Parsons Brinckerhoff, Inc. Business Information, Profile, and History

Company Perspectives:

Parsons Brinckerhoff will: Provide quality, cost-effective consulting services for public and private infrastructure worldwide. Infrastructure includes transportation, energy, environmental and building facilities. Consulting services encompass planning design, project management, construction management and facility operation, maintenance and management; Commit to performing its services in a socially, ethically and environmentally responsible manner and to high professional standards; Provide a stimulating stable and rewarding work environment and attract, retain and develop employees as leaders in the business of providing professional services to its clients; Perpetuate the company as an employee-owned firm, providing a reasonable return on shareholders' investments and appropriate benefits to all employees; and Continue to make meaningful contributions to the advancement of its profession.

History of Parsons Brinckerhoff, Inc.

Parsons Brinckerhoff, Inc. is the holding company for one of the world's leading engineering consulting firms, involved in the design and construction of transportation, power, building, and telecommunications systems. While the company has long been the leading consulting engineer firm for transportation projects in the United States, it also has a presence in nearly 80 countries. Originally organized as a partnership, Parsons Brinckerhoff incorporated in 1975, with all of its shares being employee-owned.

Transportation Specialist: 1885-1956

The history of Parsons Brinckerhoff may be traced to 1885, when William Barclay Parsons, the company founder, opened an office as a consulting engineer in lower Manhattan. Parsons' had earned an engineering degree from Columbia University in 1882. Business steadily grew, and in 1900 he was awarded a major project: design and engineering of the New York City subway. By 1904, the first stage of the project was opened, offering transportation from Manhattan to Harlem. Eugene Klapp and Henry M. Brinckerhoff joined Parsons in 1906 in what would become known as the firm of Barclay Parsons and Klapp by 1909. Brinckerhoff would gain fame as integral to the invention of the 'third rail,' a concept that would revolutionize rapid transit. Another associate, Walter J. Douglas, joined the firm in 1908. During this time, Parsons and Brinckerhoff were responsible for transportation projects, while Klapp and Douglas focused on building bridges. In addition, Douglas and Parsons oversaw power plants and dam projects.

In 1914, Parsons was named chief engineer in the construction of the Cape Cod Canal. Following the completion of that project, however, Parsons scaled back his involvement in the engineering firm in order to focus on the war effort. Parsons founded and led a special regiment during World War I known as 'the fighting engineers.' First, he was instrumental in organizing the First Reserve Engineer Regiment, and then he went abroad, being among the first to land in Europe, where he studied and made recommendations for improving railway systems, ports, shipping terminals, and the like. At war's end, at the age of 60, Parsons was detached from his engineering corps and returned to New York, where he resumed his work at the firm while also authoring several books on engineering and serving as trustee for such prominent organizations as Columbia University, the New York Public Library, and the Carnegie Institute.

While Parsons had served abroad, Brinckerhoff had remained on the home front, directing the construction of naval dry docks to support the war effort. Brinckerhoff and Douglas were eventually made partners after the war, and the firm became known as Parsons Klapp Brinckerhoff & Douglas. Between 1920 and 1939 the firm completed more than $50 million of work, including railroad and harbor terminals and manufacturing plants.

Parsons died in 1932 and was succeeded as senior partner of the firm by Douglas; the company would, however, continue to bear the name of its famous founders, even after the passing of Brinckerhoff. After the completion of the Detroit-Windsor Tunnel linking Michigan and Ontario in 1930 and a tunnel under the Scheldt River for Antwerp, Belgium, completed in 1931, the firm fell upon lean times due to the Great Depression.

Between 1936 and 1940 net income totaled only $293,010. Still, the company managed to secure important projects, among them construction of the network of roads for the 1939 World's Fair in New York. This project was headed up by Brinckerhoff and John P. Hogan, who became senior partner that year. In 1943, Hogan and Eugene Macdonald replaced Klapp and Douglas--both now deceased&ndash name partners in the firm. During World War II virtually the entire staff worked on designing the U.S. Navy's fixed and floating drydocks, including those for the Brooklyn Navy Yard.

Hogan retired in 1947 and was succeeded as senior partner by Macdonald. Projects in the immediate postwar years included tunnels, bridges, airports, and highways, culminating in New Jersey's 173-mile-long Garden State Parkway, for which Parsons Brinckerhoff served as the general engineering consultant. This project was completed in 1955 at a cost of $330 million. Also noteworthy was the firm's construction of the first Hampton Roads Bridge-Tunnel, completed in 1957. Upon his retirement in 1956, Macdonald was succeeded as managing partner by Maurice Quade, who was assisted by Walter S. Douglas, son of Walter J. Douglas. The firm now became Parsons Brinckerhoff Quade & Douglas.

Four Decades of Growth: 1957-95

During the ensuing years the firm designed and supervised the construction of the headquarters for the Air Force's North American Air Defense (NORAD) Command Center, which was completed in 1964. This facility was built underground, beneath Cheyenne Mountain in Colorado. By 1965 the firm had branch offices in four cities and field offices in nine. A joint venture of Parsons Brinckerhoff Quade & Douglas and Tudor Engineering Co. had begun work on a public rail system centered around San Francisco and Oakland for the Bay Area Rapid Transit District (BART). This undertaking included nine miles of subway, 14 miles of single-bore tunnel, a three-mile twin rock tunnel, and a 3.5-mile tube tunnel under San Francisco Bay that was, at the time, the longest underwater tunnel in the world. The $1.6-billion, 71-mile system was not completed until 1974--five years behind schedule. The same joint venture constructed a rapid-transit system for the Atlanta metropolitan area that opened in 1979.

Parsons Brinckerhoff Quade & Douglas had been incorporated in the early 1950s to meet the licensing requirements of certain states, but it continued to operate as a partnership until 1975, when it transformed itself into an employee-owned corporation in order to foster further growth and to meet increased competition and combat rising costs. Shares were offered annually to middle and senior managers, based on nominations made to a corporate committee, with the shares accumulated to be sold back to the company over a ten-year period following the employee's departure or retirement. There were 83 shareholders in 1982.

The change from partnership to corporation affected company culture as well as organization. Henry Michel, the firm's president in 1983, told Management Review: 'The partnership structure endowed individual partners, each of whom specialized in one technical area, with absolute decision-making power in their respective fields of expertise. ... The partners were almost controlling little fiefdoms.' Under the new corporate structure, however, the partners found their power somewhat diminished. The company felt that sharing the decision-making controls allowed, according to Michel, 'the best technicians and the best managers to concentrate on what they do best.' Of the new employee-ownership status, Michel noted that employee-owners were more likely to keep an eye out for cost overruns, as witnessed by a 350 percent increase in business since 1974. The change to corporate status also allowed Parsons Brinckerhoff to retain earnings and thus ease the borrowing needed for expansion.

Parsons Brinckerhoff Inc. (PB) was established in 1979 as the holding company for several subsidiaries. Parsons Brinckerhoff Quade & Douglas (PBQD) continued to be responsible for the firm's traditional transit, highway, and bridges and tunnels projects. Parsons Brinckerhoff International was charged with servicing clients abroad and also acted as a holding company for foreign subsidiaries. In addition, PB oversaw Parsons Brinckerhoff Construction Services and Parsons Brinckerhoff Development Corporation. By 1982 20 percent of the company's business was coming from overseas, including projects in Singapore and Hong Kong. PB also established a subsidiary for the alternative-energy facilities that the company was designing, building, and operating for third-party clients, including cogeneration, hydroelectric, and waste-to-energy projects in New England and California.

In 1985, PB's centennial year, the company was at work on no fewer than 14 subway systems and won nine of the 11 major projects on which it had made proposals. It was also designing and managing construction of the Fort McHenry Tunnel in Baltimore Harbor--at 8,000 feet in length and eight lanes in width the largest underwater tunnel in the world at the time. PBQD, along with Morrison Knudsen Corporation and CRSS Inc., won a contract valued at $1.6 billion in 1990 to design and build the tunnels, service areas, roads, campus, utilities, and experimental facilities for the world's largest atom smasher. (This Texas-based high-energy-physics project was later canceled, however.)

In fiscal 1993 (the year ended October 31, 1993) PB reported operating income of $13.9 million on revenues of $343.1 million, both company records. The number of employees--3,575--was also a record. The four major operating subsidiaries were in charge of infrastructure, construction services, facilities, and international work. The second largest of the company's more than 80 offices was in Hong Kong, and a Shanghai office also was opened in 1993. By late 1996 one-fifth of PB's workforce was based in five East Asian offices. PB also had clients in eastern Europe and had recently formed a Madrid-based transportation company with a Spanish partner. In seeking to gain access to Asia's lucrative and developing private-power market, PB acquired Merz & McLellan Holdings Ltd., a British-based power consultant, in 1994. The company also opened a Vienna office that year.

Projects of the Late 1990s

When work began in 1996 on the 2,400-megawatt Sabiya power plant in Kuwait--one of the largest in the world--Merz & McLellan was responsible for the design, project management, and site supervision. PBQD was in charge of project management services for the H-3 highway, the largest construction project in Hawaii history, completed in 1997. That year it won a contract, with CH2M Hill Ltd., for the planning, design, construction, and project management of a $6 billion deep-tunnel sewage collection, treatment, and disposal system in Singapore. PBQD was the prime engineering consultant for the construction of Pearl Harbor Naval Station's Ford Island Bridge, which opened in 1998. It was managing the construction of Cairo's subway, which began in 1986 and was scheduled for completion in 2003.

PB's revenues reached a record $698 million in fiscal 1998. Net income came to nearly $9 million, and the company enjoyed its 23rd consecutive year of increased value per share of stock. Its number of employees grew by 45 percent, to 7,700. Four new acquisitions were made during the year, including Booker Associates Inc., a St. Louis-based engineering and architectural firm, and Kennedy & Donkin Group, a British engineering firm. In addition to the aforementioned undertakings, the projects in which PB was taking part at this time included London's $1.4 billion Heathrow Airport Terminal 5; Saudi Arabia's $1.2 billion Ghazlan II Power Station; and Brazil's $500 million Castello-Raposo, Lot 12 toll road.

PB's main job--and its biggest headache-in the 1990s was its work with Bechtel Group, Inc. as project manager for Boston's Central Artery/Third Harbor Tunnel project, the largest civil engineering project in U.S. history. Authorized in 1987 as a mile-long portion of Interstate 93 that would run through downtown Boston underground, it was also intended to link the Massachusetts Turnpike (Interstate 90) to Logan Airport by means of a third tunnel through Boston's inner harbor. The 'Big Dig' was originally planned for completion in 1994 and the cost estimated at $2.5 billion. By the time the 1.6-mile Ted Williams Tunnel opened in late 1995, the estimate had reached nearly $8 billion. A report by an independent consultant charged that Bechtel/PB managers had allowed costs to spiral needlessly by not delegating authority to area managers in a position to control spending. The project had already fallen behind schedule and over budget because managers had failed to test the soil properly before designing the tunnel. The next part of the job involved establishing a link between the turnpike and the tunnel. In just 1,150 feet, nine lanes of highway had to be threaded under eight sets of railroad tracks bringing 40,000 people into South Station each working day, and just inches above 81-year-old tunnels through which ran a rapid-transit line. By early 2000, cost estimates had reached $12.2 billion, with completion of the project not expected until 2005.

This domestic challenge notwithstanding, PB was widely recognized as the leader in American transportation engineering and by the late 1990s was truly a global concern with offices in Europe, South Africa, China, Australia, and South America. Achieving such prominence in servicing all types of infrastructure, in addition to its flagship transportation services, remained its goal for the next century.

Principal Subsidiaries: Parsons Brinckerhoff Quade & Douglas Inc.; Parsons Brinckerhoff Construction Services Inc.; Parsons Brinckerhoff Energy Services; Parsons Brinckerhoff FG Inc.; Parsons Brinckerhoff International; Parsons Brinckerhoff Services PC; PB Farradyne Inc.; PB Kennedy & Donkin Group (U.K.); Merz & McLellan Holdings Ltd. (U.K.).

Principal Competitors: CH2M Hill Ltd.; The Parsons Corporation.

Chronology

• Key Dates:

• 1885: William Barclay Parsons opens an engineering office in New York City.
• 1900: Parsons breaks ground for his New York City subway system project.
• 1906: Henry Brinckerhoff joins the firm.
• 1916: Parsons founds and leads the Eleventh Engineer Regiment of World War I; on the homefront, the firm constructs facilities to support the war effort.
• 1930: The firm completes the Detroit-Windsor Tunnel.
• 1939: Brinckerhoff and the firm design the road network for the New York World's Fair.
• 1964: Firm completes the NORAD underground command center for the Air Force in Colorado.
• 1974: In a joint venture PB completes the Bay Area transit system.
• 1975: The firm converts from a partnership to a corporation.
• 1979: Parsons Brinckerhoff is established as a holding company.
• 1987: PB, in a joint venture, begins work on a Boston transportation project that becomes the most expensive in the world.
• 1998: Staff grows by 45 percent after four acquisitions.