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T R E N D L I N E S

Value per employee

When coming into the market to acquire a firm, it’s often wise to expand your horizons and think outside the box. Thinking outside the box

In Zweig Group’s 2022 Valuation Report of AEC Firms , yearly trends for the value per employee ratio were analyzed to better understand the market. As one of the least volatile value ratios calculated by Zweig Group, the value per employee ratio is a quick way for firms to assess their relative value. The median value for 2022 was $86,068, which was an 11 percent increase from 2021. By comparison, the average annual increase for this value was 4.6 percent between 2012 and 2021. Participate in a survey and save 50 percent on the final or pre- publication price of any Zweig Group research publication.

I n this fast-paced M&A market we’re currently experiencing, many firms are going to market looking for a mirror image of themselves. While it’s easy to plan out a pro forma business model of a firm that’s just like yours and dream about the synergies and cost-savings, it’s simply not the reality of most transactions. A lot of the time these firms either have been acquired already, aren’t for sale, or simply don’t exist. After all, if they are that much like your firm, why would they want to sell and not acquire the same way you want to? When coming into the market to acquire a firm, it’s often wise to expand your horizons and think outside the box. Let me explain why. Relatively frequently in the AEC M&A market, we’ll see a quite large – sometimes even publicly traded – firm acquire a 25-, 15-, or occasionally fewer than 10-person firm. You might ask, what value can a 1,000-person firm gain from a 25-person or fewer firm that they can’t buy elsewhere? Deep expertise that can’t be hired traditionally, that’s what they’re buying. Like what can be seen in the tech industry and private equity, large AEC firms are buying up smaller companies that have deep expertise in a particular market or service. What is this deep expertise? In our industry, it’s recently been leaning more and more toward firms that have found innovative ways to integrate technology into their design, inspection, and other services. Due to the inherent scalable nature of this kind of technology integration, the employee count of these firms matters less while the intellectual property they’ve developed matters more and could, in theory, save/make larger businesses even more money. Small and mid-size firms in the M&A market can apply this by looking for firms that are very experienced in one of their secondary or auxiliary services that has been seeing more attention or revenues over the past year or two. Often, these smaller firms can be neatly tucked into your existing practice of that service and even greatly improve it. Another reason you might want to consider thinking outside of your current offerings is for recruiting and retention purposes. A complaint we hear from firms that serve one vertical market is that their employees get bored of the same thing and want to try a different service/market. If your firm operates in only one service/market, then your employee(s) must quit to get the career satisfaction they desire. Not that there’s anything wrong with building a firm specifically around a certain niche market, as it often leads to higher profitability and better

Will Anderson

F I R M I N D E X Fluor Corporation ............................................... 12

FXCollaborative ......................................................4

NV5 Global, Inc. ......................................................2

Reynolds Ash + Associates ............................ 8

RMBA Architects ................................................... 8

Trahan Architects .................................................. 6

MO R E A R T I C L E S n HEIDI BLAU: Hybrid work, moving forward Page 3 n Humanitarians first: Trey Trahan Page 6 n JUSTIN SMITH: Plan with a pencil Page 9 n MARK ZWEIG: Prosperity leads to a slow ACP Page 11

See WILL ANDERSON, page 2

T H E V O I C E O F R E A S O N F O R T H E A E C I N D U S T R Y

TRANSACTIONS NV5 TO ACQUIRE OPTIMAL ENERGY, EXPANDING ENERGY EFFICIENCY CONSULTING CAPABILITIES NV5 Global, Inc., a provider of compliance, technology, engineering, and environmental consulting solutions, announced that it will acquire Optimal Energy, Inc. Optimal is an energy efficiency firm providing a full range of consulting services to government agencies, utilities, regulatory bodies, and state energyadvisorycouncils. Optimal specializes in advising state energy efficiency advisory councils on program planning, cost-benefit analysis, and strategic guidance. The company also assists utilities with integrating statewide and local energy efficiency mandates into their business models. “NV5’s energy efficiency and clean energy business has driven strong organic growth, and Optimal is the fourth acquisition we have made in the sector,” said Dickerson Wright, PE, chairman and CEO of NV5. “As energy efficiency continues to grow in importance in the government and utility markets, Optimal provides us with another specialized, high barrier to entry capability to differentiate NV5 and deliver value to our clients.” With offices in Vermont and Rhode Island, Optimal has worked in nearly 40 U.S. states and seven Canadian provinces. Optimal was founded in 1996 and is a consultant for nine of the top 10 states with utility and public purpose efficiency programs. “NV5’s energy efficiency services for our

federal government and private sector clients have grown rapidly in recent years, and we are excited to add these capabilities for state governments and utility clients,” said Ben Heraud, COO of Energy Efficiency and Decarbonization at NV5. “We are really excited about joining NV5 and expanding the scope and scale of technical resources available to our clients, and we look forward to the integration of our capabilities with the existing energy efficiency group within NV5,” said Eric Belliveau, partner at Optimal Energy. Optimal specializes in assessing, developing, planning, startup, and management support for energy‐ efficiency programs. Founded in 1996, Optimal’s clientele includes utilities, consumer and environmental advocates, government and regulatory agencies, and energy service providers. NV5 Global, Inc. is a provider of compliance, technology, engineering, and environmental consulting solutions for publicandprivatesectorclients supporting sustainable infrastructure, utility, and building assets and systems. The company focuses on multiple verticals: testing, inspection and consulting, infrastructure, utility services, buildings and program management, environmental health sciences, and geospatial technology services to deliver innovative, sustainable solutions to complex issues and improve lives in our communities.

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about the projects and ideas driving the AEC industry forward? Learn more with Civil+Structural Engineer Media.

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WILL ANDERSON , from page 1

clients, but just know that this recruiting and retention “ceiling” caused by boredom exists and could be difficult to combat once your firm reaches a certain size. While wanting to grow your firm in a specific niche is certainly understandable and even desirable, just know that – when looking to grow via M&A – finding a firm that’s a perfect extension of yours is easier said than done. Coming to the table with an open mind and looking for expertise in services/markets that your firm might be weaker in can often prove fruitful for both you and your clients’ firms down the road in terms of project quality and revenues. Creativity, especially when it comes to technology application and innovation in AEC, tends to pay in the long run. Happy hunting! Click here to learn more about Zweig Group’s Mergers & Acquisitions advisory team. Will Anderson is a mergers and acquisitions analyst at Zweig Group. Contact him at wanderson@zweiggroup.com.

2022 AEC EXECUTIVE ROUNDTABLE This roundtable is a unique opportunity for AEC firm leaders to engage and interact with industry peers to discuss current issues facing firms today, explore industry trends and next practices, and confront the biggest challenges they face leading their firms. See you this June 22-24 in Dallas!

THE ZWEIG LETTER MAY 16, 2022, ISSUE 1441

O P I N I O N

Hybrid work, moving forward

The hybrid model seems to be here to stay, but firms will need to strengthen their design, social, and professional development activities to keep their practices engaging.

A fter passing the second anniversary of the COVID-19 pandemic lockdowns, FXCollaborative, like many other architecture practices, continued to innovate and evolve our thinking on how to design collaboratively, grow professionally, and sustain our social equity initiatives. We are constantly being tested in our assumptions and our follow- through as the course of the virus changes.

Heidi Blau, FAIA, LEED AP

Most recently, during the Omicron surge, we pivoted back to a fully remote work model for a fewweeks to stem the tide and not contribute to the burden on the healthcare system. We’ve been back in the office since February 7, operating under our hybrid work model. Our expanded range of technologies allow us this flexibility, while our commitment to create inspiring work for our clients is unwavering. When this all began in March of 2020, we adapted at warp speed to a fully remote work modality. We quickly embraced new digital tools for collaboration and communication and found a way to make it all work. Using video conferencing and project management and collaboration tools day-to-day, visual collaboration software, advanced modeling, and AR/VR technologies, many people felt that

they were more efficient and effective than ever before, but there was something missing. With the technology learning curve flattened and the acute response abating, we can acknowledge that technology is powerful and we have an expanded tool box to work with – but there is no replacing face- to-face interactions for collaboration, communication, knowledge sharing, and opportunities for professional growth. Like many other firms, from the day we closed our doors and people scattered across the country, we were concerned about our culture and community. We understand that our creative and passionate designers and managers are essential to our success. With a people-first focus, our new mission was to bring everyone back together safely

See HEIDI BLAU, page 4

THE ZWEIG LETTER MAY 16, 2022, ISSUE 1441

TRANSACTIONS FINLEY ENGINEERING GROUP ACQUIRED BYCOWI Zweig Group, a full- service AEC management advisory firm, announced its client FINLEY Engineering Group has been acquired by COWI. The acquisition is part of COWI’s strategic focus on growing its presence in North America following the recent opening of its offices in Houston and Toronto. Zweig Group advised FINLEY through the acquisition. The deal team included Zweig Group managing principal, Jamie Claire Kiser; advisor John Bray, CM&AA; senior analyst Drake Hamilton; and analyst Will Anderson. “We are proud to have been a part of this successful partnership, and look forward to seeing FINLEY continue to leverage its elite technology and expertise to create success for its own, as well as COWI’s growing client base,” Hamilton said. FINLEY specializes in complex bridge projects, having worked with more than 100 projects in the United States, Canada, Middle East, Africa, and South America. FINLEY’s noteworthy projects include providing engineering services

on the Oakley C. Collins Memorial Bridge in Ohio, and work on the Bayonne Bridge between New York and New Jersey. The team at FINLEYwill continue to work under the management of Craig Finley who founded the company in 2004. Finley said, “It has been an incredible journey ever since we established FINLEY nearly two decades ago. We have worked hard, had a lot of fun, and can look back with pride on everything we have built and achieved together. For us, engineering has always been very much a people-oriented business, and it has always been a priority to me that every member of my team thrives and sees a purpose in what they do for a living.” COWI North America president and chief executive Thomas Dahlgren said, “As a company with a long history in bridges, globally and not least in North America, we are very excited to welcome FINLEY into the COWI family. FINLEY is known for its outstanding work with bridges, but also for its strong technical capabilities and a great go-do attitude.”

FINLEY is particularly well-known for the development and implementation of BrIM (Bridge Integration Modeling) that integrates bridge information databases into the planning, design, and construction process using advanced engineering software. “We expect to see many business opportunities in North America within all aspects of transportation infrastructure – bridges, tunnels, and highways, among others needing modernization and replacements,” Dahlgreen added. “There is a lot of work to do, and digitalization is incredibly important to us so that we can ensure best practice processes. COWI and FINLEY are a good match, because both focus on high-quality solutions and want to cultivate innovation. Together, we have a strong team in place for the job ahead of us, which is now also in Florida.” Zweig Group, three times on the Inc. 500/5000 list, is the leading research, publishing, and consulting resource for the built environment.

our initial belief that the collective office experience enhances and improves our design thinking, wellbeing, and professional development. Time with colleagues is valuable to sustaining the culture and cohesion of the firm and the quality of our work. The regular patterns of people coming to the office has given us a planning framework for collective activities that we will be rolling out this year, including in- person office meetings and celebrations related to design achievements and our employee resource groups/diversity initiatives. Many of these activities were curtailed in 2020, but now it is essential to provide engaging opportunities for people to come back together. Our most recent office survey demonstrated an evolution of thinking from an individual- centric hybrid work modality to a more office-centric one. The pendulum is swinging from a question of what is best for me as an individual to what is best for a collective, creative team. Moments of serendipity within the office setting are so important to spark new ideas and reinvigorate our design thinking. The social interactions, casual lunches, sketch crawls, and studio and officewide celebrations take on additional value when we are not all together all the time. As the imminent threat to people’s health abates, we believe the hybrid model will remain, but each firm will need to strengthen the collective design, social, and professional development activities to keep their practices vibrant and engaging. Heidi Blau, FAIA, LEED AP is a partner and chief operations officer at FXCollaborative. Connect with her on LinkedIn.

HEIDI BLAU , from page 3

and redefine the work process so we can continue to design spaces, buildings, and urban landscapes that we all want to live in. The challenge we faced was to determine what kind of an environment we could create with a hybrid workplace policy. We needed to respect individuals’ health and wellbeing, both physical and emotional. We also had to recognize that each person has a different personal and professional situation. We have a diverse population, with people at all different stages of their careers, different household demands, and different community responsibilities. These differences needed to be considered as we asked everyone to come together and bring their best selves to their work. HYBRID DESIGN BENEFITS. The hybrid work model has instilled more rigor in our design process, but it is not a one- size-fits-all solution. Just as each of our design solutions is a result of unique criteria and circumstances, each design team must define a work process that is appropriate for their projects. How often the team comes together, the duration of the interactions, and whether they are virtual or in-person, is defined and agreed to by all the team members. It is a process that is adaptable to the building typology, client demands, and team composition. The cadence and duration of these interactions evolve as the design takes shape. Fluidity and structure are counterbalanced to support creativity. CONFIRMATION. What we have learned over time confirms

THE ZWEIG LETTER MAY 16, 2022, ISSUE 1441

P R O F I L E

Humanitarians first: Trey Trahan Founder of Trahan Architects, a global architecture firm that mobilizes artistry and innovation to develop thoughtful structures that enhance quality of life.

By LIISA ANDREASSEN Correspondent

T rahan Architects (New Orleans, LA) is an award-winning firm, but Trahan, its founder, says he prefers not to dwell on accolades. The work, he says, is not about him, his firm, or even the buildings. It’s about creating spaces that evoke feeling and encourage kindness. He is continually exploring ways to cultivate generosity and inclusiveness in our relationships with each other and our environments. Trahan is commended for his innovative use of sustainable materials, stemming from his strong personal belief in the value of environmental conservancy and designing for racial and spatial equity in the built environment. “I want to create beauty, be profitable, and have financial stability,” Trahan says. “I am constantly monitoring howwe create the best product. I look at the big picture and also dive into the details. It’s about creating a balance between the two.” A CONVERSATIONWITH TREY TRAHAN. The Zweig Letter: In your bio, you say: “A building can create

something that goes beyond its walls.” Can you illustrate this with a recent example? Trey Trahan: It has to do with thinking about the environment that a building can create. A building or series of buildings can take us to a place that makes us look within and challenges us to rethink ways of doing and being. Personally, I take inspiration from churches – not so much related to the spiritual aspect, but to creating clean, pure spaces. I enjoy bringing that aspect to the commercial space. It’s about creating a holistic community. The Alliance Theatre in New Orleans is an ideal example of what I mean here. The design team felt a responsibility to remove the separation between balcony and orchestra – challenging historic notions of segregation and discrimination. All seating zones can be accessed from every entrance within the chamber – a unifying planning feature of the Alliance Theatre Transformation. TZL: Have you had a particular mentor who has guided you

THE ZWEIG LETTER M

– in school, in your career, or in general? Who were they and how did they help? TT: Doug Tompkins, founder of North Face and a noted conservationist. He was a personal friend and I had the privilege of getting to know him and his wife, Kris, and staying with them for two weeks. He had a profound passion for preserving biodiversity and instilled in me the importance of investing in the world. “We make sure that clients have access to any and all information. We reassure them that we’re not taking unreasonable risks with their money and that leads to an appropriate level of confidence.” TZL: Open mindedness seems to be an important part of the firm’s culture. How do you ensure you’re hiring people who have the same ethos? TT: It’s not so much about hiring people with that ethos as it is working to develop a group of colleagues who buy in to that culture. I often look for people who are on the edge of that culture or who challenge the overall ethos. You often get greater results this way. An ethos can be subtly shifted and that will often lead to a refinement of culture. We’re working to become more diverse and this is part of that. TZL: Howmuch time do you spend working “in the business” rather than “on the business?” TT: I spend a great deal of time on it. It’s a daily game. I want to create beauty, be profitable, and have financial stability. I am constantly monitoring howwe create the best product. I look at the big picture and also dive into the details. It’s about creating a balance between the two. TZL: Collaboration is also a key culture component at your firm. Does that process look different post-COVID? Has the process evolved or changed? Why or why not? TT: I’ve always believed in collaboration. Since COVID, we’ve become more transparent with clients. We used to just share information internally, but now it goes beyond that. COVID certainly challenged collaboration, but it also confirmed what was working and what wasn’t. It added a level of complexity that we’ve all learned from. When you collaborate virtually,

sometimes misinterpretation can happen, but better things can sometimes come from that. For example, you may think, “Huh, I never thought of that, but it could work.” TZL: Trust is essential. How do you earn the trust of your clients? TT: We make sure that clients have access to any and all information. We reassure them that we’re not taking unreasonable risks with their money and that leads to an appropriate level of confidence. Holding back information often leads to anxiety and that is something we certainly do not want to create. TZL: Your structures seek to enhance quality of life. Can you tell me a little about that? TT: We’re investing in historic properties in Louisiana and hoping to provide more accuracy to their histories by creating environments that will tell the story. We’re working to unearth the truth and hoping to bring healing to many communities. As architects, we have to be humanitarians first. TZL: What skills are required to run a successful practice? What do you wish you knew starting out that you know now? TT: Around 15 years ago, I collaborated with a landscape architect and was surprised that he referred to his clients as “friends.” I used to put clients in a silo, but he shifted my thinking about that. We spend so much time with clients and they invest so much in us that it’s only natural a friendship should evolve if the relationship is managed well. You need to be open to creating deep and meaningful friendships with clients. It doesn’t always happen, but when it does, it’s fantastic. “We’re investing in historic properties in Louisiana and hoping to provide more accuracy to their histories by creating environments that will tell the story.” TZL: Your firm has been ranked the number one design firm by Architect Magazine . What does this mean to you and to what do you most attribute the honor? TT: Three things – clients, collaborators, and colleagues. I am so very grateful for all of them. So many people have given so much and I will always remember that. It’s a team sport and you have to remain thoughtful and mindful of the talent that surrounds you. See HUMANITARIANS FIRST, page 8

HEADQUARTERS: New Orleans, LA

NUMBER OF EMPLOYEES: 37

YEAR FOUNDED: 1992

OFFICE LOCATIONS:

■ ■ New Orleans, LA

■ ■ New York, NY

■ ■ Atlanta, GA

MARKETS: Global

SERVICES:

■ ■ Academic

■ ■ Performing arts

■ ■ Cultural

■ ■ Athletic

■ ■ Mixed-use residential

NOTABLE PROJECTS:

■ ■ The Coca-Cola

Stage at the Alliance Theatre in Atlanta, GA

■ ■ The Caesars

Superdome in New Orleans, LA

■ ■ Conservation

and preservation undertakings in St. Francisville, LA, and in Corcovado National Park in Patagonia, Chile

MAY 16, 2022, ISSUE 1441

TRANSACTIONS REYNOLDS ASH + ASSOCIATES MERGES WITH RMBA ARCHITECTS Reynolds Ash + Associates has merged with RMBA Architects. The company will retain the RA+A name and will operate the expanded firm out of their new office at 564 E 2nd Avenue in Durango, and their office in Pagosa Springs at 262 Pagosa Street. The two firms do share a history. Tracy Reynolds was a junior partner with RMBA (then under senior principal R. Michael Bell), from 1997, until 2002 when he started his own firm.

The merger will use the strengths of both companies to deliver greater value and level of service to our clients. The firm is the largest locally-owned architecture and engineering firm in the Four Corners region, and has the manpower and expertise to provide services for projects of most any type and scope. RA+A serves clients in Colorado, New Mexico, Utah, and Arizona, with project types including custom residential, multi-family, commercial, and municipal

projects for cities, counties, and state organizations. RA+A’s services include planning and development, entitlement services, landscape design, structural engineering, and architecture. The merger of RA+A and RMBA is rooted in the common beliefs of building and sustaining long-term client relationships, delivering exemplary work and providing an environment where employees can excel in their careers.

Trahan Architects’ Alliance Theatre project.

tenured staff? This has always been a challenge, but seems heightened as investments in development have increased. TT: Giving them access to opportunities early on and trusting them. When you trust people, they’re responsive to that. That’s where success comes from. It’s fun and the impact is significant. TZL: In one word or phrase, what do you describe as your number one job responsibility? TT: Redefining beauty. “The design team felt a responsibility to remove the separation between balcony and orchestra – challenging historic notions of segregation and discrimination. All seating zones can be accessed from every entrance within the chamber.”

HUMANITARIANS FIRST , from page 7

TZL: Diversity and inclusion are lacking. What steps are you taking to address the issue? TT: For years, our work was about “rootedness.” That was not enough. So, we created a 501(c)(3) – “Designing for Democracy.” This organization is in pursuit of gaining a better understanding of the history of the South and what that means to D&I. A growing interdisciplinary consortium of practitioners are using the DFD platform to spatially interrogate and actualize democratic values we strongly believe are intrinsically important in scaling a just and inclusive built environment. DFD’s framework is based on a spatial practice from the lens of healing, equity, and justice. This grounds the application of DFD’s tools and methods centered on transforming the conditions that inform, guide, and manifest our society. By humanizing data and harnessing empathy, we can achieve palpable results that can correct our built environment’s disparate impacts. TZL: How are you balancing investment in the next generation – which is at an all-time high – with rewards for

THE ZWEIG LETTER MAY 16, 2022, ISSUE 1441

O P I N I O N

Plan with a pencil

P roject management is a widely studied, often misunderstood field, especially in the AEC industry. An individual firm’s definition of the function and role can vary considerably depending on the firm’s structure, client base, market segment, and project size and type. A “best practice” in one firm might inhibit performance in another firm. Write your project goals in ink and your plan in pencil, because you’ll likely need to make some changes and adapt your plan as your project unfolds.

Justin Smith, P.E.

Last week, I wrote an article that commented on previous Zweig Group statistics concerning project manager training and development. In that article, I highlighted a disconnect between the training that firms provide to their project managers and the training firms believe their project managers need. To a degree, this makes sense. Firms do a great job of training their managers in the various procedural elements of project management. Firms also recognize the need for outside perspectives to enable additional skill development beyond their internal programs. Interestingly, one core competency was missing from both lists: flexibility. Research demonstrates that the leadership ability of the project manager is the most significant predictor of project success. Researchers that studied AEC

project performance lay out four pillars of project leadership that provide the foundation for successful projects across a wide range of AEC firm and project types: 1. Leadership and team development 2. People skills and trust-building 3. Verbal communication and listening 4. Expectations management, conflict resolution When you consider your successful project managers, the chances are good that they bring some or all of these skills to their projects. But what about flexibility?

See JUSTIN SMITH, page 10

THE ZWEIG LETTER MAY 16, 2022, ISSUE 1441

Figure 1. Project Manager competencies across different project types, Krahn and Hartment (2006)

their read of the situation. This approach is in stark contrast to establishing cookie-cutter steps that must be followed in all cases. “Flexibility is a common area of struggle. More than 50 percent of project managers that we surveyed will not change approaches mid-project even when they recognize they are not meeting project success criteria.” When working with project managers, flexibility is a common area of struggle. More than 50 percent of project managers that we surveyed will not change approaches mid-project even when they recognize they are not meeting project success criteria. Many cite adherence to the original project plan. They feel they need to “stick to the process” as core reasons they cannot or will not deviate from a preset plan, even when it is not working. As you can imagine, this often takes projects on a poor trajectory and pushes them further in the wrong direction. If you want to improve the flexibility of your project managers and give them the flexibility to work creatively within the project environment, write your project goals in ink and write your plan in pencil. Chances are you’ll need to make some changes and adapt your plan as the project unfolds, which should be viewed as a strength rather than a weakness. Justin Smith is a principal at Start 2 Rise, LLC, Zweig Group’s strategic training and advisory partner in project management and leadership development. He can be reached at justin@ s2rgroup.com.

JUSTIN SMITH , from page 9

This same research looked at various team structures and project types. It aimed to rank the importance of each of these skills to establish a hierarchy of project manager skills and competencies. The results were surprising. While the four core skills remained strong predictors of project success, their relative importance to project outcomes shifted depending on the project type, as shown in Figure 1. These data highlight that flexibility is an underpinning, often invisible, competency of successful project managers. The most successful project managers draw on these core competencies, and they do that by recognizing the project environment and flexibly matching the hierarchy of skills to the environment. The skills are universal, but the way successful project managers deliver the skills depends on the unique facets of each project, and this is where a lot of project manager development stumbles. “The most successful project managers draw on these core competencies, and they do that by recognizing the project environment and flexibly matching the hierarchy of skills to the environment.” Project management that focuses on creating a constrained process also constrains the project manager’s ability to be effective in different circumstances. I admit that projects benefit from some structure. Still, the system should focus on project outcomes and goals rather than the process. Shifting the focus in this way gives the project manager the flexibility to “call the right play” at the right point in the project based on

PROJECT MANAGEMENT FOR AEC PROFESSIONALS This is a modern training for project managers led by a panel of experts, backed by proven research on how to best train project managers to be more effective. This course provides people-focused, science and data driven practical skills to help project leaders harness the power of their team and to create a better client experience. This course provides practical techniques that can be immediately implemented for a positive impact on any AEC team or business. Click here to learn more!

THE ZWEIG LETTER MAY 16, 2022, ISSUE 1441

F R OM T H E F O U N D E R

Prosperity leads to a slowACP

A s I wrote in these pages a fewweeks ago, the prosperity of the AEC industry as a whole has led to individual firms piling on overhead staff and tolerating non-chargeability in people who are supposed to be highly chargeable. It has also resulted in a certain sloppiness as it relates to billing and collection. If you are seeing your cashflow slowing down and your average collection period rising, you may want to take a look at why that is happening.

Mark Zweig

If you, in spite of having record revenues and profitability, are seeing your cashflow slowing down and your average collection period rising, you may want to take a look at why that is happening. Here are some of the things I would want to take a look at: 1. Speed of billing. Firms that have their stuff together can get their bills out quickly, and at any time someone in the firm needs one. Firms that don’t turn this into a lengthy days-long process will collect their money faster even if it isn’t reflected in the average collection period, which starts once the bill is actually sent. Why some firms have such slow and bureaucratic processes for billing is beyond me. With all of the off-the- shelf systems one can buy today that will handle time and expense reporting, along with billing,

there are few excuses for the inability to produce an accurate invoice quickly. Understaffing of the accounting and billing function is one possibility. Another possibility is that management tolerates days to get invoices for job-related expenses or sub consultants to get keyed in, or the firm has a lengthy (and typically unnecessary) time sheet review process. Either way, it will always lead to worse cashflow than the company should have. 2. Bad invoices. The invoices themselves have to be clear and formatted correctly, must be consistent with the contract the firm is working under, and should go to the right person in the client organization who has authorization to pay. If any of these are off, collections will slow down.

See MARK ZWEIG, page 12

THE ZWEIG LETTER MAY 16, 2022, ISSUE 1441

BUSINESS NEWS FLUOR JOINT VENTURE COMPLETES UNION SQUARE BRANCH OF BOSTON GREEN LINE EXTENSION Fluor Corporation announced that its joint venture team Green Line Extension Constructors, comprised of Fluor, Balfour Beatty Infrastructure, Inc., Herzog Contracting Group and The Middlesex Corp., has completed construction of the Union Square Branch of the Green Line Extension light rail project for the Massachusetts Bay Transportation Authority and it is now open to the public. “Safe and reliable infrastructure is vitally important to local, state and regional commerce,” said Thomas Nilsson, president of Fluor’s Infrastructure business. “Boston is one of the most vibrant cities in the United States and when this project is fully completed, it will help to improve transportation access for residents and visitors of the greater Boston area. The addition of the Union Square station provides first-time

access for those in the City of Somerville just north of Boston.” The 0.7-mile line is the first of two distinct branch lines to open as part of the Green Line Extension project, running from the new and relocated Lechmere Station in Cambridge to Union Square in Somerville. The second line of the 4.7-mile project, the four- mile mainline branch, is scheduled to open later this year. It includes the addition of a large vehicle storage and maintenance facility and the extension of the community path from Somerville into Cambridge. The Green Line Extension will greatly improve local and regional mobility by offering a one-seat ride to downtown Boston, address longstanding transportation concerns, result in fewer automobiles on local roads and help to combat greenhouse gas emissions and other components of air pollution. The project will also support municipal

plans for sustainable growth and urban redevelopment and provide residents with faster rides to jobs and other destinations. The projected daily ridership at the seven stations is estimated to be 45,000 by 2030. Construction began in 2018. Fluor Corporation is building a better future by applying world-class expertise to solve its clients’ greatest challenges. Fluor’s 41,000 employees provide professional and technical solutions that deliver safe, well-executed, capital- efficient projects to clients around the world. Fluor had revenue of $12.4 billion in 2021 and is ranked 196 among the Fortune 500 companies. With headquarters in Irving, Texas, Fluor has provided engineering, procurement and construction services for more than 100 years.

communicating to the client that whatever they have done in the past as it relates to paying your bills, or whatever other companies they owe money to tolerate from them, is of no concern to you – and that you fully expect to get paid promptly when you send them a bill. 4. Internal tracking and communication. You have to track and report the metrics related to billing and collection, and then talk about how you are performing in your regular management meetings. Maybe total collection period is a better metric to track than average collection period, because it starts the moment the work is performed versus when the bill is actually sent. Certainly monitoring your unbilled work-in-progress is crucial, as this money reflects the difference in total collection period versus average collection period. Many firms allow their WIP to build to a completely ridiculous number because their managers allow people to keep charging their time to jobs that are over budget with the idea that some day they may be able to ask the client to pay for some of that. Then they never bill it. This is a bad practice. Either bill it or write it off – quickly in either case – so you don’t distort your accrual revenue numbers. The bottom line on all of this stuff is that as long as I have been working with firms in this business and as solvable as these kinds of problems are, they still exist. Why not learn and change so when this economy turns down and the music stops, you aren’t left without a chair to sit in? Mark Zweig is Zweig Group’s chairman and founder. Contact him at mzweig@zweiggroup.com.

MARK ZWEIG , from page 11

This takes diligence and people in your firm who know what they are doing. It also takes some common sense. No one pays a “statement,” so why ever send those out? I also always thought that agings of prior invoices (“0-30, 31-60, 61-90,” etc.) should never show up on a bill, and a lot of companies still do that today. It just demonstrates to a client that you EXPECT them and your other clients to not pay you promptly. I would much rather show any prior unpaid invoices for a particular project to be reflected on the bill after the total for the current billing period, and to be included in the “total due and payable now” figure at the bottom of the bill. If clients gripe about you doing that, simply tell them to pay their bills promptly and they will never see that again. I’m serious! “As solvable as these kinds of problems are, they still exist. Why not learn and change so when this economy turns down and the music stops, you aren’t left without a chair to sit in?” 3. Weak collection efforts. I would define “weak collection efforts” as not following up shortly after a bill is sent to see if it has been received and if there are any questions, not following up after 30 days to see where it (the money) is if it hasn’t been paid, and not getting the technical or design professionals who are running the job involved if it isn’t paid in 45-60 days. These things have to happen consistently or payments will stretch out. It’s all a matter of

THE ZWEIG LETTER MAY 16, 2022, ISSUE 1441

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