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U.S. heritage compliance industry flat since 1990

A new analysis of data for the United States heritage compliance industry presented at the Society for American Archaeology annual meeting in April 2014 shows that the industry grew at a mean annual rate of 1.6 percent since 1990. Despite decades of nominal growth, real growth has remained relatively flat for the last 25 years (Figure 1). Real growth is non-inflationary growth. The U.S. heritage compliance industry is currently estimated to be just over $928 million in size and expected to reach $1 billion in 2015.

Nominal and Real Growth

Figure 1: While nominal growth has been increasing, real growth has been flat since 1990.

During the 1970s and particularly during the 1980s, real industry growth hovered around 15 percent annually with the exception of 1979 and 1980 which had low, but still positive, growth (Figure 2). There have been only four years since 1971 with real negative growth: 1995, 1996, 1997, and 2009. An abrupt, but currently unknown, change took place in 1990 and marked the end of two decades of aggressive industry growth. Since this time, growth has remained in the low single digits.

Real Industry Growth

Figure 2. Since 1990, mean annual real growth has been only 1.6 percent.

There are many ramifications of this new information, not least of which is the ability of the industry to attract investors as an entire generation of founding owners are divesting for retirement. New investors seeking a competitive return on their investment are likely to be reluctant to take equity stakes in firms in an industry without significant growth.

This new analysis was presented in a paper by Dr. Christopher D. Dore, a heritage business consultant and Adjunct Professor in the School of Anthropology at the University of Arizona, entitled “The Two Greatest Business Challenges Heritage Consulting Firms must Solve for Future Success.” Dr. Dore’s paper was in a symposium entitled “40 Years of CRM (1974-2014):  Accomplishments, Challenges, and Opportunities”. Dr. Dore stated that “while I’ve been tracking industry metrics for nearly a decade, this new analysis caught me by surprise.” He continued “we have known that some individual firms have been struggling to add value over this period as heritage services have been increasingly commoditized. To see this expressed at the scale of the entire industry, though, was unexpected.”

 

Merger and consolidation of heritage compliance firms continues

Pie Slice

Working for a Bigger Slice of the Pie

Consolidation of heritage compliance firms in the United States continues as more and more owner/operators seek retirement and firms struggle to gain market share. Today, the largest heritage-only firms only hold approximately 1-1.5 percent of market share of the compliance sector, now at $928 million annually and forecast to grow to $1.25 billion by 2020. Yesterday, Heritage Business Journal (HBJ) received this press release from ASM Affiliates and Rechtman Consulting announcing a new merger. Company news can be submitted to HBJ from the “Submit Press Release” page.

HILO, HAWAII – DECEMBER 3, 2013 – Rechtman Consulting has been acquired by ASM Affiliates (ASM). Going forward the company will operate as ASM Hawaii.  Bob Rechtman will be leading ASM Hawaii as Managing Director for its Hawaii and Pacific operations. The transaction involved the assets of Rechtman Consulting including its existing contracts and proposals. All the current employees have joined ASM Hawaii. Henberger served as the exclusive advisor to ASM. Financial terms were not disclosed.

“Rechtman Consulting’s reputation, its book of business and Bob Rechtman’s desire to join a larger entity, thereby allowing him to focus on his work and his clients, attracted us to this opportunity,” says ASM’s COO Bill Graham, who spearheaded the initiative. “To better serve our existing clients we had been looking for a while to expand our geographic footprint to Hawaii and the Pacific. The addition of Bob Rechtman and his team will allow us to accelerate our ability to meet the needs of our clients,” added John Cook, CEO of ASM.

“I am excited about the opportunities this acquisition provides to me and my employees,” says Bob Rechtman, Managing Director ASM Hawaii. “The cultural resource management industry today requires marketing and financial resources that, as a small operator, Rechtman Consulting was no longer able to afford on its own. I believe that ASM’s values and mine are closely aligned. Together we will be able to better serve our existing clients and expand into new markets that we were previously not able to enter.”

Slowdown coming in UK government construction and associated archaeology

Charles Mount has been following construction activity as a proxy variable for commercial archaeology work in Ireland (Mount 2012).  His data show that a slowdown in construction results in a reduction in commercial archaeology, a well known trend around the world. Applying this concept to the UK we can look at the construction industry as a proxy for possible commercial archaeology activitiy. In this case, the The Markit/CIPS Purchasing Managers’ Index (PMI) is used. The results show that while construction was very strong at the beginning of the year, especially March, the index has been falling in the last couple of months. It is currently flirting with contraction, a reading of under 50, and it is unlikely that commercial archaeology, as a whole sector, will have seen lots of growth in the last few months.

Taking a longer view of the sector shows some clouds on the horizon. The UK government is now providing pipeline views of new construction projects anticipated over the next couple of years. These are big projects, £10 million plus, but these projects indicate a drop in government construction projects over the next few years. Government construction projects make up 40 percent of the construction sector.

Count of Entries Sum of 2011/12 (£m) Sum of 2012/13 (£m) Sum of 2013/14 (£m) Sum of 2014/15 (£m)
Flood 38 £224 m £289 m £273 m £251 m
Health 158 £590 m £1,066 m £983 m £807 m
Housing & Regeneration 47 £1,789 m £1,100 m £1,281 m £1,552 m
Justice 14 £203 m £254 m £280 m £78 m
Transport 68 £3,596 m £3,411 m £3,622 m £4,001 m
Waste 35 £594 m £1,090 m £1,407 m £803 m
Education £2,504 m £1,640 m £486 m
MOD 90 £396 m £732 m £627 m £592 m
Police Authorities 132 £216 m £14 m £15 m £03 m
Home Office 6 £13 m
Nuclear Decommissioning 24 £313 m £275 m £360 m £449 m
Research 10 £13 m £23 m £14 m £11 m
Further Education 1 £17 m £153 m £59 m £01 m
Culture, Media and Sport 4 £1,098 m £467 m £425 m £117 m
FCO Embassies £42 m £64 m £69 m £65 m
Coal Authority 2 £06 m £07 m £08 m £08 m
Grand Total 629 £11,614 m £10,586 m £9,908 m £8,738 m

This could pickup as more projects are proposed and more money is allotted to large government construction projects. However, there needs to be a 25 percent increase in money allotted for proposed projects by 2014/15 to keep the supply constant. It looks as though construction will not see large growth in the next few months and there are head winds for the future. This means that commercial archaeology is probably in a similar setting. Do not expect a large contraction, but there is unlikely to be a large pickup either.

As should always be noted, a large catastrophic event make all projects redundant.

Mount, C. 2012. Indicators suggest that archaeological activity in Ireland continued to decline in the third quarter of 2012. The Charles Mount Blog, 4 October 2012. http://charles-mount.ie/wp/?p=960

U.S. compliance sector strong in 2012

September 11, 2012 Leave a comment
business chart showing success

U.S. compliance sector showing strong performance in 2012 (Photo credit: s_falkow)

The annual conference of the American Cultural Resources Association (ACRA) was held a few days ago in Seattle, Washington. ACRA is the trade association for the heritage compliance sector in the United States. While the ACRA program is filled with valuable business topics, the real benefit of attending is gained from talking with company owners and senior employees in the hallways and at the many social events. People often say things about their businesses that they probably shouldn’t and one always comes away from the meeting with a wealth of information about competitors and the compliance sector as a whole.

My back hallway sample, probably representative although not statistical, indicated that the compliance sector in the United States is strong. Most companies reported that 2012 has been a good year for business, with more than a few companies reporting that this year will be their strongest year since the recession of 2008/2009–some reporting their best year ever. Strength is primarily coming from activity in the mining, electrical transmission, alternative energy, and oil/gas client sectors. This pattern of strong performance appears to be geographically uniform, although there are some areas of the country doing better than others due to geographical factors (e.g. locations of oil fields and mineral resources). There are, however, a few gaps in the compliance sector’s overall strong business performance. A few firms reported that they are still having difficult times and have yet to really rebound from the recession four years ago. What is interesting about this is that a few of these firms are well known firms that have been market-share leaders in the past.

Is Western Australia’s heritage compliance boom suddenly over?

September 2, 2012 1 comment

To Boom or not to boom, that is the question.

Australia’s Resources and Energy Minister Martin Ferguson declared on 23 August 2012 that the country’s mining boom was over. This was one day after the world’s biggest miner BHP Billiton shelved two expansion plans – the Olypmic Dam open cut mine expansion in South Australia and the Port Hedland outer harbour expansion in Western Australia’s Pilbara region – each project valued at around $320 billion.

Archaeological salvage excavation at an iron mine site in the Pilbara (Photo: Guadalupe Cincunegui, ACHM).

These statements prompted some immediate flak from the mining and resources sector, while the Western Australian Premier Colin Barnett repeated his mantra that there never was a “boom”, it was just that his State has a healthy, expanding economy!Minister Ferguson and other senior Labor Government figures rapidly clarified his statement, saying that he was referring to the commodities boom being over, particularly with the international iron ore and coal prices dropping, while tens of billions of dollars in ongoing mining and energy development projects in Australia would continue on track.This is the point at which Australian heritage consultants could stop holding their breath and quaking every time they looked at a media financial report for more news of impending doom.

Heritage consulting in Australia is predominantly tied up with mining and energy developments and regional infrastructure development projects – which in turn are responses to growth through mining and energy developments. Minister Ferguson’s original announcement, coupled with BHP Billiton’s announcement and the resulting media blitz caused considerable angst among consulting firms still taking on new staff to push for bigger shares of mining-related heritage survey and impact-mitigation work – and for the growing numbers of local archaeology and anthropology graduates, as well as international ones on holiday-working visas, who are looking for work in the industry.

There has been some drop in available project work – cancellation of the BHP Billiton projects and some slowdowns in other companies’ projects due to credit and cost recalculations in the face of lower commodity prices. This has hit Queensland’s coal industry, though coal-seam gas projects so far seem unaffected. Overall though, everyone still seems to be maintaining their work flow on current projects. However, heritage services for development projects represent a finite block of work, and to maintain momentum, heritage consultancies need a constant flow of new projects. So while there appears to be enough work at the moment, we will still be all watching China in particular and the financial news in general, to see if the past continues to have a commercial future in Australia.

Australia’s “export resources” boom leads the economy and supports heritage consulting

Perth Airport’s plan for the $500 million upgrade that will integrate international and domestic terminals and provide for the rapidly expanding FIFO requirements of the Pilbara mining industry (photo credit Australian Business Traveller)

The Chamber of Minerals and Energy of Western Australia (CME) described the Australian domestic outlook as “cautiously optimistic”in its quarterly WA Resources and Economics Report (with KPMG) in March 2012. The export resources sector, which is providing a sustained boom for the heritage consulting segment, still leads the national economy.

Western Australia continues to benefit from the surging resources sector. The March 2012 ABS Investment Survey shows that resource investment has grown to be larger than investment in all other Australian business sectors combined. According to the survey, 86 per cent of this investment goes to Western Australia and Queensland, and there could be a further 62 per cent increase in total resource sector investment in 2012/13.

The report also noted that the high level of investment is maintaining record levels of employment in Western Australia, with February 2012 unemployment for the State at four percent, and forecast to remain this low for the next few years.

The Western Australian resources industry supports heritage industry employment (archaeologists, anthropologists, GIS specialists, etc) not just in Western Australia, but throughout the country. Most of the mining and energy project development is in remote areas such as the Pilbara and mid-north regions, so that heritage consultants join the flood of fly in-fly out (FIFO) workers for these projects from around the country. Most heritage consulting firms engaged in heritage survey and management work in this sector source both permanent and casual staff from around the country, who fly in via Perth to regional airports around the country, sometimes followed by hours of four-wheel-drive travel to reach the work sites. Read more…

The power firms in heritage consulting

Engineering News-Record recently released its list of The Top 200 Environmental Firms. Published annually, this year’s list is based on 2011 revenue.

Rank Company Heritage Services Revenue (million)
1 CH2M HILL Ltd. Yes $3,835
2 URS Corp. Yes $3,362
3 Veolia Environnement SA No $3,294
4 Bechtel Corp. No $2,731
5 Tetra Tech Inc. Yes $2,050
6 AECOM Technology Corp Yes $1,768
7 EnergySolutions Inc. No $1,752
8 The Shaw Group Inc. Yes $1,559
9 Fluor Corp. No $1,236
10 Kiewit Corp. No $1,160

Half of the top ten firms on the list provide in-house compliance services for heritage resources. On a similar list of design firms, seven of the top ten firms were in-house providers of heritage services.

Unfortunately, what most people want to know about these firms isn’t available:  how much of their overall revenue comes from their heritage consulting activities. While most of these companies are publically-traded companies and report their financials, the filings are not fine enough to go down to the level of heritage services. Read more…

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