CEO Roundtable: Engineering

Springfield Business Journal Editor Eric Olson discusses the engineering industry with Neil Brady, president/CEO of Anderson Engineering Inc.; Brandon Freeman, associate partner at Trekk Design Group LLC; Jared Rasmussen, land development leader at Olsson Inc.; and Adam Toth, president of Toth and Associates Inc.

Eric Olson: What’s the state of the industry in a single word?
Adam Toth: Very strong.
Brandon Freeman: Poised for growth.
Jared Rasmussen: Growth.
Neil Brady: Growth. But there’s some cautiousness there.
Olson: Is that a recession?
Brady: We’ll see some type of slow down at some point.
Rasmussen: It is not a memory easy to get rid of. When you knew that there was nothing coming in, it was just dead. There is a lot of activity now, proposal activity. Projects are slowly starting to slow down to a degree where people aren’t as aggressively starting them as soon as the proposal is finalized. It’s always that cautious, optimistic feeling going forward. Being an engineer, by nature you’re somewhat conservative and risk averse.

Project load
Olson: At what level are project volumes now?
Brady: We’re busier than we’ve ever been.
Toth: It’s a little different for our company. I’d say 60 to 70 percent of our work is in the electric utility business. The electric utility business didn’t see the recession. We grew double-digit growth during the recession. The recession was the best hiring plan our company could have ever had. We were able to get people from other companies when their companies were laying off. Now, we’ve branched into civil engineering and structural engineering, and they definitely see that more.
Olson: Any others have kind of niche segments?
Freeman: Everybody flushes the toilet and it rains, so stormwater pipe and people need water. I’d say 70 percent of our company is (geographic information system) data collection, really heavy into the sewer industry. We’ve had years where we just try to rely on southwest Missouri to support our team; it doesn’t work. We have to branch out.
Brady: We’ve grown in a way that we’re trying to branch out and get more geographic diverse. Also, adding services that we didn’t have to help us when that downturn comes, we’re not relying totally on southwest Missouri or one geographic area.
Rasmussen: Our growth, too, is somewhat geographic, but it’s also service lines. We try to set up a model where a portion of it is public, some of it’s private, some of it is institutional, and we try to work across all those different service lines.
Brady: We want that electric. Something like that.

Top jobs
Olson: What are your current biggest projects?
Rasmussen: I lead the general civil group within our office in southwest Missouri. That’s primarily right now a mixed-use development, The Ridge. For the region, we’ve been doing all the (Community Development Block Grant) work out of our Joplin office across the town of Joplin, and we’ve been replacing the infrastructure that was impacted by the tornado. That project has been going on now for almost seven years.
Brady: We’ve been doing a lot of that, as well, out of our Joplin office. That’s one of our concerns, though, because that’s going to drop off here in about a year.
Olson: What about closer to home?
Brady: Some of the stuff we’ve gotten into is some of what you guys do, that data collection and GIS-type of stuff. We’ve gotten into the mobile LiDAR, where we’re doing asset inventory for cities and towns, whether it be streets or sidewalks. We’re also doing one for the [Missouri] Department of Conservation all over the state, where we’re going in and looking at all their assets and evaluating those.
Toth: In our structural division, they’re wrapping up a big hospital tower down in northwest Arkansas for Mercy. In our electrical division, I’m working on a big transmission line to connect a large wind farm to the grid out in Oregon. Our biggest growth potential is in the Pacific Northwest. Missouri is not growing as much as other states. The utilities that are growing really fast are in Texas, Washington, Oregon and Florida. We recently opened two offices in Oregon.
Freeman: Our biggest right now is Springfield, a condition assessment of the stormwater system in downtown Springfield’s Jordan Creek basin. Essentially, we’re kind of going in and creating what’s almost like Google Maps, a Google street view of underground utilities. The stormwater [department] is tasked with a huge need, and that’s pipes that are deteriorating underneath, like a high-traffic area of town, but they really don’t have good condition assessment data. One of our biggest opportunities is in California, Oakland, the East Bay Municipal Utility District. We’re looking at a project in London. Our growth plan is always to get back to our roots of staying in the Midwest and not growing as fast. Part of what we’re doing is the likelihood of failure. What does the asset look like, but then you tie in the consequence of failure. We may have really bad pipes that are underneath buildings. We may have bad pipes that are underneath sidewalks. It’s the monster that lurks beneath that nobody knows about.

Federal funds
Olson: On the infrastructure side, I’m sure you all have been following the federal infrastructure spending bill talks. President Donald Trump has long touted a $1 billion spending package. What’s your take on it?
Brady: It needs to happen, but whether it does or not. Even at the state level, as well. [Gov. Mike] Parson has been talking about the bridges and those types of things, that’s good. It’s so overwhelming now because the true dollar amount that needs to be thrown out at it is just astronomical. So, anything we throw is a Band-Aid, really.
Rasmussen: Your average water system is probably 60-plus years old; your road network systems is that, if not older, and sewer systems, storm systems are all extremely old and aging. It’s maybe not on the fringes of your community where new development has happened, but in your urban cores, those systems are old.

Making the grade
Olson: How would you rate our area’s infrastructure?
Freeman: I wouldn’t say it’s the worst in the country, but also with all the rain we get that happens so quick, it does a number on stormwater pipes and sanitary sewer pipes.
Rasmussen: Average. Our community, at least leadership at the city, has recognized that there’s a need there, and they’re trying to do their best. We went through a big cycle, the city did, over the last several years of relining all the old sewer pipes. They went through a big study to determine how much infiltration they were getting into the pipes, and they identified that was significant. With lining it, they can get some more years out of the plant. You’ve got the communities, like St. Louis and Kansas City ... where they’re getting requirements and they had consent decrees come down on it or they had to fix their sewer system where they have combined sewers and it’s, you know, it’s astronomical compared with what our community is faced with fixing.
Toth: The electric grid, you hear on TV or in newspapers, the aging electric infrastructure, it’s not true. The electric grid is stronger than it’s ever been nationwide. After the big blackout in the Northeast 15 years ago, there were a lot of national standards that went in where reliability now drives the market. In the past, you would build infrastructure to serve a load. Now, a lot of the infrastructure in the country is being built for increased reliability. A lot of infrastructure now is being built to hook up new wind farms in this area, Kansas, Oklahoma and Texas, and bring that power to the grid. If you think back 15, 20 years, people saw more power outages; 30, 40 years, people in rural areas, if they had an outage, people would expect the power to be out for a few days. Now, a blink is unacceptable. There are these power pools or independent system operators that oversee an area, and when they do their studies and say that an area needs to be upgraded for reliability reasons, there’s a mechanism to pay for it.
Freeman: Wastewater bills in most towns are under $50. You get to Kansas City and St. Louis, with all the consent decrees, and it’s upwards of $100 a month. But in southwest Missouri, we’re still don’t pay much. It would be tough for us to go in there and say, hey, we want you to spend essentially an electric bill. I would like a day where I could sit here like Adam and say, “I feel like the sewer grid is strong.” When we have a sewer backup, it’s getting fixed right away instead of somebody’s house gets filled with sewage and they call the city and it’s reactive.
Toth: Our country runs on electricity, and it’s where our country’s put its priorities. We work with clients that if their industry sees a blink, let’s say that they have a factory that makes food, they see a blink and they’ve got to clean out all their equipment, everything is wasted that day. It’s a major expense.
Brady: The deal with electric is it’s a nationwide grid. Stormwater is all connected. But potable water and sewer, those are all individual.
Toth: You look across the country, the most expensive electric utility to the cheapest, it may be 2-to-1. In Springfield, you have 5-to-1 cost differences on sewer.

On the horizon
Olson: What are the growth plans? Anything new happening at your offices?
Brady: We’ve had quite a bit of growth last year. We grew about 33 percent in employees. We went from about 90 to 120 in 2018. Springfield is our headquarters, so all the admin and all those things that go along with that growth, those are all housed here. We probably ran out of space about two years ago. Our new facility is going to be great for us. Last year, we opened two new offices. This year, we’re hoping we stabilize a little bit. We’ve acquired three different firms. We just acquired a small firm in Destin, Florida, at the end of last year. We’re always looking for opportunities.
Rasmussen: We’re constantly looking for new opportunities to grow. Right now, we have 30 offices in eight different states across mostly the Midwest. In this area, we’re just trying to backfill where we have offices and try to grow those offices and try to build that footprint. We went through a rebranding effort over the last year where we changed our name and got rid of the Associates at the end.
Toth: Our company is trying to establish ourselves as a market player in the northwest over the next few years. That’s our biggest growth opportunity right now. Sometimes whenever you’re trying to grow in an area, your existing customers think that you don’t care about them anymore. We are not growing at the expense of our existing customers. We have grown because of them.
Freeman: Me and my wife had invested in an idea I had before I came to Trekk to build a camera for the sewer. Early on, it was out of necessity for small towns – like we need a way to monitor what’s going on. That led me to the managing partners of Trekk. They were like, hey, we want to invest in your idea by the way, start an office here in Springfield. We’ve invested a ton of money and time and research and development of it and this year could be the year that we commercialize it.

Next generation
Toth: Missouri State [University] having an engineering program here in town has been the best thing for engineering in Springfield. We can find people now. We can have summer interns. It is amazing that we now have a school in our backyard.
Rasmussen: I would say that more of our students are coming out of Missouri State than they’re coming out of Rolla, specifically for the reason that we can train them while they’re going to school. From a growth standpoint, it’s probably been the biggest catalyst of growth in this market – the ability to find quality people.
Toth: They don’t offer mechanical engineering. There’s talk that they’re going to offer mechanical engineering. That will be a big catalyst to the mechanical engineering field.
Olson: What are the starting salaries for these graduates?
Rasmussen: They’re going up daily. We no longer have a southwest Missouri rate scale, we have a Kansas City rate scale that applies to southwest Missouri. We start our students right now out of school at $57,000. I’ve had clients tell me, why are your fees so high? And I’ve told them, do you know how much a student is out of school?
Toth: The electric industry pays more. It’s gone up. Starting wages for electrical engineers 15 years ago were about $50,000 to 55,000. Now they’re in the low $70,000s.
Freeman: As far as engineers, we’re right at the same level as Olsson.
Brady: It’s such a competitive market. When you’re bringing in a student at $57,000, you may have somebody that’s been there a couple of years and they’re just making that now.
Rasmussen: We constantly evaluate that every year … compared to their peers in different markets and where we’re seeing the market overall.
Brady: Twenty-plus years ago, when I entered the market, starting salary for civil engineers in our area was like $28,000, and now they’re double that.

Excerpts from Features Editor Christine Temple, ctemple@sbj.net.