Design firm URS under fire, but still has global reach

  • Article by: MAYA RAO , Star Tribune
  • Updated: June 13, 2012 - 9:50 AM

Despite blows to its reputation, URS keeps getting contracts in Minnesota.

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The Sabo Bridge in Minneapolis, which was closed in February after one set of cables failed, was reopened earlier this month.

Photo: Bruce Bisping, Star Tribune

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Engineering giant URS Corp. has consulted on high-speed rail in Saudi Arabia, modernized weapons for the Pentagon and decommissioned nuclear sites in the United Kingdom.

Best known in Minnesota for its work on two troubled bridges -- most recently, a preliminary report last week questioned URS' design of the damaged Martin Olav Sabo bridge in Minneapolis -- the company's presence stretches far beyond the Midwest, through more than 40 countries, dozens of American cities and into the multibillion-dollar U.S. defense contracting industry.

With revenues of $9.5 billion last year, the San Francisco-based, publicly traded company ranks No. 2 on Engineering News-Record's list of the top 500 design firms.

"They've grown from being a small firm in the 1990s to being very large. ... When you compare it to competitors, it's one of the most-established firms," said Tahira Afzal, senior analyst at KeyBanc Capital Markets in New York.

Its size, experience and acquisition of competitors also helps explain why URS keeps landing government contracts in Minnesota despite blows to its reputation.

URS' introduction to the Minnesota public followed the catastrophic Interstate 35W bridge collapse in 2007, when victims filed a lawsuit alleging that the firm, a consultant to the Minnesota Department of Transportation, failed to detect the bridge's structural flaws. Without admitting fault, URS agreed to pay $52.4 million in 2010 to settle the suit.

Last week's report by consultant Wiss, Janney, Elstner Associates found that light winds were enough to break the suspension cables loose from their supports on the URS-designed Sabo bridge, which opened in 2007. In February, after one set of cables fell and a second set of cables was removed from its cracked anchors, the city shut down the pedestrian and bicyclist bridge for more than three months.

As a result, the Metropolitan Council has delayed action on the award of a $94 million engineering contract for the proposed Southwest Corridor light rail line, a project on which URS and just one other company bid.

Mark Fuhrmann, the Met Council's program director for light rail projects, said only a small group of firms nationally does this kind of work. In his 27 years in the rail industry, he said, the number and complexity of such projects have grown, as has the need for highly specialized technical expertise.

"Those smaller firms, dating back to the '80s and '90s, have acquired other smaller engineering firms to add to the breadth of their expertise. ... That has further narrowed the marketplace," Fuhrmann said.

URS, which declined to comment for this article, expanded into a global force after acquiring a string of companies since the 1990s. In one of its most recent, URS beat out rival CH2M Hill in a bidding war to acquire the U.K.'s Scott Wilson Group in 2010. The purchase gave URS 80 more offices worldwide -- from New Delhi to Warsaw -- and 5,500 new employees.

Acquisition streak continues

Last month, URS acquired Flint Energy Services, a provider of construction and maintenance services to oil and gas companies in North America. That deal, too, gave URS 80 new locations supporting companies operating in the oil, gas and oil-sand fields spanning western Canada, the U.S. Southwest and other regions.

Today, the company has 56,000 employees. Its vast portfolio spans tunnels, airports, light rail, sewer systems, nuclear power plants, military bases, pulp and paper production facilities and more.

The company derives 49 percent of its revenue from the U.S. government, according to securities filings. Hoovers says URS' largest client is the Army, accounting for more than 15 percent of its sales.

The Flint deal is a "substantial acquisition for the company and clearly moves them away from that federal funding," said senior research analyst Andrew Wittmann of Robert W. Baird & Co. in Milwaukee.

"In terms of how exposed they are to the government sources of funding versus some of the other publicly traded competitors, they're probably a little bit more dependent on the federal government than most," said Wittmann.

The company has worked for years on state and local government projects in Minnesota -- and that work has continued even since its settlement on the 35W bridge failure.

That's not without precedent in the public sector. The Massachusetts Port Authority faced criticism in 2008 for awarding a $30 million contract to Parsons Brinckerhoff, a company that earlier in the year agreed to pay $407 million with partner Bechtel to settle claims by prosecutors that they mismanaged the Big Dig tunnel project in Boston, according to published reports.

In Minnesota, Hennepin County has awarded URS at least nine contracts in the past five years, two of those since the 35W settlement. Last summer, the county gave URS a $1.2 million contract to design improvements for County Road 101 through Minnetonka, Woodland and Wayzata.

Also in the past five years, the Minneapolis Park and Recreation Board doled out at least six contracts worth $1 million to the company to do work that includes making improvements to Boom Island and stabilizing banks of the Mississippi River.

And last month, the Minneapolis City Council approved a $1.2 million contract with URS to study streetcars along Nicollet and Central Avenues.

Council Member Gary Schiff, who represents the ward where the Sabo bridge stands, said the streetcar contract involves some math but not any engineering.

"The failure to calculate the impact of five to 10 mile per hour winds -- that's a significant failure. ... I do think their track record is one that should be taken into account moving forward," he said.

Schiff said it is a "big concern" that Minneapolis received just two bids for the streetcar project. "The question is, how deep is the field for cities when seeking these types of services?" he said.

But there is no indication that URS is winning contracts through overt political influence. While the company has lobbyists in Washington, it has not registered any with the state of Minnesota. The company's investor relations policy states that it does not give campaign contributions "to avoid even the appearance of impropriety," and URS even complained to federal prosecutors in 2004 that it lost out on work at Los Angeles International Airport after refusing to make contributions sought by the mayor.

Maya Rao • 612-673-4210

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