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As Projects Get Larger, Scale Reigns Supreme

In all markets, size matters. Big construction projects continue to get bigger, and only large-scale companies are credible bidders for such ambitious undertakings. The industry is quite fragmented currently, which is driving the need for consolidation and M&A.

Scale is self-reinforcing: market share leaders use their scale to increase their leads over their rivals. Economies of scale can provide a pricing edge, and with scale comes depth and breadth of expertise and the ability to mobilize resources quickly when a new megaproject beckons.

The hefty balance sheets of the largest engineering and construction companies also enable them to take on projects that pose greater risk because of their size or their fixed-price terms, and the largest companies have the wherewithal to provide financing when necessary. Scale also implies a depth of experience that’s reflected in improved execution. What’s more, scale might be the best bankruptcy insurance available: companies with diverse projects in multiple markets are the least likely to capsize in unforeseen turbulence.

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