end-user trends in the electrical industry by mike eby, editor-in-chief ec&m magazine

End-User TrendsEnd-User Trendsin the Electrical Industryin the Electrical Industry

byby

Mike Eby, Editor-in-ChiefMike Eby, Editor-in-Chief

EC&MEC&M magazine magazine

www.ecmweb.comwww.ecmweb.com

What’s Going on in the What’s Going on in the Engineering Engineering Community?Community?

It’s all about It’s all about

global expansionglobal expansion

and diversificationand diversification

EC&MEC&M ‘s Top 40 ‘s Top 40

We conduct an annual survey of the We conduct an annual survey of the largest electrical design firms in the largest electrical design firms in the country (completed in 1country (completed in 1stst quarter) quarter)

We rank them based on annual salesWe rank them based on annual sales We create a special report for the We create a special report for the

magazine based on the answers magazine based on the answers they provide to the survey they provide to the survey (published in April/May issue)(published in April/May issue)


Year-over-year overall design Year-over-year overall design revenue for the 28 firms present revenue for the 28 firms present on last year’s list averaged an on last year’s list averaged an 11.1% increase11.1% increase

When drilling down, design service When drilling down, design service revenue specifically tied to revenue specifically tied to electrical work revealed a year-electrical work revealed a year-over-year increase of 4.4%over-year increase of 4.4%


Many of the firms on the list are Many of the firms on the list are cautiously optimistic regarding the cautiously optimistic regarding the speed of the economic recoveryspeed of the economic recovery

However, despite growing backlogs However, despite growing backlogs this year, most firms don’t expect this year, most firms don’t expect real economic recovery to occur real economic recovery to occur until 2012until 2012


When asked what challenges they When asked what challenges they faced for the remainder of this faced for the remainder of this year and into 2012, many year and into 2012, many identified the need to retain and identified the need to retain and recruit well-trained engineers and recruit well-trained engineers and project managers as a key factor.project managers as a key factor.

Other concerns include:Other concerns include: Pressure from clients to lower feesPressure from clients to lower fees Meeting faster project delivery timesMeeting faster project delivery times


More firms offering construction More firms offering construction management servicesmanagement services

More firms looking for projects More firms looking for projects outside the U.S. bordersoutside the U.S. borders

More firms reporting Design/Build More firms reporting Design/Build and other turnkey project delivery and other turnkey project delivery methods continue to grow in methods continue to grow in popularitypopularity


When asked about the future When asked about the future technologies that would most likely technologies that would most likely change future design practices, change future design practices, firms mentioned the following:firms mentioned the following: Building Information Modeling (BIM)Building Information Modeling (BIM) Energy efficient productsEnergy efficient products Intelligent building productsIntelligent building products

Architecture Billings Index Architecture Billings Index (ABI)(ABI)

Serves as a leading indicator of Serves as a leading indicator of construction activity (any score construction activity (any score above 50 indicates a growth above 50 indicates a growth phase)phase)

October score was 49.4, following October score was 49.4, following a September score of 46.9a September score of 46.9

Overall, business conditions Overall, business conditions remain negativeremain negative

Source: American Institute of Architects

What Does All of This What Does All of This Mean for Young Mean for Young Engineers?Engineers?

Rise of the business-minded engineerRise of the business-minded engineer Today’s engineering graduates are Today’s engineering graduates are

expected to step right off campus armed expected to step right off campus armed with the skills for organizing projects, with the skills for organizing projects, leading teams, and dealing with difficult leading teams, and dealing with difficult supervisors and co-workerssupervisors and co-workers

Engineering programs are modifying Engineering programs are modifying their curriculums to meet these needstheir curriculums to meet these needs

What’s Happening on What’s Happening on the Contractor Front?the Contractor Front?

It’s all about It’s all about surviving hard timessurviving hard times


We conduct an annual survey of the We conduct an annual survey of the largest electrical contractors in the largest electrical contractors in the country (completed in 3rd quarter)country (completed in 3rd quarter)

We rank them based on annual salesWe rank them based on annual sales We create a special report for the We create a special report for the

magazine based on the answers they magazine based on the answers they provide to the survey (published in provide to the survey (published in September/October issue)September/October issue)


Total sales for electrical and Total sales for electrical and datacom services dropped yet againdatacom services dropped yet again A 6.3% year-over-year drop on top of a A 6.3% year-over-year drop on top of a

4.5% drop the prior year4.5% drop the prior year Some companies reluctant to Some companies reluctant to

participate (assume they didn’t participate (assume they didn’t want to inform the world of their want to inform the world of their poor performance) poor performance)


Wild swings seen among this elite Wild swings seen among this elite groupgroup

+63.1% to –49.3%+63.1% to –49.3% Surprisingly, nine companies Surprisingly, nine companies

reported a percentage gain of more reported a percentage gain of more than 20%than 20%

However, nine other companies However, nine other companies reported a drop in sales of more reported a drop in sales of more than 20%than 20%


Nearly 75% of the companies reported Nearly 75% of the companies reported using the design-bid-build project using the design-bid-build project delivery method to complete projectsdelivery method to complete projects

Design-assist is the second most popular Design-assist is the second most popular method of deliverymethod of delivery

The most active market sectors they The most active market sectors they worked in included:worked in included:

Health CareHealth Care Education and InstitutionEducation and Institution Power (Utilities and T&D)Power (Utilities and T&D)


What are they thinking as the year What are they thinking as the year comes to an end?comes to an end?

83% of the group expect to meet or 83% of the group expect to meet or exceed their sales goal this yearexceed their sales goal this year

77% plan to implement lean construction 77% plan to implement lean construction practices into their projectspractices into their projects

55% expect to maintain or reduce current 55% expect to maintain or reduce current staffing levelsstaffing levels

58% do not plan on purchasing major 58% do not plan on purchasing major construction equipmentconstruction equipment


What are they thinking as the year What are they thinking as the year comes to an end?comes to an end?

59% expect to increase their use of BIM59% expect to increase their use of BIM 45% expect to build more projects to 45% expect to build more projects to

Leadership in Energy and Environmental Leadership in Energy and Environmental Design (LEED) standardsDesign (LEED) standards

A whopping 70% do not expect the A whopping 70% do not expect the construction economy to improve until construction economy to improve until 2013!2013!

How does all How does all of this relate of this relate

to employment levels?to employment levels?

General ConstructionGeneral Construction

Added 18,000 jobs in the last 12 monthsAdded 18,000 jobs in the last 12 months However, lost jobs for a second straight However, lost jobs for a second straight

month (shed 12,000 alone in November)month (shed 12,000 alone in November)

Overall construction industry Overall construction industry unemployment rate remains high at unemployment rate remains high at 13.1%13.1% But this is down from 18.8% a year earlierBut this is down from 18.8% a year earlier

Source: Bureau of Labor Statistics

General Construction General Construction (cont’d)(cont’d)

Residential construction employment Residential construction employment decreased by 3,000 in Novemberdecreased by 3,000 in November -400 jobs as compared to same time last year-400 jobs as compared to same time last year

The resi specialty trade contractor The resi specialty trade contractor subsector added 3,000 jobs for the monthsubsector added 3,000 jobs for the month +20,800 jobs year-over-year+20,800 jobs year-over-year


General Construction General Construction (cont’d)(cont’d)

Non-resi building construction employment Non-resi building construction employment dropped by 1,200 in Novemberdropped by 1,200 in November +9,900 jobs as compared to same time last year+9,900 jobs as compared to same time last year

The non-resi specialty trade contractor The non-resi specialty trade contractor subsector lost 3,500 jobs for the monthsubsector lost 3,500 jobs for the month -9,900 jobs as compared to same time last year-9,900 jobs as compared to same time last year


Electrical ContractorsElectrical Contractors

Electrical contractor employment level held Electrical contractor employment level held steady in September, down 0.6% from the steady in September, down 0.6% from the previous month (according to Dept. of previous month (according to Dept. of Labor)Labor) However, it is up 2.3% year-over-yearHowever, it is up 2.3% year-over-year

Annual average level for all of 2010 was Annual average level for all of 2010 was around 723,000around 723,000

However, as a point of reference, this However, as a point of reference, this figure was slightly higher than 900,000 in figure was slightly higher than 900,000 in early 2007early 2007

What About the Buying What About the Buying Power of Electrical Power of Electrical Contractors?Contractors?

Electrical contractors account for Electrical contractors account for an estimated 36% of all electrical an estimated 36% of all electrical products sold through electrical products sold through electrical distributorsdistributors

Each employee at an electrical Each employee at an electrical contractor makes $43,880 in contractor makes $43,880 in purchases, annually purchases, annually Source: Electrical Wholesaling magazine

Source: Electrical Wholesaling (proprietary survey)

What Do Contractors Think What Do Contractors Think About New Technologies?About New Technologies?

Are You Making Money Are You Making Money Selling Energy Efficient Selling Energy Efficient

Products?Products?

The Time is NowThe Time is Now Renewed Energy Consciousness Among Renewed Energy Consciousness Among

ConsumersConsumers Utility Rebate Programs are AbundantUtility Rebate Programs are Abundant Energy Performance Service ContractsEnergy Performance Service Contracts New Federal Energy Legislation and State New Federal Energy Legislation and State

RegulationsRegulations LEED Certification and Green Building LEED Certification and Green Building

GuidelinesGuidelines Rapid R&D in the Lighting MarketRapid R&D in the Lighting Market

Points to PonderPoints to Ponder

Are the electric utilities in my Are the electric utilities in my market offering rebates?market offering rebates?

Do I have the on-staff expertise to Do I have the on-staff expertise to be a player in the energy market?be a player in the energy market?

Which distributors & energy-Which distributors & energy-service companies (ESCOs) are the service companies (ESCOs) are the key players in this business?key players in this business?

Incentives Being OfferedIncentives Being Offered

Lighting equipment (CFLs, LEDs, Lighting equipment (CFLs, LEDs, daylighting and occupancy daylighting and occupancy sensors)sensors)

HVAC equipment (installation of HVAC equipment (installation of higher efficiency units)higher efficiency units)

Motors & drives (installation of Motors & drives (installation of premium efficiency products)premium efficiency products)

PECO Smart Home PECO Smart Home RebatesRebates

PPL Rebate ProgramsPPL Rebate Programs

PennPower Rebate PennPower Rebate ProgramsPrograms

end-user trends in the electrical industry by mike eby, editor-in-chief ec&m magazine

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