When Robert Finnegan recalls some of those first bleak weeks of the Great Recession at his engineering firm, he can’t help but remember the initial eery paralyzing effect the economic crash had on his entire staff.
“We all just sort of sat there with our hands folded looking at each other and wondering aloud, okay, now, what do we do,” said Finnegan, president and co-owner of Finnegan Erickson Associates, d.b.a. FEA Consulting Engineers, Las Vegas.
Indeed, it’s been a gut-wrenching two years for engineering and architecture firms in the Silver State. Like countless others during these wretched economic times, players in these two sectors were forced to hand out pink slips, freeze benefits and cut operating expenses at levels they never thought possible. At FEA, for example, Finnegan and his partner, Boyd Erickson, laid off more than half of their workforce, which now totals 32 employees, down from 86.
“Never in our 20-year history … did we ever have to let anyone go,” Finnegan said. “We’ve had valleys and peaks before. But nothing like this. It’s been really hard-hitting. Some of the country’s best firms simply shut down,” he said.
At Lumos & Associates Inc., an engineering firm based in Carson City, the employee roster shrunk from 160 workers to 70. Poggemeyer Design Group Inc., which has operations in the West and Midwest, scaled back to 160 employees. That compares with a pre-recession staff of nearly 300. Poggemeyer’s Las Vegas office, the firm’s Western division headquarters, currently has 30 employees, a 40 percent drop from the good old days before the economy tanked.
“That percentage is typical in Nevada,” said Michael Holloway, managing principal of Poggemeyer’s Western region. Holloway, who also serves as current Vice Chair of the Nevada State Board of Engineers and Land Surveyors, attended a recent meeting where participants were asked if they were feeling that degree of pain. “75 to 80 percent raised their hands,” he said.
If architects had been in attendance, things wouldn’t have played out much differently. “Last year was pretty much a free-fall for everyone,” said J.F. Finn managing director of Gensler of Nevada.
Nationwide, Gensler slashed its staff of 3,100 employees to 2,400, a 35 percent reduction. The fallout at its Las Vegas office has been relatively minor since the company has a policy of moving workers to and from multiple offices around the globe on an as-needed basis. Its Las Vegas operation currently has 50 employees, just 6 shy of its pre-recession permanent staff.
“We’ve always had the ability to shift people around,” Finn said. “So we’re not as severely affected as others. But we still took a hit.”
Smaller players like WorthGroup Architects, which has offices in Reno, Las Vegas and Denver, cut its staff some 15 percent and now has 30 employees. The downturn forced Dekker Perich Sabatini Architects of Las Vegas to pare its workforce from 210 employees to 165. The Albuquerque, N.M.-based firm also has operations in Amarillo, Texas.
Surviving the Storm
Nevada’s engineering and architecture firms have been some of the hardest hit in the country. Several factors are cited for this including the state’s non-diversified economy and an out-of-date tax base which has relied too heavily on impact fees alone. The latter results in state coffers that aren’t flush enough to fund much needed public projects that benefit both Nevada residents and businesses, especially in tough times like this.
“We’re the last-place state when it comes to infrastructure funds. That makes a downturn like this one even worse,” Poggemeyer’s Holloway said. “Nevada’s been dependent on the growth-fuels-growth mentality, and that simply isn’t sustainable.”
Several factors will help to ease that pain somewhat, including dollars generated by the recent passage of the Capital Jobs Bill (SB5), which is expected to create some 12,000 direct or indirect jobs this year. The bill extends a slight sales tax used on road construction and lifts a restriction on gasoline taxes generated in excess of $7.5 million. The monies collected by the latter will be distributed to regional transportation commissions in several Nevada counties including Washoe and Clark.
“It will help get projects out on the streets,” said Poggemeyer’s Holloway. “It’s won’t enable us to get back to the heyday, but it’s better than nothing,” he said.
Despite a lot of political nay saying regarding the federal stimulus package, the American Recovery and Reinvestment Act is also playing a role in easing architects’ and engineers’ pain. The state was awarded $1.3 billion for infrastructure projects. As of December 2009, Nevada received $410 million of that package. It’s estimated those monies have created approximately 3,107 jobs.
Charles Macquarie, CEO at Lumos & Associates, cited several public projects in Northern Nevada that probably wouldn’t have gotten built without stimulus funds including a multi-use project in Truckee and sewerage treatment facility in Goldfield. Some of Lumos’ public clients include Washoe County RTC and Eureka and Lyon counties. Its public entities like these that have helped Lumos weather the storm.
“We’ve had long-standing public clients that have helped to sustain us,” Macquarie said. “Although, we’ve noticed there are a lot more firms competing with us now, than in the past.” Macquarie said his firm transitioned from a 45-percent public-sector business mode to about 80 percent since the downturn.
Christopher Larsen, managing partner of Dekker Perich Sabatini, cited several public projects that are helping to provide some needed business for his firm as well. Those include a project at Creech Air Force Base, Indian Springs, and a housing project for staff at Death Valley National Park. Federal monies are also behind the firm’s Wetlands Nature Center in Clark County. Ground for the project is expected to be broken this quarter.
Aside from public projects, Nevada firms are seeking shelter form the storm by focusing more heavily on out-of-state business. Fred Graham, principal at WorthGroup Architects said it’s been gaming projects at Indian reservations in Oklahoma that have helped keep his firm afloat.
“We’ve actually been pretty fortunate. One large gaming project kept us busy through the first of the year. And we’re working out the details to build other (gaming) properties there as well,” said Graham. “We’ve become more aggressive when it comes to networking with groups we’ve never had contact with before. Just being able to establish those relationships takes time,” he said.
Finn said Gensler decided to capitalize on slower times, in part, by revisiting former projects of long-term customers. The strategy has paid off for both parties involved. “We’ve gone back to a lot of the clients we designed for and said we can help you with operating efficiency and cut operational costs even further,” Finn said. “We reexamined the ways people used space … and companies were able to cut costs (up to) 20 percent. That’s a huge savings,” he added.
Meanwhile, there’s been an uptick in Gensler’s international business, which includes projects in Russia, China and the Middle East. “It’s not steep, but it’s steady. Things are definitely ramping up in the hotter markets,” Finn said.
Green Lining for Silver State Firms
If there’s been any upside to Nevada’s economic crisis, one could point to the increasing number of businesses incorporating more green, energy-efficient and cost-effective ways of doing business into daily operations. It’s been a point well taken by the masters of design themselves, who admit that flush times can often lead to an in-house complacency regarding operating expenses and employee-relations.
“I never even knew what our power bill was in the past 20 years,” said FEA’s Finnegan. “Now I know exactly what it is every month,” he said.
Finnegan said his firm’s aggressive in-house energy audit resulted in an annual savings of some $14,000 on its power bills. Some of those savings came from implementing simple common sense weather-dictated practices like opening and closing windows and doors at appropriate times
In addition to reining in energy costs, firms have been able to pare expenses by replacing gas-guzzling trucks, used for onsite checks, with more fuel-efficient cars and hybrids. Others renegotiated leasing contracts for heavy equipment, or opted to find smaller, less expensive machinery for field work.
”We completed energy audits on all our facilities…which resulted in a lot of commonsense cutbacks,” said Lumos’ Macquarie. “It’s not a magic bullet, but it has helped.”
Moving Forward
Quieter times have also prompted some firms to provide front-end services at little or no cost to long-standing clients. “We hope there will be a pay back on the back end,” said Gensler’s Finn. “We do that with clients we’ve had a long history with.”
There’s been a lot more lending of hands in-house as well. Employees and owners don a lot more hats and in a much more congenial manner than in pre-recession times. “We all realized we had to step up our game and all pitch in,” said Dekker Perich Sabatini’s Larsen. “We don’t take each other for granted. The recession’s made us a stronger, more cohesive group.,” he said.
Despite clear signs the nation’s economy is recovering, the remainder of 2010 still looks pretty grim for Nevada. Experts cite the state’s high unemployment rate, near-silent construction industry and tight credit as reasons for another tough year.
In the meantime, engineers and architects say they will continue to dig in their heels and remain optimistic that better times aren’t as far down the road as once imagined.
“There is light,” said FEA’s Finnegan. “In the words of (best-selling author) Dr. Bernie Siegel, ‘Refusal to hope is nothing more than a decision to die.’ We all just have to keep wearing down the soles of our shoes and continue to push harder.,” he said.
