Small AEC firms getting battered by the big guys

I had a couple of disturbing conversations with BD+C readers this week that brought home to me the terrible impact of the current economic downturn on smaller AEC firms, especially smaller architecture firms. It's not a pretty picture.

The first conversation was with the owner of a three-person design firm in the West. “It's a struggle,” he told me. “We're fighting for every job, and the big firms are coming in and bidding on the little projects that we would normally get.” RFPs that in the past would have brought in a handful of submissions now draw dozens and dozens of responses, many from firms that had never had much interest in the local market his firm served.

The second conversation echoed the first. “Business continues to be slow,” said the principal of a small design firm in the Southwest. The firm was being kept afloat thanks to strong relationships with local developers, but they have had to take on a lot of remodeling work that in the past would have been low priority.

“We just haven't gotten those bigger (for us) projects that we've gotten in the past to really provide the bulk of our revenue,” this firm leader told me. “Lots of competition for projects. Owners are getting the 'name-brand' A/E firms for cheap.” One example cited: going up against a major A/E firm (in the top 10 of Building Design+Construction's Giants 300 A/E firms) for a private project with a $5 million construction budget.

In this case, eight firms—five biggies, three little guys, including our reader's shop—bid on the job. Four of the five large firms got interviews. “We didn't even get a chance to make our case, and we're very strong in interviews,” he told me.

Now, I'm not blaming the big firms in the AEC industry. They've got mouths to feed, too. But it's a sign of how desperate things are that national firms that normally work on hundred-million-dollar projects are themselves “reduced” to fighting for the “scraps” that in the past would have gone to small, local firms.

From these and other anecdotes my colleagues and I have been hearing, it's clear that the economic stimulus is not trickling down to smaller AEC firms. Except for some GSA, DoD, and Veterans Administration work, it seems that not even the firms on our Giants 300 list are capturing much stimulus largesse.

That's a concern I raised last March (“Congress to AEC industry: Drop dead!”). Apparently, the $29.5 billion in the stimulus for building projects isn't doing much for commercial AEC firms. Looks like “shovel-ready” turned out to mean a lot of pothole filling.

My concern is that we don't want a repeat of what happened in the early '90s, when that recession led to brutal layoffs at national firms and the closing of hundreds of smaller shops. A whole generation of young architects left the field, never to return. That's a loss the nation can't afford.