Finding Their Niche
December 27, 2011The cliché “bigger is better” has been drilled into our brains.
Over the years, marketing gurus have become genius at burning ideas into our psyches that we need a bigger car, a bigger TV, a bigger house — a bigger piece of the proverbial pie to get ahead.
But in the world of technology, it’s a total opposite dynamic: Everything that is cutting-edge and innovative is getting smaller, such as cameras, phones and computers.
So which rings truer: bigger or smaller in the trenchless engineering world? There’s no right or wrong answer to the question. This article focuses on the smaller trenchless firms and the critical role they play in the trenchless technology industry. These are the engineering firms that specialize in underground construction and assessment and have found their niche in the growing trenchless industry, proving their worth to project owners, as well as the larger, multi-national engineering firms they partner with on projects.
Their specialized expertise has proven invaluable to the trenchless market, with firm principals becoming established leaders in their field, applying the latest trenchless solutions and tools to each project. They team with larger firms on some of the largest and most challenging projects, firms that tap into their expertise to find the best trenchless solution to their clients’ infrastructure needs. These small firms share their knowledge with industry association training courses and universities, training the next generation of trenchless professionals.
Larger, multi-national firms seemingly have the workforce, geographic presence and endless resources to handle nearly any project that comes their way. In recent years, there have been acquisitions of smaller firms — such as Lachel & Associates by Schnabel Engineering, Lyman Henn and Berti-Linquest by Brierley & Associates and DCM by GeoEngineers to name a few — allowing larger firms to add their expertise to their firm, as well as expand their geographic base, and allowing these smaller firms to secure their future after the principal(s) retires.
Through it all, smaller specialized engineering firms have become the cornerstone to the trenchless market’s success.
Smaller Firms & Trenchless
“Trenchless technology is moving at such a fast pace that it takes the smaller firms that are focused on the technology to keep the overall industry up with the trenchless market,” says Kim Staheli, P.E., owner of Staheli Trenchless in Seattle. “As smaller, specialized firms, we see so many projects each year and the technology is moving like wildfire. It’s [the smaller] firms that are going to keep the industry on the cutting edge of the trenchless market, as well as research and development. We are exposed to so much more than a design firm that does one or two trenchless projects a year. We play a critical role in the success of the market.”
Staheli Trenchless is just one example of a smaller specialized trenchless firm, where it focuses on reduction of trenchless risk through proactive design techniques, as well as construction design and management services. Firms such as Staheli’s bring to the project table a host of intangibles beyond its expertise, making it a perfect sub-consultant for larger firms on trenchless-based projects.
But what challenges do these niche firms face? What do they offer that larger firms do not? We spoke to several smaller firms that specialize in trenchless technology to get their perspective on what role they play in an ever-growing trenchless market.
Size is an obvious challenge for niche firms and the challenges that smaller firms face are similar to any small business: fewer employees mean fewer resources and time available to take on an endless string of projects. Critical to their success is striking that balance between workload and their available resources — how many projects can they take on with their smaller staffs?
“If you are a larger firm, you can throw people at a project and draw them from different areas of your firm,” says Bob Morrison, P.E., vice president and chief engineer with Jason Consultants. “Small firms don’t have that ability. Our biggest challenge is trying to balance our workload with the resources we have available. You suddenly pick up two or three projects and before you know it you are swamped.”
Jason Consultants is a firm that does work all over the globe through its three U.S. offices, as well as offices in the United Kingdom and Switzerland. Sounds like a huge operation but Jason Consultants does all its work with 20 engineers spread out around the world. The firm was founded in 1979 by James Thompson, whose strength was in microtunneling and pipe jacking, establishing the firm’s reputation in those trenchless techniques. Over the years, the firm has moved away from new installation work as its focus and instead concentrated on inspection assessment and asset management. Pure Technologies acquired Jason Consultants in 2009, due in part to its technical expertise in analyzing pre-stressed concrete cylinder pipe. Although it is owned by Pure Technologies, Jason Consultants remains an independent consultant in the trenchless industry.
J.D. Hair and Associates was founded in 1987 and provides engineering expertise relative to the installation of pipelines and utilities using horizontal directional drilling (HDD). This Tulsa, Okla.-based firm is recognized as a pioneer in the HDD industry, having served as a key member of design teams for some of the most significant and challenging HDD installations completed. J.D. Hair employs seven engineers.
“For years, we’ve said that we work on a two-week backlog,” says Jeff Puckett, P.E., at J.D. Hair and Associates. “While that’s a bit of an exaggeration, it’s definitely harder for smaller firms to look down the road and know that they’ll have work. We’ve been quite fortunate that our reputation has resulted in a nearly continuous inflow of opportunities over the years.”
But beyond the obvious workload issues, there is also the challenge of trying to prove their worth to project owners, showing that they can handle the project. “Sometimes owner agencies consider the nationwide consulting firms because of the perception that they have almost infinite resources to bring to bear on their project,” says Dave Bennett, principal owner of Bennett Trenchless Engineers. “The truth is even the large, multi-national firms have resource constraints, especially when it comes to this niche we call trenchless.”
Bennett founded Bennett Trenchless Engineers, which has three engineers on staff, plus a senior scientist, and provides design, construction inspection and claims evaluation/expert witness assistance. The firm’s roots grew in Vicksburg, Miss., in 1997 when Bennett and Kim Staheli partnered to create the successful Bennett-Staheli, focusing on underground construction. The firm relocated to the West Coast in 1999 in order to work on a large-scale trenchless program in Sacramento, that only recently completed. The firm grew to have a second office in Seattle. In 2007, Bennett and Staheli decided to split the firm with Bennett remaining in California and Staheli taking ownership of the Seattle office.
Bennett says it’s not realistic to believe larger firms have unlimited resources at their disposal. “My experience is that larger firms today tend to have a few people who are at least knowledgeable in trenchless technology but they are trying to cover a lot of technical areas… That’s why [Bennett Trenchless] has been successful in building relationships with larger firms because they don’t necessarily have the trenchless expertise in every office nationwide,” he says.
Partnering on projects with larger firms as the sub-consultant is a staple of smaller firms, sharing their expertise when needed. “A larger firm might work on one or two trenchless projects in a given year and might not be in the position to understand the risk that each trenchless method brings,” Staheli explains. “Those are the kinds of services firms like mine and [other trenchless firms] are able to offer because we work on 50 trenchless projects a year.”
“A few of the very large engineering firms do have very good expertise in trenchless areas,” Morrison says. “But when you drop down a notch to the large regional firms, that’s where they don’t have the expertise and they haven’t had the opportunity to develop it. That’s where we find we work the best, that level just below the multi-national firms where we can provide the missing gap of the technology.”
From a professional standpoint, smaller firms give their staffs the opportunities for growth, education and challenging work in an intimate environment. Like any small business, employees at smaller firms do more than what is written in their job descriptions, tackling all aspects of a project to get the job done. “We do a variety of work throughout the year,” Morrison says. “When you work for a smaller firm you are not going to be working on a project for three years but working on a dozen projects in one year.”
Bennett agrees but takes it a step further by noting that smaller firms allow for more personal relationship development. “It may sound corny but at Bennett Trenchless we’re like a family. We share stories about our family, weekend activities and even troubles. We laugh a lot and I maintain a complete open door policy so any staff member can walk into my office at any time and kick around ideas,” he says.
A Sign of the Economic Times
The current recession has been difficult for engineering firms of all sizes, with each striving to keep its staff constructively employed and its company profitable. The recent economic woes have affected most aspects of the construction industry, with the trenchless market continuing to thrive amongst the ruins. There has been some fallout in the engineering community. For example, smaller firms are seeing a shift in its competition for projects: Larger firms are now bidding on work that has been historically off their radar.
“We have larger firms going after the smaller dollar projects today,” Staheli says. “There used to be a smaller tier of projects in size that we as smaller firms could go after and not have to worry about competition from larger firms. That’s not the case anymore. We see the larger firms going after everything.”
Morrison concurs. “There just aren’t any new wastewater treatment plants being designed and built right now,” he says. “A lot of the larger firms are now pursuing smaller asset management or inspection type projects, which 10 years ago they probably wouldn’t have looked at.”
Staheli cited an example of a recent project in Washington state that recently issued its request for proposals. “It’s a project that we would normally go after,” she says. However, “All of the firms that we usually team with went after it too, and were asking us to sub-consult on it. We ended up not going after this project as a prime because we didn’t want to compete against our normal clients.”
Larger firms aren’t the only ones adapting to the unsettling market conditions; smaller firms are doing the same. “You have to be nimble and adaptable to change,” Bennett says. “Our client base is quite different today than it was four or five years ago. We’re doing more private utility design, especially in gas pipelines, and less public agency water sewer and design. Municipalities aren’t spending the money. We are also more involved in claims evaluation and less on construction inspection.”
“Our work profile has really changed,” Staheli says, with a huge increase in the amount of claims evaluation work over the last three years. Today, she is seeing a big bump in the amount of design work being let in the Northwest. “We are seeing things turn around at the end of 2011. The design work here has really shot up.”
A Dying Breed?
Acquisitions are a way of business life and in the engineering world there have been notable purchases in recent years. The impetus for smaller firms to sell comes down to simple dollars — the need to secure its future long after the firm’s principal(s) retires. For larger firms, it adds trenchless expertise and expands to its geographical presence.
“The acquisition of a specialty niche firm can help a larger firm capture the key competencies they need to help penetrate the market and gain new clients,” Bennett says. “The smaller firms faced with ownership transition makes them ripe for acquisition because many firms don’t have transition plans in place and sometimes their best option is to allow themselves to be acquired by a larger firm.”
Ownership transition wasn’t the reason behind Jason Consultant’s decision to sell to Pure Technologies but the benefit of the firm utilizing the company’s resources. “One of the benefits for us being acquired by Pure is the resources it made available to us as a small firm. It makes it easier for us to approach larger projects and we don’t have to worry about cash flow. The acquisition also allowed us to be involved in the development of some of the innovative technologies Pure has introduced into the marketplace.”
What is the future for smaller, specialized firms in today’s business climate — will they go the way of the dinosaur? The firms we spoke to say no.
“We are always going to have these ‘know-how’ gaps that will develop in our market and there will be smaller firms that will capitalize on it,” Morrison says. “This is a very dynamic field. Every week there’s a new technology coming out to inspect pipelines or rehab existing lines. There’s always going to be a need for firms that can pick up on that and become experts and then help the larger firms be able to provide solutions to problems in these new technologies.”
Puckett agrees. “The future is good for smaller firms. There will always be skilled engineers who will realize the opportunities afforded by forming their own consulting practices,” he says.
Sharon M. Bueno is managing editor of Trenchless Technology.