CH2M Hill Ltd.

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CH2M Hill Ltd.

P.O. Box 22508
Denver, Colorado 80222
U.S.A.
(303) 771-0900
Fax: (303) 770-2616

Private Company
Founded: 1946
Employees: 7,030
Sales: $937 million (1996)
SICs: 8711 Engineering Services

CH2M Hill Ltd. is an engineering construction firm with several core services. It operates from offices across the U.S. and Canada, Europe, Asia and South America. The firm offers environmental services, including management of solid, water, and toxic wastes; pollution prevention; regulatory compliance, and risk and ecosystem management. CH2M Hill also specializes in nuclear services, including decontamination and decommissioning of nuclear sites, environmental restoration, toxic and radioactive waste containment, and other engineering services related to nuclear energy or weapons sites. The company is well-known for its water and wastewater operations. CH2M Hill worked on some innovative projects in this area, including early in its history an acclaimed wastewater treatment system that protected scenic Lake Tahoe from pollution and degradation. The company is also active in transportation services—planning, managing, and constructing transit systems, bridges, highways, ports, and airports. CH2M Hill also offers industrial engineering services, including designing facilities for the manufacture of microelectronics. The firm offers a variety of other miscellaneous services as well, such as management consulting and training of personnel, laboratory services, geotechnical engineering, and owning and operating infrastructure projects. Some examples include the company’s consulting relationship with the highway bureau of Vietnam, managing various federal projects at Kelly Air Force Base in San Antonio, Texas, and environmental assessment and support to a U.S. firm operating the first Western style gas station in Kazakhstan. The firm is privately owned by its employees.

Beginnings

CH2M Hill began as the dream of three college students and their professor. Holly Cornell, Jim Howland, and Burke Hayes were all engineering students at Oregon State College in the 1930s. The three were inspired by their civil engineering professor, an Englishman named Fred Merryfield. While still undergraduates, the three discussed with Merryfield combining their abilities in an engineering firm. After graduation, Howland and Hayes did graduate work at MIT, and Cornell at Yale. Merryfield continued to teach at Oregon State. All four were in the military during World War II, but they corresponded and stayed in touch. In January 1946 they gathered in Corvallis, Oregon, and founded the engineering firm Cornell, Howland, Hayes & Merryfield. The four brought diverse but related skills to the new enterprise. Merryfield was an expert at planning for sanitary and hydraulics projects, and had personal and business connections up and down the West Coast. Hayes specialized in electrical engineering, and Howland and Cornell both had worked in hydraulics. Howland also had experience with soil mechanics, and Cornell with structural engineering. Before the year was out, the four original partners brought in two more engineers, Archie Rice and Ralph Roderick. Roderick and Rice both had strong backgrounds in sanitary engineering. Though they became partners on equal footing with the others, their names did not get added to the firm’s. Cornell, Howland, Hayes & Merryfield was already too long. By the end of the 1940s the name was shortened to CH2M, shorthand for the first letters of the founders’ last names.

CH2M’s first projects centered around Oregon’s Wilamette valley. Much of the work was related to water or wastewater. The firm had a competitive advantage in that it had an electrical engineer on staff, and its partners had advanced skills they had learned in graduate school, some unfamiliar to the West Coast. And with the war just over, many cities now had money to spend on engineering projects. CH2M grew quickly, and in just three years completed 200 projects. In 1949 CH2M built itself a new office in Corvallis, and in 1950 opened its first branch office, in Boise, Idaho.

The company’s growth was also spurred by its technological advances. Partner Burke Hayes developed an innovative sewer pump in the 1950s, and this led to much new business. Hayes’ FLOmatcher variable speed pump was designed for areas such as the Pacific Northwest, where a great seasonal variation in rainfall makes a significant difference from summer to winter in the rate of flow a sewerage system must handle. This successful product brought attention to CH2M, and a separate company, General Service Corporation, was founded to market the FLO-matcher. The second innovative product spawned at CH2M was MicroFLOC, a water treatment process that was a significant advance over existing technology. Rice and Roderick, CH2M’s two sanitary engineers, invented MicroFLOC in collaboration with others at the firm. MicroFLOC yielded cleaner water more quickly than other water treatment systems, and soon it was in demand not only in the Northwest but in the East as well.

In spite of its esteemed innovations and growing reputation, CH2M kept its growth relatively moderate during the 1950s and into the 1960s. The company opened a Seattle office in 1960, and another in Portland in 1962. The company took on six more partners around this time. CH2M incorporated in 1966, so that ownership could more easily be spread between the growing number of partners. Meanwhile, the company was taking on bigger profile projects. In 1965 CH2M began work on a waste-water treatment facility for Lake Tahoe, the scenic lake in the Sierra Nevada mountains between California and Nevada. CH2M took on this project in collaboration with a California engineering firm, Clair A. Hill & Associates. The two companies combined their efforts to construct one of the most advanced wastewater treatment systems of the time. It reduced wastewater discharge to near drinking water quality, and prevented water quality decline in the lake much beloved by tourists. This led to a similar project in Virginia, and a bigger national presence. The collaboration with Clair A. Hill & Associates proved fruitful too. The two companies had worked together on other projects in California, where Hill was a well-known company responsible for major projects, from irrigation, electrical, and sewerage projects to the construction of an entire town. Both firms were expanding, though CH2M, with 300 employees by 1969, was twice as big as Clair A. Hill & Associates. The two companies formally merged in 1971, and the new name became CH2M Hill Ltd.

National and International Expansion in the 1970s

CH2M Hill began to penetrate the East Coast in the 1970s, establishing an office in Reston, Virginia in 1971. The company took on work abroad as well, such as managing the expansion of Trinidad’s water supply system. Though its projects were not all water-related, it was best known for its water and sewerage projects, and its reputation was strongest in the western U.S. It had gained work in California and Alaska after the acquisition of Clair A. Hill, and in the mid-1970s formed two subsidiaries, CH2M Hill Alaska and CH2M Hill Canada Ltd. To enhance its growth on the other side of the continent, CH2M Hill acquired Black Crow & Eidsness in 1977, an engineering firm based in Gainesville, Florida. Black Crow & Eidsness specialized in environmental engineering and water and wastewater projects. The firm had 200 employees, with seven offices throughout the Southeast, and branches in Philadelphia and Rochester, New York. It had constructed an award-winning zero discharge water treatment plant in St. Petersburg, Florida, and designed and constructed dozens of others across the Southeast.

By 1978, CH2M Hill had billings of over $50 million and had become the lOth-largest engineering firm in the country. The firm’s original president, James Howland, had stepped down after 30 years, and another founding partner, Holly Cornell, ran the company as a “transitional president” until a replacement could be found. Though Cornell saw CH2M through its successful merger with Black Crow & Eidsness, he was not interested in running the company much longer. In 1978, CH2M Hill got its first president from outside the small group that had started the company. Harían E. Moyer announced he would take the firm in a new direction, capitalizing on blossoming opportunities in the field of energy. The year Moyer took over, CH2M was awarded a Grand Conceptor award from the American Consulting Engineers Council for its design of a bio-gas plant in Colorado. The plant processed cattle manure into methane, replacing half the natural gas needs at the local power plant. The methane plant used many of CH2M’s proven skills in water and waste treatment. Wastewater was recycled through algae ponds, and the algae itself could then be harvested as a protein source. Waste solids from the manure were recycled into fertilizer or feed supplement. Waste heat from the power plant fueled the algae ponds. CH2M also worked closely with the Environmental Protection Agency (EPA) in the late 1970s, managing wastewater projects in California, Idaho, Oregon, and elsewhere. Eventually, cleaning up waste ended up being more of a new direction for CH2M than the energy projects president Harían Moyer had predicted.

Environmental Projects in the 1980s

CH2M Hill’s reputation for expertise in wastewater treatment led to some very large projects in the 1980s. The company took on the role of prime consultant in 1980 for a $1.4 billion project to abate water pollution for the city of Milwaukee. Also in 1980 CH2M Hill won a contract with the EPA to identify hazardous waste sites. Two years later, the company became the manager of the so-called “Superfund” across the western United States. Superfund was created by Congress in 1980 to provide money for cleaning up the most pressing toxic and hazardous waste sites such as defunct weapons plants and abandoned industrial zones. CH2M Hill was in charge of $89 million in Superfund money, and was from the start one of a handful of engineering firms given primary Superfund contracts. As it took on more and more environmental clean-up work, CH2M saw its sales and profits rise. Between 1985 and 1987 alone, the company’s sales were up 25 percent, and profits up a whopping 82 percent. By the late 1980s, CH2M Hill was the largest environmental engineering firm in the United States.

Company Perspectives:

CH2M HILL helps public and private clients worldwide realize a greater return on their investments in environmental technology and sustainable infrastructure. Our business involves project development, engineering and management of water, environmental and transportation infrastructure, as well as the design and construction of industrial facilities. Because the firm is employee-owned, each of the 7,000 men and women of CH2M HILL has a personal stake in the organization’s success. This means that each of our clients can expect quality service and personal attention from the CH2M HILL employees who serve them from nearby locations on six continents.

Responsibility for large projects and large budgets definitely had its drawbacks for the company, however. The water pollution project in Milwaukee the company had picked up in 1980 took most of the decade to complete. In 1988, three managers for one of CH2M’s subcontractors on the project died in a gas explosion in a sewer tunnel. Workers for the subcontractor, S.A. Healy Co. of Chicago, found methane while boring a cross-town tunnel. The tunnel was evacuated, but not all the equipment was shut down, and three managers returned to check the site less than an hour after the evacuation. The three were killed, and both S.A. Healy Co. and CH2M Hill were charged with willful safety violations by the Occupational Safety and Health Administration (OSHA). Several months after the incident, Labor Secretary Elizabeth Dole publicly announced she was asking the Justice Department to bring criminal charges against CH2M Hill. The criminal charges were not ultimately brought, and OSHA’s fine was overturned, but not until 1993. CH2M argued that it was responsible for the design of the sewer project, but was not in control of day-to-day construction work, and so won its appeal of the fine. Nevertheless, the company was saddled with the bad press for the accident.

In another case too, CH2M Hill found itself badgered and accused quite publicly, this time for cost overruns. The company had been in charge of Superfund money since the fund’s inception, and ended up the largest single contractor in the Alternative Remedial Contracting Strategy (ARCS) program, with several contracts worth a total of $880 million. After an audit of the company’s spending between 1987 and 1990, CH2M Hill was raked over the coals in a Congressional hearing. The public hearing brought to light questionable billing, such as for employee fishing licenses, for chocolates embossed with the company logo, and for a catered cruise. The congressman leading the hearings insisted that CH2M Hill had billed taxpayers for these items. In reality, billing was complicated, and regulation of expenses had not always been clear. Changes in billing regulations after the hearings were in some ways beneficial to CH2M Hill, but the media exposure was certainly a sour experience for the company.

The 1990s

At the beginning of the 1990s, CH2M Hill had grown to a company with 5,000 employees and annual revenue close to $500 million. The firm got a new president in 1991, Ralph R. Peterson. The company restructured in the early 1990s, after a long process of canvassing clients and employees for suggestions. Management was centralized from five district offices to just two. The company had operated five subsidiary companies, and its largest was streamlined to concentrate on only three lines of business. While consolidating its business at home, CH2M also expanded into more projects overseas. In 1991 it formed a joint venture with an Australian company, Gutteridge, Haskins & Davey, to handle the growing market in water and waste-water treatment in Australia. CH2M Hill took on a variety of other international projects in the 1990s. In another joint venture, it began a project to treat wastewater in the Chao Phraya River, which flows into Bangkok, Thailand. In a similar project, CH2M Hill worked with researchers at the University of Cincinnati to build a waste treatment plant at Lake Balaton, outside Budapest, Hungary. Also in Hungary, the company designed and built a wastewater treatment facility for a new Coca-Cola bottling plant. CH2M Hill, in addition, became a primary contractor for the Environmental Policy and Technology Project, an arm of the U.S. Agency for International Development. Through this project, CH2M researched environmentally sound ways to manage the forests of Russia’s far east. In a similar project, CH2M also ran a demonstration plant in Tianjin, China, managing hazardous and toxic waste from new industries.

In 1996 the company grossed a record-breaking $937 million. A significant portion of its billings came from overseas projects. Large overseas projects in the late 1990s included construction in Malaysia in conjunction with a telecommunications improvement project run by U.S. West, and overseeing environmental cleanup in the New Independent States of the former Soviet Union. The company ventured in some new directions, too. Though many of its projects still centered around water treatment and environmental engineering, CH2M also worked in industrial design, helping a consortium of flat panel manufacturers reduce operating costs. The company continued to work on large environmental projects in the U.S. as well. Some included closing the U.S. Department of Energy’s Rocky Flats, a former atomic bomb test site, and designing a plan to recycle the toxic glycol used to de-ice planes at Dayton International Airport.