TZL 1599 (web)

August 25, 2025, Issue 1599 WWW.ZWEIGGROUP.COM

TRENDLINES

Return on owner’s equity

42% 44% 46% 48%

2021 2022 2023 2024 2025

Environmental M&A is where sustainability and strategy meet, driving growth across the AEC industry. An environmental M&A boom

Zweig Group’s 2025 Financial Performance Report shows that the median return on owners’ equity for AEC firms rose to 45.4% in 2025. This reflects a strong rate of return on owners’ investments before taxes and bonuses, highlighting solid financial performance across the industry. Participate in a survey and save on a Zweig Group research publication.

I f you’ve been around the AEC industry for a while, you might have noticed a trend recently. The environmental sector is on fire. So far, we’ve recorded 319 M&A transactions this year and 65 of those are tied directly to the environmental sector. That’s about one in every five deals, or, in other words, a big slice of the pie. It tells us a lot about where the AEC industry is headed. From climate resilience to regulatory compliance, buyers aren’t just dabbling in environmental expertise anymore. They’re making it a central part of their growth strategies. AN ENVIRONMENTAL BOOM. The environmental sector has become both a strategic necessity and an investment magnet. Strategic buyers account for most of these environmental sector deals, scooping up specialized expertise in areas like water resources, remediation, and sustainability consulting. Still, private equity has made its presence felt, being involved in 18 deals so far this year. For many of these private equity firms, they see environmental services as a safe bet: compliance-driven, resilient in downturns, and increasingly essential for clients across every part of the AEC industry. Another major part of the story is told through geography. More than 70 percent of the environmental sector transactions have taken place in the United States. With seven transactions so far this year, Colorado stands out as the current hotspot for environmental M&A activity. Certainly, this makes sense given its mix of water resource challenges, natural resource management needs, and strong base of environmental consulting talent. Florida is the next most active state with four transactions, reflecting an ongoing focus on stormwater, coastal resilience, and development pressures. New York, Texas, California, and Minnesota are also active with four transactions each. This isn’t just a story about the United States. Elsewhere in the world, there have been 27 environmental sector transactions. The U.K. is leading the way internationally with 11 transactions while Canada follows up with six. Moreover, countries like Switzerland, Ireland, Belgium, Austria, France, Sweden, and Australia are each playing a role. Simply put, environmental M&A activity isn’t confined to one marker. It’s a global play, with firms everywhere trying to build the expertise and scale they need to meet fast-growing demand. WHAT’S FUELING THESE TRENDS? Upon closer inspection, a few themes jump out as to why environmental firms are such hot targets right now. ESG and sustainability pressures are no longer optional.

Will Swearingen

FIRM INDEX AECOM...............................................................6

Stantec............................................................... 4

TPD, Inc............................................................12

MORE ARTICLES n SHIRLEY CHE: The power of showing up Page 3 n MARK ZWEIG: Connect your people to the end result Page 5 n John McAdams : Do you really want your firm to prosper? Page 8 n JUSTIN GOUGH: Rethinking benefits funding Page 10 n Building a winning team: Kevin Johnson Page 12

See WILL SWEARINGEN, page 2

THE VOICE OF REASON FOR THE AEC INDUSTRY

WILL SWEARINGEN, from page 1

Clients across industries need help hitting carbon goals, navigating new regulations, and planning for climate resilience. And, buyers want to be the ones offering those services. Additionally, water has been a huge driver. Whether it’s wastewater treatment, stormwater management, or water resource planning, firms with deep expertise in this space are in high demand. Private equity has also played a major role. Environmental services are seen as a steady, compliance-driven investment, which makes them especially appealing in a market that can be unpredictable. We’ve also seen deals that are just as much about talent as they are about services. Firms with specialists in PFAS testing, ecological restoration, or renewable energy integration are especially attractive as those skills become more valuable year-to-year. And, finally, geography plays a major role. Clients are global, which means firms are looking for cross-border acquisitions that can support multinational needs. WHERE ARE THINGS HEADING? If the first eight months of 2025 are any indication, the environmental sector won’t be slowing down any time soon. Expect to see more private equity roll-ups as investors look to build platforms that can scale quickly across multiple geographies and service lines. Strategic buyers will also continue to chase niche expertise in areas like climate modeling, resilience planning, and carbon accounting as those capabilities are only going to become more critical. Internationally, the U.K. and Canada will likely remain major hotspots, but don’t be surprised if activity picks up in other regions where climate regulations are tightening. In the United States, places like Colorado and Florida may continue to lead, but the demand for environmental services is so widespread that deal activity will remain geographically diverse. The bottom line is this: the environmental sector is now firmly at the center of AEC deal-making, and 2025 is shaping up to be a defining year for how firms position themselves for the future. Environmental firms aren’t just along for the ride in today’s M&A market. They’re driving it. They’ve carved out a solid 20 percent of all AEC deal activity, and the momentum shows no signs of slowing. Strategic buyers see them as essential for staying competitive, private equity sees them as resilient investments, and clients see them as indispensable partners in tackling today’s toughest challenges. From Colorado to the U.K., the message is the same. Environmental expertise is in demand, and firms that have it are hot commodities. If 2025 has taught us anything so far, it’s that the environmental sector is no longer a side part of the AEC industry. It’s the headline. And with the pressures of climate change, regulatory shifts, and sustainability only increasing, expect this trend to keep building. As environmental M&A activity continues to surge, positioning your firm the right way has never been more important. Whether you’re considering buying to expand expertise and scale or selling to capture the value you’ve built, Zweig Group’s full-scale mergers and acquisitions consulting team can help you navigate the process with confidence. From sourcing exclusive opportunities to structuring, negotiating, and closing transactions, our industry-leading team blends deep AEC knowledge with decades of deal experience. We’ve built a proven track record of helping firms maximize value on the sell-side and identify the right targets on the buy-side. Learn more about Zweig Group’s M&A consulting services here . Will Swearingen is senior director of Transition consulting at Zweig Group. Contact him at wswearingen@zweiggroup.com.

PO Box 1528 Fayetteville, AR 72702

Chad Clinehens | Publisher cclinehens@zweiggroup.com Sara Parkman | Senior Editor & Designer sparkman@zweiggroup.com Tel: 800.466.6275 Email: info@zweiggroup.com Online: zweiggroup.com/blogs/news LinkedIn: linkedin.com/company/22522 Instagram: instagram.com/zweiggroup Twitter: twitter.com/ZweigGroup Facebook: facebook.com/p/Zweig- Group-100064113750086 Published continuously since 1992 by Zweig Group, Fayetteville, Arkansas, USA. ISSN 1068-1310. Issued weekly (48 issues/year). © Copyright 2025, Zweig Group. All rights reserved.

ELEVATEAEC CONFERENCE & AWARDS GALA The largest in-person gathering of industry leaders and award-winning firms, the 2025 conference promises to be bigger and better than ever with a jam- packed agenda designed to help you connect, learn, and celebrate like never before. Join us September 9-11 in San Antonio, Texas. Learn more!

THE ZWEIG LETTER AUGUST 25, 2025, ISSUE 1599

OPINION

The power of showing up

T his past summer, I found myself in ballrooms, breakout rooms, and bustling receptions across several different industry conferences. After hours of sitting through presentations (and more than a few awkward “networking” moments), I walked away with something I couldn’t have picked up from a webinar or a white paper: the power of showing up. From fees to client care, lessons learned from a season of conferences highlight growth, adaptability, and connection.

Shirley Che

Being in the room with others who are in the same shoes – asking questions that resonated, wrestling with the same challenges – hits differently than logging into a virtual session. I didn’t just hear ideas, I felt the collective curiosity in the air. And more often than not, the most valuable takeaways were the ones I didn’t even know I needed. Here are a few highlights that stuck with me: ■ Instead of just highlighting private equity and consolidation (which everyone’s already buzzing about), Will Swearingen of Zweig Group reminded us that profitability is not just a metric – it’s what enables you to invest in people, systems, and growth. Young professionals in Florida saw almost a 7% salary increase in the past year – far above the national average of 2.2%. There are so

many parts to the story of fees and profitability – fee setting, recruiting, retention, succession – and all of it ties back to understanding your cost structure and ensuring profitability. It’s not just about chasing bigger projects or higher billings; it’s about making sure your firm is healthy enough to reinvest in its future. Rosa Sheng and her co-presenters gave a solemn reminder that inequity has health, environmental, and generational consequences. Their framing powerfully tied redlining, sacrificial zones, and environmental injustice directly to the disparities we see today. It shifted DEI from being about HR policies to something much broader: who bears the cost of our built environment decisions, generation after generation.

■

See SHIRLEY CHE, page 4

THE ZWEIG LETTER AUGUST 25, 2025, ISSUE 1599

BUSINESS NEWS STANTEC AND POMERLEAU TO PROVIDE DESIGN-BUILD SERVICES FOR REPLACEMENT FERRY TERMINAL Stantec, a global leader in sustainable design and engineering, and Pomerleau, a Canadian leader in the construction industry, have been selected by the British Columbia Ministry of Transportation and Transit to provide design-build services for the Belleville Terminal Redevelopment Project Phase II. The design-build delivery of this replacement ferry terminal in Victoria, British Columbia, includes major new

marine works to replace the old wharf as well as a new passenger building and adjacent civil works. The terminal serves two international cross-border ferry routes: the FRS Clipper Navigation Inc. which is a foot- passenger-only service between Seattle and Victoria; and the Black Ball Ferry Line providing foot-passenger and vehicle service between Port Angeles and Victoria. Phase I involved the conversion of the

steamship building and wharf into a temporary terminal, and to the Black Ball building, permitting the continued operations of ferry and border agencies during Phase II. Stantec will serve as the lead designer for Phase II of the project as part of the design-build team with Pomerleau. This phase will demolish the existing Clipper Terminal infrastructure and construct a new consolidated preclearance terminal building with modern border security standards.

the industry right now: collaboration as the new currency, where true partnerships reduce risk for owners and unlock trust; the growing momentum around client experience, reminding us that how clients feel during a project is just as important as the final deliverable; and the maturation of marketing and business development, as data, AI, and integrated strategies elevate these functions from support roles to strategic drivers, the makeup of a marketing team is shifting fast. ■ Alyson Fieldman, Rebecca Lavezzary, and Sarah Hoff, through two different sessions, provided a well-rounded client care strategy. Both sessions emphasized that growth comes from treating client relationships as more than just projects. Rebecca and Sarah reminded us how tools like personas, journey maps, and consistent feedback can turn satisfied clients into long-term advocates. Alyson emphasized the need to separate the relationship from the work – segmenting clients, mapping connections, and creating account plans that deepen loyalty and drive revenue. Together, the message was clear: firms that invest in client care and account strategy don’t just win projects – they build partnerships that last. ■ Last but not least, I only managed to write this article “Because I Said I Would.” Thank you, Alex Sheen. Of course, the bullet points above don’t capture the whole value of attending. The real magic happened in the in-between moments: running into a peer at the coffee line, overhearing a conversation that resonated, or stumbling into a session you didn’t think you needed. And yes, I’ll admit it: even as someone who creates networking opportunities, the word “networking” makes me cringe. But it is also true that more often than not, those unplanned conversations have been more beneficial than the business cards I carefully collected. (I like business cards, open for debate.) This fall, as conference season kicks into high gear, I’d encourage you to show up – not just log in. Starting with Zweig Group’s ElevateAEC Conference , there’s a full calendar of opportunities to learn and connect. Sometimes the biggest ROI isn’t a metric; it’s the simple act of being in the room. Shirley Che is a field marketing and PR strategist at Zweig Group. Contact her at sche@zweiggroup.com.

SHIRLEY CHE, from page 3

■ Kermit Baker of the AIA didn’t sugarcoat it: the economy is vulnerable. From tariffs to immigration policy to funding cutbacks, firms are operating in an environment defined by uncertainty. The stop-and-go effect on projects was a wake-up call that adaptability and forward planning are nonnegotiables. ■ Heather Currier Hunt and Laura Weiss challenged the old idea that professional development is about formal training programs. They emphasized creating cultures where learning is continuous – through coaching, feedback, and stretch assignments. One phrase stuck with me: “Retention is the new recruitment.” If we don’t keep developing our people, someone else will. ■ I always knew marketing/comms is essential in a merger/ acquisition, but during a panel moderated by Jamie Claire Kiser, I got the firsthand recount of the messy realities. The panelists, including Ana Maria Collins, didn’t sugarcoat – they talked about fears from founders, missteps in messaging, even the risk of saying “nothing will change” when, of course, everything will. But the real eye-opener was hearing how two CMOs from the merging firms could co-exist and collaborate through the integration process – using their combined perspective to protect culture, craft the right narrative, and build trust inside and outside the firm. The clear takeaway: get marketing leaders to the table early. ■ I was blown away by how systematic Gina Renee Autrey is about her firm’s association and professional organization involvement. She broke down the difference between scanning 122 business cards at a booth versus actually tracking who those people are, the follow-up that happens, and whether it led to meaningful outcomes. She built a system for evaluating opportunities, aligning people with the right roles, and making sure their involvement in professional organizations ladders up to strategic goals. More impressive yet, she sticks to her guns, demands everyone sticks to the processes, and holds everyone accountable – no ROI, no future participation. ■ I sat on my legs almost outside of the room at this standing room only session led by Sarah Kinard, and it was worth it. The session highlighted three shifts shaping

THE ZWEIG LETTER AUGUST 25, 2025, ISSUE 1599

FROM THE FOUNDER

It is a basic human need to see one’s work go from start to finish, and leaders need to do more to empower their people with this perspective. Connect your people to the end result

H ave you ever seen the lawn cutting or power washing videos where someone takes an overgrown yard or filthy patio and completely cleans it up? I occasionally get seduced into watching one while scrolling through social media and they are hard not to watch. I will confess I am a fan of doing my own lawncare (no one will have the quality standard I have) and would practically pay someone else to let me powerwash all day. It’s so gratifying to see the tangible results of my work.

Mark Zweig

Believe it or not, there is a lesson for us in those videos that could help our businesses immensely. I would bet most of us who are owners of mid- to high-level managers in AEC firms feel pretty gratified by the work our companies do. In many cases, depending on our scope (and the client of course) – we get to see it all – from the initial sale all the way through to final completion of whatever project it is we are involved with. That is satisfying and motivational to us, and helps fuel our passion for what we do. But what about everyone else? What about all of the

entry-level and mid-level design and technical staff who never get out of the office or away from their computer screens? What about the marketing staff who grind out qualification documents and proposals and provide presentation support? How are they going to get that same connection to the clients and the work that the owners and higher level managers get, improving the quality of what they do and gaining the resulting satisfaction that comes from seeing tangible accomplishment? Maybe we need to do more to give those people

See MARK ZWEIG, page 6

THE ZWEIG LETTER AUGUST 25, 2025, ISSUE 1599

BUSINESS NEWS AECOM ENTERS STRATEGIC PARTNERSHIP WITH SILZ COMPANY TO SUPPORT SAUDI INTEGRATED LOGISTICS GROWTH AECOM, the trusted global infrastructure leader, announced a strategic partnership with Special Integrated Logistics Zones Company, the Kingdom of Saudi Arabia’s premier developer and operator of integrated logistics zones. This partnership is designed to accelerate Saudi Arabia’s emergence as a global integrated logistics leader, aligning with Saudi Vision 2030’s goals of economic diversification, sustainable development, and enhanced global trade integration. As part of the agreement, AECOM is delivering project management consultancy and strategic advisory services for Riyadh Integrated, SILZ’s flagship integrated logistics zone, located only eight kilometers from King Khalid International Cargo Village, with direct access to key transport corridors. Purpose-built to serve high- growth sectors such as information and communications technology, pharmaceuticals and aerospace, the zone offers a fully integrated logistics ecosystem, including pre-built warehouses, build-to-suit units, land plots, offices, and showrooms. “This collaboration marks the foundation of a long-term relationship built on shared ambition and innovation,” said Hamed Zaghw, chief executive of AECOM’s Middle East and Africa region.

“As SILZ Company transforms the integrated logistics landscape in Saudi Arabia, we’re proud to serve as their trusted advisor, guiding vision into action and advancing a bold infrastructure strategy that supports economic vitality and international investment.” “This strategic partnership with AECOM marks a pivotal moment for SILZ Company and for Saudi Arabia’s ambitious journey to become a global integrated logistics powerhouse,” said Dr. Fadi Al-Buhairan, chief executive officer, SILZ Company. “This collaboration with AECOM, a trusted global leader in infrastructure, is instrumental in translating that bold vision into tangible action. Their expertise in project management and strategic advisory will accelerate the development of Riyadh Integrated, ensuring we deliver world- class infrastructure and services tailored for high-growth sectors.” “We’re proud to bring together our deep regional insight and global expertise to help shape the future of integrated logistics in Saudi Arabia,” said Jason Kroll, chief executive, AECOM Arabia. “This partnership reflects the ongoing demand for our industry-leading advisory services and underscores the value we deliver as the world’s top transportation design firm.” AECOM is the global infrastructure leader, committed to delivering a better world. As a trusted professional services firm powered by deep technical abilities, we solve our clients’ complex challenges

in energy, transportation and buildings. Its teams partner with public- and private-sector clients to create innovative, sustainable and resilient solutions throughout the project lifecycle – from advisory, planning, design and engineering to program and construction management. AECOM is a Fortune 500 firm that had revenue of $16.1 billion in fiscal year 2024. water, environment, SILZ is the developer and operator of integrated logistics zones in Saudi Arabia. Using advanced technology, industry expertise, and smart infrastructure, SILZ sets new efficiency and value-chain integration standards. SILZ aims to become the global benchmark for logistics zones by enabling sustainable, future-ready supply chains, supporting companies investing in the region, and contributing to the Kingdom’s economic diversification and Saudi Vision 2030. Riyadh Integrated, the Kingdom’s first integrated logistics zone, is located just eight kilometers from King Khalid International Cargo Village. With a focus on light manufacturing, logistics, and trade, it offers a full-service ecosystem including a one-stop shop, value- added services, and competitive incentives, including 50-year tax relief and 100 percent foreign ownership. It is built for global industries, such as ICT, pharmaceuticals, aerospace, and more.

MARK ZWEIG, from page 5

I will never forget how excited my ex-wife was years ago, to see a project she worked on as an entry-level landscape architecture grad at EDSA while on our honeymoon in Bermuda. It was The Princess Hotel – now called the Hamilton Princess and Beach Club – and she had worked on color studies for the exterior before it was painted. Seeing the final result of her work in the flesh was the connection she never got in her low-level job. Maybe getting more of that would have kept her going when she was tired or kept her working at the company – who knows? One thing I do know for sure. It is a basic human need to see one’s work go from start to finish. I’m going to run with that and not ignore it. Mark Zweig is Zweig Group’s chairman and founder. Contact him at mzweig@zweiggroup.com.

the same connection and satisfaction from their work. Let’s bring some of them to the actual presentations to win the project. Let’s bring some of them into the initial client meetings as observers if nothing else. Let’s take some of them on the initial site visits. Let’s get some of them out of the office on construction administration visits. Let’s get some of them to the topping off ceremonies on projects they helped design. Let’s get some of them to the grand openings of whatever the facility is so they can make the connection between what they do as individuals to the final result. Yes, there is a cost to do this, but how much more motivation and how much less (very costly) staff turnover would we have if we made a conscious effort to do more of this? And wouldn’t their actual work quality improve if they had more direct client interaction?

THE ZWEIG LETTER AUGUST 25, 2025, ISSUE 1599

OPINION

If you’re serious about growing your design firm, you need to add outside experts to your board of directors. Do you really want your firm to prosper?

I founded an engineering/landscape architecture/geomatics firm named “McAdams” in April of 1979 while I was enmeshed in an MBA program at Duke University. I carefully nurtured my nascent enterprise with everything I had, conscious of relying on my business education more than my civil engineering degree. What I did not do is consult with others in the design industry; because, “Hey, I’m a freshly-minted Duke MBA!” What advice could I possibly need from others in the design industry (who probably didn’t have an MBA)?

John McAdams

Well, about 15 years in, I learned there is a wealth of knowledge out there in our industry, and I was missing out on a lot of industry-specific know-how about running a successful design firm because I didn’t bother to access it. So some other top McAdams officials and I started going to industry conferences – a very eye-opening exchange of ideas, actually; and then at our 40th anniversary we finally firmed-up the structure of our board of directors, set term limits that were staggered, and brought in three seasoned outsiders who are tremendously valuable. Here’s is what you get with outside directors: 1. Knowledgeable advice from design-industry and corporate veterans who have navigated issues you have not experienced. 2. Business executives who hold your firm’s CEO accountable for internal matters, as in:

When are you going to get serious about curing your receivables problem? What will you do to improve the work climate? Or adios those toxic employees? What programs or changes can you implement to improve talent retention? Internal directors, who report to the CEO, are a lot less likely to press these issues. 3. Executives (current or retired) from other industries (public works managers, DOT officials, real estate development executives, construction industry executives, etc.) can be invaluable in gaining introductions to potential clients, expanding into new market sectors, and in coaching the design firm as to serving selected industries with excellence.

THE ZWEIG LETTER AUGUST 25, 2025, ISSUE 1599

4. CEOs should ardently desire a group of advisors – a “kitchen cabinet” – to bounce ideas off of. This is the cure for that “alone at the top” feeling. Outside directors, veterans of our industry, are the best bet. 5. The external board members should constitute a “compensation committee” of the board, to set the salary of the CEO. This should be set at a level that is fair to both the CEO and the company, and should include meaningful bonuses tied to achieving profit and revenue (and other) goals. Boards of directors with external members should meet quarterly, allocate an entire day for the board meeting, and they should include some strategic issues on the agenda. Send the agenda packets out at least two days prior to the meeting, so that members have at least two evenings to review the packet. Run the board meeting with intentionality. Pay the external members $5,000 per meeting. The profitability of the firm will increase far more than the fee paid to the external board members, the careers of the teammates will be enhanced, and the firm will rise to new heights. A comment about pursuing growth of your design firm: Some founders of design firms operate theirs as a sole proprietorship, where continuous growth is not in the program. Small design firms with a 30-50 FTE headcount can have very low turnover and very high profitability; because everyone is highly experienced in their role, and there are no new hires to

be trained. Everyone feels part of the “family.” It’s a safe place to be. Everyone works for the owner, and the profits all belong to that owner. External board members are rarely needed for that type of firm. This small-firm culture provides a nice lifestyle for that owner, but it can get particularly difficult to retain top talent, who may want an expanded career. Eventually the owner sells to an acquiring firm; and the brand and the culture get absorbed into a different entity. Alternatively, for design firm leaders who want to grow the enterprise, the firm itself must be respected and nurtured above all, for it is the firm that is the source of all prosperity for both the people who are employed within it, and for the clients it serves. The founder/owner, originally, and the CEO later, must treat the enterprise as an entity separate from him/ herself personally, and work every day to build the enterprise, causing it to grow far beyond the level of a sole proprietorship. As part of that, constituting a board of directors that includes external members (always more than one), will enhance the performance of the CEO, and therefore of the enterprise itself. If you are serious about the growth and prosperity of your design firm, build a board with external members. You don’t know everything. John McAdams is the Founder and Chairman Emeritus of McAdams, a multi-discipline civil engineering, land planning, landscape architecture, transportation and geomatics firm headquartered in Raleigh, NC. Connect with him on LinkedIn.

& Specialty Insurance Brokerage Risk Management Consulting

• Architects & Engineers • Contractors & Construction Professionals

• Law Firms •

Boston 617-328-6555

Charlotte 703-827-2277

Orlando 202-680-4507

Philadelphia 610-547-0663

Washington, DC 703-827-2277

THE ZWEIG LETTER AUGUST 25, 2025, ISSUE 1599

www.amesgough.com

OPINION

Rethinking benefits funding

A s small and mid-sized design firms strive to attract and retain the best talent, many realize that offering competitive employee benefits can be a critical differentiator. Yet with rising costs, maintaining these programs increasingly calls for innovative funding solutions. Group captives can offer design firms flexibility, savings and control over employee benefit programs.

Justin Gough

As in other industries, many AEC firms are exploring captive insurance as an alternative to fund their benefits programs. Technically, captives are insurers established and owned by one or more non- insurance businesses, such as design or construction firms. Historically, while large corporations have been able to use captive insurers for employee benefits and other risks, smaller and middle market firms now can achieve the same advantages by joining and participating in an employee benefits group captive. These entities are owned and operated by multiple non-insurance companies, primarily to insure or reinsure the risks of their member companies. In effect, by forming a group captive, companies can collectively retain and manage risks that would otherwise be insured through traditional commercial insurance markets. This approach allows multiple

companies to band together to take control of their employee benefits programs, leading to potential cost savings and increased flexibility. Employee benefits group captives offer many advantages. For small and mid-sized design firms, in particular participating in a group captive offers several advantages, including: ■ Cost savings. By self-funding certain employee benefits, companies can save significantly on insurance premiums. Captives can earn underwriting profits and investment income on premiums paid, leading to potential savings of 10 percent to 50 percent compared to traditional insurance.

■ Economies of scale. Group captives benefit from

THE ZWEIG LETTER AUGUST 25, 2025, ISSUE 1599

pooling resources and risks, which can lead to reduced costs and more favorable pricing in negotiating for stop- loss coverage, pharmacy benefit management, wellness vendors, and administrative services. ■ Flexibility in benefit design. Captives offer firms greater control over benefit plan designs. Individual captive owner/participants can tailor their benefits to meet the specific needs of their workforce, rather than being constrained by the terms and limits imposed by commercial insurers. ■ Improved cash flow. With a captive, claims are paid as they arise, improving cash flow management. This contrasts with traditional insurance, where premiums are paid upfront, regardless of when claims occur. ■ Exemption from state mandates. Captives can provide exemption from state-mandated benefits, allowing companies to design plans that better suit their employees’ needs. ■ Potential for profit. In traditional fully insured models, if your employees are healthier than expected, your insurer keeps the profit. When you use a captive, however, you keep the savings. When claims are the captive’s expectations, the underwriting gains are returned as dividends or retained to reduce future premiums. Similarly, the captive’s investment income can also be shared. STRUCTURAL ELEMENTS OF EMPLOYEE BENEFITS GROUP CAPTIVES. AEC firms can use group captives to fund various employee benefits, including medical stop-loss, life insurance, disability insurance, and retiree benefits. Generally, the structure, typically involves: ■ Assuming first layer of risk. The group captive provides a mechanism for self-funding the initial (or more predictable) layer of healthcare risks. ■ Purchasing stop-loss coverage. To protect against large claims, such as those arising from a catastrophic illness or injury, the captive purchases stop-loss insurance, which covers claims exceeding a certain threshold. ■ Managing claims. Claims are handled through the captive, which coordinates directly with third-party administrators and healthcare providers. ASSESSING KEY CONSIDERATIONS. While employee benefits group captives offer numerous advantages, they also come with challenges: ■ Regulatory compliance. Owner/participants must navigate complex regulatory requirements, including obtaining approval from the U.S. Department of Labor for certain benefits.

■ Collaboration among members. Successful implementation requires strong collaboration and trust among member companies. ■ Initial investment. Setting up a captive requires an initial investment and a commitment to ongoing risk management and wellness initiatives. An experienced insurance broker or benefits consultant can help firms evaluate their options and explain the requirements for participating in a captive. UNIQUE ADVANTAGES OF HOMOGENOUS GROUP CAPTIVES. AEC firms exploring the use of a group captive to fund their employee benefits might be best served by a homogenous group captive, whose owner/members are in the same or similar industries. This typically makes it easier to manage risk, share data, and collaborate on solutions. For instance, architecture and engineering firms share several common characteristics: They generally employ white- collar professionals who work in similar environments, have comparable lifestyles and deal with similar types of stress. As a result, they may have comparable health risks and profiles, which facilitates more accurate underwriting; the development of targeted wellness programs, such as posture correction, stress reduction, and mental health; initiatives; and better predictability in claims trends. In working with traditional insurers for employee benefits, many design firms become frustrated with the lack of transparency with respect to their claims data and cost drivers. However, by participating in a group captive they gain full transparency into how their healthcare dollars are being spent, as well as the ability to collaborate with all other member/owners to set the rules for all participants. They also gain the control to tailor benefit strategies specifically to the unique needs and interests of their workforces. In a homogenous group captive, design firms may also benefit by sharing best practices for employee well-being, collaborating on compliance strategies (such as with respect to ERISA and ACA) and designing employee engagement strategies that resonate with their distinctive company cultures and professional and staff employees. Finally, participation in a homogenous group captive enhances the potential for continuous improvement. Member/owners may be able to share best practices and conduct meaningful benchmarking against peer companies. While homogeneous group employee benefits captives offer several exciting advantages for AEC firms, they typically require long-term commitments, careful planning and collaboration to navigate the regulatory landscape and to ensure ongoing success. However, by taking control of their benefits programs, design firms can meet the needs of their employees, while achieving cost savings, flexibility, and improved cash flow. Justin Gough, vice president of Employee Benefits, Ames & Gough. He can be reached at jgough@amesgough.com.

THE ZWEIG LETTER AUGUST 25, 2025, ISSUE 1599

PROFILE

Building a winning team: Kevin Johnson President of TPD, Inc. (Pottstown, PA), a consulting engineering firm specializing in transportation engineering and related environmental and construction services.

By LIISA ANDREASSEN Correspondent

T PD, Inc., a transportation engineering firm, is no stranger to winning the Zweig Group’s Best Firm to Work For Award and its president, Kevin Johnson, mostly attributes that to company culture. He describes his leadership style as well as company culture as collaborative. He says that for most everything he does, he learned through playing team sports and believes that teamwork is a requirement, not just a buzzword. If you want to know how TPD operates, Johnson says to watch a replay of a timeout during the Jay Wright era at Villanova which led to three Final Four appearances and two NCAA championships from 2016 to 2022. “Jay always gathered his assistants together to discuss and seek input on strategy prior to talking to the team during every timeout,” he says. “He also sought input from the players. Both his direct reports (the assistant coaches) and their direct reports (the players) knew they could provide their thoughts and honest feedback on his ideas.”

The same input is not only sought, but freely offered at TPD. Its culture is one where people know they can openly express their opinions without fear of failure and are acknowledged for making what are often great recommendations. This culture creates an environment where mentoring is expected and supported, leading to an extraordinarily talented and motivated staff. And, Johnson knows from experience that if you have a great culture, people will want to return to work for you even if they have left for perceived greener pastures or because of a reduction in force (RIF). LESSONS LEARNED; RECRUITMENT CHALLENGES MET. For example, he shares that during the Great Recession, TPD resisted a RIF for too long due to some beliefs that the cost of training these great staff members who would be part of the RIF would now be a sunk cost, never to be recouped when they went to work for other firms. However, after TPD regained its financial footing and was able to start hiring again, more

THE ZWEIG LETTER AUGUST 25, 2025, ISSUE 1599

HEADQUARTERS: Pottstown, PA NUMBER OF EMPLOYEES: 278 YEAR FOUNDED: 1989 OFFICE LOCATIONS:

Newark, DE

■

Freehold, NJ

■

Lakewood, NJ

■

than 50 percent of the RIF employees returned, including three who are now in their ownership group. “This was an extremely expensive lesson to learn and even jeopardized the ability of TPD to remain an independent entity, but now we know,” he says. Right now, TPD’s top challenge is to find people to support company growth. Over the last three years, the company has:

recruiting and “Lunch and Learn” events can be held at these locales. Sponsors six Women’s Transportation Seminar (WTS) chapters and its sponsorships support college scholarships awarded by each WTS chapter. Is a named sponsor of a $2,500 annual scholarship awarded by the Philadelphia chapter of COMTO (Conference of Minority Transportation Officials).

Lawrenceville, NJ

■

Runnemede, NJ

■

Warren, NJ

■

Melville, NY

■

Bethlehem, PA

■

Doylestown, PA

■

Harrisburg, PA

■

More than doubled the number of colleges it recruits from to fill entry-level positions Tripled its space in their Philadelphia office in the last five years to accommodate the desire of young employees, from co-ops to junior level staff, who mostly want to live in the city.

■

Philadelphia, PA

BUILDING A WINNING TEAM. Currently, TPD is focused on building a winning team to win public sector projects. Despite being an ENR 400 firm and in business for 36 years, it’s still the new kid on the block in many respects. “Engineers are risk averse which carries forward to those evaluating firms in a Qualification-Based Selection process,” Johnson explains. “This risk aversity combined with competing against 30-40 firms for every project creates barriers to entry; overcoming these barriers is challenging. So, it’s extremely gratifying when TPD is not only selected for a first project with a particular entity, but also when it’s selected for larger, more complex projects for that same entity.” When asked if there’s anything that keeps him up at night, Johnson says you can ask his wife. “She’s amazed that I sleep so well,” he says. “We’ve lived through four recessions and navigated two major partner buyouts, emerging each time even more resilient and formidable than before.” That’s winning.

■

Pittsburgh, PA

■

Pottstown, PA

■

■ West Chester, PA MARKETS: TPD operates primarily in the eastern United States, providing civil engineering for public and private clients SERVICES:

■ Filled five positions with recruiters. “We also took our employee referral bonus program and put it into overdrive with referral bonuses now up to $20,000 for hard-to-fill positions,” Johnson says. DEI also plays an important role in recruitment. The company has an active DEI committee that complies with all federal laws. It meets twice a month and to date, it has effectively expanded the pool of candidates to fill positions. The committee:

Highway design

■

Bridge design and inspection

■

Transportation planning

■

Traffic signals and ITS

■

Attends career fairs at HBCUs and hosts “Lunch and Learn” events with professional societies at these schools. Performs research to identifies the most diverse civil engineering programs within a 100-mile radius of each office so

■

CM/CI

■

Multimodal design

■

Environmental

■

Expert witness

■

THE ZWEIG LETTER AUGUST 25, 2025, ISSUE 1599

Page 1 Page 2 Page 3 Page 4 Page 5 Page 6 Page 7 Page 8 Page 9 Page 10 Page 11 Page 12 Page 13

Made with FlippingBook flipbook maker