The Parsons Corporation Business Information, Profile, and History

Company Perspectives:

The evolving requirements and expectations of our customers are dramatically changing the engineering and construction industry. In both the public and private sectors our clients are striving to improve quantitative and qualitative returns on capital investments, operate more productively, take advantage of the advances in technology, and reduce their risk profiles. At Parsons, we have responded to these fundamental shifts by enhancing our ability to deliver something more than our traditional engineering, construction, and program management services. We firmly believe that we must be in the business of providing professional, technical, and management solutions to our customers' most challenging problems.

History of The Parsons Corporation

The Parsons Corporation is a leading international planning, engineering, and construction firm with operations in 46 states and 37 countries across the globe. Founded in 1944, the company serves both government and private clients and is involved in a wide range of markets, including federal services, water and infrastructure, aviation, roads and highways, bridges and tunnels, rail and transit, systems engineering, urban planning and design, and communications network. Parsons operates with four main global business units: advanced technologies, commercial technology, infrastructure and technology, and transportation.

Origins and Early Growth

The Parsons Corporation has gone through a number of configurations over the years. Ralph M. Parsons started his namesake company in 1944. Parsons was described in a New York Times profile as an "outstanding, self-made engineer" as well as a "first-class salesman" and an "accomplished manager of people." According to the profile, Parsons first demonstrated his ability to combine engineering and business at the age of 13, when he and his brother opened a garage and machine shop in Amagansett, New York. Parsons went on to study steam and machine design at the Pratt Institute, from which he graduated in 1916. After a brief stint in the Navy, he worked as an aeronautical engineer before turning his attention to oil refinery engineering. During World War II, Parsons formed an engineering partnership that included Stephen D. Bechtel, who later became one of his chief rivals. Finally, in 1944 he founded The Ralph M. Parsons Company (RMPCo.) with capital of $100,000.

In 1945, American industry was able to turn to projects that had been delayed by World War II. Within three years, RMPCo., having reaped the benefits of such a business climate, grew to more than one hundred employees and expanded its services in architect-engineering, systems engineering, and design. During these first years, RMPCo. constructed plants and facilities for a number of companies, including Shell Chemical Corporation and Standard Oil Company of California. In addition, RMPCo. designed the Pt. Mugu Missile Test Center in California.

In an early major project, RMPCo. designed test facilities for the development of nuclear weapons at Los Alamos, New Mexico, in 1948. The following year, the company began its first overseas project with a water development program that included 125 wells in Taiwan. The company continued these efforts in 1950 with a survey on water resources conducted for the government of India.

During the early 1950s, RMPCo. expanded into the chemical and petroleum industries. The company engineered a sulfur recovery plant--which produced sulfur from hydrogen sulfide--in Baton Rouge, Louisiana, for Consolidated Chemical Industries, Inc. in 1951. During this decade the company also oversaw the construction of a number of refineries for natural gas and petroleum in Turkey and several European nations, including the world's largest in Lacq, France. Also, RMPCo. became involved in a number of advanced aviation projects during the 1950s, including high energy fuel development, programs to develop nuclear-powered aircraft for the U.S. Air Force and Navy, and the design of facilities at the National Reactor Test Station in Idaho for nuclear engine development. The company designed underground bulk fuel storage facilities for Strategic Air Command bases all around the world.

RMPCo. offered a diverse range of skills to clients, as demonstrated by the high-thrust rocket test station it designed at Edwards Air Force base during the mid-1950s. The station included control facilities, test stands, instrumentation, and laboratories, as well as systems for storing and handling fuel and disposing of hazardous waste. In 1958, the company began the first of many airport projects in the United States and around the world with the design and development of a large terminal in Saudi Arabia. Other international efforts during the late 1950s and early 1960s included additional petroleum refineries in Europe and several in Latin America. In all, RMPCo. provided architect-engineering services for construction facilities worth more than $2 billion between the late 1940s and the late 1950s.

RMPCo. gained some attention as a result of its expansion and numerous projects. One development that brought the company a higher profile, however, had little to do with engineering or construction. In 1958, Parsons purchased a 200-foot yacht, the Argo. During the next decade, the company entertained approximately two thousand people on board each year. Not surprisingly, the yacht provided a "great sales advantage," according to Parsons in the New York Times.

Success Continues in the 1960s

The purchase of Anaconda-Jurden Associates in 1961 brought significant involvement in mining and metallurgy. Renamed Parsons-Jurden Corporation, the new acquisition had experience in mining facilities around the world. Within the year, a copper concentrator was started in Butte, Montana. In addition to engineering such facilities, Parsons-Jurden was involved in other aspects of metallurgical projects, including geological and mineral surveys and feasibility and market studies.

Throughout the 1960s, RMPCo. continued with the types of projects they had successfully completed in earlier years. The company designed several major petroleum refineries in the United States and abroad, including a $100 million facility for Atlantic-Richfield in Cherry Point, Washington. New mining projects included an underground copper mine complex located in the Chilean Andes and designed for Cerro Corporation and a comprehensive mineral resources exploration and inventory program for India. RMPCo. also planned an expansion and modernization of Honolulu Airport, designed a terminal for Tunis/Carthage International Airport, and managed the construction of a $110 million airport complex in the Dallas-Fort Worth area. In addition, the company received a contract from the Federal Aviation Administration to expand and modernize air traffic control centers.

By the late 1960s, RMPCo. had designed 150 plants which produced sulfur from hydrogen sulfide. A $60 million natural gas processing plant engineered and constructed by the company in Alberta for Chevron Standard Limited in 1969 included the world's largest single sulfur recovery unit. During this time, RMPCo. also became involved in an even wider range of activities, some of which were experimental. The company engineered a saline water conversion plant in California and was involved in preliminary efforts to enable the countries of North America to collect unused runoff water in the sub-arctic. A test site designed and built by the company demonstrated that ballistic missiles could be fired from underground silos. RMPCo. also designed the first "lunar proving ground" to test flight hardware used in the Apollo moon flights.

Expansion as a Public Company: 1968 to the Late 1970s

RMPCo. had now become one of the nation's largest engineering and construction firms, with projects totaling $1.2 billion in 1968. In July of the following year, the company went public, selling a combination of stock worth about $7 million. A majority of the stock was sold on behalf of Parsons, who was serving as chairman of the company. Much of the remainder was sold to increase the working capital available for the company. In addition to the stock sale, RMPCo. began to explore more aggressively the possibility of acquiring companies. Parsons noted in the New York Times that these new practices represented quite a shift in his approach. He remarked that he would have to move beyond an adage from his childhood, "Never tell your friends where you shoot ducks"; now, he admitted, "We'll have to be more open."

During the early 1970s, RMPCo. did expand. The company acquired a controlling interest in an Australian engineering firm, adding approximately five hundred employees to its Australian operations. RMPCo. also formed a new company to aid in the integration of physical distribution services by providing warehousing, transportation management, and information services. This new company, called National Distribution Services, Inc., was the result of a joint effort between RMPCo., Eastern Airlines, and TRW Inc. In addition to this expansion, RMPCo. restructured its network of offices for improved efficiency. Activities in London were consolidated into one new facility, and a new office was opened in Australia. Finally, Parsons-Jurden moved from New York to Los Angeles, and RMPCo. consolidated its offices from four separate leased buildings in Los Angeles to a new headquarters facility in Pasadena.

Increasing concern with energy sources and pollution in the early 1970s provided opportunities for RMPCo. The company developed several new processes which helped decrease pollution. The Beavon Sulfur Removal Process reduced air pollution by increasing the amount of sulfur recovered from gases in gas processing plants and petroleum refineries, while the Double Contact/Double Catalysis process, applied in sulfuric acid plants, increased productivity as well as reducing emissions.

However, despite these apparently promising developments, demand for construction services was down in the early years of the decade, and RMPCo.'s revenue fell sharply, from $4.6 million in 1971 to $2.1 million the following year. The company attributed this development to a range of factors, including the unsettled condition of the economy, the lack of a coherent energy policy and uncertainty regarding energy requirements and supplies, the lack of government pollution standards, and pressures brought by environmental groups. The slump was short-lived, and by the mid-1970s revenues had begun a rapid and consistent rise. New projects, contracts, and acquisitions contributed to RMPCo.'s growth during these years.

On the international front, the Middle East was the main source of new foreign projects. RMPCo. was involved in the preliminary studies for and the design of Yanbu, a multi-billion dollar industrial city on the Red Sea in Saudi Arabia. In 1976, the joint venture company Saudi Arabian Parsons Limited was founded to help administer projects and pursue other opportunities in the Middle East. Along with another firm, Saudi Arabian Parsons Limited was selected by the government of Saudi Arabia to manage the construction of the new international airport in Jeddah.

That same year, RMPCo. began a major domestic undertaking: the company received a contract from the Federal Railroad Administration to manage the design and construction of a five-year, $1.75 billion program to modernize the Northeast Corridor, the passenger railroad route from Boston to Washington, D.C. RMPCo. was also involved in several projects with the Department of Energy, including an oil storage program, a synthesis gas plant, and the design of facilities and techniques for the handling of nuclear materials during the nuclear fuel cycle. In addition, Parsons became involved in an increasing number of "mega-projects," large, complex engineering ventures with multi-billion dollar budgets and decades-long schedules. One of Parsons' first such undertakings was a massive oil and gas production facility at Prudhoe Bay in Alaska. This project, the largest undertaken by private industry, required the transportation of hundreds of prefabricated modules to a site 350 miles north of the Arctic Circle.

In 1977, RMPCo. acquired two established engineering firms--De Leuw, Cather & Company of Chicago and S.I.P., Co., based in Houston. A leading engineering-design firm specializing in transportation systems, De Leuw, Cather & Company was involved in the Northeast Corridor railroad project as well as other ventures. Robert B. Richards, president and chairman of De Leuw, Cather--which retained its own corporate identity and management--was made a vice-president at RMPCo. S.I.P., Inc. provided RMPCo. with a strategic location: the Gulf Coast area, the site of much of the nation's petroleum, chemical, and gas processing industries.

Reorganization: 1978-79

Partly as a result of these acquisitions, and in an attempt to maximize the potential for future growth, RMPCo. management proposed a major reorganization of the company. Approved by shareholders on September 19, 1978, the reorganization divided RMPCo. into two separate corporations, although both were still owned by the same stockholders. In the United States, The Parsons Corporation was incorporated in Delaware as a holding company for RMPCo., De Leuw, Cather & Company, and S.I.P., Inc. Early in 1979, Parsons Constructors, Inc. (PCI), a new subsidiary intended to provide increased construction capability, was added to The Parsons Corporation. Shares of RMPCo. stock were converted to shares of The Parsons Corporation automatically at a one-to-one ratio. The company's management hoped that this restructuring would increase flexibility, aid growth, and make it easier to add subsidiaries.

On the international side, the plan was designed to improve the company's competitive position and provide tax savings. As a result of the reorganization, RMP International, Limited, was incorporated in the Cayman Islands. Shareholders of The Parsons Corporation received shares of RMP International, Limited, on a one-for-one basis. The shares of the two new corporations were required to be traded together.

In the years immediately following the reorganization, The Parsons Corporation continued to grow and to experience increasing revenue. In 1980, for example, Parsons was involved in almost 270 projects in 31 different countries. Revenue increased 25 percent in 1980 over the 1979 figure, and new records were established again in 1981 and 1982, when revenue reached $1.2 billion. William E. Leonhard--Chairman, President, and CEO of The Parsons Corporation--summed up the company's strategy this way: "The key to our continuing strength is a basic policy of providing engineering, construction, and related services, a business we fully understand, while diversifying both geographically and in terms of the industries we serve."

Returning to Private Company Status: 1984

In 1984, after fifteen years as a public company, Parsons began to explore the possibility of returning to private status. According to Business Week, provisions of the 1984 tax law made the purchase of companies by employee stock ownership plans particularly attractive. An additional reason for the move was offered in the San Francisco Business Journal by Marion Gordon, a Parsons spokesperson, who stated, "If you're not accountable [to shareholders and the public], it gives you more flexibility and the ability to map out big plans without the whole world looking on. This is a competitive industry and operating as a private company can provide a benefit in forming strategy." Chairman Leonhard similarly stated in the Wall Street Journal that he supported the plan "so we could be in control of our own destiny."

In October 1984, The Parsons Corporation returned to private ownership as a result of a $560 million buyout by the Employee Stock Option Plan. Almost immediately questions were raised about the deal, one of the largest such transactions in U.S. history. The U.S. Labor Department investigated charges brought by employee groups that executives who designed the plan benefited disproportionately, while employees were saddled with debt. The employees also argued that they had no meaningful input in the decision to go private and that they would be excluded from the process of shaping the country's future. In addition, some retirement experts expressed concern about the loss of a profit-sharing program of diversified stocks and bonds. Finally, the corporation was the target of several lawsuits. One suit, brought by employees in 1985, claimed that the purchase was a "breach of fiduciary responsibility, misuse of corporate assets, and a termination of predecessor plans," according to the Wall Street Journal. Five years later, however, a federal court upheld the buyout.

Despite the difficulties resulting from the buyout, Parsons, now the largest 100-percent employee-owned company of its kind in the United States, continued to adapt and prosper. The company benefited from an increasing trend toward privatization, providing services to municipal governments in Chester County, Pennsylvania, for example. In addition, while opportunities in the Middle East decreased in the early 1990s, Parsons increasingly turned its attention to Asian markets.

Global Expansion and Diversification: Mid-1990s and Beyond

Success continued throughout the mid-1990s. During 1995, Parsons was named the top design firm in the United States based on domestic and international billings by trade publication Engineering News Record. The publication also ranked Parsons as the second-largest global design firm in the world. By this time, the company was involved in projects related to the Idaho National Engineering Laboratory, the Amoco Gas Terminal in the UK, the Kaohsiung Mass Rapid Transit System in Taiwan, and had various other international contracts in Argentina, Oman, Kuwait, Korea, Italy, Russia, and Thailand.

The firm strengthened its holding in 1995 by acquiring Gilbert/Commonwealth Inc., a company involved in power plant design and nuclear facility decommissioning. Parsons--now run by chairman and CEO Leonard J. Pieroni--then launched a restructuring effort in early 1996 that included a reorganization into four business units: Parsons Process Group Inc., Parsons Infrastructure & Technology Group Inc., Parsons Power Group Inc., and Parsons Transportation Group Inc. The strategy also included the creation of a new global business development unit designed to increase Parsons' international revenues, which by 1996 accounted for just 30 percent of overall revenues.

Parsons met with disaster, however, just four months after initiating its new strategy. While on a business trip with Commerce Secretary Ronald H. Brown and other business executives, Pieroni was killed when the plane carrying the group went down in Croatia. As the company mourned the loss of their leader, board members scrambled to elect a new CEO. James F. McNulty was given the task and promised to continue the company's current direction. "My plans are to make Parsons into a big player in the global marketplace," McNulty commented in an April 1996 Business Week article. The authors of the piece pointed to the importance of McNulty's strategy, observing, "It's a mission that Len Pieroni endorsed with his life."

During the latter half of the 1990s, Parsons grew by diversifying into telecommunications, pharmaceuticals, and vehicle inspections. Annual revenues had more than doubled throughout the decade, growing from $1 billion in 1990 to $2.4 billion in 2000. Parsons continued to expand into the early years of the new century. The firm complemented its vehicle inspections business by adding Protect Air Inc. to its arsenal in 2000. The following year it acquired H.E. Hennigh Inc., a telecommunications general contracting firm, and bridge engineering concern Finley McNary Engineers Inc.

By now, the company had contracts with the Federal Aviation Administration to upgrade U.S. air-traffic control facilities and with Denver's Stapleton Airport to redesign its facilities. The firms other major domestic projects included the construction of the Olivenhain Dam in San Diego County, the expansion of the Seattle-Tacoma International Airport, and the Alameda Corridor rail project in Los Angeles, California. During 2003, the company was involved in the bidding process to repair postwar Iraq. While the majority of the work went to competitor Bechtel Group Inc., Parsons remained optimistic about future projects in the Middle East. With a solid strategy in place, company management felt confident the firm was headed in a positive direction.

Principal Operating Units: Advanced Technologies; Commercial Technology; Infrastructure and Technology; Transportation.

Principal Competitors: Bechtel Group Inc.; URS Corp.; Washington Group International Inc.

Chronology

• Key Dates:
• 1944: Ralph M. Parsons establishes the Ralph M. Parsons Company (RMPCo.)
• 1949: The company begins its first overseas project.
• 1958: Work on the firm's first airport project is started in Saudi Arabia.
• 1961: Anaconda-Jurden Associates is acquired.
• 1969: RMPCo. goes public.
• 1977: Two companies are purchased--De Leuw, Cather & Company and S.I.P.
• 1979: Parsons Corp. is created to act as a holding company for RMPCo., De Leuw, Cather & Company, S.I.P., and subsidiary Parsons Constructors Inc.
• 1984: The firm returns to private ownership.
• 1996: Chairman and CEO Leonard J. Pieroni dies in a plane crash in Croatia.
• 2001: Parsons adds H.E. Hennigh Inc. and Finley McNary Engineers Inc. to its arsenal.