CH2M Hill says latest restructure will cost up to $70 million

US-based construction management company CH2M Hill says its second major restructuring plan in two years will lead to it incurring costs of up to US$70 million.
In delayed filings accompanying its 2016 third-quarter results, the company said that the costs would be incurred “primarily for severance benefits for affected employees and facilities consolidation costs” as it moves away from a structure organised around four business segments – energy and industrial, environmental and nuclear, water and transport – to one focused on three client groups representing national governments, local and quasi-government bodies and private sector clients.
The company has said that it expects its new operating model to generate savings of $90m to $100m per year.
The latest restructuring follows on from an earlier round announced in September 2014 that continued throughout 2015, resulting in $131m of charges being booked against restructuring activities, according to its 2015 annual report.
That programme involved an attempt to reduce its global headcount by 1,200 staff through voluntary retirement and workforce-reduction programmes. At the time of its announcement, Neil Reynolds, the company’s Mena and India managing director, said that its Middle East operations, which then employed 2,400 people, would not be affected and that it was actively recruiting as part of a plan to double the size of its workforce by 2020.
On Monday, a spokeswoman for the company said most of the current restructuring involved administrative jobs in the former business groups in North America.
The spokeswoman said the company employs 1,700 people in the region. She said this figure could not be compared with the 2,400 number given in 2014 because the latter included staff who worked for joint ventures and the former does not. A decision was taken to remove these from official employee numbers in 2015, but the company did not reconcile these numbers by region, she said.
She said employment numbers regularly fluctuate not as a result of restructuring but through the delivery of contracts.
“Current staffing specific to the region directly reflects the current work requirements of projects under way in the region,” she said, adding that there had been delays to some projects as a result of the global decline in oil prices since the target of doubling its workforce was mentioned in 2014.
“Given our contractual confidentiality provisions, we cannot disclose projects delayed,” she said.
CH2M reported an operating loss of $108m for the third quarter of 2016, which it attributed to charges against two problem fixed-price contracts – a tollway scheme in central Texas and a power plant in Australia. Year-on-year revenue was also 6 per cent lower at $1.28 billion.
During the quarter, the company also picked up an important win in Dubai as part of the team delivering the 14.5-kilometre Route 2020 extension of Dubai Metro to the Expo 2020 site. It is already managing the delivery of the Expo 2020 site through a joint venture with the British construction management company Mace.
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