Shift in market share away from U.S. heritage-only firms
A pattern of data suggests that heritage-only compliance consulting firms are losing market share to larger multidisciplinary firms in the United States. Historically, there has been some ebb and flow of market share between heritage-only firms and multidisciplinary environmental and engineering companies. Now, however, there appears to be a more substantial, unidirectional shift and this trend has been underway prior to the U.S. economic recession of 2008.
The annual heritage compliance market in the U.S. has been estimated by many over the last decade to be in the range of $0.8-1 billion. While data to base this market estimate are poor, the fact that many authors (most notably Altschul and Patterson in 2010) have converged upon a fairly narrow range provides some measure of confidence. According to data from Environmental Business Journal, the overall environmental consulting and engineering sector of which heritage compliance is a part was valued at $27.6 billion in 2011. This, then, means that heritage compliance is 3.6 percent of the total environmental consulting sector in the U.S. Since 1991, there have only been two years (1996 and 2009) when the sector did not have positive growth. Since 2009, growth has been 2.2 percent in 2010 and 3.7 percent in 2011. Five percent growth is expected in 2012.
The American Cultural Resources Association (ACRA) has surveyed heritage firms periodically since the end of the recession. In March, 2010 44% those surveyed reported a decrease in business in the six months prior to the survey and 65% forecast that business would not grow in the six months following the survey. There was little change a year later when, in March 2011, 46% of firms reported a decrease in business over the previous six months and 61% forecast that business would not grow in the next six months. Yet, these surveys were done at a time when the industry grew by 5.9 percent, or about $53 million. What explains the opposing trends?
Most, but not all, firms that are members of ACRA are heritage-only companies. Additionally, there were some (29%) non-member firms surveyed but these firms likely fit the same heritage-only profile of member firms. So, the data indicate that while the market for cultural services was growing, the amount of work going to heritage-only firms was decreasing. If heritage-only firms were not seeing the increase, who was?
Data from the U.S. Bureau of the Census (Census) provides a clue. In 2009 and 2010, ACRA led an effort to request a North American Industry Classification System (NAICS) code for cultural resource compliance services. The request was denied and in public comment the Economic Classification Policy Committee (ECPC) of Census stated that “…ECPC considered the proposal and noted that cultural resource management, or cultural resource consulting services is a product provided by establishments in a variety of industries…Therefore, the ECPC does not recommend a new separate industry for cultural resource consulting. ” In short, Census did not establish a cultural resource industry in North America (U.S., Canada, and Mexico) in part because other industries were adequately providing cultural resource services. These other industries were not specified, but the primary “other” must be the Environmental Consulting Services industry (NAICS Code 541620): essentially the multi-disciplinary firms. Anecdotal data from conversations that I have had with a variety of business owners and CEOs over the last year seem to support this observation. Almost all told me that they believe that market share has been shifting from heritage-only companies to multidisciplinary environmental and engineering companies.
Business and industry data directly pertaining to the heritage industry is difficult to find. To identify and substantiate underlying industry and economic trends, one often has to stitch together disparate data and read between the lines. Such is the case with this analysis. That being said, it appears that while the market for heritage compliance services has been growing faster than the rate of economic growth (as measured by GDP) since the end of the recession, cultural-only firms are not seeing the benefit of this growth. Market share for heritage compliance services is shifting away from heritage-only companies to multi-disciplinary firms.
Heritage Business Journal 
In my opinion there are possibly other factors at play. First, even with the economic uncertainty, the cost of financing is low and larger firms have been shopping. So it’s not just heritage firms that have been disappearing, but smaller speciality environmental and engineering firms as well (of course they are not disappearing, they are just become part of larger corporations).
The other trend is the rate of new entrants. Anecdotally, this has been increasing which could be one of the factors that is depressing the growth assessments of the existing firms. If the bigger firms are not hiring, and some market share is generally up for grabs during acquisitions, your choices might seem to be: a) try and form a new company or b) quit archaeology.
So there could be a shift away from heritage only firms or it could be that heritage only firms are getting squeezed by these two trends. Either way, it’s not business as usual.
This is a very macro-view perspective of the practice of compliance archaeology. From my corner of the world, it seems that the very large companies supply services at the level of compliance, Class 1 and 3 survey, and monitoring, possibly testing and small scale data recovery, as well. Undoubtedly, that is a huge proportion of the archaeological work in the country, particularly on large linear projects. They seem to be less effective for projects that need large scale data recovery. That is a place where “heritage” firms may still excel — sometimes as subcontractors to these larger entities. It is these smaller companies that have the specialized staffing and capability of providing the public and scholastic benefits required by the law.
It is notable that many of the awards for archaeology in the public sector, and the projects that capture the public imagination come out of heritage only firms OR those that have sufficiently independent CRM arms to function as heritage-only firms.
This is a very macro-view perspective of the practice of compliance archaeology.
Yes, I agree on the above. From this little corner of the consulting world,we see a good number of large, natural-resources environmental consulting firms that in fact, do not maintain staff for cultural resource management-historic preservation input on projects. Firms here often do not have enough work overall to actually employ heritage folks full time. Instead, they partner with heritage-only firms to provide those services as part of the overall effort. This usually works very well. The environmental firms produce the work and products needed for natural resources, and/or engineering or architectural design elements, and the heritage-only firms address those elements, often combined into a single document or set of documents. Sometimes however, the larger, environmental or engineering firms may try to take on the heritage resources topics and bring on temporary positions to try and accomplish that. Sometimes that works, sometimes not, and eventually they have to turn to a heritage-only firm to get it done and acceptable to agencies. Another challenge at times, for the heritage-only firms is to get paid for the work, when the client fails to pay the prime contractor. This is especially the case perhaps with the emerging wind energy market here, wherein a project is proposed, and then suddenly goes away for lack of funding or a market to sell the energy. The same thing can also happen with cellular communications projects. Finally, we also see, from time to time, projects on which a larger environmental firm has proposed a level of work to a client for heritage resources which exceeds that actually needed.