Design Firms See 22 Percent Decline in Operating Profits

Newton, MA (June 9, 2009)—Median operating profits for architecture, engineering, and construction firms fell to 11.8 percent, a 22 percent decline from the previous year, according to the 2009 PSMJ A/E Financial Performance Survey.

Published by PSMJ Resources, Inc., the premier management consulting firm for the A/E/C (architecture/engineering/construction) industries, the 2009 PSMJ A/E Financial Performance Survey features more than 100 performance benchmarks, with approximately 30 different benchmarking groups shown. Respondents to the 2008 PSMJ A/E Financial Performance Survey reported median operating profits of 15.19 percent.

Firms in the 2009 Survey in the upper quartile had operating profits of 21.4 percent while firms in the 90th percentile had operating profits of 30.6 percent. “Those numbers (in the 75th and 90th percentile) indicate a number of firms may have heard about the recession, but did not want to participate,” says William Fanning, a PSMJ Resources, Inc., consultant. “The upper end is doing just fine.”

Firms who work primarily in architecture and those who work in engineering (survey) each reported median profits of just 9.5 percent. But, in the lower quartile, those numbers drop to a 1.3 percent loss for architecture and a 3.4 percent loss for engineering (survey). Fanning attributes those numbers to the tough times in the commercial and land development markets.

Engineering (prime) firms reported median operating profits of 11.6 percent and Fanning believes that industry has weathered the storm. “Engineers kept trucking along. They’re in good shape, certainly better shape than architects primarily due to less exposure to commercial markets,” he says.

When it comes to staffing, most firms cut staff as their profits declined. In fact, in the entire survey, the median staff size change was a decline of 1.21 percent. Those firms engaged in architecture cut an average of 3.1 percent of their staff while those engaged in engineering (prime) cut 3.7 percent of their staff. On the lower end of the survey, firms cut 10 percent to even 20 percent of their staff. Yet, those firms on the upper end added anywhere from 6 percent to 13 percent. “Obviously, if you aren’t making money, you are probably cutting staff,” Fanning says.

Now in its 29th edition, the 2009 PSMJ A/E Financial Performance Survey includes data from 217 firms in the United States and Canada. The Survey provides detailed data and analysis on operating profits, overhead rates, utilization, financial ratios, marketing costs, and much more.

About PSMJ Resources, Inc.
For more than 35 years, PSMJ Resources, Inc. has offered publications, educational programs, in-house training and management consulting services to A/E/C professionals worldwide. PSMJ Resources conducts more than 200 educational seminars and conferences annually, supported by major professional societies, including AIA and ACEC. Headquartered in Newton, MA, PSMJ Resources provides more than 150 titles in book and audio, and publishes three newsletters about A/E/C firm management. PSMJ Resources also produces the industry’s preeminent annual surveys on management salaries, financial performance, fees and pricing, and benchmarks for the design firm CEO. On the web: www.psmj.com