Deltek Clarity A&E Industry Study: Get the Latest Industry Trends and Benchmarks

It’s essential to stay up-to-date on the state of the industry, especially when planning for your firm’s future. Whether you are looking to invest in an innovative solution, improve firm profitability or revisit staffing needs, understanding current industry challenges and trends will help set your architecture and engineering (A&E) firm up for success.

This week, Deltek launched its 44th Annual Deltek Clarity Architecture and Engineering Industry Study for the United States and Canada. Deltek conducts an annual survey of firms in the A&E industry to identify benchmarks on key performance indicators, gain perspective on current market conditions and better understand industry trends. This year’s results include responses from 583 firms representing a broad section of small, medium and large firms.

Each year A&E firms face a changing landscape and are looking for ways to better understand where the industry is heading and how to help their firm succeed. The Deltek Clarity A&E Industry Study helps firm leaders compare where they are today with other firms like them in the industry and provides insight into how firms can drive their business forward through technology.

What’s Happening in the A&E Industry Today?

Firms had a very strong year financially with record operating profits and net labor multipliers and are projecting another strong year. Firms are continuing to be selective in the projects they choose to pursue to balance rising costs, resource constraints and profitability. Firm leaders are also shifting the focus away from solely recruiting to upskilling and retaining current staff. To address some challenges with people and processes, firms are looking to technology to automate, streamline and alleviate frustration for teams.

HERE ARE A FEW KEY TAKEAWAYS FROM THIS YEAR’S REPORTS:

• Firms are projecting a 10.2% growth in net revenue for 2023, which is down from a 17.6% high from last year
• Employee turnover levels remained consistent year-over-year at 13.7%
• 53% of firms see project management as a key area of investment in the next 12 months
• 68% of firms see data and cybersecurity as one of the top three IT operations challenges

Firms are More Optimistic About Their Progress in Achieving Digital Maturity

There are positive signs for digital maturity across the industry. Last year, only 15% of firms indicated they were advanced or mature in their digital transformation maturity and this year, that number has more than doubled. What’s even more encouraging is that 82% of firms expect to be in a stage of advanced or mature in the next five years, up from 69% only a year ago. Firms aren’t just stating optimism. There appears to be a more concerted effort to make progress in digital maturity based on other findings.

Firms expressed a desire to undertake more strategic technological improvements in high-impact operational areas such as project management and financial management. Sixty four percent of firms list creating a strategic plan for implementing tech trends as the number one initiative followed by 53% who report educating staff on technology trends.

Firms are also considering offering technology services to generate revenue. Nearly one quarter (23%) of respondents in this year’s survey indicated that their firms are already engaged in the space or have services to address these needs already underway.

Firms Experienced an Incredibly Successful Financial Year

Overall, firms had a financially strong year. Revenue KPIs were up, outpacing cost increases. As firms continue to face economic challenges, labor cost increases and an overall increase in cost of doing business, strong backlogs and project execution are making it a little easier to protect margins. Firms saw not only decade-high numbers for operating profit and net revenue, but also saw strong utilization rates. It wasn’t just about more hours though. This year’s results show more fixed price contracts, more subconsultants and additional revenue streams like technology consulting services coupled with overall business process improvement that has put firms in a successful position. Despite high margins, firms must strengthen internal resources to balance out staffing challenges as labor costs continue to rise.

Forecasts Remain Strong Across Most Markets

Looking forward, A&E firms remain optimistic across most markets with firms expecting their work to remain steady or increase across public and private markets. But, staffing constraints will continue to require firms to be strategic and intentional about the opportunities they pursue. Project delivery will need to be closely monitored to ensure that teams can deliver on projects in the pipeline if current project timelines shift.

Additionally, reported win rate remained strong, but firms saw an overall decline in the number of proposals submitted, signaling either more selectivity or a potential slowing of opportunities. The 2023 outlook is still positive with a net revenue growth forecast of 10.2%, which is a notable double-digit growth over a strong previous year.

Staffing Shortages and Schedules Top Project Management Challenges

More projects were on track for schedule and budget this year, however, firms continue to struggle with staffing shortages and competing priorities that have a material impact on project performance, especially with many inexperienced project managers (PMs) stepping in to lead projects. Firms are continuing to report a lack of visibility into key project performance metrics making it challenging to monitor projects in real time.

Challenges managing project schedules was a common theme this year. Projects on or ahead of schedule is on a multi-year decline, PMs don’t have the visibility they need into schedule variance and many firms aren’t tracking schedule-related key performance indicators.

Firms Shifting Focus to Upskilling and Career Planning

Staff growth doubled year over year, but staffing still remains a challenge for many, with most firms reporting about the same or more open positions in 2022.

With employee turnover still high but stabilizing, nearly every firm is facing challenges with candidates in the talent pool. Many firms are shifting their focus from solely recruiting to their current staff. Nurturing and developing existing talent may help firms lower their attrition, but also improve their overall reputation in the market and be seen as a place professionals want to work. Upskilling, cross-training and intentional career planning will best position firms to capitalize on growth and show employees that the firm has a vested interest in them as an individual.

Better Visibility and Collaboration Lead to Better Decisions

Architecture and engineering firms continue to be confident in the outlook for the industry, but challenges presented in an uncertain economy demand focus for firms of all sizes. There is always room for improvement to help their firms be more competitive, more attractive to retain employees and more profitable.

The 44th Annual Deltek Clarity A&E Industy Study can help firms identify areas where firms need to take a closer look at their business, have more open conversations about business challenges and identify what success looks like for firms of similar size or type. The benchmarks and industry insights in the Deltek Clarity A&E Industry Study can drive better collaboration across the business and identify where tools or technology can help improve business performance.

At Deltek, we are more than just a software provider, we are a trusted partner with industry-leading solutions designed to help companies understand how they can bring more clarity to their business and reach the next level of excellence. Let Deltek help you get to your future state through technology, business process automation and industry best practices.