Coronavirus Survey: 56% of AEC Respondents Report a Decrease in New Business Activities
Editor's Note: A second wave of this survey, conducted April 2-6, is now available. To read the updated survey, visit https://www.esmagazine.com/articles/100323-coronavirus-survey-ii-80-of-mechanical-systems-respondents-have-experienced-a-decline-in-new-business-activities
On Jan. 20, the first American case of the coronavirus was reported in Snohomish County, Washington, when a 35-year-old man was hospitalized with a fever and persistent cough. Today [March 31], more than 174,000 people have been infected and 3,400 have died. Globally, more than 820,000 people have caught the virus, and 40,000-plus individuals have passed away.
The coronavirus outbreak has emerged as a disruptive human tragedy with very real business and economic consequences. Business leaders have been thrust into uncharted waters, as, together, we face the challenges surrounding the outbreak and its resulting economic impact.
To help navigate this uncertainty, Engineered Systems has partnered with Clear Seas Research, a BNP Media company, to conduct an industry survey designed to collect information regarding industry professionals’ experiences with the coronavirus/COVID-19. We’ve gathered input related to how firms are navigating their business activities, including planning, staffing, investing, and marketing.
The survey, detailed here, examines the impact the coronavirus has had on various industries, including architecture, engineering, and construction (AEC); mechanical systems; manufacturing; packaging; food and beverage; security and critical systems; and gaming and hospitality. Our coverage will focus specifically on the responses representing the AEC and mechanical systems industries.
Of the 705 respondents, 69% identified the economy as a top concern, 68% identified concerns with achieving business goals over the next three months, and 61% identified challenges with achieving business goals over the next six months.
“Obviously, we all have personal concerns, but I believe the next three months are going to test our economy,” said Howard McKew, P.E., CPE, FASHRAE, president of Building SmartSoftware LLC. “This is going to test all types of companies, including ‘self-employed’ businesses and businesses small and big. It’s going to set back many in ‘middle America.’ Unfortunately, the poor will continue to be poor, and the wealthy will get through this quite easily.”
Workers in the mechanical systems industry ranked their top concerns accordingly: 82% identified achieving business goals over the next three months as their top priority, 77% identified the current economy, and 67% identified business stability over the next 12 months.
Respondents in the AEC industry answered a bit differently, as 62% expressed concern regarding their business goals over the next three months, 61% are most concerned about friends/family becoming infected, and 59% noted concern with the economy.
“Business concerns pale in comparison to the safety of family and friends, employees, and colleagues,” said Andrew McKeever, P.E., LEED AP BD+C, principal, Method Engineering Group. “When the well-being of others is the primary concern, I’m certain we will all work together to achieve our business goals when the time is appropriate.”
New Business Prospects
The coronavirus has drastically impacted existing and new business activities. While 55% of all respondents report their active business activity is operating on schedule, 30% said business has been delayed, and 15% have canceled business.
Rebecca Ellis, president of Questions & Solutions Engineering Inc., said the state of Minnesota deemed her company’s work ‘essential,’ easing her concerns for her current work orders. After those work orders are completed, she’s unsure what the future holds.
“Minnesota’s executive stay-at-home order exempted construction, so projects under construction have continued,” she said. “In addition, QSE’s existing work in the building sector includes a lot of health care and multifamily residential work, which is keeping us quite busy.”
Regarding existing business prospects, survey numbers look very similar in the mechanical systems and AEC industries, as 54% and 55%, respectively, are completing work on schedule, 33%-34% reported delayed business, and 12% have canceled portions of their work.
“Most of our active business has remained on schedule,” said McKeever. “While coordination and collaboration has been made more difficult, we, along with our clients, have been able to meet all previously scheduled deadlines. We have seen slight delays in some of our larger projects, due to uncertainty with the coronavirus timeline, but we expect those projects to move forward later this year.”
Respondents across all industries have felt the sting in new business activities, as 65% reported a decline in new business, 19% reported an increase, and 16% reported no change.
“Regarding the short-term future, I think the jury is still out,” said Tim Coyle, P.E., MSEE, senior technical specialist, KFI Engineers. “Our management is making extreme efforts to maintain productivity and keep the pipeline full, including ‘full steam ahead’ on marketing efforts — we are participating in a selection interview for a major project by video tomorrow — but I don’t think we can predict where we will be three months from now.”
For new projects, survey numbers are even more dramatic in the mechanical systems industry, where 75% of respondents reported a decline in new business development activity, 13% reported increased activity, and 12% reported no change.
The impact on new business in the AEC industry hasn’t been quite as steep, as 56% reported decreases in new business activity, 24% reported an increase, and 21% have not seen a change.
Gary Hamilton, P.E., PMP, FASHE, LEED AP BD+C, senior vice president, WSP, spends much of his time on health care projects. As hospitals focus on reconfiguring their facilities and operations to handle the influx of patients in the wake of the coronavirus, he admits some projects have been delayed.
“My major concern is whether health care systems will be adequately prepared for the surge in patient flow,” he said. “If they are not, this will result in a lot of deaths, not because the patients cannot be saved but because health care systems don’t have the capacity to handle the surge. I spend most of my days answering questions for clients and preparing temporary solutions that can help multiple health care systems get ready for the storm.”
Future in Focus
With uncertainty looming large, administrators are having to make some difficult decisions regarding the size and future of their firms.
One-in-four survey respondents intend to lay off some workers as a result of the coronavirus, while 31% of mechanical systems companies and 20% of AEC firms intend to do the same.
More than 40% of all respondents intend to temporarily suspend employees with or without pay. The same percentage, or two of five, reporting AEC firms will do the same, while 28% of mechanical systems companies will seek to shelve workers for the time being.
Paul Ehrlich, P.E., founder and president of Building Intelligence Group LLC, a consulting firm dedicated to the delivery of energy-efficient commercial buildings with a focus on controls, systems integration, and building to grid integration, spends most of his time on research work nowadays. The conversations he’s had with his engineering peers have not been overly positive.
“There is clearly a feeling that while they are currently OK, the prospects for the near future are pretty dire,” he said. “I talked to one firm last week that is already working on cutting staff hours and salaries.”
When it comes to forecasting what a workforce could look like in three months or more, uncertainty looms large, as at least 15% of respondents said the future is simply too difficult to predict at this point in time.
While the coronavirus has strapped numerous firms, it hasn't been all bad news for everyone. Phil Zito, CEO, Building Automation Monthly, an online training services firm that teaches building automation skills, said a down economy creates opportunities for companies willing to endure the cost to gather customers who are currently being underserved.
“As companies scale back sales expenses, we can use our reach on social platforms to drive sales and acquire new customers,” he said. “We're also working with underemployed SMEs to bring them into our training platform as instructors."
Dr. Stephanie Taylor, M.D., M. Arch, CIC, CEO of Taylor Healthcare Commissioning Inc., is also benefiting due to her medical expertise.
“My work centers on researching, advising, and updating building codes to improve occupant health,” she said. “The COVID-19 outbreak has focused attention onto what I do, so my biggest challenge right now is staying organized with tasks and not getting burnt out by working 20 hours a day. I’ve been asked to do a lot of on-camera appearances, so I’m learning how to be more composed and articulate in front of the video camera.”
The onset of the virus has certainly increased awareness of personal hygiene, as more than 37% of respondents said they intend to incorporate additional health/safety procedures into their business plans.
“Projects are slowly making accommodations, like cleaning more often, having more hand sanitizer around, and encouraging gloves and masks, if you can get them,” said Gretchen Coleman, P.E., CCP, CxA, EMP, owner, Gretchen Coleman Commissioning Group LLC. “I have been on several job sites recently, where I was one of the few wearing a mask, but many had on gloves. Social distancing is hard to do on a job site, but workers are adjusting. You have to hand someone materials and then back up 6 feet, or you hook up a duct pressure rig and then back up 6 feet.”
Above all, Coleman, like many, is most concerned about the health of her friends and family.
“I have friends who are nurses or chaplains, and they are on the front lines and can’t get N95 masks,” she continued. “Chaplains can’t get close to patients to give them comfort. My church has an elderly congregation, and while they are staying at home, what will happen if they do get sick, not necessarily from COVID-19, and can’t get a hospital bed? This virus has brought a new, underlying level of stress that just doesn’t go away.”
Rounding out the survey results, more than one-in-four respondents said they intend to investigate new technologies for future business applications, and 25% intend to read more industry publications to learn best practices on how to react and prepare their businesses going forward.
“I have spent countless hours in the past weeks evaluating technologies for remote work designed to improve the experience for my clients and colleagues,” said Rachel Romero, P.E., energy engineer III, National Renewable Energy Laboratory. “The coronavirus has brought on an incredible amount of work.”
The Clear Seas study, conducted March 24-26, garnered 705 responses. Of those, 292 represented the AEC vertical and 87 came from the mechanical systems industry.
A total of 33% of respondents reported revenues between $10 million and $99.9 million, 19% of respondents reported revenues between $1 million and $4.9 million, 17% earned more than $100 million, 12% earned less than $500,000, 10% earned between $5 million and $9.9 million, and approximately 10% earned between $500,000 and just less than $1 million.
Regarding company size, 23% of respondents employed between 251-10,000 employees, 22% reported 10 or fewer employees, 15% employed 10-25, 11% had 26-50 employees, 11% had 101-250 employees, and 8% employed 51-100 employees.
Geographically, 32% of those who participated are from the Midwest, 28% are from the South, 21% call the West home, and 18% reside in the Northwest.
This survey captures a perspective from a specific moment in time. While this perspective can be used to unite the industry, encourage collaboration, and shape the business decisions we make today and tomorrow, we must recognize that this viewpoint will continue to change over time. Engineered Systems will continue to monitor and reports on these events as they evolve. For more information on Clear Seas Research, visit www.clearseasresearch.com.
A second wave of this survey, conducted April 2-6, is now available. See it in its entirety here: https://www.esmagazine.com/articles/100323-coronavirus-survey-ii-80-of-mechanical-systems-respondents-have-experienced-a-decline-in-new-business-activities