Aecom to go creative, seek broader role
THE STRONG dollar is making it difficult for Australian professional services firms to market the skills of designers and engineers overseas, the new chief executive of Aecom’s Australian and New Zealand business has warned.
‘‘A lot of people in industry look at the high Australian dollar and say ‘why is it still up?’,’’ Michael Batchelor told The Australian Financial Review.
‘‘It is a bit of an issue for exporting services, you tend to export at the very high end, the smart stuff the world wants,’’ Batchelor said.
It’s a problem not so apparent for Aecom in New Zealand though.
Aecom New Zealand managing director Dean Kimpton said he would like the dollar to be lower, but New Zealand remains competitive in winning exports of professional services to Australia and Asia.
Kimpton said lower employment costs and a better exchange rate than Australia’s makes New Zealand’s offering ‘‘very credible’’ still.
Batchelor, a former engineer who has spent more than two decades at the New York Stock Exchange-listed global engineering and design services group, said Aecom was pursuing more creative work such as architecture and master planning for international projects out of Australia as it became ‘‘smarter’’ about working from multiple centres.
‘‘That’s going to be a big change for the way our business moves, projects are coming together using teams all over the world.’’
Kimpton said the same focus on the high end is already happening in New Zealand. Professional services are not a ‘‘fixed commodity’’, he said. If a client needs help designing a geothermal power plant or project, it need people with geothermal experience.
Aecom, which generates some US$8.3 billion ($9.9b) in revenues annually, has traditionally generated most of its income from design-related services, such as the new rail terminal at New York’s World Trade Centre site, which is being developed in collaboration with Spanish architect Santiago Calatrava.
In New Zealand, Aecom, in a joint venture with and Tonkin and Taylor, provided a feasibility study, design, and construction supervision services for the $119 million Rosedale Wastewater Treatment Plant Outfall in Auckland.
It also provided master planning services to assist in the preparation of a business case for the redevelopment of Tauranga Hospital and delivered the electrical and substation building designs for the Te Rere Hau wind farm near Palmerston North, among other projects.
But Batchelor foreshadowed Aecom would play a bigger role in the physical construction of projects in the future as demand for project management services increased, arguing all parties involved in design and construction would be expected to take on a share of the risk.
‘‘Increasingly we’re engaged with the delivery of the project, not as a hard-money contractor particularly, but rather as a programme and project manager.
‘‘That’s probably where we will see the growth over time.’’
Being more active in the management of projects could reduce the likelihood of projects running into financial trouble, Batchelor pointed out.
‘‘Not having a designer anywhere on a project is a mistake.
Aecom has first-hand experience of the risks in being only marginally associated with projects, with the group last year sued by litigators Maurice
‘Projects are coming together using teams all over the world.’
Blackburn over the traffic forecasts it provided for Australian toll road company RiverCity Motorways, which owned Brisbane’s Clem Jones tunnel.
RiverCity collapsed last year after the toll road failed to generate enough traffic in the first year it was open to pay its operating costs.
Maurice Blackburn alleges in a A$150m ($188m) class-action lawsuit that Aecom made its forecasts ‘‘without reasonable grounds’’. RiverCity’s receivers, KordaMentha, have also taken legal action alleging ‘‘misleading’’ forecasts and are seeking up to A$2b in damages.
Batchelor declined to comment on the legal action, but said Aecom was unlikely to engage in providing traffic modelling for something as risky as a greenfield toll road project in the future. ‘‘I can’t see traffic companies like us exposing ourselves to that sort of risk given the court actions that have taken place.
‘‘Any traffic work done will be high level, take it or leave it.’’
Aecom would, however, continue to provide traffic modelling for cities, such as the forecasts it provided for the Sydney Olympics, he said.
As well as moving into project management, Batchelor sees opportunities in providing a broader range of services as projects become larger and more complex.
‘‘It’s not just the engineering, it’s all the other stuff that actually makes a difference to projects,’’ he said, adding people wanted infrastructure that fitted in with the environment and local communities, as well as infrastructure that looked good and made a public statement.
‘‘If you look at some of the great cities and how they’ve developed, it’s about the intersection of urban design and technical engineering that makes them really tick,’’ he said.
In 2005, Aecom bought global design and planning group EDAW to provide more comprehensive services. More recently, in 2010, Aecom acquired global cost and project management group Davis Langdon so it could offer professional cost estimates and help clients avoid budget blowouts.
‘‘Previously we’d say we won’t cost this for you, go and get someone else to do it . . . now we can do it in-house.’’
Despite challenges posed by the strong Australian dollar, which last week traded above US$1.05, Batchelor is confident about the outlook for Aecom’s Australian business, which has about 4000 staff.
‘‘It’s been a very strongly performing business within Aecom over the past five years, there’s very steady growth.’’
Aecom has cut the number of people it has been hiring following the slowdown in mining work – the group had been expecting to provide project management services on BHP Billiton’s Olympic Dam expansion, now postponed.
But the group is still bringing in ‘‘strategic recruits’’ it believes will make a difference to its business. ‘‘It’s always hard to hire top people.’’
Batchelor expects Aecom’s energy and power business will grow in the Asia-Pacific region amid rising demand for planning and environmental consulting services, particularly on renewable energy developments, and waste disposal.
‘‘The world is hungry for energy so we will see that business expand pretty dramatically.’’
Last year, Aecom acquired 80 per cent of the South African engineering group BKS to help it provide services to multinational clients on the continent.
‘‘Africa is a great source of projects . . . mining is still proceeding apace.’’