First Research US Industry Profile

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Engineering Services
SIC Codes: 7389, 8711
NAICS Codes: 54133, 54134
Last Quarterly Update: 5/27/2019
Companies in this industry apply engineering principles to design and develop structures, systems, and processes. Major companies include AECOM, Bechtel Group, and Jacobs Engineering (all based in the US), along with Abengoa (Spain), Babcock International (UK), SNC-Lavalin Group (Canada), Wood Group (UK), and WorleyParsons (Australia).
Construction spending, particularly in emerging markets, drives global demand for engineering services. Annual worldwide spending for engineering services reached $840 billion in 2016 and will exceed $1 trillion by 2021, according to Technavio.
The US engineering services industry includes about 63,000 establishments (single-location companies and units of multi-location companies) with combined annual revenue of about $230 billion.
Competitive Landscape
Success in the engineering services industry requires efficient bidding and cost controls. Customers are more knowledgeable about costs and are breaking up projects into smaller elements -- potentially reducing efficiencies of scale -- and are expecting contractors to take on the bulk of cost risk, according to PricewaterhouseCoopers. Reduced government and commercial spending on infrastructure and construction projects during times of economic or political discord can diminish bidding opportunities.
Small firms, which can effectively compete with larger ones by having expertise in a particular field or region, are often hired as consultants on larger projects if they have applicable expertise. Large firms are advantaged in designing and managing large projects, but may face challenges on smaller projects in fields where they lack specialization. Consolidation among smaller players is common under flat market conditions. The US industry is fragmented: the 50 largest firms account for about 40% of revenue. Large global players have tended to originate in the US and Europe, but engineering and construction firms in China, India, and Korea are working to establish an international presence.
Competitive Advantages:
Efficient Cost Management -- Under fixed-cost contracts, companies bear the burden of cost overruns if estimates are inaccurate. Engineering firms must direct resources toward improved estimation and procurement processes.
Adopting New Technologies -- Emerging design and data tools are allowing companies to increase process efficiencies. The increased use of mobile technology and cloud computing allow large amounts of data to be shared, stored, and accessed from more places.
Identifying Specialization Opportunities -- The ability to successfully win contracts in highly competitive and lucrative market sectors is essential. Companies must target the most profitable market sectors and avoid less cost-effective areas of operation. Specializing in growing fields such as environmental, telecom, or infrastructure engineering can gain companies competitive advantages in winning bids.
Companies to Watch:
AECOM specializes in commercial facilities such as sports centers but also designs for energy, transportation, government, and water projects. The company provides a range of engineering, construction, and management services.
Bechtel Group has offices in about 25 countries around the globe. The company focuses on large energy and mining projects.
Wood Group provides design, consulting, and project management for oil and gas, clean energy, mining, and environmental sectors.
Products, Operations & Technology
Major engineering services include construction design and management, industrial process design, systems engineering, and maintenance and operations. ... plus:
Sales & Marketing
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Finance & Regulation
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Regional & International Issues
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Human Resources
Also includes the following chapters:
Quarterly Industry Update
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Industry Indicators
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Business Challenges
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Trends and Opportunities
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Call Preparation Questions
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Financial Information
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Industry Forecast
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Industry Websites
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Glossary of Acronyms

Historical Profiles (PDF format)

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