Younger firms are using AI to undercut you on price. Your experience is real, but it is not winning the proposal.
What’s happening
AI rendering tools have reduced visualization budgets by 60-80%. Concept development that took 2-3 weeks now takes 2-3 days. One studio increased its competition shortlist rate from 15% to 35% by submitting 8-10 concept variations instead of 2-3 — volume that would have been financially impossible without AI. The cost of competing for work has dropped dramatically for firms that have adopted these tools.
Michael Rustell, CEO of Inframatic.ai, wrote in New Civil Engineer that 'a task that once filled a week can be done in an afternoon,' making hourly billing untenable. Document review, report generation, specification checking, and data extraction — what he calls 'the economic engine of the fee base' for many consultancies — are exactly the tasks AI handles well. The Deltek Clarity study found that firms integrating AI into business development have seen median proposal win rates climb to 50%.
The competitive pressure is compounding. As younger firms win projects, they gain experience. As they gain experience, they move up-market. The price advantage they have today becomes a price-plus-experience advantage tomorrow. ACEC data shows 78% of engineering firms believe AI will positively impact operations, yet 60% lack a documented AI strategy. The firms without a strategy are the ones losing to firms that have one.
Why the obvious responses don’t work
“Match competitor pricing”
Margin destruction. Your cost structure — experienced staff, established offices, professional liability insurance — is fundamentally higher than a five-person firm working with AI. Matching their price means operating at a loss on every project.
“Emphasize experience and reputation”
Reputation alone does not justify 2x pricing. Clients respect experience, but when the deliverable looks similar on paper, they choose the lower bid. Reputation matters most when the client can see the difference in the output, and for many projects, they cannot.
“Invest in the same AI tools”
Tools are table stakes. If you and a competitor both use AI-powered design tools, the tools are not the differentiator. The competitor still has a lower cost base, and now you both produce at similar speed.
What’s working instead
Thornton Tomasetti created CORE Studio — an internal incubator that re-platformed the firm's practice around data, computation, and AI. They build custom software and AI tools for both internal use and select external clients, turning engineering expertise into a product. SHoP Architects extended beyond traditional architecture into construction technology, formed a sister construction company, and now offers advisory services in virtual design and construction. These firms are not competing on who can produce drawings cheaper. They are selling engineering intelligence as a distinct offering.
The pattern is the same across every firm that gets this right: they stop optimizing the old model and build new offerings around what AI cannot do. The Workshop is the facilitated day we do this work with you. You leave with 2–3 new offerings, specified and priced. Your team or an implementation partner builds and tests them with named clients.
Other pressures on Engineering Firms
Related reading
You’ve Done the Margin Math. Now What?
Every managing partner knows AI compresses billable hours. Almost none have operationalized the obvious answer: change what you sell.
Sequoia Just Put a Trillion-Dollar Bounty on Your Business
Sequoia Capital told its portfolio companies that the next trillion-dollar company won’t sell software. It will sell the work professional services firms do now.
$15,000
Fixed fee. A full day with your senior team. 2–3 new offerings your team or an implementation partner builds and tests.
Book a Conversation30 minutes with Shawn Yeager. No pitch.