The Hourly Rate Is on Trial

I caught the AEC Advisors’ mid-year CEO panel recently with Arcadis, GFT, Ardurra, and Apex. I walked away with a few things I’m still thinking about.

The industry overall is in great shape. Median organic growth is sitting at 9%. Profit margins have climbed to 16%—up from 6% in the mid-90s. There’s a $3.7 trillion US infrastructure gap fueling demand, energy transition projects are accelerating, and reshoring is creating entirely new categories of industrial work. By most measures, this is a historically strong moment for AEC firms and the pipeline behind it looks just as strong.

What stuck with me is the ambition underneath all of that. Because these CEOs aren’t just managing a good market. They’re trying to use this moment to permanently change the economics of their businesses. To build something more durable than a favorable cycle for AEC.

And AI is right in the middle of that conversation as an enabler, not a threat.

The margin story isn’t about the market. It’s about discipline.

One of the more direct moments in the panel came from Ernesto Aguilar at Ardurra. His argument: the industry has been commoditizing itself for decades. Rates haven’t kept pace with the actual value firms deliver. The supply-demand imbalance right now with more work than qualified firms to do it is a rare window to fix that.

The firms taking advantage are raising rates faster than salary inflation. They’re moving away from Time & Materials contracts toward fixed-price and lump-sum models. The logic is simple: if AI makes your team more efficient, T&M passes that efficiency gain back to the client. Fixed-price lets you keep it.

That’s not a small shift. That’s a fundamental rethinking of how AEC firms get paid and a real opportunity for firms that move decisively.

96% of firms haven’t changed their pricing because of AI. That won’t last.

Mike Orth at GFT put a two-to-three year window on it: a collision between firms that compete on cost and firms that compete on value. The cost-based players will use AI to get cheaper. The value-based players will use AI to get better and charge accordingly.

Right now, the industry is in a holding pattern. Most firms are using AI internally for RFP drafting, marketing, and admin workflows and not yet translating that efficiency into their pricing model. That’s fine for now. But it means the firms that figure out the value-based pricing story first will have a significant advantage when the collision happens.

The question isn’t whether your firm is using AI. It’s whether you’re building a business model that captures what AI actually makes possible. The firms that answer that question early are going to be in a very strong position.

The headcount problem is the real conversation

Every CEO on the panel, in some form, said the same thing: the goal is to break the linear relationship between headcount and revenue.

That sounds like a tech talking point, but it’s not. It’s a growth strategy.

The AEC industry is staring down a 40%+ workforce retirement by 2031. The “silver tsunami” isn’t a metaphor anymore, it’s a planning problem. Senior engineers and project managers with decades of institutional knowledge are leaving and there aren’t enough people behind them to fill the gap at the same ratio.

Shawn Doherty at Apex framed it well: AI creates “space” for growth without proportional FTE increases. You can take on more work, respond to more RFPs, and service more clients without adding headcount at the same rate you used to. For firms in growth mode, that’s meaningful.

Heather Polinsky at Arcadis has framed it in terms of capability: the goal isn't just efficiency—it's using AI to strengthen client delivery and create better outcomes, not just faster ones.

But here’s what that actually requires: your knowledge infrastructure has to be in place before the people leave. If your firm’s expertise lives in people’s heads and personal folders, you don’t have a workforce problem. You have an institutional knowledge problem. And AI can’t solve the second one if you haven’t addressed the first.

The talent constraint is real and it makes the window more valuable.

Despite the strong market, multiple panelists acknowledged that growth is being limited by a shrinking pool of qualified engineering talent. Hiring is hard and retention is expensive, but that constraint is exactly what makes operational efficiency such a competitive advantage right now.

The firms that are best positioned aren’t necessarily the ones with the most people. They’re the ones whose people are spending time on the work that actually requires human judgment—client relationships, complex problem-solving, strategy—while AI handles the volume work underneath. That’s not a consolation prize for not being able to hire. It’s a better way to operate.

That reallocation doesn’t happen automatically, though. It requires deliberate workflow design. Most firms aren’t there yet, which means the opportunity is still wide open.

Where this is all heading

The panel closed with near-unanimous agreement on one point: the AEC industry will look fundamentally different in five years. Not incrementally different. Fundamentally different in how work gets delivered and at what scale.

The tone wasn’t cautionary. It was energized. These are CEOs who see what’s coming and want to be the ones shaping it, not reacting to it.

The firms that will lead that transition aren’t necessarily the biggest ones. They’re the ones making decisions now about how they price, how they capture knowledge, and how they structure work so their best people aren’t buried in things a system could handle.

The hourly rate isn’t dead yet. But the CEOs running the most profitable firms in the industry are already building for a world where it doesn’t define them. And right now, the market conditions to make that transition are about as good as they’re going to get.

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