of electricity for the purpose of determining the design and application of electricity in power generation and distribution, machine operation, and communications.
Major associations developed in the nineteenth century to bring together engineers and engineering firms involved in similar areas of work and study. Principal engineering associations in the United States include the American Society of Civil Engineers (ASCE), the American Society of Mechanical Engineers (ASME), and the Institute of Electrical and Electronics Engineers (IEEE).
Quality certification is an issue of growing importance to many establishments involved in providing engineering services. While some engineering standards have long been in place, customers in various markets have increasingly demanded significant assurances that a suppliers' goods will be of a certain quality. As a result, individual companies using engineering services, in addition to professional organizations, have begun to articulate more exacting quality standards and to require that engineers anywhere along the production chain be versed in such standards. Initiatives to meet these demands include quality certification from the International Organization for Standardization (ISO), which confers certification on companies worldwide that meet various requirements for process regularity and product specifications.
The engineering industry's various branches of study developed at different periods in the evolution of the world's industrial landscape. Many forms of engineering trace their roots to the Industrial Revolution that began in Europe in the latter eighteenth century and continued in the United States through the mid-nineteenth century. A flurry of new inventions during that period, such as the steam engine, triggered demand for new manufacturing machinery, transportation equipment, roads, bridges, canals, and sanitation systems. Fulfilling this demand were designs by individuals who became the forebears of mechanical, civil, and industrial engineering. Later, when electric lights and other electrical applications were pioneered in the late nineteenth century, the field of electrical engineering was born.
Civil engineers have long been central figures in the construction of bridges and roads. In the eighteenth and nineteenth centuries the major advances in this field of study originated in Europe, especially in France, which boasted the leading schools of engineering education in the world. As Daniel L. Schodek noted in Landmarks in American Civil Engineering, "French institutions maintained the leadership in formalizing an approach to engineering education based on scientific principles … it was the French system that primarily influenced formal education in civil engineering in America." By the beginning of the twentieth century, a recognizable civil engineering profession was thriving in the United States and elsewhere. The arrival of the automobile accelerated the construction of highways, tunnels, and overpasses, all of which required the talents of civil engineers.
Electrical engineering advanced through the invention of the vacuum tube by Lee De Forest in 1907. This vacuum tube (called a triode) spurred the creation of various devices that could transmit an electrical signal. As telephone and radio developed, electrical engineering grew as well. During the twentieth century, government and wartime spending subsidized many engineering achievements. Advances in computers, space technology, and the development of the integrated circuit all contributed to the explosive growth in the electrical engineering industry in the latter part of the 1900s.
The entire international engineering industry in the late 1990s was buoyed by a sense of optimism brought about by robust market conditions. Engineering firms in the United States led the industry in the late 1990s largely because of their continued success in securing international business through local subsidiaries. In 1997 for instance, U.S. design firms garnered more than US$25.4 billion of the US$32.7 billion in total world billings. This strong market, however, did foster some problems, such as the growing shortage of skilled professionals, a trend which steadily boosted compensation and benefits.
Other firms around the world also took note of international opportunities in the late 1990s. Europe established itself as the top regional design market in 1997, posting US$2.4 billion in billings. In second place, Asia reported US$1.7 billion in billings, while the Middle East (US$610.9 million), Latin America (US$576.5 million), Canada (US$419.4 million), North/Central Africa (US$334.8 million), the Caribbean Islands (US$114.8 million), and Antarctic/Arctic (US$21 million) followed. The billing figure for Asia showed a dramatic jump in 1997, but the Asian currency crisis that began in Thailand and reverberated throughout the region signaled that 1998 wouldn't be nearly as lucrative. In the meantime, once Asia's design market cooled off, other regions, particularly Latin America and the Middle East, picked up the slack.
The engineering industry of the late 1990s underwent fundamental change. Consolidation increased the level of globalization, which created large enterprises with increasingly international operations, as well as some niche players. The industry also began moving away from cost-reimbursable contracts to fixed price, lump sum, and turnkey design-build contracts. Such arrangements benefited firms that contracted engineering services by providing, in effect, a price cap on how much a project cost. These arrangements also gave the engineering firm greater autonomy and incentive to complete projects in timely and affordable ways. Another major industry shift occurred because clients of design firms were increasingly operating on a global scale; as a result, they began wanting design firms to deliver more than mere designs, Engineering News Record noted. This trend prompted many firms that were purely engineering in scope to add construction capabilities to their offerings.
A particularly bright spot for the engineering services...
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