Companies Eyeing Surge in Contracts

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The catastrophic collapse of a Minneapolis bridge this month that killed at least seven people is proving to be an unexpected boost to several local engineering and construction companies.


With government officials rushing to roll out contracts to shore up the nation’s deteriorating infrastructure, companies ranging from engineering giant Jacobs Engineering Group Inc., to construction manager Aecom Technology Corp. to tiny Material Technologies Inc., which makes a cutting edge device to test metal fatigue in bridges, are expecting to get their share of a spending boom that could top $100 billion.


“Certainly there’s been a renewed focus on the entire sector and it has pointed out the dire need for improved infrastructure in the United States,” said Michael Burke, chief financial officer of Los Angeles-based Aecom. “Sad to say, the tragedy in Minneapolis just highlighted the need for some long overdue upkeep.”


Indeed, Parsons Corp., the large Pasadena-based engineering firm, has already been included by the Minnesota Department of Transportation on the short list of firms for a contract that could be worth $350 million to replace the failed Interstate 35W Mississippi River bridge. Parsons is a member of a consortium that includes two construction companies and a construction management firm. Minnesota officials hope to award the contract by Labor Day.


But with the collapse highlighting the deficient state of the nation’s bridges and other infrastructure, far more spending is almost certainly on the way.


Federal, state and local governments combined approved $265 billion in infrastructure funding in 2005, but that still falls well short of the $1.6 trillion the American Society of Civil Engineers estimates is needed to bring the country’s roads and bridges into good condition.


Sen. Hillary Clinton, D-N.Y., last week called for emergency infrastructure funding of $10 billion to repair the country’s bridges that have been deemed structurally deficient by the Federal Highway Administration.


In California alone, voters passed a $20 billon bond measure last November, of which $125 million is slated for seismic retrofitting of bridges. And Gov. Arnold Schwarzenegger has plans for additional infrastructure bonds that will surely be boosted by the collapse.


Wall Street has been far from oblivious to the implications to public companies in the sector. In the weeks following the tragedy, stocks of construction and engineering firms have soared both locally and nationally.


The Construction and Engineering Sector of the LABJ Index of 200 selected Los Angeles County stocks led all industries, surging 8.7 percent in the week ended Aug. 8. Among the winners: Shares of Jacobs rose 7.8 percent, while Aecom rose 6.9 percent.


Jacobs issued a statement last week saying the company is “prepared to provide any assistance that (the Minnesota Department of Transportation) or other authorities involved in the investigation of this tragic incident may require.”


Keybanc Capital Markets senior analyst Tahira Afzal said she expects a number of infrastructure stocks to keep climbing as a result of the increased interest in the country’s roads and bridges.


“These stocks are going to be favorably impacted moving forward as long as the hype surrounding the bridge collapse continues,” she said.



Inspecting metal

It will likely be months before investigators determine the cause of the collapse, but already speculation has emerged that the gusset plates steel pieces used on many bridges to connect girders may have failed.


In any case, the collapse is one of the most high-profile disasters in a long history of bridge failures. In the past four decades, there have been over 1,000 such incidents, including the 1983 collapse of a portion of the Interstate 95 bridge in Connecticut.


The nation’s 600,000 bridges, of which 190,000 are metal, are required to be inspected every two years, but many of them are done visually or with minimal instrumentation, and as of 2005 about 75,000 of them were rated structurally deficient.


Material Technologies, which makes devices that simplify the testing of metal fatigue and were only brought to market in the past year, has found that its new technology is attracting strong interest.


Two days after the bridge collapse, the company announced that a group of European institutional investors, led by Julius Baer Asset Management of Zurich, Switzerland, and Anima Funds of Milan, Italy, has invested an undisclosed amount.


And the company, which has been marketing itself to state transportation departments, said at least five states have inquired about its technology in the past two weeks.


“I sincerely believe this is going to explode for us in a favorable way,” said Chief Executive Robert Bernstein. “I have said many, many times it’s going to take a tragedy to wake up the DOTs to look at more legitimate, effective technologies to prevent tragedies.”


The company’s stock, which for weeks had been trading at just over a dollar, nearly doubled in the days following the incident. It dropped to around $1.50 last week, but analysts polled by Bloomberg News expect the company’s stock to reach $3.60 within the next year.


“Bottom line: The news is good,” he said in a letter to stockholders last week. “It has been an eventful week for our industry, with the tragic highway bridge collapse in Minneapolis raising fresh concerns about the safety of bridges all over the nation and generating significant media attention for us.”

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