Cover Story... CompaniesBy Richard Korman

One of the most inter-national of firms thrivesin world's hot spots

Berger Group, the big design and development consultant

known for working in poor nations, found itself in unusual

company this spring when the Bush administration was

picking reconstruction contractors to work in Iraq. In news

stories identifyiI1g contenders for the contract, which Ber-ger did not win, the company was re-ferred to as one of the U.S.'s "Big Five."The other companies were Bechtel, Flu-or, Halliburton and Washington Group.

That tickled Derish M. Wolff, the 68-year-old chairman of Berger Group,partly because he lmew that with totalrevenue of $443 million a year, his com-pany is much smaller than Bechtel or

I Fluor, and that its place on the list was

owed to deep international experience,not size. During a news conference, theadministrator of the U.S. Agency forInternational Development, Andrew S.Natsios, pointed to Berger's use of localcontractors while rebuilding a key high-way in war-ravaged Mghanistan as anexample of how the Iraqi jobs should bedone.

But the publicity also signified thatBerger's services in nation building-consulting to promote economic growth,self-sufficiency and stable institutions-was in demand and high on the Bush ad-ministration's agenda. Berger's portfoliois full of nation building assignments that,in recent years, have included convertingformer Muslim insurgents in the Philip-pines into business-minded farmers.

A critical part of Berger's strategy hasbeen to cultivate contacts in the develop-ing world, which requires the engineer tohold its own with heads of state and Har-vard-educated government technocrats.The firm has worked regularly for inter-national financial institutions and govern-ment aid agencies in places torn by warand civil strife, including the Balkans. Butsince Sept. 11, 2001, nation building hasa new urgency. "I never dreamt it wouldbe an attractive market in the post-ColdWar period," says Wolff.

In fact, the East Orange, N J .-basedcompany has turned its work in diceycorners of the world into a stable, low- ~margin business, recording fewer write- iA Frequent Flyer. Fredric Berger followed his father's path in building a global practice.

26 .ENR .July 28, 2003

became more experienced, Berger facednew corporate competitors and had touse more freelance consultants to holddown costs. This allowed the company tobill out for almost every hour and ex-pense associated with its work, an envi-able model but one that required closeoversight by veterans.

The biggest challenge today, says

'" One Brick at a Time. Community-chosenproject in Nigeria, run by Berger, is designed toreduce poverty and social tension there.

offs than on its higher-margin domesticdesign and consulting. Berger has invest-ed its profits in new domestic ventures.These include VMS Inc., a Richmond,Va., joint venture formed in 1995 thatperforms outsourced transportationoperations and maintenance. Berger hasalso bought well-known design firms,including the 1994 acquisition of bridgedesigner Ammann & Whitney, New YorkCity, which was in financial trouble, andlast year's acquisition of a stadium and

~ arena architect now known as Berger~ Devine Yaeger, Kansas City, Mo.~ The story begins 50 years ago with~ Louis Berger, a Ph.D. soil and founda-

tions engineer from Lawrence, Mass.When federal highway spending began

w to slow in 1959, he turned his domestic~ transportation design practice into one'" concentrated in overseas projects.

Berger copied the heavy customer ser-~ vice style of an engineering rival, New

York City-based TAMS, to win in that

same year the Rangoon-to-Mandalayroad in present-day Myanmar.

The globe-trotting Berger, known tomany as "Doc," spent much time on theroad during much of the next twodecades. But he also found time to culti-vate tWo heirs apparent. One is nephewWolff, a prolific storyteller who says he"has a theory on everything." The otheris Berger's son, Fredric S. Berger,now 56, a passionate and worldlyengineer whose bowties give himan academic air. They, too, tookto the road developing close con-tacts in far-off lands, includingSouth America. Most often, thefirm put together studies thatrequired a combination of eco-nomic forecasting and engineer-ing feasibility, and that often ledto design contracts.

With almost all its work com-ing from overseas, Berger calledon staff with backgrounds indevelopment, languages andoverseas service, such as thePeace Corps. In the 1980s, as they

..Risk? Wolff says foreign work is reliably profitable.

July 28, 2003 .ENR .27

Cover Story ..Companies

government client may force the firm towait as long as nine months for the firstpayment, the flow of money is usually asreliable as on a U.S.-funded job and canlast for years, says Wolff. Overseas eco-nomic and feasibility studies only provideprofit margins of a percentage or tWo, butthose from domestic transportationdepartments, airports and environmentalconsulting are more than tWice as high.

Berger makes good use of its money,turning its capital eight times a year, saysWolff. A profit of 2% gives it a 16%after-tax return on capital. Wolff andBerger together own slightly more thanhalf of the company. (The next-biggeststockholder is Fran~ois Farhi, who builtup its African consulting practice.)

Fredric Berger treats the company'swork as a cause, serves in many volunteerpositions and is openly critical of someBush administration and World Bankpolicies. He contends that a key bankproblem is an in-bred culture that per-forms much research never made public.

Berger Group may be opinionatedbut its employees also know customerservice. "What I like...was that it was oneof four companies you could pick up aphone to and get thoughtful advicefrom," says J. Joseph Grandmaison, adirector of the U.S. Export-ImportBank who worked with Berger while

~

~

~2~~'"~I

..Next Generation. MaslJcci is new Berger CEO.

in charge of the U.S. Trade & Develop-ment Agency.

That customer focus won't changeanytime soon, even as a new generationenters the firm's top ranks. Wolff lastyear gave up his chief executive title toNicholas J. Masucci, who started theVMS venture and has concentratedmostly on domestic work. Chief Operat-ing Officer Michel Jichlinski has muchoverseas experience.

So-called pure engineers try to chideBerger for doing studies of rice paddies.But the firm's domestic acquisitions haveadded depth, and it is a partner on bigdomestic and international transporta-tion design jobs. Berger also does signif-icant aviation design, environmental con-sulting and program management.

But the firm's cultural fluency remainsits core. One recent TV news commen-tator noted that "building democracy canbe good for the bottom line." Berger isbusiness savvy but prefers to portray itsstaff as idealistic hero-engineers.

And to some extent, they are. Onecurrent hero is Charles Feibel, who head-ed the Filipino project involving theMuslim fighters. He "brought all of hisskills from the U.S as well as internation-al sensitivity" to the task, says Masucci.While details about crops or rural infra-structure change with each job, says iFeibel, U.S. policy and Berger's services ~are based on the same idea: "People fight ~for many reasons, but at the end of the ~day they must have incomes to support 8

their families." 8

...Hot Spot Hero. Engineer Feibel helped turnFilipino rebels into self-sufficient farmers.

Wolff, is making sure Berger doesn't puttogether a design team when a feasibilitystudy still is needed, or vice versa. It alsomust make sure that its freelance consul-tants don't start applying theories thatdiffer from Berger's core approach.

"They exploit top experts that float inthe world market and get to know whichto trust and which will work right, and ithelps them in pricing," says Richard Fox,president of Cambridge, Mass.-basedCOM. Berger also opened small officesin many places. "It used to amaze methat in every little corner of the worldthere was a Berger office," says GerrySchwartz, a retired Jacobs Engineeringexecutive and former president of theAmerican Society of Civil Engineers.

Consulting services that Berger is will-ing to perform can go far beyond tradi-tional engineering and feasibility studies.In Mghanistan earlier this year, the U.S.and Mghan governments hired Berger tocollect existing paper money, incinerate itand replace it with new national currency.

Wolff emphasizes the work is notalways risky and low profit. "We debatethat with our auditors when it comes toreserves," he says. When the client is aninternational bank or U.S. aid agency, thepayment risk is small. While a foreign

28 .ENR .July 28, 2003

Editorials...

..I

We believe there is much to belearned from firms like Berger.

Fredric S. Berger, speaking ofhis first year in Nigeria, says that

he began to makeprogress "when Istopped ttying toexplain Nigeria inAmerican termsand let Nigeria ex-plain itself to me."That is somethingnot every nation-

building "expert"working in thesenations under-stands. Nation

building ultimately will not beimposed by the U.S. It will be cho-sen and expressed by people of thecountry itself. 8

The Berger Group's portfolio reads like the autobiography ofa footloose soldier of fortune, with stops in such places asKampala, Uganda, and Mogadishu, Somalia. There was aland registration program in Nicaragua, infrastructure

reconstruction and refomls in the ! raise human life

former republics of Yugoslavia, and above mere subsis-consultant and contractor selection tence.for reconstruction in the rnisery- Now, U.S. andravaged Democratic Republic of international ti-the Congo. I nancial institu-

But unlike soldiers of fortune, tions are workingBerger and its competitors serve to ease the suffer-as agents of technology transfer, ing in third-worldworking themselves out of a job by hotbeds of povertytraining people to be self-suffi- and chaos, now arecient. And they bring out the recognized as themeaning in the words civil engi- breeding grounds for terrorism.neering, making possible the func- But reconstruction efforts in placestioning of a civil society by putting like Afghanistan and Iraq haveinto place the vital infrastructure to been criticized for their failures.

client base may be unfamiliar.Do not expect an instant return.

In the Top 500 Design Firms issue,Henry Mann, CEO of Perkins &Will, the huge and powerful Amer-ican architectural firm, noted thathis firm had been in China for sixyears before their investment paidmajor dividends (ENR 4/21 p. 79).

Not every design firm has the ~patience and resources to wait for ~such a payout down the road. If ~you are a design firm looking to ~score big in the international mar- ~ket, remember, it takes an awful lot ~of panning to produce a pound of ~gold dust. .f

s can be seen from me ENR viding profit/loss data lost moneyTop 200 International De- in me international design market

Firms survey (p. 30), in 2002. This is nearly a mree-foldworld economic uncertainties and increase over 2001, when only 12political tensions have not serious- companies noted losses abroad.ly impacted design opportUnities. For companies considering div-

However, venturing form into j ing into me international marketI tak wfull f .as an answer to domestic

t es an a ot 0 pannIng to concerns, first picture what

produce a pound of gold dust. it takes to establish a newsatellite office in anomer

city or region in your home coun-try. Multiply mese difficulties byme prospect of opening mat officein a new country- where me lan-guage, customs, legal frameworkfor operating, players and potential

the international market is noinstant solution to stagnant mar-kets at home. One interesting sta-tistic from the ENR internationalsurvey shows that 32 of the 172design firms on the Top 200 pro-

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