An ESOP overview

CFOs share their biggest challenges of 2015

Types of disputes

Zweig Group’s 2015 Financial Performance Survey of A/E/P and Environmental Consulting Firms finds that 85 percent of firms surveyed have had a dispute associated with a project that required mediation, arbitration, or litigation. In the last three years, 82 percent of these firms have had at least one professional liability dispute. Thirty-five percent reported having one or more contract disputes during this period, and 6 percent have had general liability disputes. Respondents were allowed to select more than one answer for this question. — Leah Santos, research analyst assistant

T R E N D L I N E S

MORE COLUMNS

F I R M I N D E X

w w w . t h e z w e i g l e t t e r . c o m

Page 11

xz GUEST SPEAKER: Protect your firm from litigation. Page 3

xz M&A INSIGHTS: Planning for a successful acquisition. Page 6

xz FINANCIAL FITNESS: Go Fish! for fantastic results. Page 9

T H E V O I C E O F R E A S O N F O R A / E / P & E N V I R O N M E N T A L C O N S U L T I N G F I R M S

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Professionalliability

Contract General liability

ACS Infrastructure Canada Inc ........................................ 8AECOM ............................................................................ 8Aecon .............................................................................. 8American Iron and Steel Institute ................................. 10CH2M Hill ...................................................................... 11Design Workshop .......................................................... 10DLR Group ..................................................................... 11EllisDon ........................................................................... 8Fluor Corporation ........................................................... 12George, Miles, & Buhr LLC ............................................ 12HDR Inc .......................................................................... 11HNTB Inc. ...................................................................... 11Hunter Douglas North America ..................................... 12Jacobs Engineering Group Inc. ....................................... 8Maser Consulting P.A. ...................................................10McDonough Bolyard Peck, Inc. ....................................... 5Quad Knopf Inc ..................................................................8 Parson Corporation ........................................................ 11R.A. Smith National Inc. .................................................. 5RPS Klotz Associates .................................................... 12Skelly and Loy ...............................................................12SNC-Lavalin ..................................................................... 8Thornton Tomasetti ................................................... 8, 10Tishman Construction ...................................................... 8Wantman Group, Inc. ...................................................... 8Weston Solutions Inc ....................................................11Westwood Professional Services Inc. .......................... 10Wold Architects and Engineers ...................................... 7See MARK ZWEIG, page 2

Mark Zweig

Page 5

Big trends in the A/E businessFirm leaders would be wise to reflect on current happenings in industry and to prepare for what’s next.

“Be thinking about all of

these trends: You must look ahead, or you will suffer the

consequences of not doing

so.”

When you’re lucky enough to survive to a “certain age,” you suddenly become

aware of “certain things.” That diet you’ve had for 55-plus years might finally be catch-ing up to you, and you have to change your eating habits or go on diabetes and cho-lesterol drugs. Your friends start dying off – sometimes more than one in a given year – and you regularly find yourself reading the obituary pages in the local newspaper. Your teeth have problems they never had before, and, before you know it, you’re in a dental chair going through a painful implant process that includes bone grafts from cadavers. Let’s just say the trends become clear and will af-fect many of us as we age.

The same thing applies to our industry: The trends are becoming very clear to me. They will affect all of us – you, me, everyone – in the A/E/P and environmental business.

Here they are:

1) We’re in boom times. This means a lot of firms are overloaded with work. They’re worry-ing less about marketing and more about do-ing. Our people are overloaded and complain-ing about it. We’re understaffed. We’re making more money than we ever have before, and how we use that (i.e., suck it out or reinvest in the firm) is crucial to our future success.

2) There’s a merger of design with construc-tion. You can ignore this at your peril, but the fact is more and more clients want design-build, versus design-bid-build. That means you

J u n e 2 2 , 2 0 1 5 , I s s u e 11 0 9

Pages 5 - 12

FINANCE

© Copyright 2015. Zweig Group.

All rights reserved. THE ZWEIG LETTER JUNE 22, 2015, ISSUE 1109

2

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can either get on board with this idea and figure out how to make it work for you, or fight it and get smaller and smaller. It’s a huge deal. We all need more construction knowledge and a different attitude toward risk to deal with this.

3) Firms are adding in other, non-traditional services. It might be going into at-risk construction, or strategic planning, or providing an app or piece of software, or going in the temporary help business, or any number of very different services that aren’t “normally” part of an A/E firm’s offerings. These initiatives are critical to growth and can significantly differentiate a company, giving them a leg up on success.

4) Firms are really beginning to em-brace e-marketing. It is not just spam. It is a completely viable marketing tool that works. And more A/E and environ-mental firms are using it to promote jobs, people, market sector knowledge, poll clients, promote invents, send out newsletters and more. E-marketing works. It’s cheap and cost effective. But it takes a good list to be able to use it. And most companies in this business

do not have that.

5) Some firms are spending big money on recruiting. It is so critical to be able to find the talent you need. It is also getting harder and harder to keep the people you have. Aggressive companies are recruiting like mad, and your best people may be getting called every day by your competi-tors and their recruiting agents. How much is a lot of money? How about $10,000, $15,000, or even $18,000 per head-hired for recruiting? This is spread across ALL hires, including neophytes and support people. Think about that. Adding 50 people and re-placing 20 who leave? That’s 70 people at $10,000 each – $700,000 – or 70 people at $15,000 each – $1.05 million. It’s a lot of money. But, if you don’t spend it, what kind of talent will you be able to find – if any?

Time marches on, and things do change over time. Be thinking about all of these trends: You must look ahead, or you will suffer the conse-quences of not doing so.

MARK ZWEIG is president and CEO of Zweig Group. Contact him at mzweig@zweiggroup.com.

MARK ZWEIG, from page 1

MARK YOUR CALENDAR

COMING SOON IN TZLHot Firm PreviewDid you make THE LIST?Find out in the August 3edition!

The Hot Firm Focus Issue will include a full list of winners and profiles of the Top Three fastest-growing A/E/P and environmental consulting firms.

Best Firms PreviewDo you stand out amongyour peers for workplacepractices, employeebenefits and retentionrates, and all things HR?Find out on August 10!

The Best Firms Focus Issue will include a list of winners and profiles of the Top Three firms.

#Hot

Firm

2015 2015 Hot Firm & A/E Industry Awards Conference

S E P T. 3 - 4 | FA I R M O N T C O P L E Y P L A Z A | B O S T O N

Zweig Group will honor the Hot Firm, Best Firms to Work For, and Marketing Excellence winners and present the Jerry Allen Courage inLeadership award. Follow @ZweigLetter for live conference Tweets!

THE ZWEIG LETTER CONFERENCE RECAP

Can’t make it to Boston?Don’t worry! The September 21 issue ofTZL will feature conference coverage, including all of the photos, recaps, and behind-the-scenes antics to make you feelas though you were there.

The only thing the newsletter won’t provide are the memories and friendshipsattendees create for themselves.

3

THE ZWEIG LETTER JUNE 22, 2015, ISSUE 1109

Despite efforts by design firms and other employers across the country to comply with anti-discrimination laws and Equal Employment Opportunity Commission

regulations, employment-related lawsuits are rising. In 2014, the EEOC received more than 88,000 employment-related complaints.

Protect your firm from litigationStrategic management and specialized insurance are key for design firms seeking to address expanding employement-related risks.

O P I N I O N

For design firms of all sizes, the costs of employ-ment actions can be substantial: Expenses associ-ated with these lawsuits typically exceed $250,000 in judgment costs and attorney’s fees, in addition to negative effects on employee morale, productiv-ity, reputation, and recruitment.

Managing this risk often involves a two-pronged approach of adopting sound risk-management practices to reduce the likelihood of employment-related claims, while purchasing employment practices liability insurance to protect against the financial consequence of any claims that do arise.

Risk management helps prevent claims. An effec-tive employment practices risk-management pro-gram can prevent claims while helping establish a defense when an employment-related claim oc-curs. These programs typically involve:

z Creation of an employment manual. The manual should articulate clear and consistent policies and procedures, including any process for reporting situ-ations involving discrimination or harassment. Re-view the manual with all current and new employees and require them to sign an acknowledgement letter that they have read the manual and agree to follow the firm’s policies and procedures. Hold occasional meetings with employees to reinforce your employ-ment policies.

z Training and development. All managers and su-pervisors with hiring responsibilities should receive training, so they understand and follow your firm’s protocols and comply with all relevant employment laws.

z Attorney review. Have an attorney check all re-cruitment advertisements, employment applica-tions, job tests, employment contracts, and employ-ee manual acknowledgement letters to ensure they comply with federal and state employment laws in your jurisdiction.

z “Zero tolerance” policy. Establish a written policy of “zero tolerance” against sexual harassment and discrimination of all types – race, sex, age, national origin, religion, disability, etc. Your employee man-ual should include behavioral guidelines, reporting procedures, and disciplinary procedures – up to and including termination.

Prominently publish the firm’s equal opportunity employment policies. This shows your firm will not tolerate any kind of discrimination or harassment.

Establish confidential internal complaint proce-dures. Any employee who is potentially subjected to discrimination, sexual harassment, or other alleged inappropriate behavior, must know how to file a confidential complaint. Establish a formal process designating a higher-level manager (other than an immediate supervisor) or HR professional to whom complaints should be directed and communicate the process to all employees.

Investigate all charges of discrimination or sexual

Jared Maxwell,Assistant Vice President,Ames & Gough.

See JARED MAXWELL, page 4

“(Employment practices liability insurance) can protect insured employers against claims brought by employees or potential employees alleging wrongful termination, harassment, defamation, discrimination, emotional distress, privacy violations, and related causes of action.”

“Managing this risk often involves a two-pronged approach of adopting sound risk-management practices ... while purchasing employment practices liability insurance to protect against the financial consequence of any claims that do arise.”

© Copyright 2015. Zweig Group.

All rights reserved. THE ZWEIG LETTER JUNE 22, 2015, ISSUE 1109

4

harassment. Failure to do this can lead to lawsuits, brought by both the ac-cused employee for defamation and by the complainant for failure to prop-erly evaluate the complaint.

z Check classification of employees. All employees should be properly clas-sified as either exempt or nonexempt to avoid wage and hour claims, the fastest growing source of employment litigation. While the Fair Labor Stan-dards Act has exemptions from overtime pay requirements for executives, administrative, and professional employees, they don’t automatically apply to salaried employees or those with professional degrees (such as engineers). You need to know if and how exemptions apply to your firm’s employees.

INSURANCE CAN PROTECT ASSETS. EPLI can protect insured employers against claims brought by employees or potential employees alleging wrongful termination, harassment, defamation, discrimination, emotional dis-tress, privacy violations, and related causes of action.

This insurance is available as a stand-alone policy or combined with other management liability insurance coverages, such as directors and officers or fiduciary liability. In some cases, it’s also available as a sublimit under a business owner’s or A/E professional liability policy.

EPLI policies differ widely. For instance, some have a broader definition of a claim, such as actions seeking any type of relief whether monetary or nonmonetary, while others may be limited to demands for monetary damages.

The policies also vary in their definition of “insured.” Some extend cover-age to temporary and seasonal employees, volunteers, interns, or inde-pendent contractors.

Here are some standard coverages under EPLI policies and related con-siderations:

z “Duty to defend” or “duty to pay.” This clause determines whether your firm or the insurer assumes control of the entire claim defense process, in-cluding selecting counsel and payment of legal bills. Policies with “duty to pay” clauses only require the insurer to reimburse the insured for its expen-ditures in defending a claim. Generally, smaller firms opt for the “duty to de-fend” clause, which can have cash-flow advantages, in addition to the benefit of the insurer’s wider experience in engaging and managing counsel.

z Selection of counsel. Some policies allow the insureds to have input in the selection of counsel, including the ability to choose counsel to represent them from the insurer’s panel of pre-approved defense attorneys.

z Consent to settle. This provision may enable an insurer to limit its claim payment to no more than the amount for which it could otherwise have settled the lawsuit plus defense costs – even if the insured does not consent to such a settlement.

z Third-party liability. This covers suits brought against the insured firm by third parties, such as vendors or customers, but may have restrictions and coverage limitations.

z Determining limits. While the amount of coverage to purchase often de-pends on several factors, most A/E firms purchase stand-alone EPLI limits of $1 million- $5 million. When this coverage is purchased as part of another insurance policy, such as a professional liability or management liability pol-icy, any employment claim could erode coverage for other risks. Thus, firms with such coverage arrangements may need to purchase higher limits.

The frequency and severity of employment litigation is higher today than ever. By working with a knowledgeable insurance professional to adopt sound risk-management practices and purchase an EPLI policy, A/E firm leaders can reduce the likelihood of employment-related claims, limit their exposure from losses, and strengthen their firms in the process.

JARED MAXWELL is an assistant vice president at Ames & Gough.

JARED MAXWELL, from page 3 POLICIES BY THE NUMBERS

According to Zweig Group’s recently released 2015 Policies, Procedures & Benefits Survey of AEP & Environmental Firms:

97 percent of firms have policy manuals

89 percent of firms have a sexual harassment policy in place

88 percent of firms have a drug use/abuse policy in place

70 percent of firms have a policy regarding dress code in place

67 percent of firms have employment practices liability insurance

5 CLAIMS NOT COVERED BY YOUR PROFESSIONAL LIABILITY INSURANCE

Property damage or personal injury. Professional liability policies provide coverage for claims of financial loss as a result of professional services. Property damage/personal injury claims fall under a general liability/BOP policy.

The actions of your principals/directors/officers. Professional liability policies exclude the actions of organizational leaders, other than those named as insured. These activities are covered by directors and officers insurance.

Employee theft/dishonesty. Occupational fraud is a significant threat. Those concerned about this should explore employee dishonesty policies that provide coverage for the firm’s funds, in addition to any clients’ funds in the firm’s control.

Claims by companies in which you have a material interest. Most professional liability policies have exclusions for claims by a client in which you are an owner or serve as a director/officer.

Employee claims. More than 60 percent of employee liability claims are filed against small employers. Claims by employees or third parties for discrimination, harassment, and other workplace-related issues are addressed by employee practices liability policies.

Source: Naplia.com

5

THE ZWEIG LETTER JUNE 22, 2015, ISSUE 1109

FINANCE

By LIISA ANDREASSENCorrespondent

Now that 2015 is halfway over, THE ZWEIG LETTER thought it would be a good time to get a feel for how the year is go-

ing and where CFOs think it’s headed. So, we asked four CFOs to weigh in on what challenges they’ve seen so far and how they think the rest of the year will play out.

Here’s what they had to say:

The Zweig Letter: What has been your greatest financial chal-lenge for 2015?

Roy Mitchell, CFO,  McDonough Bolyard Peck Inc.  (Fairfax, VA), a 273-person multi-disciplined construction management firm: “The collectability of various aged receivables. While the major-ity of our clients pay in a timely fashion, there are a small hand-ful of larger clients who have been slow paying for various rea-sons, some of which are outside of their control. We continue to follow-up on aged receivables and while we fully expect to collect on all of them, the process does take time.”

Chris Pinkowski, executive director of operations, R.A. Smith Na-tional Inc. (Brookfield, WI), a 186-person multidisciplinary civil engineering firm: “Our greatest financial challenge has been in matching client expectations to fees. Demands for higher levels

What’s your greatest financial challenge?Four A/E CFOs share the issues they’ve encountered thus far and the trends they anticipate for the remainder of 2015.

L E A D E R S H I P

INDUSTRY EVENT OFFERS ADDITIONAL INSIGHTS

Chief financial officers of design firms recently met in New York City and offered perspectives on managing company growth and profitability amid new risks ranging from oil-and-gas market uncertainties to currency fluctuations and fixed-price contracts. The event drew more than 100 CFOs and was sponsored by industry financial management consultant EFCG.

Some feedback highlights included:

z CFOs remain optimistic on results for 2015, predicting median growth of 7 percent and 10.9 percent profit.

z CFOs noted that medical expenses are the most difficult to control, followed by marketing and IT-related costs.

z CFOs weighed global market turmoil such as foreign exchange rate fluctuation, slow client payment, fixed price design and tight mobilization schedules.

z CFOs also noted pressure from clients to dispatch top managers quickly to global sites, but also pushback from employees concerned about disruption in two-income households.

z Several CFOs noted delays in clients approving projects to move forward, which challenged design firms in converting backlog numbers into actual revenue.

z Several CFOs expected merger and acquisition activity to slow this year, but some such as Stantec (Edmonton, AB), a 14,000-plus-person firm that provides professional design and consulting services in planning, engineering, architecture, surveying, and project management; and CH2M (Englewood, CO), a 30,000-person global consulting, design, design/build, operations and program management firm, noted some pressure to add capability.

“Our future challenges for 2015 relate to interest rates and how they will impact debt, as well as growth, in our economy and its impact on our ability to grow our business.”

“We don’t expect to see the economy improve over the remainder of this year. The reduction in the price of oil and corresponding cutbacks by oil companies, coupled with the drought in California have put a damper on what seemed to be an improving economy.”

See CFO CHALLENGES, page 8

THE ZWEIG LETTER JUNE 22, 2015, ISSUE 1109

6

SPO TL IGHT ON: M&A activity

Growth through acquisition can position your firm for growth that it could not organically achieve in the same timeframe. The trade-off? Acquisitions are expensive,

time consuming, and difficult. Even seasoned acquirers – firms we like to call “serial acquirers” – can quickly rattle off a list of grievances that they have with the acquisition process. And after the headache of due diligence and negotiation, there’s no guarantee that the union will be a happy one. The risk associated with taking on an acquisition strategy only makes sense if your company has adequately planned and prepared for the process.

Planning for a successful acquisitionA mutually agreed upon strategy can make transactions easier for buyers and sellers, regardless of the intended outcome.

O P I N I O N

In Zweig Group’s recently released 2015 Merger & Acquisition Survey of A/E/P and Environmental Consulting Firms, we asked firms to tell us why their most recent acquisition was a success (or failure).

Firm leaders consider their most recent acquisition successful if it increased the firm’s market presence and integrated the firms successfully. Alternatively, firms that labeled their most recent acquisitions failures stated that they were unable to achieve the plan that the two firms jointly developed.

So, what’s the secret to a successful acquisition? Understanding what “successful” means to your firm by developing a sound strategy!

There are, essentially, only a handful of reasons to acquire a firm: to diversify and reduce risk, to create operating or financial synergy, to increase the current performance of your company, to build your firm’s value, or to redirect your company’s business model. An acquisition motivated by any one of these underlying objectives can be successful.

The majority of acquisitions fall under the category of acquirers seeking to increase the firm’s ability to generate revenue through opening the firm to new geographic areas, new market sectors, or new services. Texas and California are both currently “hot” geographic markets for acquisitions.

Firms seeking to differentiate from the competition may do so by adding new services or responding to market/client demands. For example, we have seen an uptick in firms seeking to acquire targets in commercial development as well as sustainability.

Some firms want to combine to operate a more lean business model (through cost savings, for example) or see an opportunity to “out-manage” the selling firm. One of my favorite explanations given to the question of why the acquisition was a success is that the firm “added experienced staff that augmented our existing staff and we were able to utilize them better than their former company could.”

All of these motivations rely on one thing: having a plan. Not just a short-term integration plan or capital plan or transition plan (all of which must be components of the overall plan), but starting and ending with a strategy. It will take tremendous preparation and – sometimes – sheer determination to make an acquisition investment work. Both the acquirer and the target have to understand what each

Jamie Claire Kiser

“What’s the secret to a successful acquisition? Understanding what ‘successful’ means to your firm by developing a sound strategy!”

“There are, essentially, only a handful of reasons to acquire a firm: to diversify and reduce risk, to create operating or financial synergy, to increase the current performance of your company, to build your firm’s value, or to redirect your company’s business model. “

© Copyright 2015. Zweig Group.

All rights reserved.

7

THE ZWEIG LETTER JUNE 22, 2015, ISSUE 1109

Zweig Group is social and posting every day!C O N N E C T W I T H U S

facebook.com/ZweigGroup

twitter.com/ZweigGroup

linkedin.com/company/ZweigWhite blog. ZweigGroup.com vimeo.com/

ZweigGroupSPO TL IGHT ON: M&A activityside wants to achieve. It is not enough to simply review each opportunity as it crosses your desk. A firm has to have a long-term mindset coupled with the ability to act fast and decisively.

Have discussions about what your firm thinks is next in your industry. Identify your firm’s weak areas and talk about whether a strategic acquisition can provide fortification. Know what metrics you’re looking for. Understand the market and the clients that the target serves. Have reasonable expectations regarding how long it will take to achieve your goals – and build a margin of error into your forecasts. Go down the “what if” trail and strategize how you will handle things that could go wrong to determine your firm’s tolerance for turbulence.

Armed with a plan for assessing acquisition opportunities and a framework for evaluating what a successful target looks like, your firm will reduce the likelihood that the acquisition will be a failure. A plan won’t fix all cultural and integration breakdowns that we hear as common reasons why acquisitions fail. However, talking through the tough issues on the front end and developing a plan will provide a common core of commitment to the end result by both parties that can help each side see through the problems.

JAMIE CLAIRE KISER is Zweig Group’s director of M&A services. Contact her at jkiser@zweiggroup.com.

“Both the acquirer and the target have to understand what each side wants to achieve.“

A CONVERSATION WITH MATT MOONEY, COO, WOLD ARCHITECTS AND ENGINEERS

THE ZWEIG LETTER: How many M&A deals have you been a part of?

Matt Mooney: This is the first M&A that I have been a part of, although Wold Architects and Engineers has completed two previously.

TZL: How many years of experience do you have in the A/E/P industry?

MM: I have been in the A/E/P industry for 16 years.

TZL: What’s your process for evaluating deals?

MM: Our process started with developing a business plan with clear strategies and goals. We then developed criteria which we used to evaluate the opportunities. These included geography, portfolio, revenue/size, services, markets/clients, leadership team and culture.

TZL: How long does it take you to decide if you are interested in a particular opportunity?

MM: If you have a clear objective going into the process, deciding whether we may be interested in an opportunity can take only a few minutes. Figuring out which opportunity is the best one can take multiple meetings between parties and months to decide.

TZL: What does a solid deal look like?

MM: A solid deal is one where the opportunity aligns with our goals and most importantly both parties have realistic expectations going into negotiations.

TZL: How do you make sure that an acquisition will work?

MM: I believe the best approach for a successful M&A is that both the purchasing and selling parties are able to adapt and change to each other. Many firms believe that if they purchased a company that the seller should adapt to the buyer, but we’ve discovered the buyer needs to adapt as much as the seller to make an acquisition truly work for both parties.

TZL: Have you ever had buyer’s regret?

MM: No. I do not have any “buyer’s regret”. There are always some surprises that come with a merger or acquisition, but if you do your homework ahead of time and hire great consultants to guide you through the process, M&A’s can be great opportunities for both parties.

TZL: What is your negotiation secret?

MM: The negotiation process starts long before the two sides sit together to work out a deal. It starts with building a relationship and trust between both parties from the first interaction. Understanding each other’s motivations is key to structuring a deal that works for both parties

TZL: Think of the acquisition that you are the most proud of. What made it a great decision?

MM: I believe our merger with Horty Elving was a great accomplishment. I believe both firms are stronger together than alone. Wold Architects and Engineers was able to gain a vast amount of experience and expertise in the healthcare and senior living markets and Horty Elving is able to take advantage of the resources Wold Architects and Engineers has to offer to deliver even more complex and diverse projects.

TZL: What industry changes do you foresee in five years?

MM: As the industry continues to improve, larger firms will have more resources to dedicate to M&A’s and aging owners will continue to struggle finding the next generation of owners. These two factors will keep M&A activity high for the foreseeable future.

TZL: What advice would you give companies looking to sell?

MM: A merger and acquisition is a long term partnership and sellers should have a good understanding of what they are looking for out of a partnership. They need to be open with the buyer about what expectations they have.

TZL: What advice would you give firms that are looking to buy?

MM: Know what you are looking for before you start the search process. You can get easily distracted by opportunities that look exciting but may not necessarily align with your long term business goals.

M&A Q&A

© Copyright 2015. Zweig Group.

All rights reserved. THE ZWEIG LETTER JUNE 22, 2015, ISSUE 1109

8

of service continue, while downward pressure is applied to fees. As a result, the consultant can be placed in the dif-ficult, and in some cases, impossible, position of seeking to maintain viable margins for work performed against clients squeezing the fee for the great-est amount of service.”

Steven Petit, CFO, Wantman Group Inc. (West Palm Beach, FL), a 243-person multidisciplinary consulting firm: “So far, my greatest financial challenge for 2015 has been in trying to man-age substantial geographic and sector growth. We have been adding a signifi-cant number of new staff in many of-fices and managing all of the new rev-enues, costs, and capital requirements has been challenging.”

Janel Freeman, CFO, Quad Knopf Inc.  (Visalia, CA), a 115-person multi-discipline engineering and architec-ture firm: “Difficulties in keeping all staff utilized and cash-flow.”

TZL: Do you predict any challenges for the remainder of the year?

RM: “In addition to our aged receiv-

able challenge, we have converted to a new accounting system as of June 1, and the smooth transition to Deltek Vision will be key to a successful con-clusion for 2015. This transition will directly affect both the financial and operational facets of the organization in a positive way, and we look forward to the efficiencies that the new system will provide us.”

CP: “Our future challenges for 2015 re-late to interest rates and how they will impact debt, as well as growth, in our economy and its impact on our ability to grow our business.”

SP: “Additional challenges for the re-mainder of the year will be indoctri-nating all new employees into the Wantman way of conducting business and helping to manage their workload projections and efforts.”

JF: “We don’t expect to see the economy improve over the remainder of this year. The reduction in the price of oil and corresponding cutbacks by oil companies, coupled with the drought in California have put a damp-er on what seemed to be an improving economy.”

CFO CHALLENGES, from page 5 TREND LINES: ANNUAL GROWTH RATES

The 2014 Financial Performance Survey of Architecture, Engineering, Planning, & Environmental Consulting Firms shows the average percentage year-to-year change in gross revenue for respondent firms.

The average annual growth rate for 2003-’04 was 11.3 percent; for ‘04-’05, it was 11.6 percent; for ‘05-’06, it was 13 percent; for ‘06-’07, it was 10.9 percent; for ‘07-’08, it was 5.4 percent; for ‘08-’09, it was -9.9 percent; for ‘09-’10, it was 1.2 percent; for ‘10-’11, it was 3.7 percent; for ‘11-’12, it was 6.8 percent; and for ‘12-’13, it was 5.5 percent.

Updated information on the industry will be available July 1, when the 2015 Financial Performance Survey is published. For more information, visit zweiggroup.com/survey.php.

11.3% 11.6%13.0%

10.9%

5.4%

-9.9%

1.2%

3.7%

6.8%5.5%

-10.0%

-5.0%

0.0%

5.0%

10.0%

15.0%

BUSINESS NEWSTHORNTON TOMASETTI TO PROVIDE STRUCTURAL ENGINEERING SERVICES FOR INAUGURAL CHICAGO ARCHITECTURE BIENNIAL International engineering firm Thornton Tomasetti will serve as the principal engineering consultant for the Chicago Architecture Biennial this fall, providing pro bono work for key installations. The first of its kind in North America, CAB will showcase new and commissioned projects by more than 60 firms from 30 countries, inviting participants to demonstrate ground-breaking advances in architectural design and its effect on the world. CAB will offer attendees free admission to a variety of seminars, screenings, tours and educational components. Titled “The State of the Art of Architecture,” the 2015 exhibition will run from October 3 to Janu-ary 3 at five venues across Chicago.

SNC-LAVALIN, AECON CONSORTIUM AWARDED $5 BILLION TORONTO TRANSIT PROJECT The Ontario government has confirmed the selection of an SNC-Lavalin and Aecon consortium to build Toronto’s Enlinton Crosstown light-rail transit project, estimated to be worth about $5 billion. The Crosslinx Transit Solutions Group, comprising SNC-Lavalin, ACS Infrastructure Canada Inc., EllisDon, and Aecon, was the winning bidder to design, finance, build, and maintain the transit line that will include 25 stations and stops. The contract is expected to be signed this summer, with construction starting early next year and completed in late 2020.

JACOBS ANNOUNCES 2 CONTRACTS Jacobs Engineering Group Inc. (Pasadena, CA) has been awarded a five-year ar-chitectural and engineering services indefinite delivery/indefinite quantity contract with the U.S. Army and Air National Guard nationwide, including Puerto Rico, Guam, the Virgin Islands, and the District of Columbia. The contract is the third continuous, five-year national IDIQ contract Jacobs has held with the National Guard, and its maximum ceiling amount is $45 million, inclusive of all options.

Jacobs was also awarded a contract by the Port of Long Beach to provide program-level construction management services for Phase 2 of its Middle Harbor Terminal Redevelopment Program, a modernization of two aging shipping terminals in Long Beach, California. The estimated value of the construction is $300 million.

AECOM SUBSIDIARY TO MANAGE MANHATTAN CONSTRUCTION AECOM (Los Angeles, CA) has announced that its Tishman Construction operation is providing construction management services for the reposition and renovation of Citi’s 388-390 Greenwich St. redevelopment. The project will consolidate a substantial portion of Citi’s New York metropolitan-area population into a newly updated global headquarters and will include exterior enhancements, additions to the plaza space, upgrades and end-of-life infrastructure replacements, in addition to restacking and renovations of 2.34 million square-feet of interior space. The project team is also pursuing a LEED Platinum certification.

TALK TO USWhat does THE ZWEIG LETTER do for you? We’d like to hear from our readers regarding the benefits they receive from this publication, what we could de better, and what topics they’d like to see covered in the future.

Longtime subscribers: Why do you keep us coming?

New subscribers: How do you like us?

Everyone: Do you share TZL’s insights with your colleagues? Do you plan on resubscribing when your current subscription expires? What recent articles have been especially useful to you? Which ones could you have done without? What industry trends would you like us to address?

THE ZWEIG LETTER wants to be your go-to resource for A/E/P and environmental information, and your feedback helps us provide a better publication for you.

Please email your feedback, questions, concerns, and/or suggestions to Managing Editor Andrea Bennett at abennett@zweiggroup.com.

9

THE ZWEIG LETTER JUNE 22, 2015, ISSUE 1109

In a recent leadership training program presented to project and financial managers of a large, successful engineering firm, Fish! was presented. Though it was only two

slides of the presentation, Fish! had profound impacts on the managers.

Go Fish! for fantastic resultsFollowing guidelines of the World Famous Pike Place Fish Market can create harmony between project and financial management teams, better results for clients.

O P I N I O N

Fish!, a small book with large concepts, was written by Stephen Lundin, Ph.D. It describes four simple concepts that can radically transform the way project and financial management staff approach what they do and to create synergies between these groups.

Take the lead from the World Famous Pike Place Fish Market and implement the following concepts to radically transform project and financial management roles and responsibilities. Each of these concepts can have huge impacts to the way project managers and financial management staff interact, assist each other, move information forward, and create more value for clients.

CHOOSE YOUR ATTITUDE! Project managers are faced with a myriad of tasks – from staffing the team, insuring scope and schedule adherence, manag-ing the external and internal consultants, achiev-ing financial success, invoicing and collections, and more. When PMs choose how to relate to the team, have a positive approach, and lead with a smile, the tasks of the day become more approach-able, achievable, and successful.

The integration of the financial management team as partners and team members allows PMs to do what they do best. The energy associated with a positive attitude is transformative when it comes to reviewing financial project performance – good news or bad – and helps the financial management staff feel more engaged, involved, and participatory in the project’s success.

PLAY. How much of what a PM does each day can be looked at as gaming?

Creating alternative models of delivery, profit projections with alternative models of schedule, and success defined by the team are really alternative gaming models. Do you treat them as play or drudgery?

How can the financial team assist in the game of project planning of architectural or engineering projects? How often do PMs get their team together to review the project in a spirit of “creative tension,” where there are no rules other than a creative review of project design, delivery, methods, and ways to achieve more?

By placing diverse team members together in a fun and stimulating environment, the results and achievements are usually more dramatic! Put those financial folks in the mix, and dramatic and transformative financial results can be possible. By finding the joy in their work, creating, and a spirit of camaraderie, a positive difference occurs.

MAKE THEIR DAY. PMs and financial management staff each have the ability to synergistically “make each other’s day.”

The financial management staff, when teamed and working effectively with PMs, can lighten

See TED MAZIEJKA, page 10

“The energy associated with a positive attitude is transformative when it comes to reviewing financial project performance – good news or bad.”

“How often do PMs get their team together to review the project in a spirit of ‘creative tension,’ where there are no rules other than a creative review of project design, delivery, methods, and ways to achieve more?”

“Making each other’s day creates a ripple effect that leads both the PM and financial team to strive to make the client’s day.”

© Copyright 2015. Zweig Group.

All rights reserved. THE ZWEIG LETTER JUNE 22, 2015, ISSUE 1109

10

their load; oversee the tasks that the PMs least like to do; leverage the PMs’ billing rate; allow the PMs to focus more time and energy on the client, the project team, and the work effort; allow for the exploration of alternative ways to manage the projects; streamline the team’s efforts; and allow for more creative thinking, rapid turnaround of proposals, effective QA/QC review of documents, and overall client relation building.

The PMs can, likewise, have significant impact on the financial team performance by insuring timely submission of time cards, submission of expenses, review of invoice preparation, review and approval of consulting invoices, effective collection calls to clients that the accounting staff can’t get a response on, resources planning assistance if the firm is using an integrated tool to manage resource planning, effective reporting on project progress, and overall assistance to the project manager and the team.

Making each other’s day creates a ripple effect that leads both the PM and financial team to strive to make the client’s day. Freeing up the PM’s time allows the PM to be able to provide more time to manage the client relationship and check in with the client to see how things are going – and this one action allows for a greater degree of client satisfaction.

BE THERE, BE PRESENT. Focused attention by each of these par-ties allows all team members to be aware and understand

what each can derive from being fully present with each other. They understand the power of being present – to concentrate fully when in each other’s presence, with no distractions, cell phones, or text messages. Without dis-tractions, there is nothing else to do but to use this con-centrated time to achieve the desired results.

Requiring full presence allows the PM and financial management team to become conscious of collaborating to get things done. By mutually respecting this time together, their interaction allows for attainment of project reviews, earnings assessments, contractual reviews, resource planning, and other important tasks that each other needs to accomplish.

Leading by example, this acknowledgement of each other’s strengths offers positive approaches that shift conversation, making each other’s lives better together.

So, go Fish! and watch dramatic and positive changes occur.

TED MAZIEJKA is a Zweig Group finance and management consultant. Contact him at tmaziejka@zweiggroup.com.

TED MAZIEJKA, from page 9 “Requiring full presence allows the PM and financial management team to become conscious of collaborating to get things done.”

MASER CONSULTING OPENS NEW OFFICE IN MARYLAND Maser Consulting P.A. (Norfolk, VA), a na-tional multi-discipline engineering firm, has established a new office in Columbia, MD. The location affirms the company’s strategic plan to provide more immediate availability to cli-ents and projects within the region, while expanding geographically to adapt to the evolving market.

With more than 20 years of experience managing civil design and construction projects, Richard M. McGill II is the geographic discipline leader for civil and site development ser-vices at this new location and will be heading the further development of existing services in the area.

THORNTON TOMASETTI LAUNCHES OFFICE IN SEATTLE International engineering firm Thornton Tomasetti (New York, NY), which comprises more than 850 engineering, architecture, sustain-ability and support professionals who collaborate from offices across the United States and in Asia-Pacific, Europe, Latin America and the Middle East, has announced its expansion into the Pacific Northwest with the opening of a new office in Seattle. Greg Briggs, a local expert with more than 25 years of experience in structural design, analysis and project man-agement across all project types, has joined the firm as principal and will oversee the office.

DESIGN WORKSHOP COMMITS TO ASIA Design Workshop (Denver, CO), an international land-scape architecture, planning, and urban design firm, has announced the opening of its new-est office in Shanghai, China. The expansion is part of Design Workshop’s commitment to China, having just completed registration of a new WFOE company called Wojing Land-scape Architecture Design Consulting Co. Ltd. to serve the firm’s clients in Asia. The new office space will be led by Charles Cobble.

WESTWOOD’S OVERLAND PARK OFFICE RELOCATES Westwood Professional Services Inc. (Minneapo-lis, MO), a provider of multi-disciplined surveying and engineering services for commercial and residential development, renewable energy, power delivery, and oil and gas projects, has moved its Overland Park office operations to 7501 College Boulevard, approximately three miles north of its previous location on 130th Street.

Office Leader Mike McCullough said: “We are excited to be at the College Boulevard office. The office is larger and designed to be more functional. Our new space will help us deliver more efficient and effective service to our clients by providing our staff the environment they need to do their best work.”

FIRMS ON THE MOVE BUSINESS NEWSAISI ANNOUNCES STANDARDS’ PUBLIC REVIEW, COMMENT PERIOD The American Iron and Steel Insti-tute has announced the availability of five of its cold-formed steel design standards and three of its cold-formed steel test standards for public re-view and comment.

Standards with a July 6 comment deadline in-clude AISI S230, AISI S240, AISI S310, AISI S400, AISI S914, AISI S915, and AISI S916. AISI S220 has a July 13 comment deadline.

AISI S240 is a revision, re-designation, and con-solidation of AISI S200, AISI S210, AISI S211, AISI S212, AISI S213, and AISI S214.

AISI S400 is a revision, re-designation, and con-solidation of the seismic provisions of AISI S213 and AISI S110.

AISI S915 will provide the methodology to deter-mine the strength and deformation behavior of through-the-web punchout bridging connectors for cold-formed steel wall stud bracing for non-structural and structural wall studs in light-frame construction.

AISI S916 will establish a rational method of de-termining the strength and stiffness of nonstruc-tural interior partition wall assemblies framed with cold-formed steel. It will provide an alterna-tive to the calculation of capacity based on AISI S100 and will permit manufacturers to deter-mine limiting height values for the assemblies.

For more information or to review the standards, visit steel.org.

11

THE ZWEIG LETTER JUNE 22, 2015, ISSUE 1109

By LIISA ANDREASSENCorrespondent

SSR, a global financial advisory services firm, reports that employee stock owner-ship plans are attractive for A/E firms and their employees. The primary advan-tages include:

z Cultural fit

z Increased ability to attract and retain talent; and

z Corporate tax advantages that can lead to material retirement savings.

These advantages are illustrated by the incorporation of ESOPs by many success-ful companies in the A/E industry, such as HNTB Inc., Weston Solutions Inc., HDR Inc., DLR Group, CH2M Hill, and Parson Corporation. In fact, based on data from the National Cen-ter for Employee Ownership, nearly 20 of the 100 largest majority-owned ESOP firms in the U.S are in the A/E industry.

“While the benefits of ESOPs apply to all size A/E companies, the benefits are es-pecially noteworthy for mid-size firms without readily available liquidity alterna-tives,” Matthew Hricko, senior vice president of SSR, says. “Under the right cir-cumstances, the ESOP structure can not only benefit the selling shareholder, but can also create a sustainable employee-owned firm with certain tax, recruiting, and operational advantages over industry peers.”

ESOPs at a glanceData from the National Center for Employee Ownership highlights the risks and rewards of employee stock ownership plans.

F I R M O W N E R S H I P

Based on data from the

National Center for Employee

Ownership, nearly 20 of

the 100 largest majority-owned

ESOP firms in the U.S

are in the A/E industry.

ESOP Q&A

The NCEO answers some common questions re-garding ESOPs:

Q. How can employee ownership be accom-plished?

A. There are a variety of ways: Employees can buy stock directly, be given ownership as a bonus, re-ceive stock options, or obtain stock through a prof-it-sharing plan. Some employees become owners through worker cooperatives, where everyone has an equal vote. But by far the most common form of employee ownership in the U.S. is the ESOP, or em-ployee stock ownership plan.

Q. How can ESOPs be used?

A. Contrary to the impression one can get from media accounts, ESOPs are almost never used to save troubled companies – only at most a handful of such plans are set up each year. Instead, ESOPs are most commonly used to provide a market for the shares of departing owners of successful close-ly held companies, to motivate and reward employ-ees, or to take advantage of incentives to borrow money for acquiring new assets in pretax dollars. In almost every case, ESOPs are a contribution to the employee, not an employee purchase.

Q. What are the major tax benefits of an ESOP?

A. ESOPs have several significant tax benefits, the most important include:

z Contributions of stock are tax-deductible.

z Cash contributions are tax-deductible.

z Contributions used to repay a loan the ESOP takes out to buy company shares are tax-deductible.

z Sellers in a C corporation can get a tax deferral.

z In S corporations, the percentage of ownership held by the ESOP is not subject to income tax at the fed-eral level (and usually the state level, too).

z Dividends are tax-deductible.

z Employees pay no tax on the contributions to the ESOP, only the distribution of their accounts, and then at potentially favorable rates.

Q. Are there any drawbacks to setting up an ESOP?

A. Yes. The law does not allow ESOPs to be used in partnerships and most professional corpora-tions. ESOPs can be used in S corporations, but do not qualify for the rollover treatment and have lower contribution limits. Private companies must

See ESOPS, page 12

© Copyright 2015. Zweig Group.

All rights reserved. THE ZWEIG LETTER JUNE 22, 2015, ISSUE 1109

12

HUNTER DOUGLAS PROMOTES NEW CEO Marv Hopkins, chairman and CEO of Hunter Douglas North America (Pearl River, NY) manufac-turer and marketer of custom window coverings in North America and a major manufacturer of architectural products with approxi-mately 7,000 employees and 40 divisions, announced the promotion of Ron Kass, its current president and COO, to chief executive officer, effective July 1. Hopkins also announced that he will be retiring effective July 1, after 20 years as CEO and 29 years in total with Hunter Douglas.

CHRISTINA CASOLE JOINS SKELLY AND LOY IN HUNT VALLEY Skelly and Loy (Harrisburg, PA), a woman-owned engineering-environmental consult-ing firm, announced that Christina Casole, a water resources engineer, has joined the ranks in its Hunt Valley, Md., office. Casole is a water resources engineer with more than 12 years’ experience, specializing in stream restoration, watershed assessment, stormwater management, floodplain analysis, and erosion and sediment control design.

RPS KLOTZ HIRES NEW PUBLIC WORKS PRACTICE MANAGER RPS Klotz Associates (Houston, TX) has announced the addition of Bart Standley as its new public works practice manager. Standley has almost 40 years’ experience in civil engineering, emphasizing public infrastructure projects. Stand-ley’s projects have included multiple water treatment plants, and he oversaw Houston’s efforts to revamp its stormwater management program.

FLUOR’S COO ELECTED TO BOARD OF U.S.-CHINA BUSINESS COUNCIL Fluor Corporation (Irving, TX) has announced that its Chief Operating Officer, Peter Oosterveer, was elected by the U.S.-China Business Council to its board. As a USCBC board member, Oosterveer will work to advance the com-mercial relationship between the two countries to support trade and investment opportunities.

Fluor has been active in China since 1978 and has completed more than 280 projects across 20 provinces and municipalities for multinational companies and China’s state-owned enterprises, and has delivered services such as project management, engineering, procurement, fabrication, and construction in the country.

GMB WELCOMES NEW, RETURNING INTERNS George, Miles, and Buhr LLC (Salisbury, MD) has announced several new and returning interns for summer 2015.

z Collin Spurgin recently joined the Salisbury office as a summer intern with the Structural Engineering group. Collin will start his fifth year at Rowan University in the fall. He studies civil and environmental engineering and is minoring in GIS.

z Devon Hendershot joined the Salisbury office as an intern for the Water/ Wastewater group. Devon is a rising junior at the University of Maryland - College Park, and is studying civil engineering.

z Jacob Erskine also joined GMB’s Salisbury office as an intern, gaining experience as a technician. Jacob is a recent graduate of James M. Bennett High School, and will be attending the University of Maryland - College Park in the fall to study civil engineering.

z Gene Wildonger is interning with the Civil Engineering group in GMB’s Seaford Office. Gene currently attends the University of Delaware, studying mechanical engineering with an aerospace concentration.

z Kevin Prag, Ahmed Osman and Jack Sewell have returned as interns to the Salisbury office for the summer. Kevin attends the University of Maryland- Eastern Shore and studies architecture. Ahmed will attend the University of Virginia in the fall to study civil engineering. Jack will attend Louisiana State University to study petroleum engineering. Ben Hearn, an upcoming senior studying civil engineering at the Uni-versity of Delaware, will return to the Seaford Office for the summer.

repurchase shares of departing employees, and this can become a major expense. The cost of setting up an ESOP is also substantial – perhaps $40,000 for the simplest of plans in small companies and upward from there. Any time new shares are issued, the stock of ex-isting owners is diluted. That dilution must be weighed against the tax and motivation benefits an ESOP can provide. Finally, ESOPs will improve corporate perfor-mance only if combined with opportunities for employ-ees to participate in decisions affecting their work.

ESOPS, from page 11

FAST FACTS

z As of 2015, the NCEO estimates that there are roughly 7,000 ESOPs covering about 13.5 million employees.

z About two-thirds of ESOPs are used to provide a market for the shares of a departing owner of a profitable, closely held company. Most of the remainder are used either as a supplemental employee benefit plan or as a means to borrow money in a tax-favored manner.

z For more information, visit the National Center for Employee Ownership at nceo.org/.

Currently, there are about 6,941 ESOPs covering roughly 13.5 million U.S. employees. ESOP companies are diverse: there are ESOPs in almost every industry, ranging in company size from just a few employees to over 250,000, spread throughout the nation.

ESOPs in the U.S.

The National Center for Employee Ownership web: www.nceo.org and www.esopinfo.org email: outreach@nceo.org

29% 18%

17%

20%

17%

Geography of ESOPs Number of Participants

Most Common Industries

A Brief History of Employee Ownership

Peninsula Newspapers establishes first ESOP.

Federal government creates statutory framework for ESOPs.

Congress passes legislation allowing ESOPs to own S corporations.

Today, there are roughly 13.5 million ESOP participants.

Year

Event

# of ESOPs

Participants

1956

1 ESOP

1974

200 ESOPs 6,680 ESOPs

1996

6,941 ESOPs

Under 200 250,000 6.3 million 13.5 million

2014

41%

19%17%

7%

9%

Construction BankingEngineeringManufacturing

301–1,000

1,000+

51–100

Up to 50

101–300

ESOPS IN THE U.S.Geography of ESOPs

Map

imag

e by

& in

form

atio

n fro

m th

e N

atio

nal C

ente

r for

Em

ploy

ee O

wne

rshi

p

Most Common Industries

MANUFACTURING ENGINEERING CONSTRUCTION BANKING

ON THE MOVE