Archive
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.
Boom times in Brazil
Brazil is the world’s seventh largest economy. It is also one of the fastest growing economies with a GDP growth rate of about 5 percent. Interesting news tidbits have been surfacing about contract archaeology in Brazil. Dr. Janet Levy (UNC Charlotte) recently told me that she learned at the last American Anthropological Association meeting that there is a demand for archaeology faculty in Brazil because archaeologists are selecting to work in the private sector instead of academia. I found this interesting and interviewed Dr. Eduardo Góes Neves, a Brazilian archaeologist, at the Society for American Archaeology’s conference in Panamá a few weeks ago. Indeed, he reported that private-sector archaeology is doing very well in Brazil driven by strong federal laws and the strong economy. There are mature companies across the country, some of which are quite large with multiple office locations. He also noted that there is currently a wave of acquisition of these firms taking place by companies based in Spain and Portugal.
Given this interesting business news from Brazil, I’m pleased to note that Dr. Renato Kipnis is joining Heritage Business Journal to cover the heritage industry in Brazil. Dr. Kipnis is a Director of Scientia Consultoria Científica Ltda. in São Paulo and will be keeping us up-to-date on business issues.
2012 increase in built environment compliance services forecast for the U.S.
While government spending in the United States, like many other countries, is contracting from austerity measures, there are some areas of growth. In a 2011 webinar by Deltek based upon the U.S. President’s 2012 Budget Request, the only areas of spending growth in the construction and rehabilitation of physical assets (the things that drive Section 106 undertakings) were energy and health facilities. Energy spending, which is primarily for fulfilling energy efficiency and renewable energy mandates, will expand 41.2 percent over 2010 actuals to $10.5 billion. A large portion of the funding will be spent on renovating and retrofitting older government buildings, many of which are historic. Spending on veterans hospitals and other health care facilities will expand 69.0 percent to $3.1 billion. Many of these facilities also are historic. If this increase in funding is realized, heritage compliance companies in the U.S. should see a rise in demand for services focused on the built environment. Federal spending on projects producing significant amounts of archaeological compliance work may be decreasing in 2012, but this should be offset by a large increase in demand for compliance services involving historians, architectural historians, and historic architects.
Heritage Business Journal 