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The Top 200 Environmental Firms for 2012: Analysis

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Photo courtesy of Antea Group
Antea Group, the Dutch-based environmental services firm, managed the decommissioning and demolition of a bulk oil storage facility in South Africa for an unidentified client. The work, whose value the firm did not disclose, included excavation and disposal of contaminated soils, air monitoring and permitting.
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The Top 200 Environmental Firms managed to grow revenue in 2011 despite economic uncertainties around the world and tightening infrastructure budgets in the public sector, traditionally a mainstay for this group. But where one window closed, a door opened for providers of environmental services on the 2012 list. Overall revenue was up 5%, to $54.1 billion, a slower rise than the 6.2% of the previous year but buoyed by increases in non-U.S. work and private-sector activity, which each exceeded 20%.

The domestic market still made up a major share of firms' revenue base, but completed projects and changing public-sector spending patterns made revenue growth anemic, up only 0.7% from the previous year's total, to $41.6 billion. Firms reported 5.2% and 6.1% drops, respectively, in revenue derived from federal and state owners, while the construction and remediation category total fell 7.1% and wastewater was off 3%. "My feeling is that many contractors who attempted to break into or increase their environmental construction work fared poorly," says Jim Voltz, president of American Contracting and Environmental Services. As a result, he anticipates "less competition and less price cutting in 2012."

But the nearly 23% hike in Top 200 firms' private- sector-generated revenue and the 25% rise in spending beyond U.S. borders managed to fill coffers for listed companies. The Top 200 also reported that revenue in environmentally oriented consulting and studies rose more than 15%, while volume in the environmental management sector increased nearly 6%. Noting ups and downs in its various market sectors, Chris Vincze, CEO of TRC Cos. Inc., says, "Across our total platform, environment work was good but not great."

Adds Michael J. Graham, principal vice president of Bechtel, and manager of U.S. environmental work, "It's an interesting time with the budget challenges that the country faces. We're seeing a shift in maturity cleanup work. Fiscal 2012 was challenged with the end of the American Recovery and Reinvestment Act. Everyone has worked their way through that bubble."

Even so, list leader CH2M Hill Cos. crossed the $4-billion threshold in environment-services revenue for the first time, while MWH Global moved into the list's Top 10, displacing Kiewit Corp. Joining the Top 200 for the first time, among 19 other firms not ranked last year, is Clean Harbors Inc. The waste services and emergency cleanup company reported more than $1.1 billion in revenue for 2011.

Another new name on the list is Aegion Corp., which last year became the new parent of water-wastewater pipeline contractor Insituform Technologies and several market-related firms. The firm noted last month improved operating profit for its North American environmental-infrastructure segment.

The water-wastewater sector also appeared to reward traditional builders such as Pepper Construction, which rose to No. 67 in the rankings based on wastewater-related revenue, and McCarthy Holdings Inc., which debuted at No. 62. But revenue stayed flat for other list participants in this sector.

PCL's Water Infrastructure Group recently won a $192-million wastewater-treatment-plant expansion and rehab project in Riverside, Calif., that, when complete in late 2015, will be the largest membrane bio-reactor retrofit project undertaken in the U.S., according to the firm. Luis Ventoza, president of PCL Infrastructure Management, is optimistic the sector will benefit from "growing interest in private-public partnerships and legislative measures being enacted in states to facilitate this delivery method and other alternative delivery methods."

Top 200 firms also working in sectors such as transportation found new environmental revenue streams. Parsons Brinckerhoff cites "sustainable" transportation planning and programming as a major market driver but says the delay in enacting federal funding limited work in environmental research and analysis for planned projects.

Ileana Ivanciu, vice president for environmental services at Dewberry, says the firm has helped the New Jersey Dept. of Transportation and the New Jersey Turnpike Authority use sustainable remediation approaches at project cleanup sites. "We have designed and implemented bioremediation programs that eliminate the need for energy-guzzling pump-and-treat remediation systems," she says. Ivanciu adds that early-onset environmental work has led to larger project roles. Dewberry's work as a subconsultant to prepare an environmental impact statement for a highway widening in New Jersey also led to a larger role as design program manager on the project, overseeing five consultants.

Versar Inc. is seeing new challenges working in federal environmental work. "Last year, we had record revenue of $137 million, of which 65% was in environmental services," says Michael Abram, the firm's chief administrative officer. "This year won't be quite as strong." As a result of less-certain federal cleanup budgets, he notes shorter time frames in government contracts, "with more option periods."

The firm and others also note more "performance-based" environmental contracting for federal clients. "You have to do your due diligence and spend a lot of time on your proposals, but that's where the contract funds are," says Abram. "If you're going to play, you have to play. They are complex and expensive proposals, but if done right, they can be lucrative. It's important whom you team with."

Adds Juan Hernandez, vice president of Cape Environmental, "Bundling of multiple sites through performance-based remediation contracts has reduced the number of opportunities but increased their size significantly." He says the approach has boosted "cost to capture" by up to 10 times, creating a challenge for small business in managing added risk.

Resurging energy and even manufacturing sectors are changing firms' mix of work. "Five years ago, our government work was 70% of our business. Today, it's about 40%," says Dan Batrack, CEO of Tetra Tech. "Our government work has remained stable, but the U.S. commercial side has grown so much more quickly."

TRC, Tetra Tech and other Top 200 firms see the boom in energy-related work as the key driver on the private-sector side, particularly with required environmental work related to oil and gas development. USA Environment LP sees oil-patch clients committing more funds to the cleanup of legacy waste sites, while shale-gas extraction sites are a growing draw for Top 200 expertise. "[Hydrofracking] has been going on for 40 years, but what is new is the depth it can go," says TRC's Vincze.

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