The green tide seems to be turning in 2011 for the Top 200 Environmental Firms, with overall revenue for list participants rebounding 6.2% to $51.3 billion from last year's recession-driven falloff. In international work, there were strong gains fueled by the needs of growing economies and environmental requirements of natural-resource development projects. Top 200 firms also climbed in the rankings by acquisition, which added significant girth to some list participants.
Based on revenue reported in 2010, there was growth in nearly all the markets. Even with stalled projects and strapped public-sector owners, domestic revenue grew 4.3% to $41.3 billion.
Non-U.S. activity was stronger, with firms reporting a nearly 15% boost in that segment of revenue. It had dropped by 9.4% on last year's list. Canada and Australia led the push in global revenue growth in 2010, rising by 49.7% and 47.7%, respectively. Canada's revenue comprised 33% of the international total reported for 2010, up from 25% in the previous survey. Work in Africa rose by 53% for the Top 200, although it makes up just 2% of total non-U.S. revenue.
Virtually all key environmental markets showed growth, from 4.6% for firms reporting work in hazardous waste to 25.6% in the nuclear-waste cleanup sector (see chart). There were declines in only the wastewater and air-pollution-control sectors.
The federal stimulus helped somewhat, but some list participants have said previously that it was insufficient to boost many environmental infrastructure projects. “The biggest challenge is the extremely competitive market today,” says Peter Bernhardt, president of PC Construction, formerly known as Pizzagalli Construction, which specializes in the water and wastewater sector.
“We may have jobs now with four to six competitors or twice that,” he says. “Pricing is extremely competitive with razor-sharp margins—a shift from last year. Owners are looking at every last nickel.” He adds that tightened budgets have “driven a short-term perspective regarding sustainable initiatives.”
Mark E. Filanc, CEO of J.R. Filanc Construction Co. Inc., says the firm is boosting its design capability to pursue as a design-builder small water and wastewater projects—$10 million or less—that are mandated by regulation. Funding for projects continues to be a challenge. “We see public-private partnerships starting to fill the funding gap, but too many contractors are pursuing the same projects, and many of the newer contractors in the environmental market do not understand all the cost nuances and therefore neglect them in their estimating. We are seeing more and more owners prequalifying the contractors.” Filanc says the firm's backlog “seems to be holding steady.”
Despite its own financial constraints or unwillingness to boost capital spending, the private sector still remained a key client base for the Top 200. Listed firms report revenue in that segment grew more than 9% to a total of nearly $19.5 billion. “Real estate is beginning to pick up in a few markets, and companies are trying to catch up with environmental compliance they have pushed off in recent years,” says Jack Cochran, marketing director at Bureau Veritas.
Thomas Boogher, executive vice president at Professional Service Industries Inc., says the firm has gained from asbestos-abatement and other environmental work related to the redevelopment of brownfield sites and other sites abandoned by financially distressed retailers. “There is an uptick in due diligence in property transfers,” he says.
He also notes a possible boost from a new law in Illinois that requires waste dirt to be engineer-certified before it can be taken to a landfill. Russell Herrscher, vice president of remediation and construction at USA Environment LP, says the firm's oil-patch clients “are spending more on their legacy sites after holding off for the past 12 months.”