Construction giant Bechtel is moving a large chunk of jobs from Maryland to Virginia, the second time in three years that the company is doing so since Maryland approved economic incentives to keep the corporate giant in the state.
The Silver Line-contractor said last week it would relocate a majority of 1,100 employees from the Frederick office to its Reston headquarters and other offices as part of a global restructuring effort. The timing of the reshuffle has not yet been determined, a company spokeswoman said.
The move is an especially damaging blow to Maryland, which had a long public courtship with Bechtel. The shift comes at a time when the state is vying with its neighbors to attract and retain businesses amid a sputtering local economy.
“Competition has been heightened by the fact that both Maryland and Virginia are suffering from the reductions in federal spending,” said Stephen Fuller, the economist who directs the Center for Regional Analysis at George Mason University.
A string of disappointing jobs reports suggest that the Washington-area’s economic recovery appears to be flagging, dragged down by the struggling government and professional services sectors. The area’s unemployment rate ticked up to 5.2 percent in October, according to government data. And the region is beginning to feel the effects. Northern Virginia now has more empty office space than at any point in the past 25 years.
Bechtel, which employs about 2,000 workers in the Washington area, has long been regarded as a plum catch.
In 2011, Maryland gave the company a $9.5 million loan when Bechtel was considering moving out of the state. One key condition for the loan, which was to be paid out over seven years, was that the company would keep at least 1,250 positions from its power division in Frederick through 2018.
Barely a month after the loan agreement was announced, the company moved 625 jobs to Reston Town Center. At the time, Virginia plied the company with its own deal, delivering $6.5 million in grants.
More recently, Bechtel said it is ready to move another large group of jobs to the Northern Virginia suburb. It has yet to specify how many.
In a letter addressed to Bechtel chief executive Bill Dudley two weeks ago, Maryland Gov. Martin O’Malley (D) asked for a meeting to persuade the company to reconsider.
“We strongly believe that Bechtel is great for Maryland, and that Maryland is great for Bechtel,” O’Malley wrote.
But his effort didn’t work.
Dudley wrote back: “The steps we are taking today are in response to fundamental changes in the global marketplace and the expectations of our current and future customers. Unlike 2011, the decision we face today is not where to best locate our separate Power Business unit; it is how to organize the entire company — across all industry sectors — to best compete and succeed.”
The privately owned company’s global reorganization takes effect in January 2015 and includes the creation of a new infrastructure unit. In the Washington region, Bechtel employees include a mix of engineers, human resources staff and technology workers. Reston is home to the company’s government services unit, which does business with the Energy Department, among others.
Bechtel’s decision to leave was “disappointing and definitely a challenge to the state” not only for the number of jobs lost, but also the quality of the workers, said Karen Glenn Hood, a spokeswoman for Maryland’s Department of Business & Economic Development.
The company’s workforce of highly educated, skilled employees — who earn an average wage of $125,000 — contributed $35 million in tax revenue to Maryland’s coffers between 2011 and 2014, she said.
Maryland is not likely to lose all of that. Many employees are likely to continue to live in Maryland, but some may move over time.
Maryland expects to recover most of the money it gave Bechtel, Glenn Hood said. The state has loaned the company $4 million since 2011, which the state said it would move to recover if the company fails to live up to the loan commitments.
A Bechtel spokeswoman said the company would abide by the provisions of the agreement.
For their part, Virginia officials celebrated their good fortune.
“Bechtel’s recent decision to restructure and potentially move a substantial number of employees to its Fairfax County operation demonstrates Virginia’s continued business leadership position, and its status as a great home to great companies,” Suzanne W. Clark, communications manager for the Virginia Economic Development Partnership, said in an e-mail.
Fuller said he doubted the economic incentives offered by either Maryland or Virginia were enough to ultimately tip the balance in favor of either state.
“It’s expensive for companies to move,” he said. “The grants are often fairly small, so [companies] think of them as frosting on the cake.”
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