Spain: Engineering Consulting Industry

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1 Industry Notes Spain: Engineering Consulting Industry one two three four five Engineering consulting What does Spain offer? Foreign Trade Conferences, Forums and Fairs Addresses of Interest

2 Engineering consulting one Companies in these industries do business in the following subsectors: Civil Engineering in road, railway, air, maritime, hydraulic transport infrastructure and traffic planning and management. Construction and Urban Planning Consulting in construction, residential buildings and urban planning Industrial Energy Engineering for industrial, conventional, and renewable energy installations. Engineering consulting in water and environmental sanitation, renewable energy, contamination, environmental management and energy efficiency. Conventional and special technical services and information technology, computing and communications services. Project Management Lifecycle in investment projects; services for project phases such as design management, construction management, cost management, program management and project portfolio, management contracting, risk y facility management. What does Spain offer? two According to the latest available data 1, engineering consulting in Spain: Comprises about three million companies generating around 14 billion in income (1.16% of the GNP) and provides direct work for approximately 85,000 people (0.47% of the total number of employed people in Spain). The industry is geographically concentrated in the Autonomous Communities of Madrid and Catalonia where 44% of the companies that produce 60% of the business and 62% of the workers are located. In fact, if the Autonomous Communities of Andalusia, Valencia, Galicia and the Basque Country were added, that would account for total 77% of companies, 93% of turnover, and 90% of employment. With respect to size, micro and small enterprises account for 92% of the industry (and generate 17.6% of the revenue and 26% of employment), while medium sized businesses comprise 6.5% of the whole (producing 14.5% of volume of business and 19.5% of the workforce); big companies only account for 1.85% of the total (although they represent in 68% of turnover and 54.6% of employment). YEARS Companies(1) 3,120 3,025 2,810 N/A. Companies (2) - 2,987 2,907 N/A Employment (2) 87,280 84,915 81,209 (+) N/A Turnover* (+) N/A Source: TECNIBERIA (*) Millions of euros (+) Estimated data based on growth of companies included in TECNIBERIA. (1) Source: INE. Number of companies with more than 10 salaried employees. (2) Source: Strategic Development of Consulting Engineering Sector. TECNIBERIA. 1 See SABI 2011 database refering to data (since data from the Registro Mercantil tends to be included in such channels with time gap).

3 Geographic distribution 2011 C.C.A.A. Export Implementation Operating Income* Com. Madrid 24.1% 53.3% Catalonia 19.5% 7.0% Andalusía 10.9% 12.4% Com. Valencia 10.2% 1.8% Galicia 6.2% 2.9% Basque Country 6.1% 15.6% Remainder 22.7% 6.8% (*) 2009 data Source: Strategic Development of Consulting Engineering Sector. TECNIBERIA. COMPANIES % Turnover % Exports Top % 83.4% Top % 91.8% Top % 97.7% Source: TECNIBERIA Subsectors Companies in the industry are most frequently oriented toward the subsector civil engineering (70%), followed by construction and urban planning (52%), the environment (50%), industrial energy (40%), and lastly, technological services (28%). One should be take into account that a company can promote its business in more than one industry, in which case it is counted more than once. However, this distribution does not correspond to the volumes of business generated by each subdivision since engineering consulting ranks highest with 49.5% of the total, followed by civil engineering with 23.8%, technology services with 11.7%, the environment with 8.5%, and construction and urban planning with 6.5%. Within the subsector construction and urban planning, Spanish project management focuses on construction and urban planning in Offices and Corporate Headquarters (16.9%), Hospitals and Residences (14.4%), Malls and Department Stores (13.3%), Residential Construction (12.8%), Public Buildings (12.8%) and Industry (12.3%). Civil engineering is the branch of engineering that uses physics, chemistry and geology in developing infrastructure, mainly in large construction projects in transportation and hydraulics for public use. This includes land-use plans such as disaster prevention, traffic and transportation control, water supply management, public services, waste treatment and any other activity that ensures the welfare of those who rely on public works built and operated by engineers.

4 Engineering that deals with construction and urban planning is closely related to architecture and urban development through, foundation design calculations, more complex structures and installations depending on the field; from the least complicated residential - to the more complex public (airport terminals, train stations, hospitals) and private projects (malls, sports stadiums and other unique buildings). Likewise, integrated project management can be included under Project Management. Industrial engineering is the branch of engineering that studies and focuses on element analysis, projections, design, planning, optimization and control in the production of goods and services (energy engineering for energy production), taking into account financial, technical and social aspects to determine, design, specify and analyze systems (in the broad sense of the word), and thereby predict and evaluate the results. Environmental engineering consulting groups together the branches of engineering that perform integrated analysis of environmental problems, taking into account the ecological, social, financial and technological aspects, with the aim of promoting sustainable development. Engineering companies in this field deal in many different areas such as, air pollution, water system planning, environmental restoration, environment management, forestry projects and planning, environmental risk analysis, monitoring environmental works and climate change and the CO2 market. Technology-based standards required to ensure minimum quality in engineering are included in the category technology services. They fall under the following subsectors: Traditional technology services. Physical data research including: topography, cartography, photogrammetry, bathymetry, geophysics, geology, chemical and biological studies, etc.; and quality control including quality control of materials and units of work in the industrial, construction and environmental industries. Special technical services. This includes remarkably innovative services with high value added, including dynamic load testing, auscultation, monitoring, etc. in public works as well as the construction, industrial and environmental industries. Information technology, computing and communications services. These activities have particularly close ties to innovation and technological development. Integrated Project Management (Project Management) manages all phases of the investment project lifecycle by using means, tools, technologies, and capabilities from start to finish, to meet the client s objective through financially and functionally viable projects that are completed according to plan, and in compliance with allowable costs and preset quality standards. These services are essential to long-term complex concession projects like Public Private Partnership (PPP) contracts. Services Engineering is a cutting-edge industry in Spain. The high level of technological advancement achieved since 1959 when Spain started to modernize its economy, has turned Spanish engineering consulting into the country s main engine of growth. With the backing of European funds, over a period of 25 years, Spanish engineering has developed a high level of infrastructures in Spain. As a result, capital investment has increased more than four thousand percent in the last forty years, from $ 11 billion in 1970 to $ 464 billion in engineering consulting industry 3

5 Hence, Spanish engineering has played a decisive role in Spain s sustained growth in the second half of the century. By understanding the needs of foreign investors, technology consulting has evolved into one of the world s most reliable occupations, with a broad global vision of proven solvency, adaptability to change and technology. Spanish companies are at the forefront in offering a broad range of outstanding services: Feasibility studies Return on investment (ROI) analysis, including rate analysis Environmental impact studies Public participation process management, with payment capability analysis for services Institutional support for the beneficiary organization Project efficiency evaluation Bidding sheets, including basic designs Planning Master plans Technical Assistance and Project Drafting Detailed designs Project supervision and start-up Project management and construction management Turnkey projects Cost control and planning control Risk management, technology audits Health, safety and quality control Innovation, competitiveness and technology transfer Spain is an importer and exporter of innovative services. The technology services currently offered are a result of an ongoing process of innovation adopted by engineering consulting companies. The application of international quality level Spanish technology, which improves production management processes in new markets and industries, promotes technology transfer. or de ingeniería y consultoría 3

6 Engineering is one of the most dynamic industries with regard to international expansion (numerous international references and success stories, progressive introduction of specialized resources, important international network of subsidiaries and branch offices, constant opening of new markets, etc.) The industry s image on an international level has progressively improved, partly on its own merits (excellent technology, good price/quality ratio, human qualities, etc.) and partly due to external factors (Spain s leadership in certain engineering-related industries: transportation, high-speed rail, renewable energy, seawater desalination, etc.). However, engineering consulting technology cannot develop or become established in a foreign market without relying on local professionals and companies. That is the basic difference between it and the production of goods. Delivering services to an export destination country creates or enhances the culture and technological capabilities of local businessmen and professionals. This process was fundamental in turning Spain from a technologically weak agrarian economy into one of the world s most industrialized countries. This proven experience in planning, designing, supervising, building and operating all sorts of infrastructures (transportation, water and energy) has led Spain, according to the World Economic Forum s Global Competitiveness Index , to rank tenth in the world in infrastructures, taking 8th, 13th, 14th and 17th place respectively in quality of railroad, road, ports and airport infrastructures. That translates into the following international competitiveness determining factors for the engineering consulting industry: Spain ranks among the top in the world in design, supervision and management of high capacity roads (4th), solar plants (3rd), wind farms (2rd) and desalination plants (4th). World leader in high-speed rail infrastructures. Leader in Latin America, Eastern European countries and North Africa. Long history of executing contracts with multilateral institutions and development Banks (Spanish engineering is the European Investment Bank s first customer). Profound knowledge of investment procedures based on public private partnerships (PPP). Industry strong points Spain has modernized its infrastructure under a major investment program, especially in the European Union. With extensive experience in concessions initiated in the 21st century, public private partnership concessions supervised by the European government have introduced substantial improvements in financial planning and control. European PPP concessions are more competitive since the supervising agency (Eurostat) requires rigorous cost control and deadlines in order to approve budgets. Once the project has launched, any further revisions will incur a penalty. The Spanish experience is supported by considerable success in several industries: roads, railway, airport, healthcare, security, public buildings, technical buildings, educational buildings, etc. It is this experience in a highly competitive national market that has given rise to companies that can compete on a global level, considering the industry s growing interest in international expansion. On the other hand, the technical and human capacity of industry professionals is remarkable. They are characterized by their strong technical aptitude, great capacity for work, high potential for project management, strong problem-solving ability, the ability to adapt to different work environments and surroundings, potential to create customer confidence, great creativity, etc.

7 Despite difficulties, the industry is taking advantage of new technologies and introducing change. Hence, the level of technology of the Spanish engineering industry is comparable to that of more advanced countries. Other industry strengths include the proven ability to develop highly technical projects, deliver specialized and customized services, and offer a good price/quality ratio nationally and internationally. Organizational structure TECNIBERIA, the Spanish Association of Engineering, Consulting and Technology Services Companies, is this industry s association. It is a national non-profit entity with more than 250 companies, promoting solidarity and cooperation among its members and their professional, technical and managerial capabilities. The association also represents its members on matters of interest to them before public and private organizations, institutions and centers. It also intervenes in labor relations issues in an effort to defend and promote the financial and social interests of the industry. Founded in 1964, TECNIBERIA is a member of the Pan-American Federation of Consultants (FEPAC), the European Federation of Engineering Consultancy Associations (EFCA), and the International Federation of Consulting Engineers (FIDIC). AEDIP, the Spanish Association of Integrated Project Management (1994), is the association of companies specializing in Project & Construction Management. It comprises 30 companies that adhere to a specific Code of Conduct and that have passed a rigorous entrance exam based on customer satisfaction scores and business organization in accordance with the guide to Project Management recorded in the new ISO (2012). Among ADEIP s international policy priorities is the establishment of pragmatic and programmatic relationships that promote technology transfer that mutually benefit and promote companies, governments and professionals. ADEIP maintains a Collaboration Agreement with CMAA, the Construction Project Management Association of America, the UK s Chartered Institute of Building (CIOB), and the Project Management Institute (PMI). It oversaw the translation into Spanish of the ISO International Organization for Standardization s ISO Guidelines for Project Management, and represents Spain at CEN, the European Committee for Standardization (TC395) in matters related to rules of Project Management. The MADRID WORLDWIDE ENGINEERING CENTER (MCMI) is an ambitious project integrating global engineering. TECNIBERIA and a few of its regional associations are its main promoters. The project aims to extend the industry a leading role with maximum visibility where its voice can be heard before all representatives of finance and the community. The Project will promote coordinated initiatives, in three levels of performance, in order to achieve three basic objectives: Create a Permanent International Forum, headquartered in Madrid, to monitor engineering consulting and innovation worldwide. Establish an International Polytechnic Center of excellence in training and research that prepares new engineers for direct entry into the business world and assists them in finding work. Promote an International Technology Center for Innovation and Development that seeks out effective solutions for the advancement of humanity.

8 Foreign Trade three The engineering consulting industry is listed in the National Classification of Economic Activities (CNAE) under group 71: Technical architectural and engineering services; technical trials and analyses. Information taken from the SABI database (Iberian Balance Sheet Analysis System) indicates that the majority of companies (93.5%) do not do any type of business abroad. While only 6.5% do, it should be noted that that is one percentage point higher than in Companies that both import and export are responsible for most of the increase, 2.3% in 2008 to 2.8% in Those companies that only export also increased their share of the total, although just slightly more than a tenth of a percent (from 2.62% to 2.76%), while companies that import only were up by nearly 3 tenths (0.67% to 0.94%). This improvement is confirmed in data from members of TECNIBERIA that indicates a 5% increase in the volume of foreign turnover (2.5 billion in 2009 to nearly 2.7 billion in 2010). Foreign Turnover (In millions Euros) 2.690, , In millions of Euros Source: TECNIBERIA Revenue from Spanish engineering consulting companies business activities abroad comes mainly from the private sector (88.4%), while 11.6% is from the public sector.

9 Distribution of overseas business by market Public 11,62% Private 88,38% Source: TECNIBERIA According to the latest available data by destination country, Algeria and Mexico clearly stand out with more than half (55%) of the turnover from abroad. They are followed by Lithuania with 14.6%, Australia with 9.6%, the Arab Emirates with 4.1% and Colombia with 3.5%. Countries with less than 2% include Italy (1.75%), Saudi Arabia (1.35%), the U.S. (1.3%) and Portugal (0.83%). Main Countries by volume of business ALGERIA MEXICO LITHUANIA AUSTRALIA U.A.E. COLOMBIA ITALY SAUDI ARABIA USA PORTUGAL REST 14,57% 9,60% 4,10% 3,51% 1,75% 7,94% 11,42% 27,24% 27,80% 0,83% 1,30% 1,35% (Source: TECNIBERIA) The business activity that produced the most income abroad for Spanish engineering companies was, by a large margin, industrial energy, with more than three quarters of the total (76.2%), almost entirely from the private sector (97.6%). It is followed, in volume of business, by the environmental field with 10.8%, again mainly from the private sector (95.5%) and civil engineering with 9.3%, although in this case more than two thirds of total turnover (68.3%) came from the public sector. (Source: TECNIBERIA)

10 Finally, completing the total, are construction and urban planning (3.5%), clearly commanding the public sector (86.2%) and technology services, with 0.21%, mostly from the private sector (62.8%). (Source: TECNIBERIA) VOLUME OF FOREIGN BUSINESS Year 2010 Source: Tecniberia 1 Algeria 740,007,084 2 Mexico 735,251,434 3 Lithuania 388,374,497 4 Australia 254,033,986 5 U.A.E 113,493,681 6 Colombia 92,881,176 7 USA 54,647,436 8 Italy 50,417,512 9 Saudi Arabia 35,723, United Kingdom 31,500, Portugal 31,084, Francie 24,497, China 23,679, Belgium 23,639, Poland 21,625, Venezuela 21,553, Chile 18,894, Brazil 17,000, Croatia 16,465, Ireland 16,050, Philippines 15,290, Jordan 15,250, Nigeria 15,200, India 15,182, Germany 15,071, Cameroon 11,157, Dominican Rep. 11,030,000 TOTAL 10 TOP COUNTRIES 2,496,330,335 TOTAL ALL COUNTRIES 2,809,000,000 Engineering Consulting Industry

11 Conferences, Forums and Fairs four CONFERENCE FIDIC Centenary Conference 2013 Barcelona (Spain) CONFERENCE CONAMA National Environment Conference Madrid (Spain) CONFERENCE WCE 2012 World Congress on Engineering London (United Kingdom) FORUM VI World Water Forum 2012 Marseille (France) FAIR WindPower 2013 Chicago (USA) FAIR UIC HIGHSPEED 2012 Philadelphia (United States) FAIR InnoTrans 2012 Berlín (Germany)

12 CONFERENCE AP-CON 2012 Central American and Caribbean Project Management Conference San José (Costa Rica) FAIR MIPIM Cannes (France) Addresses of interest five TECNIBERIA Spanish Association of Engineering, Consulting and Technology Services Companies AEDIP Spanish Association of Integrated Project Management MCMI Madrid Worldwide Engineering Center

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