Infrastructure Boom Gives Boost to Engineering Giant.

AECOM Technology Corp. - the parent of architecture and engineering giant Daniel Mann Johnson & Mendenhall and already one of Los Angeles' largest privately owned companies - is going through a major expansion to take full advantage of the glut of infrastructure projects coming down the pipeline.

The company capped off a very busy year with the December acquisition of the transportation practice of KPMG Consulting LLC in Fairfax, Va.

This latest acquisition, which will enable the company to provide fully integrated transportation infrastructure services for its clients, follows two other major transactions earlier in the year: the March merger with London-based infrastructure design firm Maunsell, and the April acquisition from Vivendi of Metcalf & Eddy, a Wakefield, Mass.-based environmental consulting firm specializing in wastewater engineering.

As a result of these transactions, AECOM's projected revenue for 2000 will be $1.6 billion, up from $990 million in 1999. And that is not going to be the end of it, as both the federal government and local governments have earmarked billions of dollars to upgrade long-neglected infrastructure facilities.

"We want to be strategically positioned for changes in the industry and our acquisitions are made toward that end," said Raymond Holdsworth, president of AECOM. "Our objectives here, among others, are to balance our infrastructure work between transportation and wastewater services and to be a global provider of engineering services."

In recent years, local environmental authorities have become increasingly vigilant in enforcing the provisions of the federal Clean Water Act. Consequently, local industries and government agencies such as the California Department of Transportation, are forced to comply with, for example, stricter stormwater drainage provisions. The addition of Metcalf & Eddy, a brand name in wastewater engineering services, will make AECOM one of the key players in this growing field.

World leader

Likewise, the merger with Maunsell positions AECOM as one of the largest infrastructure design firms in the world, particularly in the Far East. If and when the Asian economies move into fast-growth mode in the coming years, as many people expect they will, the combined enterprise stands to reap the benefits from their dominance of that market.

"Right now Asia is down, but we still have 3,000 employees there," said Holdsworth. "In the next three or five years, it will come roaring back, and we want to make sure we have a presence there to take advantage of it."

The acquisition of KPMG's transportation consulting practice, which will become the AECOM Consulting-Transportation Group, will likewise fit in with AECOM's long-term strategy. Federal and state budget surpluses have made a lot of money available for badly needed and long-postponed infrastructure improvements. The Consulting-Transportation Group's area of expertise is to work with key government agencies to develop their long-term transportation plans.

"They provide the front end of the project," said John Dionisio, chief executive of DMJM+Harris. "Clients retain them to analyze their needs and help them to think through their issues; The addition of these services will make us a full-service organization and we will be able to develop a project for a client, design and build it, as well as maintain it."

One-stop provider

As such, AECOM wants to become a one-stop, fully integrated infrastructure services provider for its public-sector clients, which include very large accounts, such as the New York Metropolitan Transit Authority and the Federal Highway Administration.

The consolidation of the engineering industry is to a large extent driven by the need to provide such a wide array of services, said John Sasaki, a partner with Arthur Andersen LLP.

"Their clients are looking for firms that have expertise across a wide scope," said Sasaki. "So you see many firms acquiring other companies in order to broaden their expertise. In order to compete for the biggest accounts, they have to become bigger themselves."

Locally, DMJM is involved in all the major infrastructure improvements currently underway in L.A. County. From the recently finished $1.6-billion overhaul of the Hyperion Wastewater Treatment Plant near El Segundo, to the $650-million expansion of the Port of Los Angeles, to the $2.4-billion Alameda Corridor, AECOM's engineering teams have been involved in the design and implementation of these projects.

"We do about one-third of our projects in the West and the other two-third in the eastern U.S., said Dionisio. "But our business on the West Coast is growing fast and with the Caltrans bill that was signed by Gov. Davis this year, we expect to do a lot more work in California."

Budgeted projects

The 2000-2001 California state budget sets $4.9 billion aside for transportation infrastructure improvements over the next six years. Dionisio expects that AECOM will be involved in many of the projects that will result from this spending on improving roadways and integrating mass transit into local transportation.

Aside from these major infrastructure projects, AECOM's subsidiaries are also involved in high-profile private-sector projects locally, such as the design of the new Rand Corp. building in Santa Monica.

It is in the private sector that AECOM is taking particular advantage of its global reach to optimize its resources.

"We had our architect in Chicago design a pasta factory we built in Iowa for a client in Milan," said Holdsworth. "We primarily used the Internet to communicate with the client about the design, and that saved an incredible amount of time and resources by not having to meet frequently. We can only do that in the private sector, however, because the public sector still does not allow us to work that way."