The sober world of consulting engineers has been shaken of late, with transatlantic consolidation, diversification and job losses signalling fundamental changes in the rules of the game.
recent headlines on consulting engineers make for unusually colourful reading. A sector usually regarded as one of the industry's backwaters has seen two top 40 UK names snapped up by acquisitive US giants. Bovis and quantity surveyor McBains Cooper have declared an intention to buy engineering consultancies. And, only last week, Maunsell announced it was shedding 50 staff.

So, what's going on to link transatlantic consolidation, the diversification plans of a construction manager and a QS, and redundancies at one of the UK's largest engineering practices? There is no single answer, but trends in the type and size of projects and the expectations of their clients suggest that the sober world of consulting engineering could be in for a bumpy ride. The scene looks set for further shake-ups. At least one other top 30 firm – WA Fairhurst and Partners – is in talks with a US-based firm about creating a super-consultancy. Others map out a future that will bring them closer to contractors. And smaller firms are realising that they will have to sharpen up their services and marketing if they want to survive.

The new reality

The factors driving change include the well-documented cuts in UK civils spending (the reason for 50 job losses in Maunsell's road and bridges division), general economic uncertainty and a shift towards long-term, privately financed projects.

Another point, raised by Gifford & Partners' joint managing director Geoff Clifton, is that the sector is only now dealing with its historic oversupply, a hangover from when engineers built the infrastructure of the Empire. "It's amazing how long that heritage takes to work its way through," he says.

The arrival on UK shores of acquisitive US giants – $800m Parsons Brinckerhoff bought Kennedy & Donkin, 7000-strong URS snapped up Thorburn Colquhoun – is the most dramatic pointer to structural change in the consulting engineering sector. The motives of the four firms are clear. Larger consultants can take on larger projects and the risks associated with them. They can spread overheads and achieve economies of scale. And a global spread of offices allows them to follow work around the world.

URS chairman and chief executive Martin Koffel, speaking from his company's San Francisco headquarters, highlights all three arguments to explain the firm's ambitious acquisitions spree. He believes that URS is following the lead set by the consolidating automotive, telecommunications and pharmaceutical industries – and the way they expect their consultants to work for them. "At URS, we decided not to be reactive," he says. "We set out three years ago to be a consolidator – to build real mass in the USA and then to put ourselves in the position to follow our multinational clients." His opposite number at Thorburn Colquhoun, chief executive Ian Wotherspoon, views the consolidation argument from the opposite end of the telescope. "There was a strong desire for growth to reposition the company out of the middle ground and take it from 450-strong up to around 1000," he says. "A merger was always an option." At Kennedy & Donkin, business development director Jack Hill describes the problem in more detail. A sizeable, 1250-strong firm, Kennedy & Donkin still found itself out of its depth when it tried to swim upmarket to higher-margin work. "There were certain jobs we wanted – design and build where we were asked to go in with contractors and take risks, or facilities management projects that needed a 25-year sinking fund," Hill explains. "Previously, we were just too small. Now with a bigger balance sheet, maybe we can take some of them on." Glasgow-based WA Fairhurst & Partners finds itself in a similar position to Kennedy & Donkin, and has reached a similar conclusion. Joint senior partner Neil McNeill describes "very early" getting-to-know-you talks with a US-based consultant, which, if successful, would allow the 400-strong firm to "get its feet into other markets".

The re-engineered engineer

There were some jobs that needed a 25-year sinking fund. Previously,we were just too small. Now, maybe we can take some of them on

Kennedy & Donkin business development director Jack Hill

Three UK consultants may have concluded that growth and consolidation are the right strategies, but others stress re-engineering their role in the project team as the way ahead. Their argument is that private finance initiative projects, long-term FM work and contractor-led "prime contracting" will account for a growing proportion of high-value work in the future. As a result, any client looking for a one-stop-shop service is likely to knock on contractors' doors, and that may hurt consulting engineers hoping to retain their traditional role as client's adviser.

"More PFI-type work means that engineers are going to be working more with contractors, and not with clients," says Symonds Group chief executive Chris Booy. "That puts engineers further down the food chain." Despite any loss of status, Booy is attempting to build formal "liaisons" between contractors and multidisciplinary consultant Symonds. He believes they can address clients as an "integrated organisation", instead of working together on an ad hoc basis.

There is evidence that contractors are coming round to the idea. Kennedy & Donkin's Hill says that other suitors for the firm included contractors, although this would have been seen as prejudicial to the consultant's traditional independence. Now Bovis has made public its intention to acquire a consulting engineer in the South-east, a move that suggests it, too, believes that PFI and "prime" clients want a seamless construction and consultancy service. Gifford & Partners is another example of a consulting engineer that welcomes closer links with contractors. It claims that its roads business is relatively healthy, thanks to a high proportion of design-and-build work.

"If we'd just relied on work from the Highways Agency, things could have been very different," says Clifton. Maunsell divisional chief executive Peter Head also believes that the firm's 60% design-and-build turnover will ensure its future health.

Small comfort

Clifton's point about where work originates is key for smaller engineers. Traditionally, firms relied on other consultants, such as architects or QSs, to bring them on to projects. But this strategy starts to look less than efficient where those consultants themselves are more likely to be multidisciplinary, and where clients want to cut the number of faces in the project team to reduce hassle.

McBains Cooper has been researching these trends with the help of a marketing expert and management consultant Warwickers. Its plan is to acquire one or two consulting engineers so that it can present itself as a true multidisciplinary practice. In its early research, it is understood that McBains Cooper has been surprised by the number of small engineers expressing interest. The implication is that many are directionless and need a new home. Marketing consultant Philip Collard believes that firms in this position need to consider strategic alliances with other niche consultants to complement their service, and to align themselves much more closely with what their clients actually need. "If I was a client, I wouldn't want the creatively engineered solution. I'd want the low-cost one," he advises bluntly.