Low Margin - High Liability Business 1

[howardoark]

I have to give a presentation to the management of my company (we're in the 4500 person range) on geotechnical engineering. We're mainly an environmental firm, but we have around 60 geotechnical engineers. Of the geotechnical engineers, 20 do straight geotechnical engineering (everything from giant USACE projects to designing foundations for houses) and 40 do "GeoEnvironmental Engineering" - soft sediments, slurry walls, excavations, et cetera.

No one in the environmental business believes that the gravey train is going to continue forever (in fact, it's been pretty gloomy for 10 years), but margins are still pretty high in the environmental business. The general feeling in the company's management is that geotechnical engineering is a low-margin, high liability business to be in.

I don't necessarily agree with that, but I don't have any evidence that isn't an accurate depiction. I see that the environmental engineers generally have higher billing rates than I do and I imagine they get sued less. But the US needs $300 to $400 billion in infrastructure work every year and it really doesn't "need" any more environmental cleanup (by that, I mean that spending $100,000,000 to clean up 30 acres in the middle of no where that will still be polluted in 200 years after the money's spent and which has an economic value of $0.50 isn't really something we need).

What is the general sense out there regarding our low-margin, high-liability avocation?

Thanks

 

[lovethecold]

I probably haven't been around long enough to comment, but these are my thoughts on the issue. It seems that some geotechnical engineers take on too much risk without the testing and data to back up their assumptions and recommendations. Where I work, if a customer wants borings done that we disagree with, we will reject them out of hand and walk away; there are others who would gladly take on that work. Sometimes the customer comes back and says "oh" and lets us do the work to our satisfaction, sometimes not.

The company I work for has been in court only once, and never sued in over 30 years. It is mid range in size as geotech companies go. But my bosses are generally good about speaking up when things don't look right. But at the same time not terribly affriad to take on some risk, with the appropriate information to take on such risks. Geotechnical engineering definately seems to be a risk/reward business.

I would probably agree that the margins are less than that for environmental work. And environmental engineers definately seem to get paid quite a bit better.

 

[civilperson]

Geotechs use enormous safety factors to compensate for the unknowns they leave undiscovered. The price of foundations could be shrunk 20-40% with more discovery, such as being on hand during excavation to see every type of soil encountered. The increase in fees necessary to allow the cost effective foundations to be built would still result in overall savings if no catastrophic results were found.

 

[msucog]

i wouldn't say "enormous"...perhaps "safety factors in line with the potential unknowns" is more correct. the more you know, the more refined the model you can generate and higher confidence you can have in the evaluations.

the industry as a whole is plagued with firms that prostitute themselves for the sake of quantity and not quality. it's low margin because of these firms. high risk is usually associated more with the people you work for than the actual work itself. if you use good engineering judgement, carefully pick the clients you work for, keep that client's interests in mind, and keep your focus on providing a good quality (and honest) end product then the risk will diminish (at least to some extent). however, you must always be on the lookout for the rats that want you to take their liabilities (whether taking that liability intentionally or not).

 

[BigH]

To the "dig" that geotechs use enormous safety factors, one must remember that in dealing with soil - even with good information - the coefficient of variation of soil properties is typically 15 to 35% - i.e., the ratio standard deviation to average is 0.15 to 0.3. This is enormous compared to that of steel and concrete, eh? Yet look at the failures that the civils have - "Cave-on Foods" from Vancouver comes to mind. The I-35 bridge, etc. I think that there is a lot more savings to be gleaned from the superstructure than in pouring a few extra cubic metres of concrete for foundations.
The good firms develop and educate their clients - in order to achieve a mutual understanding of risks and rewards. Good for LovetheCold's company. It is similar to the experience I had with the company I worked with in the 70s and 80s.

 

[civilperson]

The variability of the soil parameters would be a good argument if the average was used. The geotechs of my experience use the worst set of values to base their design on.

 

[msucog]

civilperson, with soil, you can bet your paycheck that no matter what the "worst" soil you find is, there's is something worse that you did not find. i have never seen a geotech use the "worst" set of values unless there was only very limited information. most use something on the order of about 2/3's in the range. a few even go way in the opposite direction...they also happen to be the ones that are typically tied up with buildings cracking and things failing a regular basis. even with using slightly conservative numbers, i've still seen things go back because mother nature gets an attitude at times and throws you a curve ball that no one expected.

soils are by far the complicated (and least understood) material in all of construction.

 

[Ron]

Back to the question...

One very important reason to maintain a geotechnical presence is the follow-on with a variety of other services, including environmental. It has a lot to do with overall client service and the need to maintain a technical presence on projects that does not require that the client engage numerous factions to create fingerpointing and liability avoidance instead of solving the client's problems.

Yes, there have been arguments for at least the past 20 years that geotechnical engineering is dying or flat at the least. It is no "flatter" than any other discipline with respect to projects. The geotechnical engineer has a part to play in each structure, just as the structural, mechanical, electrical and others. Promote professionalism, interaction, and project-duration involvement, not division of responsibility among firms.

 

[DRC1]

If you want get into some real low margin high risk, try pile driving.
Seriously, I think a lot will hinge in the US on November. Our commitment to infrastructure has been poor to none over the last decade. I belive that roads bridges water sewers airports utilities are deteriorating rapidly now and will at some point in the near future need to be addressed in a large rebuilding program. At that point it will be up to the geotechs to get us out of the ground. How soon it will happen is hard to say, but when it does there will be a large demand for traditional foundation engineering, and the bucks to get it. My advise is to keep a couple oars in the water and join with ASCE, ARTBA and other groups advocating the need to renew our infrastructure.

 

[Doc08]

There were two main points raised in this forum:

1. return on the geotechnical engineering business versus the risk taken

2. relatively high safety factors taken by geotechnical engineers.

After nearly 27 years in this business, I can vouch that for the most part that geotechnical engineering has not been as appreciated say as structural engineering. Financially, we're making money but comparing with structural or environmental, it is definitely not the same and considering that geotechnical engineering still rely largely on experience backed by scientific knowledge, I would say the risk factor is higher for us whereas structural engineering is a more defined science. Furthermore, it seems that this level of appreciation is at best stagnant if not receeding as it seems for most people (especially small to medium size projects) geotechical engineering is usually reduced to the Terzaghi's bearing capacity formula which may be utilized by anybody, so why the need for the geotechnical engineer? folks, I promiss, no exageration. Even the concept of a soil investigation is becoming, year after year, a foreign concept instead of the other way around.

As to the larger safety factor, I am definitely a proponent of it if coupled with sound engineering judgement, that is, it has to be reasonably justifiable. During my junior year at the University of Texas, one of our profs. used to tell us that the safety factor is required for the following reasons:

1. cover the variability in workmanship
2. cover the variability in materials (which is definitely true for soils)
3. cover the variability in loading conditions including weather and rare events, and last but not least
4. account for the probability of failure and expected "losses", human as well as property.

Others have repeatedly cautioned us about the human element in every aspect we dealt with, and over the years I found this to be an extremely important factor. "Human Error" and "human judgement" on site. As engineers structural / geotechical/ all of us, we can prepare the best design and it would look wonderful on paper, but you can bet your shirt that there will always be someone or something on site that will botch it up, somehow. The examples are too many.

Bottom line: indeed geotechnical engineers are underpaid / unappreciated, and higher safety factors are justified.

 

[garrettk]

civilperson,

As soon as owners (or the person with the money) stop selecting a geotech firm based solely on price and start looking at the experience and proposed explorations you'll probably see a change in the recommendations.

It's not the case every time, but too often the low bid geotech ends up costing a boat load more money when construction comes along.

Unfortunately, geotech has become something of a comodity when dealing with smaller projects and low bid wins. Low bid typically means less of an investigation which means greater factor of safety.

 

[lovethecold]

garrettk,

Do you think that will actually happen? I learned recentlay that some local architects will chose the geotech based on the low bid and spec that same firm for the testing. Some of the other firms have taken to low balling the drilling just to get the testing. On big jobs this can be a huge advantage, especially when they are not asked for prices and can pretty much jack the prices up to be significantly higher.

I can't necessarily blame the other firms. Those responsible for selecting the geotechnical engineer and testing firms need to take some responsibility and realize that the low price may not be the low price (or quality for that matter).

 

[garrettk]

Do I think the practice of geotechs being a comodity will change? Honestly, No.

What I have found over my career has been the larger the company you work for, the larger the more complex the projects are, and the client is more willing to spend the money for proper investigations.

It's a very frustrating situation in that there is always some one man shop that is willing to low-ball prices - and then gives out extremely conservative values because they didn't do the proper investigation.

The trick is having a good relationship with clients and showing them how an extra $10k up front can save them $100k during construction - or in some cases save them from even more headaches.

 

[Doc08]

Amen to that. The problem is that it is not as simple as it sounds. What is happening with us is the following: The client knows that we offer at lest one of the best services in our area yet he still goes somehow for this one man show thing, then later when he finds out that the service was not up to par and the consequential cost is out of the expected, he is too ashamed (at least a large percentage) to come back to us for the proper thing. Believe it or not I have had sites come back to us after they had been investigated two and three times. Frustrating to say the least.

 

[vulcanhammer]

Regarding the factor of safety, such a discussion reminds me of David Victor Isaacs' (the man who first identified wave propagation in piles in the early 1930's) concept of a "factor of ignorance," which you can read at

http://www.vulcanhammer.info/drivability/developm.php

http://www.pz27.net

 

[msucog]

"As soon as owners (or the person with the money) stop selecting a geotech firm based solely on price and start looking at the experience and proposed explorations you'll probably see a change in the recommendations."...YOU HIT IT ON THE HEAD! for example, i could probably provide a subsurface exploration for a site using only three borings...the recommendations are going to be very generalized, conservative and "cheap" (cheap as far as i am concerned but likely much more expensive for the owner). if the owner wants to pay for real recommendations, then they will most likely realize some substantial cost savings for a moderate sized project if they're using a respectable firm.

"factor of ignorance"...that's great! and doesn't it really explain the complexity of dealing with dirt and those that manipulate dirt...