Ask a principal at a mid-sized architecture and engineering (A&E) firm how business is going, and you'll likely hear some version of "busy, but complicated." The pipeline looks okay. The team is stretched. Margins are tighter. And somewhere underneath it all is a sense that the usual levers aren't pulling the same way they used to.
The 47th Annual Deltek Clarity A&E Industry Study puts a number on what many principals are already sensing. Backlogs softened from recent highs, and operating profit pulled back from a 10-year high. Labor costs are rising faster than firms can absorb, and firms submitted 32% more proposals while win rates declined. Busy and healthy aren't the same thing right now.
In a recent episode of the Deltek Podcast, Megan Miller, Sr. Director and A&E Industry Insights Lead and the driving force behind this year’s report, sat down with three colleagues who have each worked inside the A&E industry: Bret Tushaus, VP of Product & Technology; Dawn Gajewski, Sr. Director of Product Management; and Linda Dininger, Sr. Product Marketing Manager.
Here are five things every A&E leader should take away.
#1: Margin Protection Is a Connection Problem Before It's a Technology Problem
The firms managing today's pressures well aren't necessarily bigger or better resourced. They're running on a connected view of their business, where business development (BD), project financials, resource capacity, and delivery performance all live in the same picture. During the podcast Bret Tushaus shared, “When those four things live in four disconnected places, write-downs and write-offs stop being surprises; they become discoveries you make too late.”
Why It Matters: When your BD team, project managers, and finance team are working from different data sources on different timelines, the firm is always making decisions with a lag. In a market where margins are already compressing, a 30-day lag on a project trending over budget isn't a process problem. It's a profitability problem.
In Practice: Before investing in new tools, identify your integration gaps. Where there are manual processes serving as the connective tissue between systems? That's your highest-risk single point of failure and your best first investment.
#2: Most Firms Are Managing Projects Through the Rearview Mirror
During the episode, Dawn described something she watched play out repeatedly inside A&E firms, “Project managers don't find out a project is in trouble until invoice time, month-end close, or when a client starts calling. By then, the damage is done. The root cause isn't capability. It's structure. Architects and engineers become PMs because they're skilled at their craft, not because they were trained in project financials. When firms give PMs the right tools and hold consistent, data-driven project conversations, the behavior changes. They stop reacting and start anticipating.”
Why It Matters: According to this year’s study, utilization of labor costs for billable work declined to just under 60%. That decline isn't because firms have excess capacity. It's because a growing share of time is going to coordination and administration that doesn't get invoiced. Every point of utilization recovered through better project visibility goes directly to the bottom line.
In Practice: Start with a simple plan for every project: work, budget, schedule, fee. Make project reviews a regular cadence, not an exception. You don't need a significant investment in technology to start. You need the discipline to plan and monitor consistently.
#3: Business Development Is Scaling Volume. It Also Needs to Scale Judgment.
Clarity data also showed that firms submitted 32% more proposals this year while win rates declined. Activity is up, but selectivity hasn't kept pace. Bret described what the firms gaining share are doing, “Using AI as a capacity multiplier, not just a productivity tool. A four-person BD team can now pre-qualify more opportunities and produce more tailored proposals than was previously practical for a small team. That's a durable competitive advantage.”
But Linda added important context, “You can't grow a pipeline you can't deliver. When technical leads are already stretched, and a firm keeps pursuing every opportunity, the risk isn't just a missed deadline. It's burning out the people who hold client relationships and institutional knowledge, the ones who are hardest to replace.”
Why It Matters: Win rate is a lagging indicator. By the time declining win rates show up in the data, the underlying damage: overextended staff, rushed proposals, misaligned pursuits, it’s too late. Firms with the strongest win rates are making smarter go/no-go decisions earlier, not submitting more and expecting a better outcome.
In Practice: Build your go/no-go process to answer two questions, not one. Not just "can we win this?" but "do we have the capacity to deliver it profitably?" The second question protects your people and your margins.
#4: AI Adoption Is Broad. Measurable Impact Is Narrow. The Gap Is Fixable.
This year’s report cited, 78% of A&E firms are using generative AI, up from 64% last year. While only 38% of firms report measurable positive business impact. Bret's assessment, “It's not a technology problem. It's an operating model decision. Firms getting results aren't using more AI tools. They're using fewer, with more intent. They identify specific workflows to improve rather than features to explore. They've invested in clean, connected data. And they measure outcomes.”
Why It Matters: AI on top of disconnected, inconsistent data doesn't produce better outcomes. It produces faster wrong ones. The firms in the 38% got there by making deliberate decisions about which problems were worth solving and building the data foundation to support it.
In Practice: Begin with AI use cases that work with data you already have, including automated project summaries, budget anomaly detection, and document analysis on specs and contracts.
#5: Talent Is Still the Single Greatest Risk & It Starts Earlier Than Most Firms Think
Staff growth slowed to 1.2% year over year, down from 2.9% in last year’s Clarity report. Turnover reached 13.8%, returning to the higher end of its historical range. The average time to fill an open position sits at 46 days. Individually, those numbers are manageable. Stacked on top of rising labor costs, shrinking margins, and project managers already carrying more than their roles were designed to hold, they describe a compounding challenge.
Linda noted, “The most important signal in the data isn't the industry average. It's the gap between high-performing firms and everyone else. High performers run lower turnover, which means experienced PMs stay on the job, client relationships stay intact, and there's less disruption when someone does leave.”
Why It Matters: With an average of 46 days to fill an open position, every unexpected departure creates a revenue gap, a delivery risk, and a client relationship under stress simultaneously. Retention isn't a culture initiative. For A&E firms, it's a financial strategy.
In Practice: Treat people capacity the same way you treat your BD pipeline. Map who your key delivery people are, what would happen if they left, and what you're doing today to keep them engaged. The firms growing consistently have made this a leadership responsibility, not an HR task.
Deltek Clarity A&E Industry Study
Proprietary Insights for Project-Based Businesses
The firms pulling ahead right now aren't doing more things. They're doing the right things with more visibility, more discipline, and more intention. That requires project managers who can anticipate problems before they surface, BD teams that know which pursuits to walk away from, AI connected to clean and reliable data, and sustained investment in the people who make all of it work.
The 47th Annual Deltek Clarity A&E Industry Study is designed to show you where your firm stands relative to the peers already operating that way.
