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VOL. 125 | NO. 159 | Tuesday, August 17, 2010

Few Engineering Firms Credit Stimulus For Survival

NICKY ROBERTSHAW HITCHING | Special to The Daily News

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The federal stimulus program has been very, very good to the Pickering Firm Inc., a Memphis-based engineering company.

Work funded directly or indirectly by the program, known officially as the American Recovery and Reinvestment Act of 2009, generated 15-20 percent of the firm’s revenues during the past year.

“The whole idea behind the program was to find projects that were shovel ready,” said Marc Rubenstein, principal of facility design services for Pickering.

He noted that his firm was well positioned for projects with ARRA funding, since they were being awarded through the previously established procurement procedures that government agencies use.

A key component of the stimulus, announced by President Barack Obama in February 2009, is $150 billion being invested in infrastructure. That means sewer, road and other public works projects that require the skills of engineers, although the funds will mostly run out by the end of the year.

While other beneficiaries of the stimulus include Allen & Hoshall and Fisher & Arnold Inc., those firms have tended to be the exception rather than the rule.

“For the most part, the stimulus program hasn’t helped engineers,” said Candy Toler, executive director of the American Council of Engineering Companies of Tennessee.

Pickering, though, has worked on a roadway in Lincoln County, Miss.; the Hog Creek sewer interceptor in Flowood, Miss.; upgrades for Memphis Housing Authority as well as the $10 million U.S. Corps of Engineer’s Bayou Meto Basin project in Arkansas. All of these are funded directly or indirectly by stimulus money.

Local engineering firms, which have struggled during the recession, attributed their survival to other factors, namely, their diversified clients and capabilities, a focus on strong areas such as transportation and energy, and internal cost-cutting measures.

For example, Allan & Hoshall’s work is spread out among education, transportation, health care and commercial/industrial building clients, said the company’s chief operating officer Danny McKee.

“I think that diversity is what’s kept us whole,” McKee said, who also noted that while the firm’s revenues haven’t grown during the recession, they haven’t declined either.

Some $4 million in revenues came from ARRA funding for work on the portion of Tenn. Highway 385 near the border of Shelby and Fayette counties, he pointed out.

About 5 percent of Fisher & Arnold’s revenues during the last year came from stimulus funding, said president Jeff Arnold, through projects that include the Lakeland bicycle and pedestrian trail along Canada Road, improvements to Houston Levee Road for the town of Collierville and three resurfacing projects in Millington.

“We have weathered the recession, we continue to weather the recession, but we’ve also given up the bottom line,” Arnold said. The firm decided early on not to lay off employees, which has been tough given the declines in revenues for the last two to three years, he added.

Pickering attributed its relatively good fortunes during the recession to several factors, including an ability to offer civil, architectural, structural, electrical and other types of engineering services.

“It’s a positive for us if we can offer all those services and keep the revenues in-house,” Rubenstein said.

Pickering took a number of actions once its saw the recession coming, he added. The firm shifted resources toward public projects and cranked up their business development efforts and contact with existing clients.

Pickering was lucky in that several large clients are in the food business, including rice producer Riviana Foods and grocery chain Kroger Co. These businesses have flourished, as more consumers eat at home during recessionary times instead of going out to restaurants.

“Since we do not do as much work with developers, with the stimulus money projects, with public money and with key growth of private clients with private funding, that’s how we survived,” Rubenstein said.

Even though the Memphis-based firm Kimley-Horn & Associates does about 90 percent of its business in public works, it is not working on any projects directly funded by stimulus, said James Collins, the firm’s office manager.

That being said, the firm has done planning work for cities who, in turn, may be getting stimulus money to reimburse those costs, he said.

The firm, which operates 60 offices nationwide, coped with the recession by shifting staff from private to public projects as private development dried out, then laying off 10-15 percent of its work force in spring 2009.

So what’s the forecast for the industry, as the stimulus program ends?

Observers point to several contradictory factors, including reduced public works budgets at the same time that business overall shows signs of picking up. And because stimulus-funded projects are at various points in the procurement pipeline, a sudden dropoff in that business is not expected.

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