Array of Skills Takes Arup Group’s Global Network In New Directions

Megaproject.  Channel Tunnel Rail Link crowns infrastructure work, contributing 40% of Arup’s revenue. (Photo Courtesy of London & Continental Railways)

Talk to executives at the design firm Arup Group and it won’t be long before they mention the “key speech.” Written by the founder nearly four decades ago, the speech is a road map with unusual influence on the firm’s emergence as a growing global business with a diverse array of design and analysis skills among its 7,000 staff.

With group sales rising 15% last year, “every part is growing,” says Chairman Terry Hill. “What is reassuring is that our core strengths are getting stronger.” Seeking quality and integrity were the first two aims listed in the key speech by Ove Arup, who founded the firm 60 years ago. Making money came only third, notes Hill.

Leadership. Chairman Terry Hill is still influenced by founder Ove Arup’s emphasis on quality. (Photo by Michael Goodman for ENR)

Owned by internal trusts, Arup has eschewed stock market listing or joining a larger group. “Yet we still do succeed, grow, stay profitable...with no borrowing, no acquisitions,” says Hill. Having no shareholders, “we self-invest,” he says. “Clients know that the profitability of the work we do is staying within the firm.”

The group’s doubling in size over the past six years was largely organic, boosted by its merger in 2001 with the autonomous 650-person Australian business. Growth by acquisition is possible, “but we don’t think that would be a way to develop,” says Hill.

China and “Australasia” are Arup’s high-growth areas, while the home U.K. market is firmly rising. “We will not grow dramatically in the U.S.,” says Hill. Happiest working collaboratively with owners and contractors, Arup found the combative U.S. market tougher than others. “We are getting better at avoiding the pitfalls,” he says.

Global team (top, left to right) includes Gregory Hodkinson, Philip Dilley, David Singleton, Robert Care, John Miles, Cecil Balmond and Andrew Chan. (Photo courtesy of Arup Group)

Arup’s design disciplines are now streamed into three businesses, strategically managed from London. Fee-earning work is run by regional chairmen covering the Americas, Asia, Australasia and Europe/Africa/Middle East (EAM). Of the three businesses, infrastructure now rivals buildings, contributing about 40% each to total sales, of $800 million last year. A consulting unit is being nurtured, but infrastructure has become the biggest profit earner, says sector global chairman David Singleton.

Roots

Yet Arup’s image remains welded to architectural projects. It is essentially a building designer “with an excellent reputation,” observes Klaus Ostenfeld, president and chief executive officer of Denmark’s COWI A.S., a current partner in bridge design.

A knack of forming relationships with star architects has endowed Arup with a name for designing signature buildings, though smaller projects provide the bulk of its business. Arup’s Cecil Balmond, for example, has collaborated extensively with Dutch architect Rem Koolhaas for 20 years, most recently on Beijing’s China Central TV headquarters.

Arup’s collaboration with London-based Foster & Partners dates back at least 25 years to the design of HSBC bank’s Hong Kong headquarters. “Arup is not the only engineer we work with…. There have been, at times, perceptions that they were,” says Foster senior partner Grant Brooker. Other firms compete for Foster’s attention, but “Arup is still incredibly strong…the special skills they can bring to a project are impressive.”

Providing “total architecture” was part of Ove Arup’s plan that spawned a range of skills needed to provide “integrated design.” The term holistic entered the group’s vocabulary 40 years ago, around creating the multiskilled architect Arup Associates, remembers Balmond.

Craig Gibbons, the Hong Kong-based leader of the group’s skyscraper work echoes that sentiment. Designing high-rise buildings, “is not just about structure,” he says. Energy efficiency and elevator strategy are among the range of Arup’s interests, he adds. “We have all the tools in-house.”

Being multidisciplinary was Arup’s key to the U.S. some 20 years ago, recalls Gregory Hodkinson, Americas chairman. Arup now has over 600 people in nine offices across the U.S. New York City’s is the biggest, with a staff of 300. Orders are due to rise 20% this year, he says. An invitation by a U.S. architect to provide multiple design services for a hospital project led Arup to establish its first U.S. office in San Francisco in 1985. Soon, it opened in Los Angeles and, in 1988, went east opportunistically. Opening the New York City office without the underpinning of a contract was “unusual for Arup,” and was tough going, says Hodkinson.

Now, “most architects know them,” says John Nesholm, partner in LMN Architects, Seattle, who worked with Arup on that city’s central library. “They are known for being innovative. They were really sympathetic to the architectural concept,” he says.

Landmarks. Arup is strong in competitions, which brought in work on China Central TV headquarters (above) and Olympic stadium (right). (Photos courtesy of Arup)

With its boom of high-rise construction, China has been natural territory for Arup. Its projects include not only CCTV, but also a 610-meter-tall TV and observation tower and a 432-m building in Guangzhou, all under construction. Arup claims to have worked on 300 mainland projects since the early 1980s. China’s adoption of international design competitions for the

Olympic projects suited Arup, says Andrew Chan, who chairs the Asia region from Hong Kong. “Our firm is strong globally in these competitions and our chances are very high,” he says. Projects including the Olympic stadium and Beijing’s new $2- billion airport terminal boosted Arup’s Beijing office to around 90 people.

Though Olympic design work has peaked, Arup’s Chinese business grew 30% in the last year as Hong Kong developers moved in, says Chan. It now has over 200 staffers on the mainland and 1,900 in the Hong Kong office, the largest outside the U.K.

The firm sees Shanghai increasing in its attraction, particularly as the city starts preparing for the 2010 Expo. Opportunities in planning and energy-efficient design are also in Chan’s sights. Arup’s biggest coup in that business is a contract to plan China’s “first sustainable city,” initially with a population of 50,000 by 2010, at Dongtan, near Shanghai.

As well as opening regional doors, building design helped Arup launch its infrastructure business, says Singleton. Foundations expertise in Hong Kong led to work on the region’s mass transit, helping Arup win orders abroad. Projects include a slice of conceptual and preliminary multidisciplinary engineering for New York City’s Second Avenue Subway.

That project could rival in size the U.K.’s $9.5-billion Channel Tunnel Rail Link, says Singleton. Arup secured part of CTRL’s design, having successfully promoted the project in its current form.

Arup entered big bridge engineering 10 years ago by teaming with specialists on the Denmark-Sweden Öresund fixed link for its owner, Öresundskonsortiet. “We have had people capable of doing major bridges, but we didn’t have the track...

...record,” says Singleton. Big bridges are less profitable than lesser structures but Arup likes them “because they are a statement.”

Peter Lundhus, Öresundskonsortiet’s technical director at the time, found Arup “very well suited to be part of a team.”

Öresund helped Arup, with COWI, win the detail design contract for Hong Kong’s Stonecutters bridge in 2001. Arup was “local and we had the bridge experience,” says Ostenfeld. “Neither of us could have won the project alone.”

The Arup/COWI team scooped that contract from the joint venture, led by the U.K.’s Halcrow Group, which had won the bridge’s design competition a year earlier. Halcrow, nevertheless, is now leading another team, with Arup, checking a turnkey contractor’s designs for South Korea’s Incheon Bridge.

In the bridge field, Arup’s reputation was most seriously threatened by the unnerving wobbling of London’s Millennium footbridge over the Thames River, leading to its closure immediately after its inauguration six years ago. The firm identified a novel form of harmonic loading and fixed the bridge. It lost an undisclosed, large sum of money but retained its credibility. “I applaud them for the way they managed that and turned it into a technical advantage,” says Roger Buckby, Halcrow’s bridges director.

In the last 15 years Arup has opened a sprinkling of offices in the culturally diverse and difficult markets of continental Europe. Extending to Moscow and Turkey, they employ about 400 people, growing to 500 next spring, says Philip Dilley, EAM chairman.

More recently, Arup turned its gaze again to the booming Middle East. Quitting that region to focus on East Asia and the U.S. “was a mistake,” says Dilley. “Clients are asking us to go back.”

Arup’s international reach is mainly through its own business, but a handful of autonomous firms sharing its name operate around the world. They are the product of a policy, now being reversed, of cutting offices free once they had fledged. One of the biggest of these, in Australia, merged back into the group in 2001.

Sharing the same outlook, the Australians and the main group had often collaborated, reports Robert Care, head of the region. “We had to put contractual relationships” in place though “the clients wouldn’t have known,” he says.

Now with some 80 offices in most regions except Latin America, the U.K. remains Arup’s hub. A still buoyant economy, the 2012 Olympics in London and other megaprojects herald steady growth for the 3,600-person U.K. business, says Dilley.

Much of the group’s expertise remains in the U.K. but “we don’t have a headquarters culture,” says Hodkinson. He portrays Arup as a global network, linked electronically into a single team.

Hong Kong Chek Lap Kok Airport

When the owner of an emerging steel-framed skyscraper in Hong Kong ordered a redesign after the World Trade Center was destroyed, Arup mobilized its global web of engineers to prove the existing structure was robust, recalls Gibbons. Given three weeks to make a case, he set up a team of “15 people around the world,” he says.

Some directors wonder about harnessing that global web to gain from low-cost regions, but little offshoring goes on, they say. “It comes back to the philosophy of why we are trying to do things. It’s not just about lowest cost,” says Care.

+Enlarge this image

Steady Sales.  Arup’s largest market is still at home in the U.K. with projects like the Swiss Re building in London (left). But markets such as Europe (Allianz Stadium in Munich, center) and China are also growing. In the U.S., Arup won multidisciplinary work on Atlanta's High Museum. (right).

Going Upmarket

Some 30 specialist units that have developed, mainly, to support Arup’s design work are now bundled in a new consulting business offering advice on planning, management, design and technology. Global chairman John Miles aims to provide high-level advice to industries based on technical assets.

“I don’t want to become a business consultant, but an engineer who is valued,” says Miles. Arup’s consulting contract with China’s Nanjing Automotive in its successful bid last summer for the bankrupt U.K. car maker MG Rover is the kind of work he wants.

Because of its well-established auto design consultancy and presence in China, Arup was appointed initially just for Nanjing’s bid, says Miles. Now, with the manufacturing plant largely transferred to China, Arup’s contract includes advice and design of Nanjing’s new car lines, some to be built in the U.S. Miles forecasts the share of consulting to group sales rising from about 20% to maybe 30% in the next few years. And, able to charge fees three times higher than for engineers, profits could be even higher.

 But money is not the main aim, says Hodkinson. “We need to broaden our multidisciplinary approach to understand the whole context. Maybe it’s not just an engineering question.”