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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.
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.
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.”
U.S. compliance sector strong in 2012
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.
New small business thresholds in North America will change competition
Last week in the Federal Register, the United States Small Business Administration increased 37 small business size standards for 34 industries in Sector 54, Professional, Technical, and Scientific Services. Under the North American Industry Classification System (NAICS), used by Canada, Mexico, and the United States, the industry code for Environmental Consulting Services (541620) was increased from $7 to $14 million. The majority of cultural resource consulting firms in North America are in the Environmental Consulting Services category. This change was effective yesterday, 12 March 2012.
Within the United States, many, perhaps the majority, of cultural resource compliance service contracts issued by the federal government are set aside for small businesses. This new, larger, small business size category will change the competitive landscape by allowing firms with annual revenue up to $14 million to compete directly with truly small firms for small business contracts. The American Cultural Resources Association (ACRA), the trade organization for the heritage compliance sector, classifies small firms as those with annual revenue below $400,000, medium firms as those with annual revenue between $400,000 and $1.5 million, and large firms as those having annual revenue above $1.5 million. This new ruling will not provide any protection for truly small heritage firms, those in ACRA’s small and medium categories, and create head-to-head market competition for all firms below the $14 million threshold. For companies who target the federal contracting sector, there is now an advantage to being larger and this may prompt a new round of heritage firm mergers and acquisitions in North America.
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