2020-06

Highlights of Deltek's 41st Annual Clarity Architecture & Engineering Industry Study

Deltek Senior Product Marketing Manager Megan Miller came on Engineering Influence to offer her insights into the 41st annual Clarity Architectural and Engineering Industry Study, which Deltek released on June 17. Clarity identifies key performance indicators, market conditions, and industry trends and is a benchmarking study, designed to give firms a way to measure their performance in a variety of areas against their peers, including project management, financial performance, business development, and employee management.
For this year’s study, Deltek surveyed 415 architectural and engineering firms between January 21 and March 23, so the study period ended right on the cusp of the COVID-19 pandemic in this country. In our conversation we focused on what engineering firms can take from the study both in the short term to improve their operations despite the pandemic and over the long term.
Transcript:
ACEC:
Early on in the study, you say the changes that we've seen in the market over the past few months due to the pandemic make benchmarking even more critical for a firm's success. Why is that?
Miller:
When you look at what happens with benchmarking, a lot of times companies are looking not only at industry benchmarks, but also evaluating their own numbers on an annual basis, or as they prepare for strategic planning. And as things are changing so rapidly, it just becomes more important that companies are keeping a closer eye on those metrics more regularly, because those things are, as we know, going to change and they're going to evolve. And as you're looking at those numbers and you're monitoring what's happening in your business, then you're able to adjust or able to make decisions based on what's happening in your business more quickly, if you're seeing those changes happen more frequently.
ACEC:
On that, is it, as the pandemic, the impact of the pandemic works its way through the market, it's going to affect those numbers, isn't it? I mean, how do you pick the numbers that you want to benchmark against because the market is changing as we go along,
Miller:
Right? So when you're looking at the numbers, it's really, you know, the number itself is a piece of the story, but it's really understanding what that number is telling you about your business. So if you have a certain utilization rate, you know, looking at that and knowing what that was pre-pandemic times and looking at 2019, you're going to want to caveat that when you set your targets as you go into 2020 and figure out what the actual impacts are going to be of this. That's still your target, but you have to be realistic. And knowing that may not be achievable now, but if it's dropping drastically, is that something that you expected and do you know why in each of those metrics, just so that you better understand the details behind it, not necessarily the number itself.
ACEC:
So you're basically using it as a, I guess, benchmark and saying that it's what you're comparing your performance to. And as time goes on, you say, is this a reasonable performance versus what we thought we could do,
Miller:
Right. And I think part of that, you look at it too and say, as you look at multiple KPIs, if you're seeing a significant drop in one in your business, but not the others. So if you're looking at the benchmarks in the report and you're 20% below what that number is in one area, but not in the others, then that tells you that there may be some imbalance in something you need to address in the business. If you're having a consistent decrease across those metrics then you're probably where you need to be across the business, but seeing how those impact each other really becomes a key piece of that story.
ACEC:
In this study, you've covered a lot of key performance benchmarks. In a time like this, which ones would you recommend the firms focus on?
Miller:
Some of the ones that we really recommend focusing on are those that allow you to look at different aspects of the business. Often times when it comes to KPIs, firms really focus on financials, especially in an uncertain times like this, but it's really looking at the whole story. So while the operating profit and looking at your utilization and how your collections are happening is vital to seeing what's happening in the business, it's also important to be monitoring what's happening in your pipeline. What's coming down the pipe or not coming. You can monitor some of that through your win rates or in some of those win rates, making sure that you're digging a little bit deeper and seeing if there a lot of "No" decisions that are happening in those projects. That may be an indicator of some things that are happening in those particular markets. Some of the other metrics that we always encourage people to monitor closely are those around projects specifically. So there's a couple in there in terms of projects on or under budget and projects on or ahead of schedule. So making sure that you're keeping track of that and that project managers can see that information readily. If projects get delayed, if there's changes to what's happening in those projects, as a result of this uncertainty, it's important that they're able to proactively manage that and see what's happening and adjust accordingly.
ACEC:
To take the project schedule benchmark as an example. A lot of projects have been delayed. Is it basically a situation of a starting up again once you get started and sort of just take that delay as having been a "Deus ex Machina" situation that just came in and now it's gone, or is that something you incorporate into your numbers?
Miller:
So I think when you're looking at those, when I look at the project schedules and whether they're on track, are there indicators that you have the ability to influence? So are you not scheduling appropriately? Do you not have the resources you need that's impacting those delays? If there's projects that have been put on hold or they're delayed, I would look at those as a project stop and a start. Not that they're necessarily delayed, but if you start to keep track of those and you find that, for example, I'm looking at the healthcare market and out of the 10 projects we have, eight of those have been delayed that can start to tell you different things that you may need to do in that market for your business. So tracking some of those can really provide some key insights to your business as well.
ACEC:
In the financial area, you, the firms had a current ratio of 2.87 and a debt to equity ratio of 0.76, which as you mentioned in the study suggest that they're well situated for the economic slowdown. Is there any other data in the study that's supports that conclusion or contradicts it?
Miller:
I think some of the things that we looked at,specifically is around the trends over the past several years, and especially looking at the financial side of it for those benchmarks We've seen an increase in many of those for the last eight years. We've seen that strong financial performance. So we haven't seen a lot of fluctuation. We haven't seen large dips in the operating profits and other areas. So we really see that's showing that firms have been strong. They've had a lot of work and projects and financially they're in a good position. We also look at some of the challenges that firms look at and the top challenges this year really show us that if the financial stability of the industry was a challenge, then we would see more focus on cashflow and unpredictable spending environment. And some of those challenges that we've seen probably seven years ago or so that those became the top focus. Now we're seeing firms focused on increasing profitability and really on the financial challenges. The second one that's identified this year is finding and retaining qualified staff. So having that strong financial position means that those companies can start to focus on other areas of the business and address some other things that may be impacting their businesses.
ACEC:
Does it also speak to the health of the industry? Because I think I recall that the operating profit has gone up for seven or eight consecutive years.
Miller:
Yes. So if we look back at the trend there. We look at the last 10 years and I could go back further than that, but at least for the last 10 years, that number has grown every year in the past 10 years for operating profit. The other thing that we also look at is the factor in what a high performing firm is. And we look at those that have an operating profit above 15% and the net labor multiplier above three. This is the second year in a row that our net labor multiplier average is above that 3.0 threshold. So again, just pointing to the strong financial performance, our operating profit on average was also above that high performer threshold on average. So we've got some firms that really have had some strong financial years that I think is putting them in a good position, but I do think firms were a little bit more conservative going into this year totoo. When we start to look at the net revenue growth forecast, we saw a little bit more conservative approach to that going into this year, even before the pandemic.
Miller:
And so I think firms are we're already a bit hesitant of maybe not reaching those same thresholds and those same numbers coming into 2020. So hopefully they were already starting to prepare and plan for if something would happen and how that would impact their business
ACEC:
Because of that strong financial performance we've seen over the past several years. Is that a function of the market or is it a function of how firms are improving their operations? I know that's a tough call.
Miller:
I think it's a little bit of both, because I think when you look at the markets, one of the key indicators that we see, especially for architecture and engineering is when you have strong private and public markets, it makes it easier for these companies to be successful. So when we come out of economic downturns, we usually see one area of the industry coming back stronger. Both of those sides of the industry really have been strong for several years. When we have conversations with companies around the country, they all seem to say the same thing. They're really busy. They have a lot of work. As we even saw in the Clarity report, they have strong backlogs. They're looking at backlogs in excess of seven plus months at any given time. So they're feeling confident that they have work to rely on for the months to come.
Miller:
And they are just seeing that there's more work out there. There's not a lack of projects. There's not projects that are getting defunded. Some of that though, to your point, is also efficiency internally. People are leveraging more technology. They're looking at their processes internally and making them more efficient so that they can increase that profitability. They're able to reach some of their targets. They can attract the right talent so that they can fill some of those vacant seats. I really do think that for many companies, it's a combination of both. They'ree successful in the projects that they're winning but they're also becoming more sophisticated in how they run their businesses.
ACEC:
I don't know if this is a function of that, but one of the things that jumped out at me was that 60% of the contracts of the respondents are fixed price. Is that something that contributes to an improved bottom line? Is that a growing trend that you've seen?
Miller:
I looked back at a couple of the past years there, and I think it's pretty close to that 60% for the past few years. So if I look at 2018, or 2017, it was 57% and in 2018, it was 59%. So there's some incremental increases in more of that fixed price, but I do think that that gives companies more flexibility in how they leverage those contracts, if they have more of those fixed price fee structures in place.
ACEC:
I was looking at your data on client relationships and three things jumped out at me, and I'm not sure if they're contradictory or if they're complimentary. First, the firms said that their top business development challenge is nurturing client relationships, but then they also said that the only 44% of the firms actually measure client satisfaction, but then conversely 76% of the firms said they are good at client relationships. Are those complimentary in some way that I don't see?
Miller:
So I think in some ways it's the perspective of the different areas of the business. So when I look at nurturing client relationships, I look at that from the business development perspective and really having time to invest in those relationships, staying out in front of the next big project, and making sure that you're top of mind when another project comes out. When it comes to client satisfaction and measuring that specifically, oftentimes that's done when a project is completed. It's not done early on in the process, right? So it's not always done throughout the lifecycle of the project. It's often only done at the end. Some companies feel like they get that feedback without doing formal client satisfaction reports, so I think that's where you get that 76% thinks they're great at these client relationships, yet only 44% are measuring. Some I think are measuring in a different way. They're just not doing those formal evaluations. And I think this industry is always striving to do better. They're always pressed for time. I think their challenge will continue to be making time for business development and making that client nurturing a key priority for their businesses.
ACEC:
On that 44%, it seems to me like a no brainer to measure your client satisfaction. If you measure your client's satisfaction from the previous job, you are basically setting yourself up for the next one. Is that 44%--I didn't look back to previous studies--is that ncreasing? Is it decreasing? Staying the same?
Miller:
For this year in particular, it did go down quite a bit, surprisingly, and what's even more interesting is the frequency of measuring that client satisfaction. So I mentioned that project complete, there are a lot of companies that only do this once a year, and they're not really getting that feedback on each project in some cases. Again, I think that's a time thing and it's not seen as top priority. We're finished with the project and we're moving onto the next one. But I think there's a huge opportunity there for companies to really get that feedback. I will say that it's important to get that feedback from the right person, or have the right person go and seek that feedback. Because if, for example, a project manager was a challenge on a project, that client may not tell the project manager that that was part of the issue that they may have had, and it could create issues like you said, of going after the next project.
Miller:
So that's one area that I really think that companies should be taking advantage of and finding a way to be able to do more with client satisfaction, even if it's not a super formal process, but being able to do that. So that really you can make sure that what's happening on the business development side and those nurturing of those relationships is also carrying through. And there's a connection there between the project delivery and the business development. So that we're all instinct with what's happening with this client, how we're focusing on this client and we, whether we're positioned well to go after the next project.
ACEC:
You've mentioned a couple of times that attracting good candidates is a prime concern and challenge for a lot of firms. Employee turnover in this study was about 13% annually. Is this high for our industry? And relative to other industries is it high?
Miller:
Across the board for the past several years, it's about the same for what we've seen for turnover. From the Clarity Report specifically, we know that professional services firms on average have about 11%. So I would say that from an overall professional services perspective, the A&E industry does tend to be higher than that number. Historically I think we've come down a little bit. There have been some peaks and valleys in this particular metric, but we tend to hover right around that 13%, 14% for turnover in this industry
ACEC:
And in an economic slowdown, does that number go up? Does it go down as people try to hold onto their jobs? Or what did you find?
Miller:
I think some of that's really going to depend on the different markets and the different companies, and where they typically are working. So if they work more in the public sector, they may see an increase in employees and they may see that they need more positions filled and they may lose fewer employees. The flip side is that there could be some challenges with people having too much to do if they do see an influx in one market or the other. The flip side of that obviously is that we have seen some companies that there have been some furloughs and there have been some challenges in keeping staff. I think really what companies need to be looking at in their turnover is, is it voluntary? Is it involuntary? What's happening in that? So maybe there's something that's more appealing in a different company that companies need to be considering. And just making sure that again, they're watching what's happening with the workload so that they can adjust accordingly. We anticipate that there'll be some increase in this, but a lot of that is just going to depend on the duration of the pandemic and the impact to see how far is this going to go and how deep will this continue to impact companies.
ACEC:
In their going out in the market and looking for candidates, I was struck that 33% of firms track passive candidates, which jumped 8% from the previous year. What exactly is tracking passive candidates? And why did that jump so much?
Miller:
If you think of tracking passive candidates, it's really keeping a portfolio, so to speak of possible candidates. So if I know that there is a project manager at a company who is a strong project manager, andthey have a great relationship with certain clients that we work with. And maybe because of some relationships that they have with others within my company, I know maybe they're not a hundred percent happy where they are. They may not be ready to make a move, but I want to keep in touch with them and I want to keep them on my radar. So if you think about it, it's similar to business development. You're building those relationships. You're building that pipeline of candidates in the same way that you would a pipeline of potential prospects or clients. I think we're seeing much more of a move to this because again, looking at the challenges in all the different areas, financial has finding and retaining talent, project manager has staff shortages and competing priorities, so this piece of the business really has become much more of a focus for many firms. They're becoming more strategic about it. It's a more integrated process across the entire business. And many companies are moving to a more modern recruiting strategy. And one of those strategies is to really keep that pipeline of potential candidates for when the right position becomes available. You're not starting from scratch and then trying to find anybody that might be interested. You've already identified some potential candidates to start those conversations. And it's more of a warm lead for recruiting in the same way that you would want a warm lead from a business development perspective.
ACEC:
From all you've said during our discussion, it seems to me that engineering firms are getting more operationally effective as the years go by. Would you agree?
Miller:
I think in some companies, absolutely. I think there are many companies that are becoming much more strategic. They're becoming much more savvy in the way that they're running their businesses. But I do think in some cases, there are some companies where there's still some work to be done. It may be in their processes. It may be how they're leveraging technology, but many companies are looking at,the way we've been doing things for that past 20 years and saying that may not be the best way to do it anymore. And they're leveraging the expertise of their staff to find ways to make things better. For the companies that are doing that. I think they're seeing some of the progress like we've talked about here. In other companies, there are still opportunities for them to take advantage--whether it's the technology, whether it's the process improvement--to be able to put themselves in that same type of position.
ACEC:
If an engineering firm wants to get a hold of this study, how would they do that?
Miller:
If you want to, go to deltek.com/clarity-AE, then you can download the report. It is a complimentary report that we provide to the industry. In there you can find dozens of benchmarks. You can see some of these ten-year trends in all of these different sections of the report. So we encourage you to check that out. We also have deep-dive webinars on each of these that are also available, so you can dig into the results a little bit more, understand a little bit more about those trends, to be able to better understand what you can do with this information. Because again, the number is just a piece of the story. It's what your numbers are telling you, and really what you can do with that information to drive change, and to be a catalyst for conversations within your company.
ACEC:
And I would concur it's an exceptional report. So thanks so much, Megan, for taking the time to speak with us today.
Miller:
Thank you. I appreciate the opportunity.
 
 

The Buildings We Live and Work In: ACEC Research Institute Panel Discussion

This is the second of three roundtables on the future of engineering presented by the ACEC Research Institute. www.acecresearchinstitute.org
The world today is full of extraordinary volatility, yet the engineering industry has risen to the challenge. Uniquely positioned at the forefront of designing buildings for work and home – engineers are solving for the new normal and exploring what is needed for commercial, high-rise, healthcare, and mixed-use buildings of the future. How do we design them? How do we rehab or retrofit them? What is really needed for the future when designing work and living spaces in this new paradigm. Join this exciting panel discussion that explores the future of the buildings we live and work in.
Panelists:
• Dino DeFeo, Managing Partner, AKF
• Peter DiMaggio, Co-CEO, Thornton Tomasetti
• Arathi Gowda, Associate Director, Skidmore, Owings & Merrill
• Kate Wittels, Partner, HR&A Advisors
• Moderator: Joseph Bates, ACEC Research Institute
 
Transcript:
Daphne Bryant:
Welcome to our second roundtable in this series, The Future of Engineering. A big thank you to our donors who have made this session possible. We have a great group of thought leaders here today that are going to share their insights and expertise with us on the future of buildings, where we live and work now without further ado. It's my pleasure to introduce two of my colleagues at the ACEC Research Institute, Joe Bates, who will serve as our moderator for today's session and Kevin McMahon, who will be monitoring the chat box and fielding your questions during the session, Joe, it's all yours.
Joe Bates:
Thank you very much, Daphne, and thank you all for joining us today. First, I'd like to introduce you all to each of our panelists. We have Dino DeFeo, who is managing partner at AKF. Dino is a respected and admired leader whose market knowledge and passionate commitment to clients have formed the foundation of a 25 year career. He understands the importance of working as an integral part of a design collective with the express goal of realizing the direct client's vision. We also have with us, Peter DiMaggio, co-CEO of Thornton Tomasetti. Peter is responsible for defining, articulating and driving the firm's strategic vision. In addition to leading the development and execution of the overall business plan, he directs key strategic initiatives, such as identifying new markets and merger and acquisition opportunities, as well as instituting mentorship and professional development programs. I'd also like to welcome Arathi Gowda, who is Associate Director of Skidmore, Owings & Merrill. Arathi is a team leader for the company's Chicago's performance design group charged with researching new technologies and recommending integrated environmental design solutions that are substantiated with computer simulation for SOM project teams worldwide.
Joe Bates:
And finally, I'd like to welcome Kate Wittels, who is a Partner at HR&A Advisors. Kate specializes on the future of work and how to best shape places, train people and deliver infrastructure to make today's cities ready for tomorrow's opportunities. She creates strategic plans, public private partnerships, policies, and programs to guide governments, developers, and businesses on growing tech and innovation ecosystems in cities around the world. Thank you all very much for joining us today. I'm going to jump right into our questions. It's obviously no surprise that we're living through this pandemic and it's completely changed the way that we live and work. I think we have all within a blink of an eye, had to create new ways of working and communicating and, and some of the participants and viewers who were with us during the pregame show might have heard us talking about some of those challenges we live with. So my first question, I'd like Pete, to start out with Pete, are we going to see a fundamental shift in where we work in the future?
Peter DiMaggio:
I do. I think we're going to see a fundamental shift. What I think is less clear is what that shift actually looks like. Let me give you my example on this right before Kobe, we have about 1500 people and the large majority of them were working in the office. COVID hits. We send as many people as we can almost close to 1500 to work remotely. And early on, it really looked like as we were learning from this, that we were going to have this situation where more and more people want to work remotely. That was an early indicator. What we're seeing now actually is a lot of people want to be back in the office, whether it's for that social interaction, their ability to be more effective. And I think in the last two or three weeks, and this is how uncertain this future is, what we're getting from our employees is they want flexibility, which is a really interesting challenge.
Peter DiMaggio:
They don't want to be full time at home and they don't want to be full time in the office. And if I had to make a guess, I would think that that is going to be something that stays with us where people want that ability to do some time at home and some time in the office. And it's a really big challenge, right? It's a challenge to get people really effective in the office. It's also a challenge to get them really effective at home, but just think of what this means from an IT point of view, right? How many different computer systems do you have? Do you have monitors? Do you need the right working environment, both at home and in the office? The second challenge that comes from that is again, early on, it's really interesting to see how things progress over the last month.
Peter DiMaggio:
Early on, I think the immediate reaction was we're probably going to need less for real estate for our entire office structure because clearly people want to be at home. Now, all of a sudden we're saying, but if they want to be partially at home and partially in the office, you still need less real estate or do you just need different real estate? So the simple answer to your question is, yes, I think you'll see a fundamental shift, a much more complex question to ask is what do we think this is going to look like? And if you really want to challenge the group, I think it's going to look very different in suburban areas than it may look in urban areas due to the challenge of public transportation. So are people able to do both of these and still use public transportation to get to their office?
Joe Bates:
Kate Pete mentioned public transit. What do you think is going to happen with public transit and you're in New York city. So how's that going to affect people that are working and living in New York city?
Kate Wittels:
Yeah. I mean, it's a big, it's a big unknown about transit, but I think as Pete was starting talking about the mood changes so quickly, if you ask people a month ago, six weeks ago, you get on the subway? No. But if you asked me last week or yesterday and you're starting to hear stories and be like, I want, I'm taking the subway. It's clean, it's the cleanest it's ever been. And so I think to what Pete was saying is that there's going to be this half in half out experience and we're going to figure out how we best travel to the places. And it's really about, what's the role of the physical office in how we work and that's really what we need to figure out. And that will change how offices are laid out, but it used to be that we had to produce everything in the office.
Kate Wittels:
And now we're realizing that somethings that we can produce it's more effective to produce it, the knowledge economy stuff in our home, and maybe having recurring meetings in our homes, but the culture, brand, desire for you know, interaction. And I think as an amenity to employees for retention and attraction, the office will play a role in that sense. And so I think it's, it's really thinking through what the role of the office is going to play for businesses. And then what does that mean for neighborhoods? And then what does that mean for the need for transit? Cause maybe the demand will be actually less or only half of us are going in half at a time.
Joe Bates:
It feels almost like we've let the genie out of the bottle here with having people working from home that in the past, there was a lot of pushback from many companies that were saying, Hey, we don't want you working from home. And now everyone was forced to do it. And somehow they're making it work. So I don't know, Arathi, do you, what do you think about that? You know, have we just let the genie out of the bottle, not going to be able to put it back in?
Arathi Gowda:
I think so in a lot of ways, and I don't think it's necessarily about trust even though maybe sometimes that was an issue. I think it was about collaboration and so engineering, architecture, planning, we're very collaborative disciplines. And so there was always this idea that you had to have the groupthink in the office. And I think obviously now as Kate was mentioning some of the things that are a little less efficient remotely, but people are seeing that actually we can be very collaborative in our home environment. And I think this is actually very positive because we've been talking about that for a long time. There's an emissions reduction, there's a positive, personal benefit. There's a lot of good things that are happening or silver linings as a result of this. But we almost needed to have the push. And I think that does speak a little bit to what Peter was saying about, there's a little bit of a multiplicity of futures, but let's face it. We're a complex society and we'll, we'll keep going the way we were going if it's working and this has forced us to maybe shift faster. And I think in a good way as we're all seeing there's some benefits. I don't think we're going to go Back to the way we were.
Joe Bates:
Dino, any thoughts on this?
Dino DeFeo:
I think everybody has some good points. You know, you start thinking about what is the role of the office and in our environments. And you know, it has a huge impact on the culture of your firm, your interactions in the office, how you work with one another, your collaboration, but nowadays with the tools you have online and the collaboration that you can do online, it will change the way we work. And you will start seeing some more decentralized offices in headquarters might not be the size they used to be anymore, but you still might need the office space for more of a a collaboration area or a conference center, you'll see more hoteling, all the things that we've been talking about for years, this has really accelerated that.
Dino DeFeo:
And I think it's going to continue to accelerate and things are going to be like this until there is a vaccine. I mean, a lot of people won't be comfortable coming back to the office until that's the case. So until then, you know, we're still going to be experimenting with the conditions that we're in and seeing how things work and what doesn't work.
Joe Bates:
So Dino, I have one thought on that sort of a follow-up question for you, maybe dive a little bit more deeply into this issue of there's this near term, of course, but and then let's, let's assume we're going to have a vaccine and, and everybody is able to return to some level of normalcy, but what's the long-term implication on how buildings commercial buildings will look in the future. This pandemic will, I think be fresh in everyone's memory for a generation at least to come. And so what kind of design considerations will we need to make in terms of health and safety, you know, cleaning the offices, elevators, things of that nature?
Dino DeFeo:
Well, I mean, you know, we're an MEP firm, so, you know, I could just stick to some of the things that we've been dealing with in, with our clients on the MEP side, you're starting to look at buildings that are going to be much more robust in engineering infrastructure. We've spent a lot of time looking at the energy efficiency of buildings and we're going to start spending more time looking at the wellbeing of the occupants of the building. And there's going to be a push and pull there. There's still the energy codes we're going to have to comply with, but a lot of things that we'll have to do to make people feel comfortable with coming back post pandemic and let's keep in mind, this is not the only pandemic we've been through.
Dino DeFeo:
This is the worst by far, but we've had SARS and a number of others. And every couple of years, it seems like there's something else that we're talking about. So the infrastructures of these buildings will have to be much more robust, much more flexible, you know, greater ventilation rates, greater air changes, higher humidity because we're finding that, you know, humidification is great for the wellbeing of the person, regardless of during pandemic or not. So all of these things impact the energy efficiency of a building. So we will try and we will need to figure out how do we balance the wellbeing of the people within the building, and yet still comply with the energy efficiency mandates that are being required of us. So that's kind of where we're going to, we're going to have to be whether it's UV lights that we're adding into systems, greater filtration, decentralized systems, you know, there's going to be a number of challenges on you in the engineering world in order to make people feel more comfortable with how buildings are performing and how they're protecting the people within the building.
Joe Bates:
Arathi, what about the elevators? We were talking about that before we went live here, are we going to have, you know, elevators that are 10 times the size as they are now? Or are we, how are we going to move thousands of people up and down? You know, these high rise buildings?
Arathi Gowda:
Yeah. I mean, I think, you know, there might be some things even to Dino's point, there, there are things in the market that are already stacking elevators and others that increased capacity. But I think, you know, we haven't been able to always sell those on projects. So I think what's going to happen is these things that were harder sells before are going to become better or easier sells now. So this nexus of energy and wellness, particularly to elevators, you know, I think it's, it's touchless, it's called button sensoring, it's stacked elevators. I think there's also maybe a reality of a public health response. So by nature, these are more confined spaces. And what would be more like Asia, you know, look to our Asian friends and say, they're very used to masks. It's not an issue for them to wear masks or wear gloves.
Arathi Gowda:
Because some of those things can't be solved strictly with social distancing, but I do think it's a very important time. And even in the environmental movement, it's always been planet first and not people. And there's been a real problem with messaging with that, that mentality, because of course we know the eight ball is energy efficiency, carbon reduction, but until we connect that to stories that people can relate to, then it's very hard to change hearts and minds. And I think that this piece of wellness it's very relatable, people can understand. So I think there are going to be some very important conversations in the engineering community about how we can do the things we've been even talking about humidity for years and advanced filtration. And we're building on that with code policy and rating systems. These are not always things that our clients opt into. So I think there's a lot of opportunity for us to be asked to do those things more consistently have the cost of it dropped so that it can become more ubiquitous in the market, which is essentially what we want.
Kate Wittels:
I think what's interesting about this right now is this is an opportunity for building owners to become really creative and force them to really differentiate themselves and try the new systems that they we've been talking about and pushing for them. Because now buildings aren't just competing with other commercial buildings in their own sub market. They're competing with other sub markets. They're competing with residential products, they're competing with retail products. People are working out of restaurants now. And so I think this is a real interesting opportunity for what the building will actually offer in the long run to make companies want to continue to pay rent and to make employees want to come back in. I mean, you can offer up that you're going to have better air in your office, then you are in your home for example, or sound quality or other things. That's, that's where the building would have the opportunity to really keep, keep their asset as it is.
Peter DiMaggio:
I think that's such an important point. I, you know, as Kate was talking, it struck a nerve. If you think back to September 11th to 9/11 when, when that event occurred the first response was we're never going to build high rise buildings again, right? People aren't going to. And so of course that's not what happened, right? So it took a while. And then people started talking about how do we address this issue? And then people got creative and then people started to figure out how to build security. And, and one of the questions I just saw in the chat - what happens to existing buildings that aren't ready? You know, this was a really good example. People upgraded those buildings, they invested in them, and then they use that to try to draw tenants back in. And the big difference I see now is we're only a few months into this and already you have some of the smartest people on the planet talking about how do we solve this issue and get back to work.
Peter DiMaggio:
And to me, that's one of the biggest differences. It took us a long time after 9/11 to say, we're going to go back into a high rise building. How do we address this now? We're saying, and, and again, look, the first month of COVID people were staying in the office is that nobody's ever going to go back when, and I though the speed at which the design community has started to attack this problem to me is a really positive thing. And so I think, you know, to the point of how much is it going to cost and what are people going to do if groups like everybody on the phone, right? Even people listening in are already starting to try to solve this. I'm really excited to see where this ends up because we're not stuck on the problem. We're already talking about the solutions.
Dino DeFeo:
This is going to be a balance. I mean, there's going to be so many different solutions that are kind of come out of this to your point. I mean, there are a number of different ways to tackle this and whether it's you know, office space, that's spread out a little bit more, you're going to have social distancing within the office. You're going to need that office space to, in order to keep people. I mean, we used to talk about densification. We did a tremendous amount of studies about how many people we can put on a floor. You're not going to have that anymore. That's not really going to want to be what people want to do. So office space is going to be a necessity a long time. It's not going away. So it's a matter of, I guess the question came in. What do you do with the older building stock? We're going to have to figure out how to convert those buildings. So people feel comfortable again, just like after 9/11, just like after Sandy, you know, things are going to be different, but things will be, you know, we'll still need those that office space.
Joe Bates:
I want to come back to that issue and question in just a few minutes, but first Kevin, do we have any questions from the audience on the topic of the buildings that we live in our buildings that we're working in?
Kevin McMahon:
Yeah, we do. Joe. We have a couple of really good ones. The first one is about what we've been discussing. And the question is how much of the effectiveness working remotely is due to the fact that we know our colleagues. when we got put into the situation there, the audience members asking, what strategies would the panel recommend for bringing new team members into the group, collaborative culture effectively while they're working remotely?
Dino DeFeo:
I could start with that because we actually hired people pre pandemic and they started post pandemic. So it was a matter of introducing them to the people who they were going to be working with via something similar in zoom or via teams. And it's a daily and sometimes multiple times a day collaboration with them. And it's a challenge to make sure that the culture of the firm you're imparting that on new people. And we're going through something now where we're bringing EIT and interns in. So we're also working with our interns and it's again, multiple touches a day and making sure that they're, they're getting the education that, that, you know, we promise them and that they need as they go back to school. And also for the EITs that we're starting to culture and then starting to introduce the culture of our firm to them from the beginning. So you have to work with them daily, you have to make sure that they have someone who is their partner, that they can reach out to with any questions, but you have to make sure that there's a connection back to the firm consistently.
Kate Wittels:
I think, you know, we've talked about mentorship and collaboration and kind of those types of things are just going to have to happen even more so. And I think that's great, right? We, not, every firm really prioritizes mentorship and now it's going to happen and it's going to happen across offices. I think you'll actually get to know more people than you would of just the people that were within your team or on your, on your floor now. And so that's an exciting opportunity.
Peter DiMaggio:
And I think that that point that Kate has made is even more powerful if you are a very diverse spread out organization. So we have 50 offices. And so it's clearly more difficult for us when we onboard somebody now in that local office for all the challenges that come. But one of the things we've been really successful with is building a culture between offices. We've gotten very good at this kind of a call and getting to know people in the old days, what would happen is you'd be in your local office and everything would be on a voice, a conference call. And I don't know how everybody else feels, but I like it this environment so much more than the non facial conference call. And we, I think we build culture and get to know each other. So this Zoom call has been a clearly a challenge, but I think going forward, it's something we're going to use. We're talking about, you know, trying to keep the carbon footprint down, having a lot more meetings in this environment and being able to bring more people into those meetings rather than flying them from 50 places. So I think there's an opportunity to really take advantage of it.
Joe Bates:
Kevin do we have any other questions on the buildings that we work in before we move on to the buildings where we live?
Kevin McMahon:
Yeah. This is an interesting question, Joe. It's about the cost of, of the existing buildings in many cities that require retrofitting. And a lot of these retrofits may become too expensive and cost prohibitive. What will happen to these buildings?
Joe Bates:
Arathi? Do you have any thoughts on that one to start us out with?
Arathi Gowda:
I think we were talking about it or touching on it a little bit or, but I think obviously there's a lot of fun costs and we know the real estate market is, I mean, this is a, and one of the biggest financial engines and hard to move slow to move and change, but that makes, I think all of us believe that no, we are not going to abandon these, which is a good thing from a carbon sink perspective. And I think the technology is all there. And many people touched on that already in the panel, but there are a multitude of retrofits that are already starting to happen. I think at som we have a getting back to work plan. I'm sure Kate, you know, Peter has similar words, you know, we're looking at different things. How do we space out?
Arathi Gowda:
How do we have shifts? How do we have advanced filtration? How do we have flush out? How do we have twice daily cleaning? And you know, again, those aren't cost prohibitive measures for people to undertake. It's not talking about a whole a to upgrade or change. It's about how much extra outside air can we bring into this space. So and when we can in a certain space how do we socially distance more you know, and think about those other, other issues. So I think people are being very flexible, which is quite interesting as we get back into this space. And again, thinking, not build new, but how do we, how do we work with what we have, which is, is really important.
Dino DeFeo:
Yeah, the solutions are not a one size fits all. You're going to have, you know, air handler, retrofits
Speaker 6:
And upgrades that are going to be relatively inexpensive and some that are going to be very expensive to do. But, you know, let's be honest. The building stock is very expensive. Leases are very expensive. And if in order to attract people and charge the leases that you're charging, you're going to have to ensure that the occupants of the building are safe. So it's going to be probably something that is going to be demanded of landlords in order to make their building stock of value. So I think there's going to be ways to afford it. And as technology gets more affordable, it's going to be easier and easier to do.
Kate Wittels:
I also think there's going to be a lot of adaptive reuse. I mean, we're going to see, we were seeing a mix of uses that before this people wanting to live closer to where they work, people wanting to have more options. And so for some buildings that can be adapted really just because, and they can't be easily upgraded. They're going to turn into residential or they're going to turn into some other function. And that's just how we're going to continue on to live.
Joe Bates:
So what I'm hearing is we're gonna be doing a lot of retrofitting and not, not whole scale demolition of city blocks and making new buildings. It's just too expensive. I'd like to now turn to the next topic that we're going to discuss, which is the buildings in which we live, obviously we've started working from home, but what kind of w what kind of considerations are we going to have when it, when it comes to where people are living, making those buildings more healthy, especially multi-dwelling buildings RFP, do you have some thoughts on that one?
Arathi Gowda:
I think this is again, it's a, always listening for the glass is half full, but I think this is again, another opportunity in a market that's been really tough. So, I mean, when we look at the history, the historic trends of energy efficiency residential is the lowest in this country and globally even in multifamily housing. And why has the lowest energy efficiency? Well, it follows the cost. It's the lowest cost per square foot. And I think of course, right now everyone's rethinking. I mean, I personally am rethinking, why did I get that parking space when I do own a car, because I'm a greenie, why didn't I get the balcony instead? But it was resale value, right? And so those of us in cities are thinking about options like that. But I think people, again are thinking more about space gardens, other features that had people historically in the suburbs.
Arathi Gowda:
But I think it will again, drive up what the cost per square foot is that people are willing to invest. And what they're willing to invest in, which I think is very positive because they've gotten to this is the biggest investment of most Americans' lives. And it's very, very commodified in a way that's not good for health and it's not good for carbon either. So again, looking at this health and energy carbon nexus I think there's a lot that people are rethinking now. And I don't think that it's going to mean you know, an exited to the suburbs. It might be, people are looking at different kinds of cities where they can afford a little bit more space. It might be, again, it's not the parking spot anymore. It's something else. Or maybe it is the car because now I can move around. But I think people are thinking about it in a much more nuanced way than historically just bigger, bigger, bigger, bigger space, which was the, usually the driver.
Joe Bates:
Yeah. It seems like there's been this sort of initial knee jerk reaction of we're going to get outta here or we're moving out to the country. In, in my neighborhood, I live on a mountain and the Blue Ridge West of DC and four brand new houses have gone up in the last four months. So highly unusual. What, what do the rest of you think about that? You know, is this just sort of an initial reaction that people are going to leave the cities? Or are we, are we going to adapt and how?
Peter DiMaggio:
I'll jump in on that? I think one of the most interesting things about the cities and this may be, even appear off topic, but I don't think it is, is, is how much of the cultural institutions people come back to whether it's sporting events or Broadway or restaurants or bars or whatever you can think of. In a lot of ways that has been something that has drawn lots of people into the city, right? And so if that comes back and it comes back powerfully, I think you're gonna see a lot of people stay. And then that, to my original point, if people really want to spend some time in the office, they are also going to need to be, and those offices are in an urban environment. They can't really move so far to the country, which is why I think originally when we started talking about everybody's gonna move to the country, that was a knee jerk reaction to, I can work from home.
Peter DiMaggio:
If I can work from home, I don't need to be near my office. And I think people are rethinking that because they don't want to be so isolated. So I, I think it's a combination of, do you want to spend some time in your office, which I think the answer will be yes, for most people. And can we get these cultural institutions that have really, in my opinion, made our cities what they are, if we can get them up and running safely, I think you're going to see that, that draw to be in a city again, to that nine 11 quote, I think 10 years from now, we're still going to want to be in our urban environments for the same reason we want to be there now. So I think it will come back around what it looks like and how fast we get there. I'm not sure.
Dino DeFeo:
Yeah. To a, to Joe, your point about the homes being built. I've already heard a couple of stories in my area of bidding Wars for homes, which is, you know, unusual in the suburb of New York lately. I mean, we used to have that years ago, but not for quite some time. So we're starting to see that, but I, you know, I, I do, I do agree with Peter. I think you're going to start seeing people want to come back and just the, how long will that take? I mean, if we go through another pandemic, would you rather quarantine in a 500 square foot apartment without the balcony? Or would you rather quarantine in a 2,500 square foot house with a backyard? And maybe if you have a spouse who works two offices built into the house as well it's going to be a, it's going to be a little bit of a balancing act. And I think if, if you can work from the office part time, like we were talking about earlier, you might choose to move a little further away from the city, knowing that you're not doing that long commute every day. If you're doing it a couple of days a week or three days a week, you might be willing to sit on the train for longer than to, than to be close to work.
Kate Wittels:
I think this is a call for cities to work with their regional partners. There's been a long time of a us versus them, right? You want to keep the residents or the office workers on your side of the border and retain the taxes. And I think this is really now about a regional approach to to how we're going to be living. So it's not New York city. It's the New York city MSA and living in the Hudson Valley and working, you know, coming into New York city twice a week, instead of five times a week, it's all going to seem like we're all part of the same same community. And we need to work together more.
Joe Bates:
Kevin what, what questions do we have on this?
Kevin McMahon:
We have a great question that ties right into this discussion. Does the panel see more use in high rises of residential and commercial cohabitating becoming part of the same building, you know, leveraging the efficiency of elevators and heating and air conditioning systems addressing some of the panels that comment
Kate Wittels:
For, for a long time, I always was saying that office was going to become an amenity of residential and every tall office tower was going to have two floors of coworking in some sense. And you, you would subsidize that off some sort of check from your employer to work out of that for a couple of days a week, or what have you. And I think that office offering is going to be more and more offered in the residential products, especially the high rise, dense residential product. You don't have to get a bigger apartment, but you have a floor go to when you want to get away from your children.
Joe Bates:
Kate, I want to follow up with you on that one. Again, I'm, I'm sort of talking from the perspective of the DC area out in the suburbs. We have a lot of mixed use planning going on where, you know, it's required now to have retail in the bottom and apartments, condos up top. And, and the idea is that it will reduce traffic, et cetera. And it's not, you know, we're just seeing people who are, you know, they're still moving to the suburbs, but then they're working in DC and still have to commute. And there's just a lot more traffic going cross-ways every which way. You know, what are your thoughts on that?
Kate Wittels:
I think DC I mean, it's congestion, do you see as that people need to be getting out of their cars more and having more public transit options than just what the Metro is providing. Right? I think there's a example that people want to go places. We have to figure out how to get them more there, more efficiently without the congestion of single person vehicle travel.
Joe Bates:
And that's going to be a challenge, especially in the near term, at least because the CDC is saying, hey, drive, drive a solo now.
Kate Wittels:
Yeah, I think what's be interesting is bus. I think the advent of bus rapid transit and where, how we're going to be using buses differently is going to be really, really interesting.
Joe Bates:
Yeah. I saw a photo of a bus where they're, you know, they tape off various seats and the untaped seats you can sit in. So there's this weird, you know, social distancing thing going on. What do the rest of you all think on this question that Kevin proposed?
Peter DiMaggio:
I think for what it's worth from my side, I think you, you touched on one, that's absolutely critical caked in, and then you mentioned that, which is the public transportation system. And for many, many years, we said, it's going to work well, if there's a great public transportation, as far out as that goes, that's how far people will move. Right? So if the train line goes out 50 miles, people will be 50 miles out, 70 miles. And I think it's going to be really interesting to see how people respond to public transportation. The exact opposite is what's happening in our offices right now. We have 50 of them. So we have all these different kinds. The places where people drive to work are filling up very fast because they don't have to deal with that, that danger or the potential exposure. So it's an odd mix of the places where we don't have public transportation or working very well to get back in the office. I don't think that's sustainable. I think ultimately we'll figure out a way to safely transit and then, then we'll get back to where we were. But however long that takes and that's a tough challenge to, to keep the public transportation to some ways, for instance safe. That's why I think we're seeing in New York, which are very slow movement to come back to the offices.
Speaker 6:
Well, that is the issue. I mean, for, for our firm, I mean, we we've, I like all of us, we've probably sent out surveys to our staff to figure out what are some of the key drivers. And, and one of the ones that keeps coming up is public transportation. So that's why we're moving very slowly with bringing people back to New York, but our other offices are coming back much more quickly because they are suburban suburban offices for the most part they commute via or bus, or it's a little bit easier. A lot of people are in their own car. But Boston, New York, Philadelphia, where they're taking more mass transit again, it's coming back much more slowly. So we'll have to figure out how to do that safely. And and ms. Strategy is going to have to be a part of that equation.
Speaker 6:
And remember that's out of our control as office leadership, right? As, as from leadership, we know we can, we can really have pretty good control what's going on in our offices and we can work with our building management to even have pretty good control of what's going on. If we're a tenant, once you get outside of that and people control their own home environment very well. It's that piece right in the middle of that you know, Kate, you mentioned something that struck a nerve partner and you, you mentioned that on a regional level, I think we're going to have to really partner with, with the mass transit systems and the public transportation systems to, to solve this problem collectively. And I think we said it earlier, the subways have never been cleaner. I forget who mentioned it. Yeah. But you know, that's because there's not much use right now, you know, once we started having more people on the subway, so it'll be clean less frequently, there'll be more cars that are out in service at any given time.
New Speaker:
And it's going to be, again, something we're going to have to help manage, because it is a key driver to getting us to where we need to go. Yeah. I mean, there is some collectivism in here as to how we behave as a society that I think, again, it's out of our control a little bit, but I mean, not, not so much, I think individually we add up. And that's why I did say, like, if we look at our Asian friends in the beginning of this, the first question, I think how they behave in a very organized and very dense places you know, Hong Kong after SARS, they completely changed their mentality and they're in a completely different situation now. And again, it wasn't just the engineering community that responded is the public health, but it was also just the general public in terms of not having an emergency aversion to math, you know, using their elbows for buttons, if they didn't have gloves, you know, just, I think they're a little behavior modifications, as we said, that we'll all get used to.
Speaker 5:
But they do have that, you know, they've had a long mentality needed to have you know, live work half rezzy, half office towers. And you know, that wasn't necessarily a commentary like, Oh, I may about mixed use and I'll go to thing. There was a commentary about speculation in the real estate market. Like let's make sure the column spacing, the engineering can convert because we're building these cities so quickly. So I think there is something in that too. That's really it's very optimistic and it's about, you know, if we build it, people will come. And that we shouldn't, we should kind of borrow from that mentality to how do we engineer buildings that can be very flexible, you know? Kay. You had that great example too about you know, Rezi flexibility with office floors. But again, like how do we, how do we design ultimately very flexible spaces that can last a long time?
Speaker 6:
Certainly with RCI. Yeah, I was. I'm wondering if you have any specific examples you can share with us that you're aware of. You mentioned, you know, the SARS outbreak and what types of engineering changes were made, or is there anything that you, you know of that you can share with us?
Arathi Gowda:
Well, there were changes to their their wind code essentially. So they have one of the most aggressive code standards and people are following it around the world in terms of not just wins and the public realm that would blow people over, but also about contaminant control. So these are things that it's like being a good neighbor because one of the contamination points was in the vent stack of two adjacent rez buildings. So it was a plumbing stack. There was a re entry point. And so they were wondering like, it's not just a tooth, but it's also, if there's something in that vent stack going wrong, that you can contaminate amongst floors. But you know, again, it's even Peter, you had mentioned that it's, it's not just our disciplines, but there were many other responses from the public health departments, how people change their behavior. And certainly we have a very big contribution and particularly in dense environments, because there are a lot of engineering control points that could facilitate better health management
Peter DiMaggio:
Joe, to your point. I think there have been so many unbelievable advancements in fluid mechanics, which might be a strange question, but our ability to model how particulates move around and environment, and it came from the fire industry was doing work and the blast resistant design community was doing work like this ability to model really high end modeling of how people interact and how fluids interact with people really does exist today in a way that it didn't exist five years ago. So we have the capability, the question is, do we want to use it and adapt it and really go in that in that way, because I think we could really solve this problem on a technical level where at least address it in a way we couldn't previously.
Dino DeFeo:
Well, actually to that point, we are doing that already. A number of higher education institutions have reached out to talk to us about the way they use their classrooms and the placements of students with the air distribution and the air flow across those, the students in there, the people using a room so that they understand that there's a, there's a, an airflow. That's not hitting every single student. You're trying to space them out so that the separate airflows hitting separate groups of students. So you're not contaminating everybody in one shot. So you're already starting to look at the computational airflow in a, you know, in an auditorium or a classroom to see the impacts of having 10 students, 20 students, a hundred students, depending on the size of the room. So it's something that people are looking at and it's a, it's guiding their, the way they're bringing the kids back to school.
Joe Bates:
Kevin, what other questions do we have on this subject?
Kevin McMahon:
You have a question that I think impacts every business out there. It's how does the panel see the balance between densification or efficiency and hygiene? Will we be moving? We went from officers to cubes and we moved them back to offices out as the panel, see that sort of dynamic playing out?
Kate Wittels:
Well for a firm that's never had a private office. I don't see us going to private offices. So we will probably not be densifying as much anymore. And especially with a little bit of hoteling and a little bit of work from home and part time, work, home, and an office. I think it's very easy to densify and still maintain your office space or even a little bit less office space.
Peter DiMaggio:
I'll take the easy part of that question. I don't think you will see more private offices again, you know, a month and a half ago where we had older buildings, which had that we were able to get people back and then we realized, but why did they go back? Because the whole purpose of being in that office environment are at these point is to collaborate. And so I think that's the one easy one I can give you is my opinion. That's not the solution to have more people in private offices so that they can social distinction, you know, keep their air, their own environment clean. They may as well work from home at that point. So I don't know that you'll have none of them, but I don't think that's what you'll see. You're going to see people really trying to figure out how to keep their conference room safe, because that's why we go to the office.
Kate Wittels:
Yeah. Yeah. I mean, that's a great point. It's about why are we going to the office? What are we doing at the office? Not do we need just another place to work. And it's a space spaces. They're going to be designed around those functions of collaboration and cultivating brand and selling to our clients and making employees happy and willing to, to work and stay at the company.
Arathi Gowda:
I mean, it's just you know, working at SOM we just went through a office renovation, which was quite interesting. So all of our major offices in North America are having a new office right as this was hitting, we were like, we have these beautiful spaces that we enjoy. We were all excited to go back. But I think, you know, Kate hit on this a little bit in some earlier points that you know, we all took as a value, almost less desk space and more collaborative and conferencing space. And also recognizing that it is also for us to not just be locked into our desk, only working like this, but we do a lot of you know, conferencing, more soft spaces, more areas to eat and then have more informal conversation. So, you know, Peter, your point is to how do you keep those spaces clean beyond like a, to a twice a day protocol. It's easy to do that at your desk. You know, you're just, you are wiping that, but I think it might turn into almost like a gym where you carry your towel everywhere and you wipe it down.
Arathi Gowda:
It just becomes a different office etiquette in these collaborative spaces. And we've seen that as obviously a design trend. It's a, nobody wants to see, or just always be an identified area, but everyone wants to be on the soft couch or, you know, in the sling chair in the conference room, like group thinking. So that's why people are going in and the cappuccino maker, which is far superior to anything we have at home.
Joe Bates:
Well that, that that's sort of goes to another question of those, those other shared spaces that we haven't really talked about, the kitchen, the bathroom, I was reading an article about how you can with the sort of power flushes. Now you aerosol you know, not to get too into it, but there's a health issue in the restrooms now. How do you all see addressing those communal space health issues?
Arathi Gowda:
We've started talking about that vacuum flushing, which has long been the con of the noise and it's annoying, but the aerosol is much less. We were talking about that on a recent airport. So it significantly reduces the amount of water reducing the aerosol, but for a long time, everyone was like, eh, sounds terrible, which it does, you know, but if you're in an airport and you're already used to hearing that on the plane but I think you've heard conversations. I think there's also, and again, an interesting social nexus with these conversations about gender fluidity and how do we plan? Because again, we often do our plumbing, this based on code counts. And we don't think about having more counts, you know, both for you know, for people to feel safe with gender fluidity, for mothers rooms and other things. So I think it's going to change the way we engineer and plan for these spaces to try to be not just code, but above that, you know, think about people first.
Arathi Gowda:
And how do you have, you know, an extra thing or two, and so people could be faced out, like you go into the bathroom, you don't have to be right next to someone because you just had the code minimum, you could go every other. So these are some of the things we're thinking about. And it's interesting. Cause even standards like the wells certification, or they've been asking about things like this, and now this is kinda coming up a little bit more like, how do you, how do you have more counts of these essential places to clean?
Dino DeFeo:
Yeah. I mean, you touched on it. Code was always the code minimum. And you know, when you're designing a building, you're looking at what is, what do I need to do to meet code? I think we're, we're going, we're getting to a place where we're going far beyond what code requires and what is appropriate now.
Kevin McMahon:
So we have a question that's specifically, I think it's from a designer, and the question is, can the panel discuss educational facilities and the challenge of social distancing among children with large classroom settings? What is the solution to that?
Dino DeFeo:
Well, you can social distance into classroom. I don't know if you're going to social distance in the quad and the bar and every place else the kids go. But as far as what a lot of the higher ed is looking at right now is, is limiting the class sizes. So if you had typically that you use a small classroom for a class size, you're using your medium sized classroom class size, and the medium went to a large and a large became a virtual class. So you're, you're using larger rooms for the, then the number of students that you had. My daughter is actually just entering college now and they just actually today emailed their list of what they're doing. And it's a masks are going to be required everywhere in common spaces when you can social distance. And they're looking at flushing out their HPAC systems much more often. So when you're running a school building, you're you're using, instead of ending the day at four o'clock or five o'clock and shutting the systems down, you're running it for an extra hour, with extra ventilation air to flush the building out. So there's going to be a number of techniques that they're going to be doing to in order to make sure that they can keep the spaces clean. It's just, it will be a challenge because kids don't always follow the rules as much as they probably should.
Peter DiMaggio:
I think one of the challenges will be the short term issue and then the longterm issue. And I think Dino just did a great job of talking about using very reasonable methods in the short term. The other one that we're seeing is, and as I mentioned with the offices, colleges are splitting classes. So if you have two classes a week, one time you're in the, in the class at one time, you're the remote person. So I think the next two semesters we'll see a lot of that. And the real question will be, let's say we get our hands around this virus, right? Let's say we get a vaccine. Do people go back to the way we did things previously and start packing people into classrooms? Or do we say, this is the first of many of these potential pandemics that we may have and are they all airborne and are the same solutions they are?
Peter DiMaggio:
So, you know, my, one of my partners wants to talk about the fact that we're in the fog right now, and we know some of our challenges, but the really big challenge for the designers is know you're designing a building right now and do you design it as if this isn't going to be here and we're going to solve it. And in the near term, you use social distancing and hand washing and masks. What do you say these kinds of pandemics may be coming again? And let's build something into this facility. And that's a really big challenge for the designers right now.
Arathi Gowda:
Yeah. I mean, I would, I would just add to this and I think people can tell already in the audience that I'm the engineer for a better social, social fabric, like keep making these points. But you know, this even gets back to classroom size or what we advocate for. Cause we get pushed. I think as engineers all the time to be code minimums, it's a lot of invisible things and there might be things that are very visible, like features that people want to pay for. And so there is a space in this too. There's a, a broader conversation about pedagogy and classroom size. But this moment is saying, you know, actually protect children, protect that institutional learning and have less children in a classroom that even though we're in the fog, maybe we can, we can be advocates for that after we get out of the fog.
Joe Bates:
Kevin, one last question. And then I'm going to ask everyone for some closing thoughts on this.
Kevin McMahon:
Okay. This, this question ties into the code discussion and the American Disabilities Act drove a lot of projects for all of us over the years. Does the panel see the government and different government agencies creating many more code modifications with this pandemic in all different facets of a project, you know, such as simple things like increasing the distance between bathroom facilities in the inside, the bathrooms, et cetera?
Peter DiMaggio:
I'll take a quick shot at that. I hope we don't do that. Dino alluded to it started out with, and I think Kate did also, my preference would be we go more towards a performance based design. We've thought it for seismic. We have a lot of structural engineers. So we like when the code specifies what kind of performance the building would need to have. And I think if we do see code changes, I'd love them to be performance based changes. And then you would have the engineering and the architectural societies really figure out the best way to solve that rather than mandating specific things. I personally would like to see that flexibility.
Arathi Gowda:
Yeah, I would agree. And it's, you know, going back to that was a perfect way to describe it, Peter, the fog, but we saw a similar thing with 9/11 and fire codes. And I think again, because we, we are seeing that the science is changing on what works best or not. And I also think what works best for this particular disease might not be the same as what works for flu or, or other things that we're still going to be concerned about. A performance based method would be really important versus being very reactionary to this specific instance of health concern.
Joe Bates:
So I'm going to ask the final question for each of you and Kate. I'm going to let you start us out on this one, give you a second to get your thoughts for repaired here. But so we thought we talked about a lot of things today. The, we talked about the buildings we work in, we live in public transit, educational settings. What are, what are buildings going to look like 10 years from now that we haven't included today? What are the, you know, I want you to put your crystal ball out there and tell us what's going to be standard in 10 years. That, that isn't today.
Dino DeFeo:
I think you're going to see buildings that to be much more flexible. You're gonna, I'm sorry. It was not directed towards me, but you know, I think it's going to have to be much more flexible. We've spent a lot of time. I think I started by saying, looking at energy efficiency and not so much the wellness of the people using the building. We're going to have to focus on the wellness part of the building and make sure that the occupants are, are safe and are taken care of. And it become a respite for them and not so much a place that is ready to go to, but a place they want to go to.
Kate Wittels:
I think well, I mean, it's hard to have a crystal ball. I think we're gonna, you know, adapt to new technologies and how we do it that are going to become commonplace. I mean, I think we we've changed so quickly from home, from working in the office, to working at home that I think we can change our behavior to do anything. So if we put our minds together and try to make our society better for women, whether it's climate or equity, I think we can force ourselves to have better behaviors in that sense. And so maybe it's more not about what, how the buildings will look differently, but maybe we'll have different people in the buildings and we'll be using them in a different way for betterment of our society. I hope
Joe Bates:
Peter, what do you think?
Peter DiMaggio:
I always have two words. Do you know, stole the first, which was flexibility? The second one I'll throw in is, is comfort. People are going to expect more from their buildings because they're comfortable in their home and they know they could be there. So the two things about coming to the office are first. What is your reason for being there? And I have a reason now I expect to have a view or, you know, I can open my window and get fresh air. So I think that was already coming. But I think the pressure on the design community is going to be huge to be comfortable in the office.
Joe Bates:
Arathi, I'm going to give you the last word here today. What's going to be different 10 years,
Arathi Gowda:
No pressure with all of these superstars. But I do think that to Kate's point, you know, the future, there's going to be a multiplicity. We don't know, but I mean, when do you know that we have an aging population? So health is going to continue to be top of mind. And Joe, you said it, well, that it's going to be, this is not something that we're going to forget tomorrow is going to be a generation of us being very mindful. But we also have the climate eight ball. So I think that there is in 10 years, I hope that both of these things have more of a symbiotic relationship as compared to what they've been in the past, where we've been exclusively efficiency and exclusively health. And that's been, I think, really damaging to the engineering of our buildings that it's like, it was never both when, when it was always one or so I'm, I'm pretty hopeful that we're looking at these solutions that are really quite clever and bring the costs down.
Arathi Gowda:
They become more ubiquitous. And they look at that nexus of efficiency in health. And I think there's a lot of things that are really quite exciting now, too. It's like all dirty. And everyone's talking about this filtration humidity, like very aggressively, and we've been circling the drain on that for a long time. And I think we're getting very serious right now. You know, Peter, even to your point about comfort, it's like, well, you know, we, we had because of code because of liability, but now we're getting serious in our forums about, okay, come on. Like what's, what's going to be the best thing. And I think that's the part where it's, it's really fun and geeky, and it's fun to hang out with engineers on those topics. So I'm very hopeful that people will come. What are the good conclusions?
Joe Bates:
Yeah. All right. Well, thank you to all our panelists day after he's going to have a final goodbye here for us, but earthy Peter, Kate Dino, and Kevin. Thanks for fielding those questions for us as well. Daphne back to you.
Daphne Bryant:
Thanks, Joe. And thank you for joining us today. Thank you to our panelists and our donors for making this session possible. Lots of great information and giving us something to think about. We have a short evaluation that we will send you this afternoon. So please share your experience with us and be sure to join us on July 16th for our next session funding and the new normal, have a great afternoon and stay well.
 

The Impact of Technology on Engineering - an ACEC Research Institute Roundtable

On June 18, 2020, the ACEC Research Institute held the first of a series of panel discussions on the future of engineering.  The topic covered by the panelists was the "Impact of Technology on Engineering."  Panelists included:
• Jose Luis Blanco, Partner, McKinsey & Company• Mike Haley, Vice President of Research, Autodesk, Inc.• Chris Luebkeman, Director for Strategic Foresight, Office of the President, ETH Zurich• Heather Wishart-Smith, SVP Technology and Innovation, Jacobs• Moderator: Joseph Bates, ACEC Research Institute
A full video of the roundtable can be viewed here. 
Transcript:
Daphne Bryant :
Behalf of the ACEC Research Institute's, board of directors. Welcome to our first round table and the series, the future of engineering, a big thank you to our donors who have made this session possible. We have a great group of thought leaders, as you can see here today that will share their insights and expertise with us on the impact of technology on engineering without further ado. It's my pleasure to introduce two of my colleagues from the ACEC research Institute, Joe Bates, who will serve as our moderator today and Kevin McMahon, who will be monitoring the chat box and fielding your questions during the session, Joe, it's all yours.
Joseph Bates:
Thanks very much Daphne, and thank you everybody for joining today's round table. Before we get started with our questions, I'd like to introduce each of our panelists for the webinar. Today. First we have Jose Luis Blanco. He's a partner at McKinsey & Company Jose leads, McKinsey's engineering, construction, building materials and construction technology work in North America. And as a leader of its retail real estate practice, he brings deep expertise in optimizing performance and unlocking value through embedding digital capabilities and deploying and scaling up new technologies. We also have Mike Haley, vice president of research at Autodesk. Mike leads a team of researchers, engineers, and specialists to explore the future of how people design and make things. A primary focus of his team, is automation and leveraging technologies and disciplines that include machine learning, robotics, human, computer interaction, geometry, and visible visualization. Next, we have Chris Luebkeman. He's the director of strategic foresight at office of the president with ETH Zurich.
Joseph Bates:
Chris has a multidisciplinary education, including geology, civil engineering, structural engineering, entrepreneurship, and a doctorate in architecture. And he is deeply passionate about curating, constructive dialogue, insatiably curious. He relishes the opportunity to discover the opportunities which will be created by change, and perhaps most importantly, to evolve position solutions to the profound positive solutions to the profound challenges we face today. And last but not least, we have Heather Wishart-Smith. She's SVP of technology and innovation at Jacobs. Heather is a registered professional engineer and certified project management professional with proven, experience managing large design programs and developing, managing, and turning around troubled offices and the architectural engineering professional services market. And also Heather is a fellow of S A M E and she is currently the president elect for the 2020, 2021 Centennial year. Thank you all of our panelists for joining us today. I'd first like to start out with a question fairly broad one for each of you to start out with, and I'm going to ask Mike to start us with this based on your individual perspectives, as you look at the engineering industry, what are the one or two biggest impacts that technology will have on the industry in the future, say in the next five to seven years, for instance, will, will things be going faster? We'll be doing things in a different place,uwhat what's going to happen, Mike?
Mike Haley:
Thanks, Joe. Yeah, it's a, it's a, it is a broad question. There's two things, main things that come to mind for me. So the first one relates to systems and, you know, I think as we all know engineering anything in the world today and especially buildings is all about resolving the various forces that are acting between the systems and systems might be the relationship between the architecture of the building, the structure of the building NDP systems. It could be the relationship between the materials and the methods of production of the building and the sustainability of the environment. It could be the relationship between the people that are ultimately going to be in the building. And today in most practices, we don't have a way of resolving all of those tensions all the time because systems are inherently very complex and they're always changing. So the industries rely on rules of thumb, established practices, standards, these kinds of things.
Mike Haley:
And I can see that changing in the future. We're beginning to have the ability to automate the understanding of systems and be able to bring those insights and that guidance to engineers and designers in that process. So that's my one aspect that then leads to the second one, Joe, which is that with all of this automation and your question about, you know, you know, do, do we, are we going to need more engineers or are we going to need less engineers? What's the nature of the job market? I actually believe we're going to need more. And the reason I believe you're going to need more is I actually think we're opening up the world to greater possibilities right now with these tools. And that is going to lead to the next, my second point, which relates to knowledge and education. And I think as we build automation systems that understand and learn the patterns, we don't just use that knowledge to automate and make the machine do things, but we can use that knowledge to upskill people. We can train people more easily in using tools and using techniques. We can raise the sea level for lots of people at the same time with technology. So I see that as a sort of a commencement great trend that we're going to see in the coming years.
Joseph Bates:
Great. let's, let's go over to Chris. Chris, what do you think?
Chris Luebkeman:
So I, I totally agree with everything Mike just said, and I want to amplify a couple of points. I think there's three things. We're going to see expansion, acceleration and consolidation. As Mike said, an expansion of what we can do and expansion of toolsets and expansion of knowhow and expansion of what we're going to be asked to do. I think there's the acceleration, there's going to be, we're, we're suffering from this already when we like to complain about not enough time to even think anymore, we just have to do do do, and frankly, that's not going to stop. And so therefore these tools are going to help us. I hope and these techniques and our, and our teaming will help us deal with that acceleration. And the last is consolidation. I think we've seen over the past 10, 20 years, an industry wide consolidation, especially in the built environment.
Chris Luebkeman:
And I believe frankly, that will continue, but I also believe we come back to the first one, it's going to lead to an expansion because as we have the consolidation and either, so this core, core, core core, all of a sudden, there's going to be the realization. We need these new typepology, these specialists who can really focus on, for example, getting our, our third world infrastructure back up to what it needs to be in order to to regain our, our, you know, a position of pride and the other parts of this sort of this other is a consolidation of knowledge. I really think that we're going to be able to acquire and that it's not consolidation by what's there, but how we get it. Right. So we're going to be able to in a much easier way, consolidate know how consolidate knowledge in a much more rapid way. So those are my three words. Great. Jose, what about you?
Jose Luis Blanco:
Like how Chris frame it in three specific like you know, sentences or, or, or, or things? Let me try to do the same. I think that for me, the three things that I believe what I would love to see going forward, given what we see in technology is more transparency first. Second, being more output outcome driven. And the third one is actually much more collaborative environment. Let me try to just give you 15 seconds for me to one the transparency of think it's clear, but I think it's, I think right now we're capturing data. Not only we capturing data, we're storing data in a much more way that is going to be, we're going to be able to actually analyze that data and provide like, you know, transparencies and some traditional issues we always have a, in the construction industry and Jane construction English, okay.
Jose Luis Blanco:
Who made that change? What happened? What was the implication? So I think that that's going to be a huge unlock for us, and we wouldn't have a lot of noise that is always around our industry and to move forward. The second one is outcome driven. It's also tied to the first one. I think if we have more data, we have more transparency and then we're going to be able to actually you know, our designs are going to be much more outcome driven is going to be able to provide better service to our owners. I mean, I'm sure Mike and his team are working on Gera design, like crazy these days. And that for me is critical because it's going to be able to fully actually capture what the client needs and actually tell them, like, here are the choices for you, depending on the outcomes you're trying to achieve.
Jose Luis Blanco:
And the third one, which is the collaborative point, I think is much more than just breaking silos because we're going to have much more transparency. It's like for me, going back to Chris' point about knowledge, is really unleashing like the potential talent of fully the potential of like a group of engineers working together, right. Removing all the constraints that we need to do right now being tying like the King of silos and many other things. So these three things : transparency, outcome driven and collaborations is the things I expect and hope to see in the future there.
Joseph Bates:
Heather why don't you round us out here with your thoughts on this subject.
Heather Wishart-Smith:
Sure, so I think that my thoughts on this are really quite frankly, complimentary to what the gentlemen have mentioned. The first really that I would focus on is the interconnectivity of systems. So I've mentioned since, but that interconnectivity and disciplines, and then also the technical workforce. With regard to the interconnectivity of systems, you look at the interconnectivity of society we're coming out of the pandemic, the future of cities the urbanization, everything is going to need to rely on techno technology to really meet that exponential growth and the exponential growth of mega cities. So as was mentioned earlier, this will provide more opportunities for engineers to get involved, to leverage that kind of technology. And, you know, Jose mentioned silos. With that, I mean, I really think that those who are most successful in the technology enabled world will be those who are able to break down those silos and cut across disciplines.
Heather Wishart-Smith:
So much of what we do in innovation is rather than just say creating something in one discipline and then kind of throwing it over the transom for the next discipline and the next discipline; cutting across, and co-creating across disciplines in order to increase that speed to market. But then the workforce is that second aspect. You know, of course there's so many statistics out there about the U.S. In particular, not graduating enough STEM graduates, and of course it's about more than just graduating them. We need to retain them once they come into the workforce in order to remain competitive. But we also need to recognize the value of the trades, particularly as the trades become increasingly complex, as we bring IOT into operations and maintenance and all of that. So I think sometimes it's tempting to view technology as kind of a way out of not graduating enough STEM graduates, but it's, it's, it's really going to cause the need for even more of those graduates.
Heather Wishart-Smith:
They need to, you know, they need to have the skillset to design a program that operates and maintain all the technologies that we think will help, you know, get us out of, out of the, the brain drain if you will. But that, that workforce, it needs to be nimble, adaptable needs to be committed to lifelong learning. And finally, I think it's critically important that that workforce be inclusive and diverse. It's not just the right thing to do. It's been proven by study after study that inclusive and diverse companies and organizations perform better. It allows us as an industry to just really cast the widest net to draw the widest possible pool of candidates, to get as many STEM professionals as we can. And it's really once you that critical mass of diversity, that's when you can get the most benefit from diversity of thought.
Joseph Bates:
So, Heather, I think you've provided a great segue into the next section of questions here that I wanted to ask about. And that's about the increasing speed of design and how that impacts projects and delivery. And in particular, are there generational issues that we need to consider here are our younger people that are graduating more adept with the technology that is out there, or, you know, what, what are your thoughts on this?
Heather Wishart-Smith:
So because the people who are graduating today are digital natives. I think it's, you know, very often tempting to fall into that unconscious bias that people who are have more time in their career might not be as willing or able to change. But I have found and worked with so many people who were at the latter end of their career, who really do fully embrace that technology and innovation. So I mentioned earlier being nimble, being adaptable, having that commitment to lifelong learning, it's really about that mindset. And I think it's also important to be open, to taking on say a reverse mentor. Yes, we absolutely need to be learning from, from younger people. We need to provide better pathways to promotion and success. We, we shouldn't in any way be writing off due to our unconscious bias, any kind of you know, whole groups of people, right.
Heather Wishart-Smith:
I, I'd also add that, you know, not all technologies innovation, not all innovation involves technology. Some of the best innovations we have are those that have nothing to do with technology. It's really innovation in my mind is about how you approach problem solving, constantly asking what is the problem that we're trying to solve. So automation, of course, you know, we all know it should be harnessed to reduce repetitive tasks. And oftentimes also more higher risk operations to get people out of harm's way we should be using it for rapid auctioneering. We all know about, you know, generating just infinite possibilities, filtering them down to make sure that we're presenting to our clients what's best for them. Gone are the days where we show up at the [inaudible] with just, you know, possibilities. So we have a lot more to offer it's design attitude approach rather than the decision attitude approach, because you know, of course, decision attitude is assuming that all the, you know, the good options are out there. It's just a matter of deciding which one is best, but as we move into more automation, I really think it's important to take the design attitude approach to come up with the best alternatives. And then after that, the decision will be much easier.
Mike Haley:
Yeah. I'll answer that a little bit. What had I say that, you know, what, what we've found with the, with the newer generations, the digital natives, as you put it, Heather, is that there's a different expectation about the time to productivity you know, the traditional tools, certainly that we've been building were things that required a long time to become proficient. You had to study them, you had to learn them, you to learn the features you had to, there was a period of learning that was required. And there's, there's a level of expectation now about digital natives that they can pick up a tool and be productive immediately. So there's this relationship between learning and being productive, I think, is going to change. It is we're not ever going to have a world where you learn first and after I think, period, the time you become productive, the two are going to be much more intertwined.
Kevin McMahon:
I've got a question from the audience, one of the audience members wants to know in the future because of the varied nature and multidisciplinary skills that are going to be needed, that all the panels have mentioned, will, graduates be coming out of school with a more varied skillset - majors in civil, but perhaps minors in mechanical and electrical, for instance.
Heather Wishart-Smith:
Yeah. So I'll address that. I would even great question and I would even take it one step further, not just minors in mechanical and electrical, but in programming, in robotics, in all kinds of different disciplines that might not have been considered as related say to civil engineering as in the past. But the challenge for us in the industry is to make use of them. I think the risk is really there where you get the bright eyed, bushy tail, new graduates, and they come in and you're really attracted to them because they have the programming skills, they have the robotics background, they've done all kinds of three D printing. And then we sit them behind a computer and tell them to design things the same way that we've been doing it for decades. And we run the risk of burning them out of just really disenfranchising them. So we can't just be attracted to them. We need to recognize that we need to continue to foster that and cycle them through different opportunities and then listen to them when they come up with a way to challenge the status quo.
Jose Luis Blanco:
I think what Heather just said is super important. And I think that there's, if I may add one, another point is I think there's a very thin balance between and technology needs to help us with that between actually ensuring the that we maintain the knowhow that has been billed by the, I will call the older generation so to speak. I mean, we know that 30 or 40% of the workforce is going to retire over the next 10 to 15 years. So I think technology needs to allows us to capture that kind of knowhow making institutional and at the same time, without the same time, you know, and now we're allowing or empowering the new generation to do new things and doing them right. Right. So for me, that's a little bit of like [inaudible] out the new generation to do things differently, not the same way I've been down before that, for me, it's like what you actually make magic happen.
Chris Luebkeman:
So excuse me, I'd like to build on that as well. Yes. And first to the graduates, and then to what Jose was just saying, I think the question Kevin was a little bit in my mind too limited. Saying gonna major in civil and mechanical, I would much rather say, well, how about civil and philosophy or civil and biomedical or bio or, or, or some earth sciences or something that's actually, I think what we're hoping to see is actually a mix of the hard - the decision sciences with the natural sciences, because the challenges which we require, I think as a society are not just those who are trained how to make a decision, but as Heather was saying, the profound impact of a systems understanding and the need for us to understand more and more about how the elements within their systems sometimes need to be sub-optimized so that the system is optimized. And I think this is one thing. And the second point to build on what Jose was saying is I, totally agree with that. And we have to figure out how to make real lifelong learning, not just continuing education credits, which you go to some lunchtime lecture, which we all do and get a stamp and say, Oh boy, that was good. Thank you very much. But actually to real meaningful, lifelong learning and how I, and I, frankly, I don't know exactly what that means at this point, but I do know we're all recognizing that due to the, due to the rate of change, both professional, informational knowledge, that we need to find better ways to foster, to empower and encourage real lifelong learning and lifelong curiosity to learn. And I think that those are the two aspects there, which are not hand in hand, but in North self evident, but very, very critical for us.
Kevin McMahon:
Joe, we have one very interesting question then I'll let you ask the next question to the panelists. The question is with the super evolvement of technology to the panel is see that where most of the work is still procured locally and performed locally. Do they see a future where the local office, where the client is maybe just a small nub or collaboration, and then the bulk overwhelming bulk of the work is done around the globe or, or outside that core local office. Do they see that future happening in the next five to seven years?
Mike Haley:
I will. I'll say we're, we're beginning to see that happening already. I don't think it's a, I think it's, it's a growing trend. You know, technology is enabled and enabler of it. So as the economy, so it's society, right? All at the same time, we're seeing the shift of cloud adoption. People storing the data in centralized locations that can access it from everywhere. The days of having it on the server, inside your company, and only being able to use it. They're pretty long gone for a lot of companies. I think the gig economy, the notion of being able to hold down multiple contract jobs at the same time, switch between things, manage your workload, manage your life is a reality for a larger, larger number of people year over year. And then I, I just think that the borders are breaking down in terms of how we think about the world. And I think just because you live in another side of the world, you can think about problems elsewhere in the world, quite easily. You have access to that information.
Heather Wishart-Smith:
And I'll add to that. We've actually been doing this for years. It started out, I looked back in my career when I was, you know, managing programs. It started to become of course necessary when you needed to bring in a specialist who you wouldn't expect to have in the local office, but it really has evolved to the point where it's just a normal part of how we do things these days. And I think it will just continue to evolve. And that's a little bit different. I come from a very large firm,uand the smaller firms probably it's not as necessary, but it it's absolutely being done. And in addition to the technology and adoption of cloud, as Mike said, also,uvirtual and augmented reality has helped to facilitate that as well. And it also means,uless travel for some of our staff. So that's better from a work life balance perspective.
Chris Luebkeman:
To me, I agree with both, both of those, again, strange, but to me it's all about access. Now, at the end of the day, you used to not have access to first-class knowledge unless you were in a center. Now we right now are in two different continents at seven different time zones, and yet we're all accessing each other at this moment and the other, almost 300 people. And so it's it's access. And so it's access to knowledge, but it's also access to the marketplace. So I've been for the past five, 10 years, really, really encouraging the integration of small local offices, because at the end of the day, we know with the global move towards segregation. So national segregation and regional segregation, this is, this is going to continue. And so the local offices are going to become key to be networked and to create a new kind of network, which is trans-regional as, as the, you know, globalization screeches to a halt. I think this is, this is going to be a new reality, which we have to really look at. How can we make sure that the small local office can really provide the most excellent world-class delivery. And I, and I think that at the same time, we will still be, the big firms will still work globally and the Jacobs, the ARUPS, and all these they'll be able to flip work around the, around the world and continue doing that.
Joseph Bates:
Great. So I want to move on to the next section and I'm going to have Jose - I'd like to direct you then to start out with you on this one. There's a lot of buzzwords today in technology such as digital twins, data analytics, machine learning, and artificial intelligence. I'd like to talk about, first of all, what are the terms actually mean? And secondly, how will they actually affect the industry in the future? So maybe Jose, if you want to start out with one of these areas and kick us off.
Jose Luis Blanco:
Yeah. So a couple of reactions here. I think there's definitely a lot of buzzwords going on. And I think that I would like to separate the reason for that is because I think people sometimes actually confuse you know, technologies that aren't available or venture capitalists sounding, right, or that money is flowing to actually develop reinvestigate versus technologies that are really being adopted, whereas having mass adoption. So we'll make that distinction in the beginning of it. Right. So it's just been, you know, two or three or four, what you say is like, really, if I think about technologists, for instance, that are already impacting the way we work, obviously there's analytics that actually are being applied or advanced analytics are being applied on the field for early flags for projects. How do you explain, or the main factors that explain what a project can turn profitable non-profitable so you can, you can do a reduction analysis to actually do that, and even just forecast that you can definitely do it, you know, analysis of bidding and bidding factors, or even you can apply it to other electronic design for instance, right.
Jose Luis Blanco:
Which is starting to be widely used. Right. So there's things that are already happened, right. When you think about some of the things that may happen in the future, or maybe starting to happen, but not fully implemented, that's when you start entering like a world of lack of potential digital twinning, construction, or potential, like, you know, artificial intelligence where we actually fully explain, I don't think we're doing artificial intelligence in construction, per se right now, I think we're starting to do machine learning. And actually my, my actually disagree with that. I'm not, but actually that is a little bit like how we see. So I think the big, important thing for me is like all these technologies we're exploring and what should we be talking about all of that. Right. And, you know, venture capital is funding as soon as you get amount of them. And we're seeing a lot of them, the ones that actually read being adopted, I wouldn't say that at scale, they started to be adopted as a sizable pattern actually are much limited. I mean, they made it to analytics and we made it too, obviously maybe generated the design, some machine learning applications from project planning in advance.
Jose Luis Blanco:
[Inaudible] ....some Of that is implemented. I just want to hold on. When you say digital twin, the sec for various specific kind of use cases or a specific like areas who still are like ha a little bit like far away from a fully functioning digital twin, we understand in aeronautics to where we understand, you know, their industrial processes. Anyway, that's my perspective.
Mike Haley:
Yeah. I, I think Jose I makes a great point about, you know, I think of it as the hype cycle, right? And the reality is all technology goes through a hype cycle and terms like artificial intelligence, machine learning are, are hype terms. Now we deeply believe in artificial intelligence and machine learning and digital twins, but they have to be ready to Joe's point. One of the things I would add is I, you know, I think the things that are real today, like you said, are our analytics computational methods. You mentioned that Heather as well, the ability to explore alternatives, I think that's becoming a fairly robust capability today. When we start coming back to that systems aspect of things that we were talking about earlier, that's where it starts becoming complicated. And I think this is a big role where machine learning can actually play.
Mike Haley:
If we are to build - digital twins, I've also been around for actually quite a long time. And as you said in other industries too, but the difference is the future to have to understand the system. If they don't understand the systems, they're not correctly reflecting the situation and you're not going to be able to optimize your solutions correctly. The only way I believe you're going to be able to make correctly representative digital twins in the future is through sampling. The world is through measuring the data, learning from that data, generalizing those patterns, and then placing them within that digital twin. And then you, then you leverage that digital twin to optimize your designs and look for alternatives. But that's a pot. That's a path we're on. We're not there yet today.
Chris Luebkeman:
I think one of the interesting things with all of those is, as you said, Joe there's, there are buzzwords and there are many different interpretations. We can look at them with starry eyes and say, you know, I can't wait to do a digital twin and others get terrified of the thinking of the matrix coming down upon us. But as you've asked, I think it's, as we're talking. It's really critical that every firm, it makes the effort to learn about them. Both the potential as is implied by the technology tool makers, but also from those like Jose or Heather, or my other colleagues about what we're seeing is little small implementations that are showing success. So some of the data analytics for mobility and how that's able to really begin through the digital twinning of mobile networks and, and train systems of our airline systems actually to say, ah, okay, well maybe that works there.
Chris Luebkeman:
Maybe I could work on our proposals for this project, if we could try something. You know, I think so for me, the key with the buzzword is that our firms are prototyping a little bit and they're having a person or two who they give a freedom. What say one degree of one degree of freedom to try this. So that when the, when the client, the project, the tools are all right, that we're ready and it doesn't take yet another three years of ramping up to figure out what the heck it is. And I think that's, that's my 2 cents on that.
Heather Wishart-Smith:
Yeah. Joe, I can give a couple of very specific applications if you're interested. Yeah, yeah, sure. So starting with digital twins on water treatment and industrial water plants. So we've got a tool called replica that allows us to optimize those systems to prevent overflows in the event of emergency response, do a lot of scenario and what if training? And it also allows us to optimize the design and optimist and operations and maintenance. Another example for data analytics is for NASA at their Langley site in Virginia, we have about 120,000 sensors that are all around that campus. That measure things like vibration temperature, humidity, and we use predictive analytics and machine learning to be able to anticipate when something might break, which then leads to benefits like improved safety. You don't have to send somebody out to just regularly change a fan belt or whatnot improve reliability.
Heather Wishart-Smith:
That is a huge aspect of it. A site like NASA, they really do need to keep their site going and not have these unexpected outages also financial benefits, money money that saved and energy efficiency. And that we've had - we didn't start with 120. We started with, you know, you know, I think it was a few thousand or something like that, but it's been going on for about four years. And it just goes to show that there are a lot of opportunities in the built environment to be able to harness these technologies. I think we probably, you know, as far as specific discussion about artificial intelligence, but when, you know, when you marry that with automated design, we've been able to automate the design of you know, replicate some some very re repetitive sorts of components, say of rail or other things that, that are used quite frequently. But then bringing that and taking the learning again, starting small. So I mentioned starting smaller with Langley, starting smaller with some other things, learn from that and then be able to use it to scale even larger.
Kevin McMahon:
Joe, we have a pretty interesting question following up with what the panel just talked about from the audience. And it's with the ongoing industry evolution of technology is all for the panels of describe and the new graduate backgrounds that are not necessarily all engineering, traditionally related vertical integration of team, perhaps some of those team members being around the world. What impact does the panel see relative to professional engineering licensor requirements? Also coupled with the political issue today of making sure that America stays strong in engineering and doesn't outsource all the talent, like the manufacturing issue that we're well aware of.
Joseph Bates:
Good question. Anybody want to bite that one?
Chris Luebkeman:
So I I'm perhaps not the right person to answer this one. And I put that up front because I'm no longer licensed. So I really probably don't have the right to answer that question. I think what is critical is there, look at what the responsibilities are and who carries the responsibility because to me, a professional engineer in Switzerland, you don't need to have us go through a special, another licensing exam because the education is supposed to prepare you for that. But at the end of the day, it's who carries the responsibility. And what do you want to trust? Do you want to just, you want to trust a degree or do you want to trust actually that someone has proven their capability to make the right decisions. So I think it's that trust and I hope I've given Heather enough time.
Heather Wishart-Smith:
True friend, Chris, thank you. Yeah. Yeah. I think that's a, that is a great point. I am still licensed. But I think it's, yes, it is trust. I think it's important to recognize despite the fact that there are many forces out there in various States trying to diminish the value of the license and great organizations like ACEC, like NSPE had been working hard to show that value. So despite those forces of trying to diminish the value of it at the end of the day, I think we need to remember that technology is a tool. So the tools have evolved. It used to be that professional engineers just worked at the drafting table. Then we shifted to computer aided design, you know, and then we've, we've evolved. We've got, you know, all kinds of different tools, but the technology is just a tool we still need to, as Chris said, trust the people who are applying the tool and that's for the professional engineering, licensure comes in.
Chris Luebkeman:
Good job Heather, thank you.
Joseph Bates:
So in the interest of time, I'm going to go ahead and move on to the next question that we have here. Okay. We could, we could probably have a round table on each one of these questions. This next one. I'd like to direct it at Heather and, and Chris as well, actually. How is, and you all have talked a little bit about this already, so maybe dive a bit more into this, but how will the technology affect the culture and the collaboration environment of engineering firms? You know, we talked a little bit about will, and there was a question about, will it work different places around the world, but in terms of the culture, how is that going to be impacted by technology?
Heather Wishart-Smith:
Yes. Would you like to start, or should I start and give you some time to think...
Chris Luebkeman:
You're on the edge of your seat and ready? So go for it.
Heather Wishart-Smith:
Okay. so we've already talked about that. I think there's going to be - several of us have said that we think that there will be a greater focus on cross disciplinary work. Innovation, pretty much demands it. And we, we can't just complete our work in silos. We need to have these multi-disciplined teams and these multi-disciplined teams, can't just be the disciplines they need to include the business model. So the HR piece, the finance and all the rest, that should be part of the development of new solutions. I think a key way of doing this is, you know, at least in my role is by embracing innovation within the workforce that we have and that's by promoting collaboration.
Heather Wishart-Smith:
So we need to teach people across the business to be able to collaborate, to be able to network so that when that real work does happen, they have that muscle memory of the collaboration of the innovation. And I mean, you know, in our industry, it's so difficult because we're built on a billable hours culture, it's been this way, you know, for eternity. And there's also a performance unit kind of mentality to the engineering industry where you know, it's, whether it doesn't matter how your company is structured, whether you're structured in it by geography or by discipline or by market, there's still silos. And so we need to find ways to promote and, and sustain the breaking down of the silos. Many firms are, are, are structured to promote and sustain them, but we need to find ways to break them down. They're hard to break down. But I really do think that the firms that endure and those that will be successful are the ones that are successful in doing that on breaking down those silos.
Chris Luebkeman:
So I agree with fully Heather and I want to bring up two more aspects. One is cooperation, we are going to be in an increasingly cooperative and competitive environment. And I think many firms already, and many of us already understand how you can compete and still be friends. And this is one of the things I always enjoyed. When I was got to travel, go down to Australia and watch a sort of Australian rugby game or rugby, you know, and people would literally like without pads, try to beat the blank out of each other, but nobody really did anything where they couldn't go have a beer afterwards and they would respect each other from, you know, the grit and their cleverness and how they played the game. But you never played dirty. Cause if you played dirty, you know, you couldn't have that had that beer.
Chris Luebkeman:
And this is something which I would like to hope that we can also aspires - not necessarily Australian rules, rugby. It's a crazy game, all due respect, Mike, it's crazy. But this idea that just because we're competitors does not mean we can't always be good friends and I truly believe we need to work more on the second part. I think we're very good at the first part. So I think so culture is actually a manifestation of both the written and unwritten rules and how one treats each other. And it's the written and the unwritten rules. And part of your question there, Joe is about culture change. So part of the question that has to be, as we look at ourselves and our firms, what is our culture? And do we actually understand what the written and unwritten rules are of our firm? And if you haven't asked yourself that, and not just what you think as a principal, what the culture is and you say, well, our culture is openness and you walk into the office.
Chris Luebkeman:
And as soon as you walk in, everybody puts their head down and they're afraid of you, but you can say it's open, but the reality might be a very different thing. So to actually have a real conversation about the culture that we need in order to be successful in the new economy, in the digital transformation and one and one more thing, Jose, and it's all you said. So for me, the most important thing that we could say with this is, and I support Heather is it's not just a technology, but it's actually having a real conversation about our firm's culture and what we wanted to be slash needed to be.
Jose Luis Blanco:
Yes, just 10 seconds of this. I think that there's clear, there's a very clear link between performance and health, right? Health critical part of that is culture. And I think that over the past three months with COVID, I think we shift towards a working remote environment and we all will be surprised how fast we've been able to adapt to that. Right. but I think that some of the challenges of the issues will culture are going to start to appear in the coming months. And it's my belief that you can sustain. You can potentially sustain our existing, strong cultural, remotely. I don't think you can build the cultural remotely, or you can rebuild a culture remotely. So that's something that firms will need to, you know, when we're talking about what we're hearing about are they working from home, you know, half of my staff working from home and things like that. I think the implications of cultural implications of that I get to be seen, and we just need to pay attention to that.
Kevin McMahon:
With lifelong learning, that a lot of the parents have mentioned, and the ability for more experienced engineers to learn new tools and skills, maybe it's more from Mike's first answer, or are the tools keeping pace with the expectation of learning curve of designers to shorten or eliminate the learning curve to use these tools?
Mike Haley:
No, I wouldn't say they are. I think there's a it's, it's, it's a very, it's a, it's a difficult problem because I don't think it's well understood today. I mean, we, we still live in a world with traditional educational cycles, traditional university college, whatever it may be, get your, get your certification, do that. But those are the cycles we live in. So those are the models we have today. There isn't many models that, that, that, that have this sort of rapid learning world that I referred to for. I mean, some of the only models today are actually newer technology applications. Things you might get on an iPad that people are learning supervised there's there's ideas. There's these hints. I think all over the place as to what these are, I would hesitate to think of a single really, really good example that exists in the world of technology today.
Mike Haley:
I can tell you, in our research group, this is a very large part of our research objective. And it's precisely for this reason is that we don't actually know the right ways to do this. We are doing experiments in our software. We were introducing features that help people understand how they're learning the software, how they compare to others who are learning it, what are their patterns of progression through the software? And as we do this, we are gradually introducing more tools, but we're also learning at the same time. So I'm not quite sure what that looks like yet, but we don't have an option. That's the point though, we have to do this. We have to make this, the nature - tools cannot just be about taking what you do today and automating it away. Tools have to be about making you more effective and making the combination of human and machine better at the end of the day.
Chris Luebkeman:
No, I think that's great. The other thing I think so fascinating, it was Kevin with that question is the micro-learning. And I have two 20 something year olds one's graduated. One's just about to, and you know, they, they do micro-learning if they need to learn how to do something, they take and look on YouTube and they find a little burst on how to do it. And then all of a sudden they know how to do it. And I just, it's hard for me of a different generation to think that way. I'd rather call up Mike and have Mike explain it to me and say, hey, you know, and talk to him. And my son, George would just rather just look at YouTube, look it up. And he actually doesn't care what language it's in, because if it's a tool, he can just watch the strokes. And sometimes he'll look at something in different languages, because it's just interesting to see how someone's designed something slightly differently. It just kind of blows my mind, you know?
Joseph Bates:
So I, again, I just want to keep us moving here. I apologize for cutting off these great conversations. I want to this one's just for Mike, and then we're going to, we're gonna move to the last questions here, but Mike, how, how are people going to pay for this? You know, are certain firms going to have an advantage, the big firms, because they can afford to pay for the technology and the education and the taking the non billable hours to learn it, what's going to happen there and how will the small firms catch up?
Mike Haley:
Right. So, I mean, you know we're seeing a lot of new business models around how people pay for software, right? So, I mean, we've, we've moved to subscription models which make billing more consistent. And over time, we're also seeing the emergence of capacity based models. And, you know, there was a time not too long in the past where there were, there were products and tools that we make at Autodesk that very few firms, unless you are a massive firm could actually afford, you know, you would, you would only use those tools if you're a certain size that doesn't actually make sense in a capacity based world. So if you're paying for capacity, if I'm a small, if I'm a small firm and I need to run say three structural simulations a week, if I pay per structural simulation and don't have to pay an enormous amount of money for the software upfront, then it doesn't matter that I'm a small firm versus a big firms.
Mike Haley:
So I think we were seeing these more flexible models that, of course they relate to the cloud, they relate to those sorts of things. And I think, I think there's an interesting difference between large firms and small firms. I think large firms have an inertia that, that, that they have to overcome, but they also have, they have the capital, they have the assets, they have the money, they have the ability to do some of these things only. So the firms lack what Heather were saying. Firms that have been doing this for awhile, actually have a massive advantage because they are there. They are able to act on it. On the flip side, the small firms are nimble, right? They are flexible. They starting up. In fact, their secret sauce will be adopting these very kinds of technologies that we're talking about right now, data in the cloud work from anywhere, flexible learning, bring the data together. Use, use generative design, use, use digital twins, use insights, use these things. And those will be the folks that will win better. But I do believe in the sort of flexible business models that allow everybody to leverage all of the technology.
Joseph Bates:
Okay, great. So I'm going to ask the final question for each of you, and then we may have time for a couple of questions. Kevin Jose, I want to start out with you. I know you have to log off just a couple of minutes before the rest of us. So the big final question is what is, what is the firm of 2040 look like? You know, put you put on your thinking, cap, your wizardry, whatever you want to call it, your crystal ball. What is the firm of 2040 look like Jose? He might be gone. Oh. Did we already lose them? Okay, well sorry about that. I thought we were going to have him for another five minutes, but so let's just go ahead and throw that one over to Heather.
Heather Wishart-Smith:
Sure. So I think that we're going to see very few of the traditional A & E's in place. I think that line between technology and design it's, it's already been blurred. I think it will become increasingly blurred. Some examples. We all know about Sidewalk Labs and their smart city project in Toronto. And, you know, yes, I know it's, you know, that project has been terminated, but it they're going to come back in a different city with a different model, with more privacy controls and all the we've seen it with Elon Musk, the Boring Company, and Hyperloop pretty much with no past performance, they've won large scale tunneling projects. You see it with tech companies with autonomous vehicles. Just what was it two weeks ago with space spaceX just launched America's first private company to do so here in America. So that line is really becoming increasingly blurred.
Heather Wishart-Smith:
So it's really going to result in the increase in the skill set of firms. So tech companies, I think, are going to start acquiring more traditional skill sets, maybe by buying some of these more traditional A & E companies, especially as the owners age out and traditional companies are going to be acquiring the tech skills. That's maybe not as much through acquisition, but through training, by hiring different people. It's funny at Chris, I love your term of coopertition in, I have a colleague at Jacobs who refers to it as competitive-ates. These are where sometimes you compete and sometimes you collaborate together. Taking what Chris said earlier a little bit further. I always try to remember that today's competitor could be tomorrow's client because this is such a small industry. We all have competitors who have since become a clients but, you know, with these competitive-ates, cooper-ates competition, it's really about collaborating together to address these new market opportunities because alone, we're probably not going to be able to get there. So it comes back to your behavior, your home, we talked about earlier, your mindset, not being risk averse, being open to new ideas. And if you want to endure, do not get too comfortable in your silo.
Joseph Bates:
Great. It looks like we have Jose back Jose. I wanted to ask you before you have to jump off, what does the firm of 2040 look like?
Jose Luis Blanco:
Well just kinda like very, very interesting question. I mean, I wish I had a crystal ball to actually explain all that, but I think that, I think in my mind, if I just summarize what I see the firm of 2044 as like having a very different demographics in terms of like the roles that we have and have been there for 34 years I'm very doubtful that we're going to be there. Right? [inaudible] The projects that we have right now, many different type type of led professions in there and professions that don't even exist as of today. Right. I expect us probably hopefully it'd be again, probably much more remote, but also with some sort of physical presence because in the end physical presence, local presence, because in the end, I think that the work that we do is not only even the built environment is an enabler for many of the things and we need to listen locally to be able to deliver globally.
Jose Luis Blanco:
Right. So that's something that also, I think the firm needs to have. And I hopefully I hopefully like you by 2040 as is like in a few years time, which is time you know, infrastructure and the brother engineering space is being seen as a critical part of how people, you know, how will you enable how people live, work and play. So hopefully we will see engineering to be playing even a more integral part in people's lives than it even paying today. So maybe I'm being too optimistic, but those are the things that I would personally see. I see all these revolutions that are happening is also like almost like an opportunity to put the engineers back at the center of so many different things that we can do to improve our society going forward. So again, maybe I'm a little bit of like an optimistic, maybe I'm just like a little bit optimistic, but those are some of the things that I would expect to see in digging the farmer to 40, like diversity from backgrounds, diversity in terms of likely for him elements being much more at the core of how we work, play and live. And and those are some of the traits that I expect.
Joseph Bates:
Great. Thanks Jose. Mike, what about you? And then we're going to add, go to Chris.
Mike Haley:
So I, since we're a group of optimists here, so I'm, I'm I'm an optimist as well. When for me, a lot of it comes back to the competition thing that Heather and Chris have both talked about, but looking at it at a knowledge level I think there's an enormous amount of knowledge that exists across the engineering architect of the entire building industry that is mostly common, but it's not always shared or is really shared. And I think by 2040, I see there being a strata of, of knowledge be a digitally represented, hopefully that is then is available to everyone. It, again, I used the term, you know, raising the sea, raising all boats, right? All boats are naturally floating at a higher level, which allows the competition then to actually happen at a higher level. The difference between firms is no longer at this lower level that everybody is benefiting from the shared observations, perhaps it's the performance of certain buildings or performance of certain decisions or materials or processes or whatever it is. So I really do see a more collaborative world centered around knowledge sharing.
Chris Luebkeman:
So for me, well, the first thing that I do whenever I asked a question like that, Joe, is I think of, I go 20 years back. So if we go back to two year, 2000 and think, where are we as a practice, as a world, they're all freaking out because we thought our computers were going to blow up, right? And the world was a, I would argue a very, very different place 20 years ago. So I'll then go forward and think 20 years, what's the context going to be of the firm 20 years from now. And so we will have massive water stress globally. We're already seeing that in the United States, North America. So we will see mass migration. We're going to have a political stress due to migration, which we have not in our lifetimes yet even begun to experience.
Chris Luebkeman:
And so therefore we're going to be called upon to solve problems, which are not just technical, but have a social dimension in a way which is quite profound. And I'm not quite sure if we're going to be up for the, up for that yet right now, the firms aren't. But I think by then we will be, I think there by 2040, we are always going to be designing and full artificial reality. And we'll be using virtual reality in construction sites as an absolute norm. It's gonna be like, duh, can you believe that we actually did this once without it just in the same way. Now we can hardly imagine using a slide rule, which I think I was the last class at Cornell to actually use, you know, and I think, and so this is going to be a new, so let's means then if you're doing in VR/AR or that means you don't have to be co located in any way, shape or form.
Chris Luebkeman:
So all of us can be in a design meeting right now and actually really interacting with haptics so we can push and pull and really feel that I think by 2040, we will have climate legislation, which has been a long time coming, which will then have a different paradigm shift on how we, and what we designed to. So the makeup of our firms will also be very different and what's going to be needed in order to, for us to design for things which will be fit for purpose because the purpose will be not just engineering specification. And I think that's so, and then if I think about economically, we will have gone through two recessions. We're about to hit one and we will at least go through another two within 20 years. And I think we'll go through to identity crises as a profession. We're kind of in one right now, we're doing, what's our role.
Chris Luebkeman:
I think we'll go through a couple more as these new tools and these new challenges come. And so, and the last one, I'll say, no, politically there will be a new ballgame. There'll be a new empire, not quite sure which one will rise stronger, but you know, our rocket is kind of kicking over. We've seen peak Americas. And so, and then the question becomes, what will it look like in this new environment for consultants that we already have a lack of sand. We have a lack of, you know, so it's gonna be very interesting in how we design in a constrained physically constrained world. So these are gonna be new challenges, which I think is super exciting for us. And we have to be walk into this with our head up, right? Not looking backwards, but to walk with that with our head up and shoulders back saying, okay, it's, it's a new, it's a new game. It's a new quarter. Let's get the team out there and let's play ball.
Joseph Bates:
Great. Great, Chris, thanks for closing this out there. Daphne, I'm going to throw it back to you for a few final comments.
Daphne Bryant :
Thank you everyone for joining us. Thank you to our panelists for all your wonderful insights to our donors for making this session possible. We do have a short evaluation that we will send you this afternoon. So please share your experience with us and be sure to join us next week for our second session, the buildings we live and work in, that'll be on June 25th at 3:00 PM. Eastern. Thank you. Have a great afternoon and please stay safe.

Exploring ACEC's Pathways to Executive Leadership

Geordie Aitken and Rod Hoffman, the faculty of ACEC's Pathways to Executive Leadership program, stopped by the show to discuss the importance of giving mid-level engineering executives the tools necessary to succeed in the C-Suite.  More information about the Pathways program can be found here.

Are We Turning the Corner in the Economy? We Ask Richard Branch

Back by popular demand, Engineering Influence welcomes the Chief Economist with Dodge Data and Analytics, Richard Branch, to discuss the economic outlook for the nation and the engineering industry.  
Transcript:
Host:
Welcome to another edition of Engineering Influence, a podcast from the American Council of Engineering Companies. Today. We're very pleased to welcome back to the program Richard Branch, Chief Economist with Dodge Data and Analytics to talk about the economy. Richard was on last month, and it was a very popular show talking about the macroeconomic situation in America, and given the fact that we're into June, and it seems like every month seems to be a different year in 2020, we wanted to have him back on. Richard, thank you again for coming back on the show.
Richard Branch :
A pleasure to be here. Thanks again. It was great to hear that people found hearing from an economist and in this day and age a positive thing. So, so that's certainly a good news.
Host:
Yeah, it's not exactly the dismal science anymore this time. More people want to know what's happening and I really want to start out the conversation because, you know, we're recording this on Friday, the 5th of June and today, the Labor Department came out with some surprising numbers. They found that the unemployment rate actually decreased a slight bit. We actually had job creation of 2.5 million jobs in May, which outperformed a recent survey by economists at Dow Jones who actually anticipated a drop in employment by 8.3 million jobs. So we have a 13.3% not wonderful unemployment rate, but it's better than we expected. Then we have other news, the airlines are starting to expand capacity. The theme parks in Florida, for example, Universal is opening. Disney's going to be opening. It seems like we're turning a corner. Is that, is that too much wishful thinking or what are you seeing right now?
Richard Branch :
Okay. I think when we look back on this crisis, May will have turned out to be the low point. And I think today's numbers are just an indication that we're now in the recovery phase. It happened a little bit earlier than we had anticipated. We had figured that job creation would start again in June. But as you mentioned, the main numbers coming in at plus 2.5 million, a huge upside surprise, and as state and local areas continue to reopen and loosen those rules on, on business activity and whatnot hiring we'll certainly keep moving forward. But not to be a wet blanket on today's number. But you know, between March and April, we lost well over 21 million jobs. So today's addition, certainly a positive step, particularly in the construction industry, the construction industry added back 464,000 jobs this morning following a million job loss in April. So you know, that that recovery though is going to be a very long and slow process and it just fraught with pitfalls. You know, the easy lifting will come first with, with those huge negative numbers in April that the big changes will come early. But once we get we continue to think that once we get into the back half of this year, that that growth will continue to move forward, but at a pretty slow pace.
Host:
Yeah. And it's interesting because we just recently launched a research Institute, which was a separate arm of ACEC, and they've been doing some business impact surveys since really the beginning of the COVID-19 pandemic....tracking different indicators. And our most recent survey came back end of last week. And it showed that one fourth of our firms that were surveyed roughly 22% of respondents reported having business areas that are outperforming now, which is a significant increase from April. And they've seen some growth in the COVID-19 area of business, healthcare and the like, it seems like it's turning that corner. But as you mentioned, you know, at large recovering from this is not going to be an overnight kind of thing. It's gonna be a building process. Do you think that it's extending know a little bit further into 2021? Or do you think that we might be able to see a little bit of a, you know, recouping some of our losses before the end of the calendar year?
Richard Branch :
I think overall for the economy I think obviously the economy will contract this year. You know, we're still looking at a potentially 20 plus percent decline in GDP in the second quarter. That will be difficult to make up in the second half of the year. In terms of employment, you know, it's probably not going to be until mid to late 21 or possibly into early 20, 22, when we start seeing all the jobs that we've lost in March and April added back. In terms of construction, I think it's, it's, it's a mixed bag. I think there will be some sectors that will absolutely outperform and surprise on the upside and, and potentially getting back to by the end of the year, getting back to levels that we've seen prior to the crisis. But, you know, I continue to think that this will be, you know, one of the big questions is, is what's the shape of recovery, you know, and it's what letter of the alphabet are you going to choose to define that shape? The L the w the V a I think a V shape recovery here, even with today's job numbers is still asking a lot. I think that's, that's a big uptick,
Host:
Maybe a W....
Richard Branch :
Could be potentially a w - the one that I've heard recently that I enjoyed was the Nike swoosh.
Richard Branch :
That, you know, the slope would be fairly sharp on the upside, you know, where we are now adding those jobs back quickly, but, but then as time goes on, that curve starts to flat now, and all of this is of course pending any future fiscal stimulus. So in our forecast, we we've included no future fiscal stimulus programs, even though they're likely to come. It, it just, you know, we need to see something that has a pretty good chance of passing through the House, the Senate and, and receiving presidential approval. So should there be fiscal stimulus, you know, a phase four phase five of five, six, that could certainly alter that trajectory in that shape of recovery, but barring fiscal stimulus, further fiscal stimulus that, that recovery in the second half of the year will be slow.
Host:
And I think that what you just said kind of reflects the thinking of our membership, because one of the questions that we asked in that survey was essentially, you know, what sector do you think is going to recover first? And it was really a, it was a split decision. I mean, there there's, there's no agreement on whether the private sector, the public sector, when it, when it comes to engineering, design, construction is going to recover. You know, we had essentially... yeah, roughly, you know, it was kind of 50 50. Is there anything in, in, in your research that would indicate one sector recovering earlier than the other? Does it, is it still too early to tell? I know that, you know, Congress has something to say about this, about exactly what's going to be in that next if we do have one phase four stimulus you know, what are your thoughts on, on who's going to get there first?
Richard Branch :
I think it's, that's a very nuanced conversation because I don't think it's broad based that public will do better than private or private will do better than public over the next several months. I do think that certain areas of private construction have the ability to bounce back quicker than others. You know, single fam is certainly outperforming expectations warehouse construction especially those big eCommerce fulfillment sites, I think have a potential significant upside data centers, but other sides of public or private construction, or are going to suffer. Retail. Hotels. And then even the office sector, the speculative side of the office sector, it seems the trend now that we're a month or two into this crisis the trend towards working from home seems to be continuing in terms of, you know, I just within the past couple weeks, Facebook and Twitter have essentially announced plans that they're going to incentivize workers to stay at home..
Host:
And Facebook is going to index salary to the areas where the people live. Exactly. Which is even more interesting because, you know, then that way that'll keep some people in those higher - those more expensive areas. Yeah. I guess this is the kind of thing that's going to be fueling academic papers for a while.
Richard Branch :
Yes.
Host:
I, I doubt that there was a handle and, and, and, and on exactly how much of an impact and how lasting an impact the shift to remote work and just the way that people are going to be interacting with the built environment. It's really hard to write policy now for something that we just don't know what the impacts are going to be. And I would imagine from the, financial analytical side, and then also from just the economic side, it's hard to get a handle on exactly what that impact's going to be long term.
Richard Branch :
Absolutely. You know, that the office market has gone through such undulations over time. You know, from, from everybody back in the old days, you know, everybody having their own office too, be more open space environments and, and the beginning of the gig economy and people working from home more and telecommuting and whatnot to now this, I think, well, that is a potential downside. I do think there's, there's some upside there as well in terms of design elements and improving office design and air circulation and air handling and whatnot. So you know, I think even in that downturn, or even in that systemic shift in an office market, I still think there is incredible potential there for construction.
Host:
For the industry right now, you know, Congress is in the midst of handling a number of issues, but one of the things that continues to move at least in the Senate and now in the house, cause this week Chairman DeFazio released his concept - his surface transportation bill and any set a date, he said, July is when he wants to have a floor vote, which would be very wishful. You know, fast-tracked kind of wishful thinking because you're just given schedule, but how important would getting a surface bill, a longterm surface bill be to the industry you know, what kind of impact do you think that would, would have either speculative just kind of injecting some confidence back into the economy and then just the real dollars and cents project work.
Richard Branch :
It's critical. It provides not only the clarity to state and local areas in terms of future funding, but of course there's just a huge positive force in terms of injecting dollars into the system. I was just this morning reading a report that ARTBA but put out the American Road and Transportation Builders Association, and their research found that in fiscal year 2018, they estimate that States were able to take 30 point $8 billion in federal highway funding and translate that into $66 billion in actual highway improvements.
Richard Branch :
So taking some federal money, lumping it with the States. And so there's a huge multiplier there. So that might be limited in the cycle, just with the pressure that state and local areas are feeling in terms of revenues and whatnot in this crisis. But it just goes to show that that getting that low hanging fruit of the reauthorization of the FAST Act through as quickly as possible is a necessity yeah. In terms of the construction industry.
Host:
Yeah. And as we mentioned yet, I think last time we kind of talked about the whole concept of shovel ready and, and how that, you know, the approach - It appears the Congress is taking now what you know is more thoughtful and longterm than looking at the immediate payoff of saying, okay, well, we're going to put X amount of money of stimulus and we're going to create, you know, these immediate jobs. The longterm infrastructure investment would create that sustained job growth and kind of extend that multiplier. And, you know, I guess for any of the policy people out there who listen to our podcast, we try to get them to listen by sending it to them as much as possible, what message would you give to them as they put together kind of a proposal for a longterm infrastructure bill?
Richard Branch :
Think big. This is not a time in our opinion to quibble over dollars and cents even with today's job numbers, even with the positive trend in initial claims you know, this is, this is a time to, to dig in with the construction industry and get projects moving. And you know, there, there will be issues of course, over the longer terms in terms of debt and whatnot with the U S economy, but people are out of work. The construction industry is, is a great litmus to get that economy moving again, especially as state and local areas that are suffering and, and so think big and get it done sooner rather than later.
Host:
Absolutely. Well, is there anything else going on from your world, from your perspective that, that are listeners should know about now? Or is it, is it just kind of pay attention to the news and keep abreast on what's what's going on?
Richard Branch :
Sure. Well, I think when we spoke last and I can't recall if we had released our April construction starts data yeah. At that point. But our April data for construction activity was as suspected. It was pretty weak in total construction starts, fell close to 25% from March to April, it does look like as we look at the May data and we're still cycling through that, the quality control aspect of it. But it does look like the May data we'll show a slight increase in nonresidential building construction activity from April to May. So again, another sign that the potential that the bottom of this cycle was probably in May, and just this morning, we released our leading indicator of construction, the Dodge Momentum Index, which was essentially flat compared to April. So these are projects when they first enter the very earliest stages of planning for nonresidential building. It was essentially flat in mid April. So I'll take that as a good sign. You know, back in the recession, the Great Recession, I guess we have to call it just to differentiate it. Back in the Great Recession, the DMI fell sharply and over a long period of time. Yeah. So far over the last couple of months, the DMI is only down by about 10 or 12%.
Richard Branch :
So it shows us that there are still a lot of projects early in the pipeline for a nonresidential building. So again, a positive note that as the economy starts to reopen and as rules on construction are relaxed that there are a lot of projects in the pipeline ready to move forward.
Host:
Yeah. And that's good. And that, again, for any of our members listening for anyone listening, you can access those indices and the reports at construction.com and the really good detailed information to have if you're a business leader or you're someone interested in the sector the data that you have up on that site and that Dodge produces is extremely useful. So I encourage people to go and check that out.
Host:
Well, I do appreciate you coming back on the show, Richard, because it's always good to do a, do a check in, especially when you see all these, you know, these numbers flying around and you get an unexpected jobs figures in the midst of a pandemic and everything else going on to kind of get an update and see where things are. And I do hope to have you on again, in a couple of in a couple of weeks to see if anything's changed.
Richard Branch :
You're right. This, this was after so many months of, of talking to our clients and the press and, and about bad news. It's good to finally see a little bit of a light at the end of the tunnel. So always happy to be here and a pleasure talking to you. And I hope you stay safe and healthy.
Host:
You as well, stay safe, stay healthy. And again, thank you. That's Richard Branch, he's the Chief Economist for Dodge Data and Analytics - www.construction.com is where to find him. And this has been Engineering Influence from ACEC.