Despite solid results and strategic changes last year that pushed a number of Top 200 Environmental Firms higher on the 2018 list, the absence of others from survey participation and some uncertain signals on the U.S. and global political fronts injected caution into the environmental marketplace that tempered overall results.

Even so, nearly three-quarters of this year’s listed firms indicate better signs for 2018 and ahead, with markets strengthening and projects on the move. 

“Since the beginning of 2017, we are seeing more proposed changes and legislative agenda items to streamline environmental analyses and permitting than has been experienced in a generation,” says Eric Keen, CEO of HDR, which jumped two spots to No. 11. “There continues to be a need domestically to upgrade aging transportation, water and energy infrastructure. Globally, we are seeing an increase for environmental services driven by water quality and availability, biodiversity and resilience.”

The Top 200 total revenue reported in 2017 fell to $53.37 billion, off 2% from the previous year’s tally. Domestic revenue showed a 2.1% decrease from last year’s total, but activity in global markets limited falloff of the non-U.S. sector to 1.26%.

“The environmental services market experienced tough market conditions overall in 2017,” says John Cowdery, CEO of Cascade Environmental, a Washington state remediation and geotechnical contractor. “Large projects were put on hold while the stakeholders awaited signals on regulation and funding availability. We expect the administration’s pledge for less bureaucracy and more spending on infrastructure to positively impact our business in 2018.”

Chris Leichtweis, CEO of federal contractor North Wind Group, which rose 19 spots on the list to No. 55, says “there is predictable growth in this market and I don’t think it will change anytime soon.” He cites “an uptick” in its military cleanups in the Pacific Rim and strong organic growth. Mott MacDonald North America CEO Nicholas DeNichilo says strong real estate and urban redevelopment markest propelled remediation work that is “mostly immune from federal dysfunction.”

Changes in listed firms were apparent in 2018 Top 200 revenue totals, based on consolidation moves last year at a pace and scope not seen for several years. These include the acquisition last year of CH2M, a Top 200 perennial leader, in a $3.27-billion deal that returns Dallas giant Jacobs to the list after a long absence. Wood PLC debuts in the Top 10 as the new parent of AMEC Foster Wheeler, while SNC-Lavalin Group’s $2.6-billion buy of Atkins, also completed last year, helped it rise to No. 28 from No. 71.

Top 50-ranked firms Layne Christensen and Louis Berger will disappear on next year’s Top 200, but their revenue is set to boost list standings of their respective 2018 acquirers—Granite Construction, in the first quarter, and WSP Global, in an agreed-to deal announced July 30. The list debut of water and wastewater plant builder Salini Impregilo added $1 billion in revenue, but not participating this year were Veolia North America and CB&I.
 

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Streamlining

Revenue totals in the key private and federal markets fell by 10.8% and 2.1%, respectively, in a year marked by Trump administration policy confusion. While some firms note impacts from environmental anti-regulatory fervor last year by now-gone EPA Administrator Scott Pruitt, others are less concerned.

“Streamlining regulatory approval processes does not eliminate them, but will hopefully shorten the timeline,” says environmental sector veteran Ron Oakley, a former contractor CEO and top executive. “Environmental services providers will still have the business, but they will just have to do it quicker, which could require additional resources.” Weston Solutions CEO Alan J. Solow says new hires over the past year “are becoming catalysts for expansion of our environmental services business company-wide.” But staffing remains a key growth constraint for most firms.

The Top 200 were buoyed by some unleashing of delayed projects with related environmental services, as rising oil and commodity prices began to lift investment in oil-and-gas and mining. Environmental consultant ERM, which rose two spots to No. 13, notes “more positive” trends in client operational and capital spending in the resources sectors. Rising prices that have spurred soil and groundwater cleanups in both upstream and downstream oil-and-gas niches generated a 10% hike in backlog for No. 39-ranked German contractor Bauer Resources GmbH, says Dennis Alexandersen, international business development manager. Antea Group CEO Gerard Sanderink says sector consolidation “lent itself to an increase in environmental due diligence.” He sees “strong demand” for services in North America, Africa and Latin America as oil- and-gas spending continues to recover.

The Top 200 nuclear services sector, which fell 12% based on 2017 reported revenue, will improve in coming years with more decontamination and demolition (D&D) of shuttered federal and commercial nuclear power plants anticipated. The sector “has become a rapid growth market with a forecast value exceeding $14 billion in the next 10 years,” SNC-Lavalin CEO Neil Bruce told investors on Aug. 4 in an earnings call. He said its new D&D joint venture, CDI, just purchased from Entergy two nuclear plants set for shutdown within the next three years whose decommissioning the firms will fast-track. Bruce said one-third of SNC-Lavalin’s year-to-date nuclear revenue now relates to D&D and waste management projects.

While some Top 200 firm executives note the start of Pruitt-inspired reforms at EPA to accelerate the federal Superfund waste cleanup program, EHS Support CEO Andy Patz says the ex-chief’s tenure “was too short to complete the [program] renovation in a long-lasting, meaningful way.” But last month, new Superfund cleanups were accelerated at the federal Hanford nuclear site in Washington state and at the former Anaconda copper smelter in Montana.

One key area of growth in the hazardous waste market, which fell 5.6% for 2018 Top 200 respondents, is looming regulation of “emerging” contaminants PFAS, PFOA and PFOS, contained in firefighting chemicals and other products, which migrate into groundwater without decaying, says Leslie Shoemaker, Tetra Tech executive vice president. “There is a search for the best technologies and the best course of action,” she says. “The military has an acute concern and is likely to spend money on a large scale. EPA and states now are developing cleanup criteria.”

Water Security

The $18.7 billion in revenue that Top 200 firms reported from state and local municipal clients on the 2018 survey is a nearly 11% boost, reversing a 1% market falloff in the 2017 analysis. Work in wastewater plant design and construction was up 6.2%, while water supply-generated revenue rose 3.3%. The latter now makes up more than 20% of the Top 200 revenue total.

Tetra Tech’s Shoemaker foresees bigger spending on water security in Florida, Texas and Southern California as concern rises over drought cycles and supply diversity. “Not everyone has a reservoir with perfect water,” she says. “In areas where there is growth, investment will continue. Uncertainty at the federal level doesn’t mean changes won’t happen at the state level. States have autonomy over water quality standards.”

Tim B. Wall, chairman and CEO of CDM Smith (No. 16), says that while “one water” programs drive new treatments and industry support to state and local entities in formal asset management programs, “high costs cause projects to be put on the back burner until the next drought, which works against forward movement.” But, he says, “I am more optimistic about the market than in years. There’s finally a tailwind.”

Sector revenue fell for Florida contractor Haskell last year, but CEO Steve Halverson is bullish on overall market conditions and a push for compliance and sustainability “that is driving investment and expansion” in water and wastewater facilities for both public and private owners.

Firms continue to see technology as a key future revenue driver. Cascade Environmental’s Cowdery predicts more acceptance by private and federal waste site owners of thermal remediation technology. “The speed from cleanup to closure is remarkable,” he says, with project sites completed in 18 months.

The process involves the use of high-temperature probes that heat contaminants in liquids and extract them. Clean water is injected back into groundwater. “It is used a lot in real estate, where cleanups are quick so the land can be put back into use,” says Cowdery, who notes that traditional methods can take up to 15 years.

Al Hannum, president of AECOM’s environmental business, says smart infrastructure sensors used in its air quality practice “can be deployed very cost effectively and provide real-time monitoring” of particulates, carbon monoxide and ozone.

“Our markets are some of the most data-rich, and we are looking for ways to leverage that resource,” says CDM Smith’s Wall. “There is a lot of information but not a lot of use,” despite fewer barriers and better tools that can create “more constructive insight and competitive advantage. As a private company we have a multidimensional view rather than looking at a singular view of return on money invested.”

Going forward, “environmental services is a really big business and it shifts from one area to another depending on need,” says consultant Oakley. “The changes keep [sector] businesses going. Someone has to know what the changes are to advise customers.”

With data support from Gary Tulacz, Andrea Pinyan and Hillary Swantek