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The Association of Consulting Engineering Companies

The Association of Consulting Engineering Companies

The Association of Consulting Engineering Companies

The Association of Consulting Engineering Companies - Canada (ACEC) is a business association representing nearly 500 companies that offer professional engineering and related services to a wide range of public and private sector clients.

Organizationally, ACEC is a national federation of provincial and territorial associations representing consulting engineering companies across Canada. Collectively, ACEC member companies directly employ nearly 75,000 Canadians.

The mission of ACEC is to promote a business and regulatory climate that recognizes and rewards the expertise of its members and their contribution to the quality of life in Canada. ACEC supports this mission with a strong advocacy program that engages with federal government and other national stakeholders to shape public policy and to raise the profile of the consulting engineering sector.

Founded in 1925, ACEC’s ongoing success has been a result of its ability to proactively anticipate issues and respond to trends that can impact its member companies.

For many decades, through much economic and technological change, the role and the basic business model for a consulting engineering company remained largely unchanged. That is until the 1980’s.

Generally speaking, consulting engineering companies had normally acted as agents of the owners. Performing varying combinations of feasibility studies, permitting, detail design and construction administration on behalf of the owner. The owner would in turn hire a contractor to carry out the consulting engineer’s recommendations or design.

In most cases, there was no contractual relationship between the consulting engineer and the contractor. This vertical hierarchy for project delivery is commonly referred to the Design-Bid-Build (DBB) model. Notwithstanding some recent revisionist history, this model had been (and can still be) successful in serving the interests of the owner and the public while offering a reasonable business model for consulting engineers and contractors.

When the boom of the 1980’s and its resultant buoyancy gave way to the harsh realities of the 1990’s recession, everything changed. The consequences of government deficits started in the 1960’s and 1970’s (without adequate foresight on how to manage debt) came home to roost. As a society, in order to pay the bills, we stopped investing in our future. We stopped investing in the very things the create prosperity.

Public investments in infrastructure dramatically decreased from about 6 percent of GDP to less than two to three percent of GDP. Private companies shelved or outright cancelled projects (or went out of business). Work dried up. For those projects that did proceed, value became confused with price and consequently, emphasis on lowest short-term cost replaced long-term savings value. In this economic environment, consulting engineering companies downsized or folded.

Some dating back to the turn of the century disappeared as the results of mergers and acquisitions. Postsecondary enrollment in engineering and other scientific and technological disciplines plummeted. Many skilled professionals and experts were lost to the sector forever.

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Fast forward to today: underinvestment has grown the infrastructure deficit in Canada. Fiscal deficits at all levels of government are consuming tax dollars and curtailing the ability to invest sufficient capital into infrastructure programs.

A fixation on low-price over value and quality has become entrenched in the procurement practices in much of the private sector. Downsizing in the 1990’s and fiscal austerity have conspired to erode the amount of experience and expertise available to deliver infrastructure projects and programs in both the public and private sectors.

But it is not all bad news. For the first time in decades, political leaders have begun to acknowledge infrastructure as an investment in prosperity rather than an expense. The recent commitment by the federal government to a ten-year infrastructure investment program is an example of how the public sector is starting to understand the importance of considering life-cycle in infrastructure economics. Now the challenge has become: where do we find the money to invest in infrastructure?

Public investment in infrastructure is on the upswing. But with the ongoing fiscal challenges facing governments this public investment, while helpful, is unlikely to overtake the infrastructure deficit in the near future.

Consequently governments are looking to different delivery models that promise more cost and schedule certainty and/or that encourage private sector investment in infrastructure, namely Design-Build (DB) and Public-Private Private Partnerships (P3). These models significantly change the relationship between the consulting engineer and the constructor.

Whereas under DBB there is no direct contractual relationship between the consulting engineer and the constructor, both DB and P3 place them into a very intimate contractual relationship. With increasing frequency, contractors and construction companies are becoming important clients for the consulting engineering industry.

In any form of project delivery, the best results are achieved when there is a fair sharing of risk and reward among the parties–including the consulting engineer–and when risk is allocated to the party best able to manage that risk.

Consulting engineers and other design professionals must understand that there are risks specific to DB and P3 projects that are very different from those encountered in conventional delivery models. Principal among those risks are very high pursuit costs which are typically not compensated at the engineer's usual rates, and a strategy on the part of the owner to transfer its risks to the project team.

The private sector partner will in turn seek to transfer those risks to its team, including the consulting engineer. Design professionals must be prepared to negotiate reasonable limits on the risk they assume and ensure appropriate compensation for those risks they choose to accept.

Ultimately, the success of a DB or P3 project is highly dependent upon the team that the private sector P3 partners assemble to fulfil their obligations to the owner. All parties must carefully consider the qualifications and expertise of all others on the team before deciding to participate. Underperformance by one member of the team will have serious negative consequences for others on the project team, for the public owner and for the end-users.

There is one key similarity between DB, P3 and more conventional delivery models like DBB– The contribution of the consulting engineer is an important investment in the success of the project. Even though the planning and design of a project represents less than 2 percent of the total life-cycle cost, decisions made during planning and design have ramifications over the entire service life of a project.

The owner will have to live with those decisions for decades, even generations. For this reason the selection of a consulting engineering firm for a project, regardless of the delivery model, should focus on the qualifications of the project team and the merits of the proposal rather on fees. An appropriate investment in professional services at the onset of a project can potentially reduce capital, maintenance and operating costs while improving reliability and extending service life. Conversely, reducing the investment at the design stage can result in significant higher capital, operating and maintenance costs throughout the service life of the project.

 

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