In recent weeks, Third Bridge Forum has heard that a number of E&C players are shying away from oil and gas and turning their attention to bright spots in other end markets. We interviewed a range of experts, including a former senior manager at Fluor Corp, former EVP at KBR Inc and former C-level executive at Jacobs Engineering Group Inc, to discuss some of the challenges and opportunities facing the E&C industry.
In recent years, 60% of US engineering, procurement and construction (EPC) revenue has been generated outside North America, we heard in one Interview. At the same time, competition in the global market has intensified, resulting in tougher bidding processes and a shift from the cost-plus to fixed-cost model. This has left larger E&C players wrestling with the significant risks of fixed-priced work, particularly in oil and gas, where costs can quickly spiral. Compounding this, knowledge transfer from project to project is awkward, and fast-moving technology can make it difficult to rely on previous bids and estimates. As a result, firms are moving away from the fixed-cost model while trying not to lose projects to competitors willing to adopt that contract structure.
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