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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549



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FORM 10-Q



|x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ---------------------------------------------------------------------------------------

For the Quarterly Period Ended December 31, 2005

OR



| ̈ | TRANSITION REPORT PURSUANT TO SECTION 12(g) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ----------------------------------------------------------------------------------

For the transition period from  to

Commission File Number 0-30911

THE PBSJ CORPORATION

(Exact name of Registrant as specified in its charter)



|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|Florida                                                        |  | 59-1494168                          
|(State or other jurisdiction of Incorporation or organization) |  | (I.R.S. Employer Identification No.)

5300 West Cypress Street, Suite 200

Tampa, Florida 33607

(Address of principal executive offices)

(813) 282-7275

(Registrants telephone number, including area code)



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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ̈Yes    x No

Indicate by check
mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of accelerated filer and large accelerated filer in Rule 12b-2 of the Exchange Act. (Check one):

 ̈Large accelerated
filer ̈Accelerated
filer            x  Non-accelerated filer

Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Act). ̈Yes    x No

As of April 30, 2007 there were 6,668,606 shares of Common Stock, $.00067 par
value per share, outstanding. There is no public trading market for the registrants common stock.



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##### Table of Contents

THE PBSJ CORPORATION

Form 10-Q

For the Quarterly Period Ended December 31, 2005

Table of Contents



|           |  |                                                                                       |  |     
|---------- |  | ------------------------------------------------------------------------------------- |  | ----
|ItemNumber |  | CAPTION                                                                               |  | PAGE
|PART I:    |  | FINANCIAL INFORMATION                                                                 |  |     
|           |  |                                                                                      
|Item 1.    |  | Financial Statements                                                                  |  | 3   
|           |  |                                                                                      
|Item 2.    |  | Managements Discussion and Analysis of Financial Condition and Results of Operations |  | 20  
|           |  |                                                                                      
|Item 3.    |  | Quantitative and Qualitative Disclosures about Market Risk                            |  | 38  
|           |  |                                                                                      
|Item 4.    |  | Controls and Procedures                                                               |  | 39  
|           |  |                                                                                      
|PART II:   |  | OTHER INFORMATION                                                                     |  |     
|           |  |                                                                                      
|Item 1.    |  | Legal proceedings                                                                     |  | 41  
|           |  |                                                                                      
|Item 1A.   |  | Risk Factors                                                                          |  | 44  
|           |  |                                                                                      
|Item 2.    |  | Issuer Purchases of Equity Securities by Issuer and Affiliated Purchasers             |  | 48  
|           |  |                                                                                      
|Item 3.    |  | Defaults Upon Senior Securities                                                       |  | 48  
|           |  |                                                                                      
|Item 4.    |  | Submission of Matters to a Vote of Security Holders                                   |  | 48  
|           |  |                                                                                      
|Item 5.    |  | Other Information                                                                     |  | 48  
|           |  |                                                                                      
|Item 6.    |  | Exhibits                                                                              |  | 48  
|           | 
|SIGNATURES |  | 49                                                                                   



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##### Table of Contents

PART 1 FINANCIAL INFORMATION



|Item 1. | Financial Statements
|------- | --------------------

THE PBSJ CORPORATION

Condensed Consolidated Balance Sheets (Unaudited)



|                                                                                                                                                                                |  |                  |         |   |                   |   |         |  
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---------------- | ------- | - | ----------------- | - | ------- | -
|(Amounts in thousands, except shares and per share amounts)                                                                                                                     |  | December 31,2005 |         |   | September 30,2005 |  
|Assets                                                                                                                                                                          |  |                  |         |   |                   |   |         |  
|Current Assets:                                                                                                                                                                 |  |                  |         |   |                   |   |         |  
|Cash and cash equivalents                                                                                                                                                       |  | $                | 7,508   |   |                   | $ | 22,556  |  
|Marketable securities at fair value                                                                                                                                             |  |                  | 650     |   |                   |   | 636     |  
|Accounts receivable, net                                                                                                                                                        |  |                  | 70,726  |   |                   |   | 67,493  |  
|Unbilled fees                                                                                                                                                                   |  |                  | 65,551  |   |                   |   | 69,658  |  
|Assets held for sale                                                                                                                                                            |  |                  | 8,859   |   |                   |   | 9,289   |  
|Shareholder subscription receivable                                                                                                                                             |  |                  |        |   |                   |   | 4,276   |  
|Other current assets                                                                                                                                                            |  |                  | 6,727   |   |                   |   | 2,039   |  
|                                                                                                                                                                                |  |                  |         |   |                   |   |         |  
|Total current assets                                                                                                                                                            |  |                  | 160,021 |   |                   |   | 175,947 |  
|Property and equipment, net                                                                                                                                                     |  |                  | 36,501  |   |                   |   | 36,741  |  
|Cash surrender value of life insurance                                                                                                                                          |  |                  | 9,260   |   |                   |   | 9,602   |  
|Deferred income taxes                                                                                                                                                           |  |                  | 9,595   |   |                   |   | 4,817   |  
|Goodwill                                                                                                                                                                        |  |                  | 17,777  |   |                   |   | 17,736  |  
|Intangible assets, net                                                                                                                                                          |  |                  | 1,470   |   |                   |   | 1,820   |  
|Other assets                                                                                                                                                                    |  |                  | 1,295   |   |                   |   | 4,984   |  
|                                                                                                                                                                                |  |                  |         |   |                   |   |         |  
|Total assets                                                                                                                                                                    |  | $                | 235,919 |   |                   | $ | 251,647 |  
|                                                                                                                                                                                |  |                  |         |   |                   |   |         |  
|Liabilities and Stockholders Equity                                                                                                                                            |  |                  |         |   |                   |   |         |  
|Current Liabilities:                                                                                                                                                            |  |                  |         |   |                   |   |         |  
|Accounts payable and accrued expenses                                                                                                                                           |  | $                | 59,461  |   |                   | $ | 84,223  |  
|Liabilities related to assets held for sale                                                                                                                                     |  |                  | 4,606   |   |                   |   | 4,627   |  
|Accrued reimbursement liability                                                                                                                                                 |  |                  | 35,341  |   |                   |   | 34,772  |  
|Current portion of long-term debt                                                                                                                                               |  |                  | 460     |   |                   |   | 408     |  
|Current portion of capital leases                                                                                                                                               |  |                  | 274     |   |                   |   | 341     |  
|Accrued vacation                                                                                                                                                                |  |                  | 8,591   |   |                   |   | 10,163  |  
|Billings in excess of costs                                                                                                                                                     |  |                  | 3,668   |   |                   |   | 3,339   |  
|Deferred income taxes                                                                                                                                                           |  |                  | 23,058  |   |                   |   | 7,568   |  
|                                                                                                                                                                                |  |                  |         |   |                   |   |         |  
|Total current liabilities                                                                                                                                                       |  |                  | 135,459 |   |                   |   | 145,441 |  
|Long-term debt, less current portion                                                                                                                                            |  |                  | 7,297   |   |                   |   | 7,425   |  
|Capital leases, less current portion                                                                                                                                            |  |                  | 628     |   |                   |   | 512     |  
|Deferred compensation                                                                                                                                                           |  |                  | 12,209  |   |                   |   | 11,994  |  
|Other liabilities                                                                                                                                                               |  |                  | 6,795   |   |                   |   | 8,443   |  
|                                                                                                                                                                                |  |                  |         |   |                   |   |         |  
|Total liabilities                                                                                                                                                               |  |                  | 162,388 |   |                   |   | 173,815 |  
|                                                                                                                                                                                |  |                  |         |   |                   |   |         |  
|Stockholders Equity:                                                                                                                                                           |  |                  |         |   |                   |   |         |  
|Common stock, par value $0.00067, 15,000,000 shares authorized, 7,435,373 and 7,720,527 shares issued and outstanding at December 31,
2005 and September 30, 2005, respectively |  |                  | 5       |   |                   |   | 5       |  
|Retained earnings                                                                                                                                                               |  |                  | 78,578  |   |                   |   | 82,991  |  
|Accumulated other comprehensive loss                                                                                                                                            |  |                  | (1,938  | ) |                   |   | (1,957  | )
|Unearned compensation and other                                                                                                                                                 |  |                  | (3,114  | ) |                   |   | (3,207  | )
|                                                                                                                                                                                |  |                  |         |   |                   |   |         |  
|Total stockholders equity                                                                                                                                                      |  |                  | 73,531  |   |                   |   | 77,832  |  
|                                                                                                                                                                                |  |                  |         |   |                   |   |         |  
|Total liabilities and stockholders equity                                                                                                                                      |  | $                | 235,919 |   |                   | $ | 251,647 |  
|                                                                                                                                                                                |  |                  |         |   |                   |   |         |  

The accompanying notes are an integral part of these condensed consolidated financial statements



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THE PBSJ CORPORATION

Condensed Consolidated Statements of Operations (Unaudited)



|                                                                 |  |                                 |         |   |      |   |         |  
|---------------------------------------------------------------- |  | ------------------------------- | ------- | - | ---- | - | ------- | -
|                                                                 |  | Three Months Ended December 31, |        
|(Amounts in thousands, except per share amounts)                 |  | 2005                            |         |   | 2004 |  
|Earned revenues:                                                 |  |                                 |         |   |      |   |         |  
|Engineering fees                                                 |  | $                               | 128,466 |   |      | $ | 127,617 |  
|Direct reimbursable expenses                                     |  |                                 | 23,774  |   |      |   | 35,126  |  
|                                                                 |  |                                 |         |   |      |   |         |  
|Net earned revenues                                              |  |                                 | 104,692 |   |      |   | 92,491  |  
|                                                                 |  |                                 |         |   |      |   |         |  
|Costs and expenses:                                              |  |                                 |         |   |      |   |         |  
|Direct salaries and direct costs                                 |  |                                 | 37,304  |   |      |   | 34,994  |  
|General and administrative expenses, including indirect salaries |  |                                 | 56,407  |   |      |   | 47,841  |  
|Misappropriation loss (recoveries), net                          |  |                                 | (1,298  | ) |      |   | 1,954   |  
|Investigation and related costs                                  |  |                                 | 4,780   |   |      |   |        |  
|                                                                 |  |                                 |         |   |      |   |         |  
|Total costs and expenses                                         |  |                                 | 97,193  |   |      |   | 84,789  |  
|                                                                 |  |                                 |         |   |      |   |         |  
|Operating income                                                 |  |                                 | 7,499   |   |      |   | 7,702   |  
|Other income (expenses):                                         |  |                                 |         |   |      |   |         |  
|Interest expense                                                 |  |                                 | (473    | ) |      |   | (515    | )
|Other, net                                                       |  |                                 | 136     |   |      |   | 55      |  
|                                                                 |  |                                 |         |   |      |   |         |  
|Total other income (expenses)                                    |  |                                 | (337    | ) |      |   | (460    | )
|                                                                 |  |                                 |         |   |      |   |         |  
|Income before income taxes                                       |  |                                 | 7,162   |   |      |   | 7,242   |  
|Provision for income taxes                                       |  |                                 | 3,634   |   |      |   | 3,097   |  
|                                                                 |  |                                 |         |   |      |   |         |  
|Net income                                                       |  | $                               | 3,528   |   |      | $ | 4,145   |  
|                                                                 |  |                                 |         |   |      |   |         |  
|Net income per share:                                            |  |                                 |         |   |      |   |         |  
|Basic                                                            |  | $                               | 0.50    |   |      | $ | 0.56    |  
|                                                                 |  |                                 |         |   |      |   |         |  
|Diluted                                                          |  | $                               | 0.47    |   |      | $ | 0.53    |  
|                                                                 |  |                                 |         |   |      |   |         |  
|Weighted average shares outstanding:                             |  |                                 |         |   |      |   |         |  
|Basic                                                            |  |                                 | 7,007   |   |      |   | 7,381   |  
|                                                                 |  |                                 |         |   |      |   |         |  
|Diluted                                                          |  |                                 | 7,481   |   |      |   | 7,835   |  
|                                                                 |  |                                 |         |   |      |   |         |  

The accompanying notes are an integral part of these condensed consolidated financial statements



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THE PBSJ CORPORATION

Condensed Consolidated Statements of Cash Flows (Unaudited)



|                                                                                |  |                                |         |   |      |   |         |  
|------------------------------------------------------------------------------- |  | ------------------------------ | ------- | - | ---- | - | ------- | -
|                                                                                |  | Three Months EndedDecember 31, |        
|(Dollars in thousands)                                                          |  | 2005                           |         |   | 2004 |  
|Cash flows from operating activities:                                           |  |                                |         |   |      |   |         |  
|Net income                                                                      |  | $                              | 3,528   |   |      | $ | 4,145   |  
|Adjustments to reconcile net income to net cash (used in) operating activities: |  |                                |         |   |      |   |         |  
|(Increase) decrease in cash surrender value of life insurance                   |  |                                | 426     |   |      |   | (160    | )
|Depreciation and amortization                                                   |  |                                | 2,637   |   |      |   | 2,468   |  
|Gain on sale of property and equipment                                          |  |                                | (12     | ) |      |   | (12     | )
|Provision for bad debt and unbillable amounts                                   |  |                                | 154     |   |      |   | 1       |  
|Provision for deferred income taxes                                             |  |                                | 10,699  |   |      |   | 4,422   |  
|Provision for and amortization of deferred compensation                         |  |                                | 427     |   |      |   | 406     |  
|Change in operating assets and liabilities, net of acquisitions:                |  |                                |         |   |      |   |         |  
|Increase in accounts receivable                                                 |  |                                | (3,387  | ) |      |   | (12,750 | )
|Decrease in unbilled fees and billings in excess of costs                       |  |                                | 4,436   |   |      |   | 4,762   |  
|Increase in assets held for sale                                                |  |                                | 4,165   |   |      |   |        |  
|Increase in other current assets                                                |  |                                | (4,688  | ) |      |   | (4,267  | )
|Increase (decrease) in other assets                                             |  |                                | (45     | ) |      |   | (288    | )
|Decrease in accounts payable and accrued expenses                               |  |                                | (25,508 | ) |      |   | (15,742 | )
|Increase in accrued reimbursement liability                                     |  |                                | 569     |   |      |   | 2,449   |  
|Increase in liabilities of assets held for sale                                 |  |                                | (2,120  | ) |      |   |        |  
|Increase in book overdraft                                                      |  |                                |        |   |      |   | 3,198   |  
|Decrease in accrued vacation                                                    |  |                                | (1,572  | ) |      |   | (1,151  | )
|Decrease in other liabilities                                                   |  |                                | 485     |   |      |   | (882    | )
|                                                                                |  |                                |         |   |      |   |         |  
|Net cash used in operating activities                                           |  |                                | (9,806  | ) |      |   | (13,401 | )
|                                                                                |  |                                |         |   |      |   |         |  
|Cash flows from investing activities:                                           |  |                                |         |   |      |   |         |  
|Investment in life insurance policies                                           |  |                                | (85     | ) |      |   | (140    | )
|Acquisitions and purchase price adjustments, net of cash acquired               |  |                                | (40     | ) |      |   | 138     |  
|Purchases of marketable securities                                              |  |                                | (17     | ) |      |   | (5      | )
|Proceeds from the sale of property and equipment                                |  |                                | 12      |   |      |   | 16      |  
|Purchases of property and equipment                                             |  |                                | (1,895  | ) |      |   | (1,900  | )
|                                                                                |  |                                |         |   |      |   |         |  
|Net cash used in investing activities                                           |  |                                | (2,025  | ) |      |   | (1,891  | )
|                                                                                |  |                                |         |   |      |   |         |  
|Cash flows from financing activities:                                           |  |                                |         |   |      |   |         |  
|Borrowings under line of credit                                                 |  |                                |        |   |      |   | 13,234  |  
|Principal payments under notes and mortgage payable                             |  |                                | (75     | ) |      |   | (72     | )
|Principal payments under capital lease obligations                              |  |                                | (103    | ) |      |   | (160    | )
|Common stock:                                                                   |  |                                |         |   |      |   |         |  
|Proceeds from sale                                                              |  |                                | 4,276   |   |      |   | 3,960   |  
|Payments for repurchases                                                        |  |                                | (7,315  | ) |      |   | (3,497  | )
|                                                                                |  |                                |         |   |      |   |         |  
|Net cash provided by (used in) financing activities                             |  |                                | (3,217  | ) |      |   | 13,465  |  
|                                                                                |  |                                |         |   |      |   |         |  
|Net decrease in cash and cash equivalents                                       |  |                                | (15,048 | ) |      |   | (1,827  | )
|Cash and cash equivalents at beginning of period                                |  |                                | 22,556  |   |      |   | 1,910   |  
|                                                                                |  |                                |         |   |      |   |         |  
|Cash and cash equivalents at end of period                                      |  | $                              | 7,508   |   |      | $ | 83      |  
|                                                                                |  |                                |         |   |      |   |         |  
|Non-cash investing and financing activities:                                    |  |                                |         |   |      |   |         |  
|Property and equipment financed under capital leases                            |  | $                              | 166     |   |      | $ | 53      |  
|Change in fair value of marketable securities available for sale                |  | $                              | (3      | ) |      | $ | 66      |  
|Payable to former shareholders for repurchase of stock                          |  | $                              | 744     |   |      | $ |        |  
|Cash paid for interest                                                          |  | $                              | 332     |   |      | $ | 128     |  
|Cash paid for income taxes                                                      |  | $                              | 121     |   |      | $ | 1,182   |  

The accompanying notes are an integral part of these condensed consolidated financial statements



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The PBSJ Corporation

Notes to Condensed Consolidated Financial Statements



|1. | Summary of Significant Accounting Policies
|-- | ------------------------------------------

Basis
of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the
interim reporting rules and regulations of the Securities and Exchange Commission for reporting on Form 10-Q. Pursuant to such rules and regulations, certain information and footnote disclosures normally included in financial statements prepared in
accordance with accounting principles generally accepted in the United States of America have been condensed or omitted.

In the opinion of
management, the accompanying unaudited condensed consolidated financial statements of the interim period contain all adjustments, which are of a normal and recurring nature, necessary to present fairly the financial position of The PBSJ Corporation
(the Company) as of December 31, 2005 and the results of operations and cash flows for the periods presented. The accompanying condensed consolidated financial statements should be read in conjunction with the consolidated financial
statements and the notes to the consolidated financial statements included in the Company's Form 10-K for the year ended September 30, 2005. The accounting policies followed for interim financial reporting are the same as disclosed in Note 1 of
the notes to the consolidated financial statements included in the Companys Annual Report on Form 10-K. The results of operations for the three-month period ended December 31, 2005 and 2004 are not necessarily indicative of the results to
be expected for the fiscal year.

Basic and Diluted Earnings Per Share

Basic net income per share has been computed by dividing net income by the weighted average number of common shares outstanding. Diluted net income per share reflects the potential dilution that could occur assuming
the inclusion of dilutive potential common shares and has been computed by dividing net income by the weighted average number of common shares and dilutive potential common shares outstanding. Dilutive potential common shares include all outstanding
restricted stock awards.

A reconciliation of the number of shares used in computing basic and diluted earnings per share follows:



|                                              |  |                                |  |      
|--------------------------------------------- |  | ------------------------------ |  | -----
|                                              |  | Three Months EndedDecember 31,
|(Amounts in thousands)                        |  | 2005                           |  | 2004 
|Weighted average shares outstanding - Basic   |  | 7,007                          |  | 7,381
|Effect of dilutive unvested restricted stock  |  | 474                            |  | 454  
|                                              |  |                                |  |      
|Weighted average shares outstanding - Diluted |  | 7,481                          |  | 7,835
|                                              |  |                                |  |      

Revenue Recognition

The Company recognizes engineering fees from different types of services under a variety of different types of contracts. In recognizing engineering fees, the Company evaluates each contractual arrangement to
determine the applicable authoritative accounting methodology to apply to each contract.

In the course of providing its services, the
Company principally uses three types of contracts from which it earns revenue: cost-plus contract, time and materials contract and fixed price contract.



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Cost-plus Contracts. Under Cost-plus contracts, the Company charges clients negotiated rates based on
direct and indirect costs in addition to a profit component. The Company recognizes engineering fees at the time services are performed. The amount of revenue is based on its actual labor costs incurred plus a recovery of indirect costs and a profit
component. In negotiating cost-plus contracts, the Company estimates direct labor costs and indirect costs and then adds a profit component, which is a percentage of total recoverable costs, to arrive at a total dollar value for the contract.
Indirect expenses are recorded as incurred and are allocated to contracts. If the actual labor costs incurred are less than estimated, the revenues from a project will be less than estimated. If the actual labor costs incurred plus a recovery of
indirect costs and profit exceed the initial negotiated total contract amount, the Company must obtain a contract modification to receive payment for such overage. If a contract modification or change order is not approved by our client, the Company
may be able to pursue a claim to receive payment. Engineering fees from claims are recognized when collected.

Time and Materials
Contracts. The Company recognizes engineering fees for Time and Materials contracts at the time services are performed. The amount of revenue is based on the actual number of hours it spends on the projects, multiplied by contractual rates or
multipliers. In addition, the Companys clients reimburse it for its actual out-of-pocket costs of materials and other direct reimbursable expenses that it incurs in connection with its performance under these contracts.

Fixed Price Contracts. For Fixed Price Contracts, the Company recognizes engineering fees based on the percentage-of-completion method whereby fees are
recognized based on the ratio of actual cost of work performed to date to the current total estimated contract costs (generally using the cost-to-cost method). In making such estimates, judgments are required to determine potential delays or changes
in schedules, the costs of materials and labor, liability claims, contract disputes, or achievement of specified performance goals. At the time a loss on a contract becomes evident and estimable, the Company records the entire amount of the
estimated loss.

Change orders that result from modification of an original contract are taken into consideration for revenue recognition
when it results in a change of total contract value and is approved by our clients. Engineering fees relating to unapproved change orders are recognized when collected.

The Companys federal government contracts are subject to the Federal Acquisition Regulations (FAR). These regulations are partially incorporated into many local and state agency contracts. The FAR
limits the recovery of certain specified indirect costs on contracts subject to such regulations. In accordance with industry practice, most of the Companys federal government contracts are subject to termination at the discretion of the
client. Contracts typically provide for reimbursement of costs incurred and payment of fees earned through the termination date.

Contracts
that fall under FAR are generally cost-plus contracts and are subject to audit by the government, primarily the Defense Contract Audit Agency (DCAA), which reviews the Companys overhead rates, operating systems and costs proposals.
As a result of its audits, the DCAA may disallow costs if it determines that the Company has accounted for such costs in a manner inconsistent with generally accepted cost accounting standards.

Direct Reimbursable Expenses

Direct
reimbursable expenses are primarily comprised of subcontractor costs and other direct non-payroll reimbursable charges including travel and travel related costs, blueprints and equipment where the Company is responsible for procurement and
management of such cost components on behalf of the Companys clients. These direct reimbursable expenses are principally passed through to our clients with minimal or no mark-up.



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Capital Structure

The by-laws of the Company require that common stock held by employee shareholders who terminate employment with the Company be offered for sale at fair market value to the Company, which has right of first refusal.
Should the Company decline to purchase the shares, the shares must next be offered to the Companys profit sharing and employee stock ownership plans at fair market value, and then ultimately to full-time employees of the Company. The by-laws
of the Company provide that the fair market value be determined by an appraisal. Other than agreements with certain retired Directors, as of September 30, 2005, there is no outstanding common stock held by individuals no longer employed by the
Company.

During fiscal year 2006, the Company repurchased stock held by employee shareholders who terminated employment with the Company
at a price ranging from $24.00 to $27.00, pending completion of the September 30, 2005 valuation. The September 30, 2005 valuation established the price per share at $28.00. At December 31, 2005, the Company had an accrual of $744,000
million for the stock price differential, included in accounts payable and accrued expenses in the accompanying condensed consolidated balance sheet. Other than agreements with certain retired Directors, as of December 31, 2005 and
September 30, 2005, there was no outstanding common stock held by individuals no longer employed by the Company.

Pursuant to the
terms of our credit agreement, we cannot declare or pay dividends in excess of 50% of our net income. We have not previously paid cash dividends on our common stock and have no present intention of paying cash dividends on our common stock in the
foreseeable future. All earnings are retained for investment in our business.

Recent Accounting Pronouncements

On February 15, 2007, the Financial Accounting Standards Board (FASB) issued SFAS No. 159 (SFAS 159), The Fair
Value Option for Financial Assets and Financial Liabilities, which allows an entity the irrevocable option to elect fair value for the initial and subsequent measurement for certain financial assets and liabilities on a
contract-by-contract basis. Subsequent changes in fair value of these financial assets and liabilities would be recognized in earnings when they occur. SFAS 159 further establishes certain additional disclosure requirements. SFAS 159 is effective
for the Companys financial statements for the fiscal year ending September 30, 2009, with earlier adoption permitted. Management is currently evaluating the impact and timing of the adoption of SFAS 159 on the Companys consolidated
financial statements.

In September 2006, FASB issued SFAS No. 158 (SFAS 158), Employers Accounting for
Defined Benefit Pension and Other Postretirement Plans. This standard requires an employer to recognize the overfunded or underfunded status of a defined benefit postretirement plan (other than a multiemployer plan) as an asset or
liability in its statement of financial position and to recognize changes in that funded status in the year in which the changes occur through comprehensive income. The Company is required to adopt the recognition and related disclosure provisions
of SFAS 158 for the fiscal year ending September 30, 2007. The Company is also required to adopt the measurement provisions of SFAS 158 for the fiscal year ending September 30, 2009. The Company is still evaluating the impact of this
standard on its consolidated financial statements.

In September 2006, the FASB issued SFAS No. 157 (SFAS 157),
Fair Value Measurements. SFAS 157 prescribes a single definition of fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the
measurement date. The accounting provisions of SFAS 157 will be effective for the Company for the fiscal year ending September 30, 2009. The Company does not believe the adoption of SFAS 157 will have a material impact on its consolidated
financial statements.



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In September 2006, the SEC issued Staff Accounting Bulletin No. 108 (SAB 108). SAB 108
addresses how the effects of prior year uncorrected misstatements should be considered when quantifying misstatements in current year financial statements. SAB 108 requires companies to quantify misstatements using a balance sheet and income
statement approach and to evaluate whether either approach results in quantifying an error that is material in light of relevant quantitative and qualitative factors. When the effect of initial adoption is material, companies will record the effect
as a cumulative effect adjustment to beginning of year retained earnings. SAB 108 will be effective for the Company for the fiscal year ending September 30, 2008. The Company does not believe the adoption of SAB 108 will have a material impact
on its consolidated financial statements.

In July 2006, the FASB issued Interpretation (FIN) No. 48 Accounting
for Uncertainty in Income Taxes  an interpretation of FASB No. 109 (FIN 48). This interpretation establishes guidelines and thresholds that must be met for the recognition and measurement of a tax position taken or
expected to be taken in a tax return. The provisions of FIN 48 are effective for fiscal years beginning after December 31, 2006. The Company is currently evaluating the impact of adopting FIN 48 on its consolidated financial statements.

In November 2005, the FASB issued FASB Staff Position (FSP) FAS 115-1 and FAS 124-1, The Meaning of
Other-Than-Temporary Impairment and Its Application to Certain Investments, ( FSP 115-1 and 124-1) which address the determination as to when an investment is impaired, whether that impairment is other than temporary, and the
measurement of an impairment loss. FSP 115-1 and 124-1 also includes accounting considerations subsequent to the recognition of an other-than-temporary impairment and requires certain disclosures about unrealized losses that have not been
recognized as other-than-temporary impairments. The guidance in FSP 115-1 and 124-1 amends FASB Statement No. 115, Accounting for Certain Investments in Debt and Equity Securities, and Accounting Principles Board
(APB) Opinion No. 18, The Equity Method of Accounting for Investments in Common Stock. FSP 115-1 and 124-1 is effective for reporting periods beginning after December 15, 2005. The adoption of FSP
115-1 and 124-1 did not have a material impact on our consolidated financial statements.

In May 2005, the FASB issued SFAS No. 154
(SFAS 154),Accounting Changes and Error Corrections (SFAS 154), which replaces APB Opinion No. 20 Accounting Changes and SFAS No. 3 Reporting Accounting Changes in
Interim Financial Statements. SFAS 154 requires that a voluntary change in accounting principle be applied retrospectively with all prior period financial statements presented on the new accounting principle. SFAS 154 also requires that a
change in method of depreciating or amortizing a long-lived non-financial asset be accounted for prospectively as a change in estimate, and correction of errors in previously issued financial statements should be termed a restatement. SFAS 154 is
effective for accounting changes and correction of errors made in the first annual reporting period beginning after December 15, 2005. We early adopted SFAS 154 and have reported and disclosed the correction of errors in our previously reported
consolidated financial statements in accordance with SFAS 154. The other reporting and disclosure requirements of SFAS 154 did not have a material impact on our consolidated financial statements.

In December 2004, the FASB issued SFAS No. 123 (revised 2004), Share-Based Payment (SFAS 123(R)), which is a
revision of SFAS 123, Accounting for Stock-Based Compensation. SFAS 123(R) supersedes APB Opinion No. 25, Accounting for Stock Issued to Employees. SFAS No. 123(R) requires all share-based payments to employees,
including grants of employee stock options, to be recognized in the financial statements based on their fair values, beginning with the first annual period beginning after December 2005, with early adoption encouraged. We are required to adopt SFAS
123(R) in our first quarter of fiscal year 2007, beginning October 1, 2006. The Company is currently evaluating the impact of adopting SFAS 123(R) on our consolidated financial statements.



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In December 2003, the FASB issued Interpretation No. 46 (revised December 2003),
Consolidation of Variable Interest Entities (FIN 46R), which replaced FIN 46. FIN 46R addresses how a business enterprise should evaluate whether it has a controlling interest in an entity through means other than
voting rights. This interpretation requires a variable interest entity to be consolidated by a company if that company is subject to a majority of the risk of loss from the variable interest entitys activities or is entitled to receive a
majority of the entitys residual returns or both. The interpretation also requires disclosures about variable interest entities that the company is not required to consolidate but in which it has a significant variable interest. We are
required to adopt FIN 46R immediately for entities created after December 31, 2003 and at the beginning of fiscal year 2006 for all other entities. The adoption of FIN 46R did not have a material impact on our consolidated financial statements.



|2. | Misappropriation Loss
|-- | ---------------------

In March 2005,
subsequent to the issuance of the Companys 2004 financial statements, we discovered misappropriations of Company funds by our former Chief Financial Officer and two former employees who worked in our information systems and treasury
departments, collectively, (the participants). The participants colluded and circumvented controls to misappropriate funds and conceal the misappropriations possibly beginning as early as 1993 until the misappropriations were discovered
in March 2005.

Shortly after this discovery, an investigation sub-committee was formed comprised of the three outside members of our
Corporate Audit Committee. These three outside members were subsequently appointed to the Board of Directors and became the three members of the Audit Committee of the Board of Directors. The Audit Committee retained independent counsel to conduct
an investigation and advise the Audit Committee in connection with the investigation. The independent counsel retained forensic accountants, including accountants experienced in conducting forensic audits for companies that perform contracts for
federal, state and local governments to assist with the investigation.

The investigation team discovered that at least $36.6 million was
misappropriated between January 1, 1998 and the discovery of the misappropriations in March 2005. The amount misappropriated prior to January 1, 1998 could not be determined because certain data for the period prior to January 1, 1998
was unavailable. The participants in the embezzlement scheme used several methods to misappropriate the funds while engaging in conduct to conceal the misappropriated amounts. This conduct included among other things, recording and changing normal
recurring journal entries and overstating accruals in prior periods to facilitate improper write-offs of misappropriated funds.

The
misappropriation loss and concealment also resulted in the overstatement of overhead rates which the Company used in connection with certain government contracts. As a result, in these instances, some of our billings to our government clients relied
on or incorporated the overstated overhead rates, and as a result revenues were overstated and we incurred refund obligations to these clients. We have also recorded an accrual for the estimated reimbursement to our clients.



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Overstatement of Amounts Billed for Overhead

The Company determined that the misappropriation scheme led to the overstatement of overhead rates that the Company used to determine billings in
connection with certain of our government contracts. As a result, some of our government clients were overcharged for the Companys services. During the review of the overhead expenses, the Company identified certain instances of costs
erroneously included in our overhead cost pool which were unallowable under applicable regulations and an error in our calculation of our overhead rate, which related to certain general and administrative costs. The Company determined that the
unallowable costs and general and administrative expense errors also led to the overstatement of overhead rates which the Company used in connection with certain of its government contracts. As a result, in these instances, some of our billings to
our government clients relied on or incorporated the overstated overhead rates.

The Company determined corrected overhead rates
considering the impact of the misappropriations and considering the impact of additional errors identified. The Company and its advisors have been working with its government clients to finalize the refund amount (See Note 13 for further
discussion). The Company estimates that the total refund amount, before any payments, resulting from the overstated overhead rates before payments are approximately $38.8 million through December 31, 2005 ($37.1 million as of fiscal year 2005),
including interest that the Company will generally be required to reimburse its government clients. At December 31, 2005 and September 30, 2005 the accrued reimbursement liability was $35.3 million and $34.8 million, respectively, in the
accompanying condensed consolidated balance sheets.

Misappropriation Loss, Investigation Related Expenses and Recovery of Assets

The misappropriation loss for the three month period ended December 31, 2005 previously described is presented net of the gain from recovered assets.
All assets recovered during the investigation and not yet liquidated, are classified as assets held for sale in the accompanying condensed consolidated balance sheets and are recorded at estimated fair value as of the date recovered, less estimated
costs to sell. The recovered assets consist of personal homes, condominiums and other real estate, automobiles, funds from bank accounts, jewelry, fine-arts and cash proceeds from the liquidation of personal retirement accounts. Some of the real
estate recovered was acquired subject to existing debt, liens or mortgage notes. Such debt is reported as liabilities related to assets held for sale in the accompanying condensed consolidated balance sheets. The Company does not own any other
assets held for sale other than those recovered during the investigation. Gain from recovered assets has been recognized at the estimated fair value of the assets recovered, less related debt and estimated costs to sell the assets.

In April 2005, approximately 174,000 shares of the Companys common stock were surrendered. These shares were not included in assets held for sale,
as the estimated fair value of such shares was recorded as a reduction of stockholders equity. The gain from recovered assets of $4.7 million was included in misappropriation loss, net of recoveries in the third fiscal quarter of 2005. In the
second fiscal quarter of 2006, approximately 19,000 shares of the Companys common stock were surrendered. These shares were not included in assets held for sale, as the estimated fair value of such shares was also recorded as a reduction of
stockholders equity. The gain on recovery of misappropriated assets of approximately $537,000 was included in misappropriation loss, net of recoveries in the second fiscal quarter of 2006.

In addition to the misappropriation loss, the Company has incurred certain professional fees and other costs that relate to the investigation of the
embezzlement and the recovery of assets. These expenses include legal fees, forensic audit fees and related costs, and other costs associated with the recovery of misappropriated assets. Collectively, these costs are stated as investigation and
related costs in the accompanying condensed consolidated statements of operations and are recorded in the period the costs are incurred.



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The following table sets forth the components of the misappropriation loss and related investigation
expenses:



|                                           |  |                                 |        |   |      |   |      
|------------------------------------------ |  | ------------------------------- | ------ | - | ---- | - | -----
|                                           |  | Three Months Ended December 31,
|(Dollars in thousands)                     |  | 2005                            |        |   | 2004
|Misappropriation loss                      |  | $                               |       |   |      | $ | 1,954
|Less: gain from recovered assets           |  |                                 | (1,298 | ) |      |   |     
|                                           |  |                                 |        |   |      |   |      
|Misappropriation loss (recoveries), net    |  |                                 | (1,298 | ) |      |   | 1,954
|                                           |  |                                 |        |   |      |   |      
|Legal fees related to the investigation    |  |                                 | 1,691  |   |      |   |     
|Forensic accounting fees and related costs |  |                                 | 2,573  |   |      |   |     
|Other                                      |  |                                 | 516    |   |      |   |     
|                                           |  |                                 |        |   |      |   |      
|Investigation and related costs            |  |                                 | 4,780  |   |      |   |     
|                                           |  |                                 |        |   |      |   |      
|Total                                      |  | $                               | 3,482  |   |      | $ | 1,954
|                                           |  |                                 |        |   |      |   |      

During the three-month period ended December 31, 2005, the Company recorded a gain from
recovered assets totaling $1.3 million and incurred approximately $4.8 million in costs to investigate and quantify the impact of the embezzlement, and in costs related to the recovery and maintenance of certain assets. During the three- month
period ended December 31, 2004, the Company recorded a misappropriation loss of $2.0 million. The gain from recovered assets, the misappropriation loss and the investigation and related costs have been allocated to our segments based on the
individual segments proportionate share of general and administrative (G&A) costs to total Company G&A costs.



|3. | Assets Held for Sale
|-- | --------------------

During the course of
the investigation into the misappropriations, the Company identified and recovered certain assets acquired by the participants using misappropriated Company funds. Assets recovered during the investigation and not yet liquidated, are classified as
assets held for sale in the accompanying condensed consolidated condensed balance sheets and are recorded at estimated fair value less estimated costs to sell. The recovered assets consisted of personal homes, condominiums and other real estate,
automobiles, funds from bank accounts, jewelry, fine-arts and cash proceeds from the liquidation of personal retirement accounts. Some of the real estate recovered was acquired subject to existing debt, liens or mortgage notes. Such debt is reported
as liabilities of assets held for sale in the accompanying condensed consolidated condensed balance sheets at December 31, 2006.

During the three-month period ended December 31, 2005, the Company recovered additional assets from the investigation with a total estimated fair value of approximately $1.4 million, excluding the gain on shares recovered, which was
not subject to debt, liens or mortgage notes.

During the three-month period ended December 31, 2005, the Company sold assets for a
total of $5.6 million. The Company did not recognize any additional gains or losses related to the sale of these assets since they were recorded at their fair value less estimated costs to sell.



|                                             |  |                   |        |   |                    |   |        |  
|-------------------------------------------- |  | ----------------- | ------ | - | ------------------ | - | ------ | -
|(Dollars in thousands)                       |  | December 31, 2005 |        |   | September 30, 2005 |  
|                                             | 
|Assets held for sale at estimated fair value |  | $                 | 9,496  |   |                    | $ | 10,180 |  
|Less: estimated costs to sell                |  |                   | (637   | ) |                    |   | (891   | )
|                                             |  |                   |        |   |                    |   |        |  
|Adjusted fair value of assets held for sale  |  |                   | 8,859  |   |                    |   | 9,289  |  
|Outstanding mortgage liabilities assumed     |  |                   | (4,606 | ) |                    |   | (4,627 | )
|                                             |  |                   |        |   |                    |   |        |  
|Net fair value of assets held for sale       |  | $                 | 4,253  |   |                    | $ | 4,662  |  
|                                             |  |                   |        |   |                    |   |        |  



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Additionally, as of September 30, 2005, two real estate properties were not available for sale since
the required renovations were completed in fiscal year 2006, at which time they were classified as assets held for sale. As of September 30, 2005, the Company classified these recovered assets for a total of $4.1 million in other assets and
$2.3 million of related liabilities in other liabilities in its consolidated balance sheet. The Company does not have any other assets held for sale other than those recovered.

During the remaining nine months of fiscal year 2006 and first fiscal quarter of 2007, the Company sold assets for a total of $8.7 million which were
subject to related liabilities of $4.6 million. The Company did not recognize any additional gains or losses related to the sales of these assets since they were recorded at their fair value less estimated costs to sell. The Company intends to sell
the remaining assets as soon as practicable.



|4. | Commitments and Contingencies
|-- | -----------------------------

The Company
is obligated under various non-cancelable leases for office facilities, furniture and equipment. Certain leases contain renewal options, escalation clauses and payment of certain other operating expenses of the properties. In the normal course of
business, leases that expire are expected to be renewed or replaced by leases for other properties.

As of December 31, 2005, there
were various legal proceedings pending against the Company, where plaintiffs allege damages resulting from the Companys engineering services. The plaintiffs allegations of liability in those cases seek recovery for damages caused by the
Company based on various theories of negligence, contributory negligence or breach of contract. The Company accrues for contingencies when a loss is probable and the amounts can be reasonably estimated. As of December 31, 2005, the Company had
an accrual of approximately $5.1 million for all potential and existing claims, lawsuits and pending proceedings that, in managements opinion, are probable and can be reasonably estimated.

In July 1998, we entered into an agreement with West Frisco Development Corporation (WFDC) to provide various services, among which was a
flood plain study to be used by WFDC, the City of Frisco and FEMA. In 2003, the City of Frisco retained the services of a third-party architecture and engineering firm in connection with the extension and widening of Teel Road which lies within the
greater drainage basin included in the Companys original flood plain study. This architecture and engineering firms assessment of the flood plain study determined that the Company used incorrect assumptions when calculating the size of
the drainage culverts required for the increased development of the areas transportation infrastructure. Based on this assessment, the Company has entered into negotiations with the City of Frisco to correct the drainage needs to support the
Teel Road expansion project. As a result, the Company had recorded an estimated liability of $3.1 million to cover the costs associated with correcting the drainage needs of the Teel Road expansion project. Included in this estimate is the purchase
of a parcel of land for $1.5 million, the remaining balance of $1.6 million is reflected in other liabilities in the accompanying condensed consolidated balance sheets as of December 31, 2005.

The Company expects to pay these liabilities over the next one to three years. Management is of the opinion that the liabilities ultimately resulting
from such existing and other pending proceedings, lawsuits and claims should not materially affect the Companys financial position, results of operations or cash flows.

The Company maintains a full range of insurance coverage, including workers compensation, general and professional liability (including pollution
liability) and property coverage. The Companys insurance policies may offset the amount of loss exposure from legal actions.



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##### Table of Contents

In July 2006, we entered into a settlement agreement with the State of Texas, Department of
Transportation which resolves all claims that the State of Texas may have had against us for overpayments related to the restatement of overhead rates on billings on or before April 30, 2006 under contracts with that agency based on our payment
of approximately $5.4 million and provides for the determination of the appropriate overhead rate for billings after April 30, 2006. In November 2006, we entered into a settlement agreement with the Florida Department of Transportation which
resolves all claims that agency may have had against us for the overstatement of rates on billings through September 30, 2005 (and with respect to cost contracts through September 30, 2006) under our contracts with them based on our
payment of approximately $12.5 million. This settlement agreement also provided for the determination of the appropriate overhead rate refund for fiscal year 2006 billings under fixed price contracts. The refund amount was finalized in March 2007
and totaled $0.4 million.

In January 2007, we reached a settlement agreement with the Department of Justice, Civil Division on behalf of
it and all other federal agencies with which we have contracts to resolve all federal claims including claims under the Federal Civil False Claims Act, related to the overstatements of overhead rates on our contracts with federal agencies. The
agreement requires approximately $6.5 million of reimbursement payments for all contract amounts through September 30, 2005.

The
settlements described above, excluding those settlements which were paid during the three-month period ended December 31, 2005, are included in the accrued reimbursement liability in the Companys condensed consolidated balance sheet at
December 31, 2005. We are in discussions with our remaining government clients to enter into settlement agreements in order to satisfy any refund obligations, which are in various stages of settlement.

In the course of our investigation of the accounting irregularities and misappropriations, it was determined that there were possible violations relating
to past political contributions by us and certain of our employees. The United States Attorneys Office for the Southern District of Florida (Miami) and the Federal Bureau of Investigation have conducted an investigation relating to
improper campaign contributions including improper use of political action committees. We produced documents and other information to the government and fully cooperated with the investigation. Criminal charges have been filed against two of the
Companys former chairmen. At the present time, we believe it is unlikely that criminal charges will be filed against us in this matter, but the authorities are not precluded from bringing charges, and circumstances may change.

The United States Securities & Exchange Commission is also conducting an investigation of the accounting irregularities and misappropriations of
funds described above. We are fully cooperating with the investigation and have produced documents and other information to the commission. At the present time, we are unable to predict the likely outcome of this investigation.



|5. | Income Taxes
|-- | ------------

The income tax provisions were
$3.6 million and $3.1 million, or effective tax rates of 50.7% and 42.8% for the three-month periods ended December 31, 2005 and 2004, respectively.

For the past several years, the Company has generated research and development tax credits related to certain qualifying costs. The qualifying costs relate primarily to the Companys project costs which
management believes involved technical uncertainty. These research and development costs were incurred by the Company in the course of providing services generally under long-term client projects, thereby creating costs associated with recognizable
revenue under the project. Because the Company has been unable to utilize the entire amount of research and development tax credits it has generated each year, the condensed consolidated balance sheets reflect a deferred tax asset of $5.5 million
and $5.5 million as of December 31, 2005 and September 30, 2005, respectively, for the unused research and development tax credit carry forwards. The credits will expire beginning 2017 through 2022.



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##### Table of Contents

The Companys effective tax rate is based on expected income, statutory tax rates and tax planning
opportunities available in the various jurisdictions in which the Company operates. Significant judgment is required in determining the effective tax rate and in evaluating the Companys tax positions. The Company establishes reserves when,
despite its belief that the tax return positions are fully supportable, it believes that certain positions, if challenged, we believe will likely be resolved unfavorably to us. These reserves are adjusted in light of changing facts and
circumstances, such as the progress of a tax audit or current developments in tax law. The Companys annual tax rate includes the impact of reserve provisions and changes to reserves. While it is often difficult to predict the final outcome or
the timing of resolution of any particular matter, the Company believes that its reserves reflect the probable outcome of known tax contingencies. Resolution of the tax contingencies would be recognized as an increase or decrease to the
Companys tax rate in the period of resolution.



|6. | Segment Reporting
|-- | -----------------

The Company is organized
by the services provided to its customers. Under this organizational structure, the Company has four segments: Transportation Services, Construction Management, Civil Engineering and Environmental Services.

Activities in the Transportation Services business segment generally involve planning, design, right of way acquisition, development and design of
intelligent transportation services and program construction management services for multiple transportation modes, including interstate and primary highways, toll roads, arterials, bridges, transit systems, airports and port facilities. The Program
Management group of our Transportation segment provides many of its governmental clients the necessary resources to manage large infrastructure programs from concept through construction. Services include planning, programming, and contract support.

The Construction Management segment provides a wide range of services as an agent for the Companys clients, including contract
administration, inspection, field-testing, scheduling/estimating, instituting project controls and quality assessment. The Company provides scheduling, cost estimating and construction observation services for the project, or its services may be
limited to providing construction consulting.

The Civil Engineering segment provides general civil engineering as well as specialized
services to public and private clients. Included in these services are: site engineering and surveys, infrastructure engineering, master planning, disaster mitigation planning and response, asset assessment and management, emergency management and
architectural and landscape design.

The Environmental Services business segment focuses on the delivery of planning, design and
construction management services for private and public sector clients related to air quality management, flood insurance studies, energy planning, hazardous and solid waste management, ecological studies, wastewater treatment, water resources,
environmental toxicology analysis, aquatic treatment systems and water supply and treatment.



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##### Table of Contents

Financial information relating to the Companys operations by segment is as follows:



|                                     |  |                        |        |                        |   |                  |  |                       |        |       |   |        |  |   |        
|------------------------------------ |  | ---------------------- | ------ | ---------------------- | - | ---------------- |  | --------------------- | ------ | ----- | - | ------ |  | - | -------
|(Dollars in thousands) (Unaudited)   |  | TransportationServices |        | ConstructionManagement |   | CivilEngineering |  | EnvironmentalServices |        | Total
|Three Months Ended December 31, 2005 |  |                        |        |                        |   |                  |  |                       |        |       |   |        |  |   |        
|Engineering fees                     |  | $                      | 46,988 |                        | $ | 21,103           |  | $                     | 31,918 |       | $ | 28,457 |  | $ | 128,466
|Net earned revenues                  |  |                        | 36,434 |                        |   | 17,510           |  |                       | 27,639 |       |   | 23,109 |  |   | 104,692
|Operating income                     |  |                        | 2,411  |                        |   | 460              |  |                       | 4,378  |       |   | 250    |  |   | 7,499  
|Depreciation and amortization        |  |                        | 909    |                        |   | 331              |  |                       | 681    |       |   | 716    |  |   | 2,637  
|Total assets                         |  |                        | 86,290 |                        |   | 38,754           |  |                       | 58,615 |       |   | 52,260 |  |   | 235,919
|Purchases of property and equipment  |  |                        | 650    |                        |   | 336              |  |                       | 433    |       |   | 476    |  |   | 1,895  
|Three Months Ended December 31, 2004 |  |                        |        |                        |   |                  |  |                       |        |       |   |        |  |   |        
|Engineering fees                     |  | $                      | 43,631 |                        | $ | 19,125           |  | $                     | 40,684 |       | $ | 24,177 |  | $ | 127,617
|Net earned revenues                  |  |                        | 34,115 |                        |   | 14,631           |  |                       | 23,986 |       |   | 19,759 |  |   | 92,491 
|Operating income                     |  |                        | 3,043  |                        |   | 468              |  |                       | 3,724  |       |   | 467    |  |   | 7,702  
|Depreciation and amortization        |  |                        | 911    |                        |   | 297              |  |                       | 612    |       |   | 648    |  |   | 2,468  
|Total assets                         |  |                        | 71,570 |                        |   | 31,373           |  |                       | 66,737 |       |   | 39,660 |  |   | 209,340
|Purchases of property and equipment  |  |                        | 695    |                        |   | 315              |  |                       | 425    |       |   | 465    |  |   | 1,900  



|7. | Long-Term Debt
|-- | --------------



|                                                                                                                                                                                                                                                                                                                                                                     |  |                  |       |                   |   |      
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---------------- | ----- | ----------------- | - | -----
|(Dollars in thousands)                                                                                                                                                                                                                                                                                                                                               |  | December 31,2005 |       | September 30,2005
|Line of credit                                                                                                                                                                                                                                                                                                                                                       |  | $                |      |                   | $ |     
|Mortgage note payable due in monthly installments starting on April 16, 2001, with interest, collateralized by real property; unpaid
principal due March 16, 2011. Interest at LIBOR plus the floating rate margin of not less than 65 basis points and not greater than 90 basis points (5.02% and 4.51% at December 31, 2005 and September 30, 2005,
respectively) |  |                  | 7,757 |                   |   | 7,833
|Capital lease obligations                                                                                                                                                                                                                                                                                                                                            |  |                  | 902   |                   |   | 853  
|                                                                                                                                                                                                                                                                                                                                                                     |  |                  |       |                   |   |      
|                                                                                                                                                                                                                                                                                                                                                                     |  |                  | 8,659 |                   |   | 8,686
|Less current portion of long-term debt                                                                                                                                                                                                                                                                                                                               |  |                  | 460   |                   |   | 408  
|Less current portion of capital lease obligations                                                                                                                                                                                                                                                                                                                    |  |                  | 274   |                   |   | 341  
|                                                                                                                                                                                                                                                                                                                                                                     |  |                  |       |                   |   |      
|Long-term debt and capital lease obligations                                                                                                                                                                                                                                                                                                                         |  | $                | 7,925 |                   | $ | 7,937
|                                                                                                                                                                                                                                                                                                                                                                     |  |                  |       |                   |   |      

The Company has a $58 million line of credit agreement, inclusive of $10 million in letters of
credit, with Bank of America, N.A. (the Bank). The expiration date on the line of credit is June 30, 2008. The letters of credit reduce the maximum amount available for borrowing. As of December 31, 2005 and September 30,
2005, the Company had letters of credit totaling $3.4 million. No amounts have been drawn on any of these letters of credit. As a result of the issuance of these letters of credit, the maximum amount available for borrowing under the line of credit
was $54.6 million as of December 31, 2005 and September 30, 2005.

The interest rate 4.89% and 4.36% at December 31, 2005
and September 30, 2005, respectively) ranges from LIBOR plus 50 basis points to Prime minus 125 basis points if the Companys funded debt coverage ratio is less than 2.5. The range increases to LIBOR plus 75 basis points to Prime minus 100
basis points if the Companys funded debt coverage ratio is between 2.5 to 3.0. The line of credit contains clauses requiring the maintenance of various covenants and financial ratios including minimum levels of net worth, a minimum coverage
ratio of certain fixed charges and a minimum leverage ratio of earnings before interest, taxes, depreciation and amortization to funded debt. The Company was in compliance with or obtained a waiver of default of the line of credit financial
covenants as of December 31, 2005. The line of credit is collateralized by substantially all of the Companys assets.



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On March 19, 2001, the Company entered into a mortgage note with an original principal amount of
$9.0 million due in monthly installments starting on April 16, 2001, with interest. Interest on the mortgage is LIBOR plus the floating rate margin of not less than 65 basis points and not greater than 90 basis points. A balloon payment is due
on the mortgage on March 16, 2011. The effective interest rate on the mortgage note was 5.02% and 4.51% at December 31, 2005 and September 30, 2005, respectively. We used an interest rate swap (the Swap) agreement in order
to minimize the adverse impact of the floating interest rate characteristics of the Companys long term debt obligations. The swap converts the floating interest rate on the note payable to a fixed rate of 6.28%. On March 16, 2006, the
Companys swap expired. Our adjustable rate mortgage calls for an interest rate based on the 30 day LIBOR plus a margin of .065%. The mortgage agreement contains clauses requiring the maintenance of various covenants and financial ratios. On
December 10, 2003, the lender approved an amendment to the mortgage agreement to reflect new conditions for the Tangible Net Worth covenant requirement under the agreement. The Bank has provided us a waiver of default caused by our failure to
deliver to the Bank audited financial statements for fiscal year 2006 and unaudited financial statements for the quarters ended December 31, 2006 and March 31, 2007, so long as the fiscal year 2006 financial statements are delivered to the
Bank no later than June 30, 2007 and the quarterly statements are delivered no later than September 30, 2007. The bank has also provided us a waiver of the minimum net worth covenant for fiscal year 2006 and all periods in fiscal year
2007. The mortgage note is collateralized by the office building located in Maitland, Florida.

The Companys capital leases consisted
primarily of equipment. The interest rate used in computing the minimum lease payments range from 2.02% to 4.84%. The leases were capitalized using the lower of the minimum lease payments or the fair market value of the equipment at the inception of
the lease.



|8. | Comprehensive Income
|-- | --------------------

Comprehensive income
consists of net income and other gains and losses affecting shareholders investment and minimum pension liability that, under Generally Accepted Accounting Principles (GAAP), are excluded from net income.

The components of all the comprehensive income are as follows:



|                                                                        |  |                                |       |   |      |   |       |  
|----------------------------------------------------------------------- |  | ------------------------------ | ----- | - | ---- | - | ----- | -
|                                                                        |  | Three Months EndedDecember 31, |      
|(Dollars in thousands)                                                  |  | 2005                           |       |   | 2004 |  
|Net income                                                              |  | $                              | 3,528 |   |      | $ | 4,145 |  
|Other comprehensive income:                                             |  |                                |       |   |      |   |       |  
|Unrealized gain on available for sale marketable securities, net of tax |  |                                | (2    | ) |      |   | 18    |  
|Unrealized gain on interest rate swap, net of tax                       |  |                                | 21    |   |      |   | 65    |  
|Minimum pension liability adjustment, net of tax                        |  |                                |      |   |      |   | (49   | )
|                                                                        |  |                                |       |   |      |   |       |  
|Total comprehensive income                                              |  | $                              | 3,547 |   |      | $ | 4,179 |  
|                                                                        |  |                                |       |   |      |   |       |  



|9. | Goodwill and Other Intangibles Assets
|-- | -------------------------------------

The
changes in the carrying amounts of goodwill by segment for the three-month period ended December 31, 2006 are as follows:



|                                 |  |                                      |       |                        |   |                  |  |                       |       |       |   |        |  |   |       
|-------------------------------- |  | ------------------------------------ | ----- | ---------------------- | - | ---------------- |  | --------------------- | ----- | ----- | - | ------ |  | - | ------
|                                 |  | Three Months Ended December 31, 2005
|                                 |  | TransportationServices               |       | ConstructionManagement |   | CivilEngineering |  | EnvironmentalServices |       | Total
|Goodwill, beginning of period    |  | $                                    | 3,650 |                        | $ |                 |  | $                     | 2,641 |       | $ | 11,445 |  | $ | 17,736
|Other purchase price adjustments |  |                                      | 41    |                        |   |                 |  |                       |      |       |   |       |  |   | 41    
|                                 |  |                                      |       |                        |   |                  |  |                       |       |       |   |        |  |   |       
|Goodwill, end of period          |  | $                                    | 3,691 |                        | $ |                 |  | $                     | 2,641 |       | $ | 11,445 |  | $ | 17,777
|                                 |  |                                      |       |                        |   |                  |  |                       |       |       |   |        |  |   |       



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##### Table of Contents

The Companys intangibles assets consisted of the following:



|                         |  |                       |  |                      |       |                         |   |      
|------------------------ |  | --------------------- |  | -------------------- | ----- | ----------------------- | - | -----
|                         |  |                       |  | December 31, 2005   
|(Dollars in thousands)   |  | Estimated UsefulLives |  | Gross CarryingAmount |       | AccumulatedAmortization
|Client list              |  | 10 years              |  | $                    | 1,453 |                         | $ | 674  
|Backlog                  |  | 3 years               |  |                      | 1,799 |                         |   | 1,464
|Website                  |  | 7 years               |  |                      | 200   |                         |   | 88   
|Pension intangible asset |  | 6 years               |  |                      | 1,946 |                         |   | 1,702
|                         |  |                       |  |                      |       |                         |   |      
|                         |  |                       |  | $                    | 5,398 |                         | $ | 3,928
|                         |  |                       |  |                      |       |                         |   |      
|                         |  |                      
|                         |  |                       |  | September 30, 2005  
|(Dollars in thousands)   |  | Estimated UsefulLives |  | Gross CarryingAmount |       | AccumulatedAmortization
|Client list              |  | 10 years              |  | $                    | 1,453 |                         | $ | 607  
|Client name recognition  |  | 2 years               |  |                      | 100   |                         |   | 100  
|Backlog                  |  | 3 years               |  |                      | 1,799 |                         |   | 1,269
|Website                  |  | 7 years               |  |                      | 200   |                         |   | 81   
|Pension intangible asset |  | 6 years               |  |                      | 1,946 |                         |   | 1,621
|                         |  |                       |  |                      |       |                         |   |      
|                         |  |                       |  | $                    | 5,498 |                         | $ | 3,678
|                         |  |                       |  |                      |       |                         |   |      



|10. | Related Party Transactions
|--- | --------------------------

At the annual
meeting of the shareholders held on January 28, 2005, the shareholders approved a proposal to authorize the Company to execute an agreement with Richard Wickett, our former Chairman of the Board from 2002 to February 2005 and former Chief
Financial Officer from 1993 to 2004, to allow him to retain his 138,607 shares of the Companys stock, exclusive of his shares owned through the Companys Employee Profit Sharing and Stock Ownership Plan and Trust (ESOP), upon
retirement and offer for sale the shares, in blocks of 46,000, 46,000 and 46,607 shares in February 2005, 2006 and 2007, respectively, at a price determined at the valuation at the fiscal year end immediately preceding the redemption period.

Pursuant to the Companys by-laws, the Company is permitted to repurchase
stock by delivery of a promissory note to the employee. On February 23, 2006 the Company repurchased 46,000 shares and 3,400 shares, respectively, of the Companys stock from Richard Wickett and Kathryn Wilson in the original principal
amounts of $1.2 million and $92,000, respectively. The shares were repurchased for $27.00 per share which represents the September 30, 2004 share price. During the second quarter of 2006, the Company recorded an accrual of $49,400 for the
difference between the purchase price and the September 30, 2005 share value of $28.00. The notes currently bear interest at the rate of 7.5% per annum and such rate is adjusted to the then current prime rate of Bank of America on
December 31stof each year. Accrued interest and $1 of principal is due monthly on the notes with all remaining
principal and accrued interest due and payable on the five year anniversary of the date of issuance.

On February 13, 2007, the Company repurchased an additional 46,607 shares of the Companys stock from Richard Wickett in the original principal amount of $1.0 million. The additional shares were purchased
for $22.40 which represent 80% of the September 30, 2005 share price, pending completion of the evaluation of the Companys stock as of September 30, 2006. The 2007 note currently bears interest at the rate of 8.25% per annum and
such rate is adjusted to the then current prime rate of Bank of America on December 31stof each year. Accrued
interest and $1 of principal is due monthly on the notes with all remaining principal and accrued interest due and payable on the five year anniversary of the date of issuance. The notes are subject to the Companys right of set off, which
permits the Company to set off all claims it may have against the payee against amounts due and owing under the notes.



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##### Table of Contents

|11. | Acquisitions
|--- | ------------

On April 30, 2006, we
acquired 100% of the stock of EIP Associates (EIP) for $6.0 million, net of cash acquired of $15,000, comprised of $5.5 million in cash, $334,000 accrued additional purchase price and $200,000 held in escrow. The purchase price was
allocated to the respective assets and liabilities based on their estimated fair values as of the acquisition date. The allocation of the purchase price resulted in assets of $9.0 million, including approximately $1.5 million of intangibles and $4.3
million of goodwill, none of which is deductible for tax purposes, and liabilities of $3.9 million. The weighted average amortization period for the identifiable intangible assets is 2.8 years. EIP specializes in environmental, urban planning, water
resource planning and natural resources in California.

The primary factor that contributed to a purchase price that resulted in the
recognition of goodwill in our acquisition is the intellectual capital of the skilled professionals and senior technical personnel associated with the acquired entities which does not meet the criteria for recognition as an asset apart from
goodwill. The results of operations of the above acquisition are included from the date of each acquisition. The pro forma impact of this acquisition is not material to reported historical operations.



|11. | Retirement Plans
|--- | ----------------

The Company uses a
September 30 measurement date for its plans. The following table provides a summary of the Companys periodic costs:



|                                              |  |                                |     |      |   |    
|--------------------------------------------- |  | ------------------------------ | --- | ---- | - | ---
|                                              |  | Three Months EndedDecember 31,
|(Dollars in thousands)                        |  | 2005                           |     | 2004
|Service benefits earned during period         |  | $                              | 185 |      | $ | 162
|Interest cost on projected benefit obligation |  |                                | 173 |      |   | 160
|Amortization:                                 |  |                                |     |      |   |    
|Prior service cost                            |  |                                | 81  |      |   | 81 
|Net loss from past experience                 |  |                                | 99  |      |   | 91 
|                                              |  |                                |     |      |   |    
|Net periodic pension cost                     |  | $                              | 538 |      | $ | 494
|                                              |  |                                |     |      |   |    



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##### Table of Contents

|ITEM 2. | Managements Discussion and Analysis of Financial Condition and Results of Operations
|------- | -------------------------------------------------------------------------------------

The following discussion and analysis is provided to increase an understanding of, and should be read in conjunction with, the unaudited condensed
consolidated financial statements and accompanying notes included elsewhere in this Form 10-Q.

This Form 10-Q and the information
incorporated by reference in it include and are based on forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. We intend these
forward-looking statements to be covered by the safe harbor provisions for forward-looking statements in these sections. These statements can sometimes be identified by the fact that they do not relate strictly to historical or current facts and
they frequently are accompanied by words such as may, will, anticipate, estimate, expect, or intend and similar terms and expressions. All statements regarding our expected
financial position and operating results, our business strategy, our financing plans and forecasted demographic and economic trends relating to our industry, and statements relating to our ability to be awarded government contracts, the adoption of
certain laws by Congress, our ability to compete effectively with other firms that provide similar services, our ability to attract and retain clients, our ability to achieve future growth and success, our expectations for the public and private
sector economic growth, the outcome of our internal investigation and the various on-going government investigations, are forward-looking statements. These forward-looking statements involve known and unknown risks, uncertainties and other factors
that may cause our actual results, performance or achievements to be materially different from the results, performance or achievements expressed or implied by the forward-looking statements. We cannot promise you that our expectations in such
forward-looking statements will turn out to be correct. Factors that may impact such forward-looking statements include, among others, our ability to attract additional business, the timing of projects and the potential for contract cancellation by
our customers, our ability to attract and retain skilled employees, our ability to comply with new laws and regulations, our insurance coverage covering certain events, the timing and amount of the spending bills adopted by the federal government
and the states, our ability to complete our internal investigation in a timely manner, the outcome of the investigations by the Department of Justice, the United States Attorneys Office, the Securities and Exchange Commission, the Federal
Bureau of Investigation, possible changes in collections of accounts receivable, risks of competition, changes in general economic conditions and interest rates, the risk that the Internal Revenue Service or the courts may not accept the amount or
nature of one or more items of deduction, loss, income or gain we report for tax purposes and the possible outcome of pending litigation, legal proceedings and governmental investigations and our actions in connection with such litigation,
proceedings and investigations, as well as certain other risks including those set forth under the heading Risk Factors and elsewhere in this Form 10-Q and in other reports filed by the Company with the Securities and Exchange
Commission. All forward-looking statements included herein are only made as of the date such statements are made, and we do not undertake any obligation to update or revise publicly any forward-looking statements, whether as a result of new
information, future events or otherwise. Subsequent written and oral forward-looking statements attributable to the Company or to persons acting on its behalf are qualified in their entirety to the cautionary statements set forth above and elsewhere
in this Form 10-Q and in other reports filed by the Company with the Securities and Exchange Commission.

Actual results could differ
materially from those projected in these forward-looking statements as a result of these factors, among others, many of which are beyond our control.



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##### Table of Contents

Misappropriation Loss

In March 2005, subsequent to the issuance of the Companys 2004 financial statements, we discovered misappropriations of Company funds by our former Chief Financial Officer and two former employees who worked in
our information systems and treasury departments, collectively, (the participants). The participants colluded and circumvented controls to misappropriate funds and conceal the misappropriations possibly beginning as early as 1993 until
the misappropriations were discovered. The investigation discovered that at least $36.6 million was misappropriated between January 1, 1998 and the discovery of the misappropriations in March 2005. The amount misappropriated prior to
January 1, 1998 could not be determined because certain data for the period prior to January 1, 1998 was unavailable.

The
Company determined that the misappropriation scheme led to the overstatement of overhead rates that the Company used to determine billings in connection with certain of our government contracts. As a result, some of our government clients were
overcharged for the Companys services. During the review of the overhead rate calculations, the Company identified certain instances of costs erroneously included in our overhead cost pool which were unallowable under applicable regulations
and an error in our calculation of our overhead rate, which related to certain general and administrative costs. The Company determined that the unallowable costs and general and administrative errors also led to the overstatement of overhead rates
which the Company used in connection with certain government contracts.



|1. | Results of Operations
|-- | ---------------------

The following table sets
forth the percentage of net earned revenue represented by the items in our condensed consolidated statements of operations for the three-month periods ended December 31, 2005 and 2004, respectively:



|                                                                 |  |                                |   |  |       |  
|---------------------------------------------------------------- |  | ------------------------------ | - |  | ----- | -
|                                                                 |  | Three Months EndedDecember 31, |  
|                                                                 |  | 2005                           |   |  | 2004  |  
|Engineering fees                                                 |  | 122.7                          | % |  | 138.0 | %
|Direct reimbursable expenses                                     |  | 22.7                           |   |  | 38.0  |  
|                                                                 |  |                                |   |  |       |  
|Net earned revenues                                              |  | 100.0                          |   |  | 100.0 |  
|                                                                 |  |                               
|Costs and expenses:                                              |  |                                |   |  |       |  
|Direct salaries and direct costs                                 |  | 35.6                           |   |  | 37.8  |  
|General and administrative expenses, including indirect salaries |  | 53.9                           |   |  | 51.7  |  
|Misappropriation loss                                            |  | (1.2                           | ) |  | 2.1   |  
|Investigation and related costs                                  |  | 4.6                            |   |  |      |  
|                                                                 |  |                                |   |  |       |  
|Operating income                                                 |  | 5.9                            |   |  | 10.5  |  
|Interest expense                                                 |  | (0.5                           | ) |  | (0.6  | )
|Other, net                                                       |  | 0.1                            |   |  | 0.1   |  
|                                                                 |  |                                |   |  |       |  
|Income before income taxes                                       |  | 5.5                            |   |  | 10.0  |  
|Provision for income taxes                                       |  | 3.5                            |   |  | 3.3   |  
|                                                                 |  |                                |   |  |       |  
|Net income                                                       |  | 2.0                            | % |  | 6.7   | %
|                                                                 |  |                                |   |  |       |  



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##### Table of Contents

A summary of our operating results is as follows:



|                                                                 |  |                                |         |   |      |   |         |  
|---------------------------------------------------------------- |  | ------------------------------ | ------- | - | ---- | - | ------- | -
|                                                                 |  | Three Months EndedDecember 31, |        
|(Dollars in thousands)                                           |  | 2005                           |         |   | 2004 |  
|Engineering fees                                                 |  | $                              | 128,466 |   |      | $ | 127,617 |  
|Direct reimbursable expenses                                     |  |                                | 23,774  |   |      |   | 35,126  |  
|                                                                 |  |                                |         |   |      |   |         |  
|Net earned revenue                                               |  |                                | 104,692 |   |      |   | 92,491  |  
|Costs and expenses:                                              |  |                                |         |   |      |   |         |  
|Direct salaries and direct costs                                 |  |                                | 37,304  |   |      |   | 34,994  |  
|General and administrative expenses, including indirect salaries |  |                                | 56,407  |   |      |   | 47,841  |  
|Misappropriation loss                                            |  |                                | (1,298  | ) |      |   | 1,954   |  
|Investigation and related costs                                  |  |                                | 4,780   |   |      |   |        |  
|                                                                 |  |                                |         |   |      |   |         |  
|Operating income                                                 |  |                                | 7,499   |   |      |   | 7,702   |  
|Interest expense                                                 |  |                                | (473    | ) |      |   | (515    | )
|Other, net                                                       |  |                                | 136     |   |      |   | 55      |  
|                                                                 |  |                                |         |   |      |   |         |  
|Income before income taxes                                       |  |                                | 7,162   |   |      |   | 7,242   |  
|Provision for income taxes                                       |  |                                | 3,634   |   |      |   | 3,097   |  
|                                                                 |  |                                |         |   |      |   |         |  
|Net income                                                       |  | $                              | 3,528   |   |      | $ | 4,145   |  
|                                                                 |  |                                |         |   |      |   |         |  

Overview

Business Overview

We provide services to both private and public sector clients, with the public sector comprising
approximately 75.0% of our revenues. Our business is divided in four segments, consisting of Transportation, Civil Engineering, Construction Management and Environmental. Engineering fees for the three months ended December 31, 2006 was flat
when compared to the same period in 2005. All segments, except the Civil Engineering segment, experienced growth in engineering fees. The increase in engineering fees for the Transportation Services segment was due to new assignments in the Central
Region with the TxDOT, partly offset by decreases in projects in the Western Region with the Nevada DOT. The growth in the Construction Management segment was due primarily to additional work with existing customers in the Southeast Region,
including Georgia and Florida DOTs. In addition this segment also experienced growth in their Construction Consulting practice. The Civil Engineering segment experienced a decrease in engineering fees for the three-month period ended
December 31, 2005 when compared to the same period in 2005 primarily due to the winding down of the work related with the hurricanes response projects that hit Florida in calendar years 2004 and 2005. Our Environmental Services segment
experienced organic growth from contracts with FEMA and the State of Georgia and a new contract with the California Department of Water Resources. Additionally the Environmental Services segment benefited from the current quarter impact of the LWC
acquisition. The total backlog for the Company at December 31, 2005 decreased by 6% when compared to the backlog at September 30, 2005. All segments of our business, except the Environmental Services, experienced decreased volumes in
backlog at December 31, 2005, as compared to September 30, 2005.



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##### Table of Contents

We earn revenue for time spent on projects, in addition to certain direct reimbursable expenses of our
projects, such as travel and lodging, blueprints and sub-contractor expenses. The fluctuation in direct reimbursable expenses, specifically sub-contractor costs, including travel and lodging, will influence the fluctuation of our net earned revenue
(NER). For instance, our Civil Engineering segment experienced a significant decrease in direct reimbursable expenses during the three months ended December 31, 2005, as compared to the same period in 2004. The decrease was
primarily due to a significant reduction in subcontractors costs related to debris removal from the Florida hurricanes in calendar 2004 and 2005. During the three-month ended December 31, 2004, the Civil Engineering incurred significant
subcontractors costs, including travel and lodging costs, for the hundreds of employees overseeing debris removal in the areas affected by the disasters. As a result, our Civil Engineering segments NER grew at a greater rate than its
engineering fees, because more work was being performed by our in-house technical professionals.

Business Environment

The need to modernize and upgrade the transportation infrastructure in the United States has been a source of continued business for us through the last
ten years. Fueling the initial growth in this market was the Intermodal Surface Transportation Efficiency Act of 1991 (ISTEA). In 1998, ISTEA was reauthorized as the Transportation Equity Act for the 21st Century (TEA-21),
earmarking $218 billion for highway and transit projects through 2003. Prior to the expiration of TEA-21 on September 30, 2003, the U.S. Congress and President Bush signed a five-month extension of the program. Since then, a series of
additional extensions have been granted, the most recent of which occurred on July 30, 2005 and was set to expire on August 14, 2005, however, on August 10, 2005, the President signed into law the Safe, Accountable, Flexible,
Efficient Transportation Act: A Legacy for Users (SAFETEA-LU). The SAFETEA-LU guarantees funding for highways, highway safety, and public transportation totaling $244.1 billion. SAFETEA-LU ensures that state agencies that depend largely
on federal transportation funding, will continue to make investments needed to maintain and grow the vital transportation infrastructure.

The demand for our construction management services has also been fueled by the legislation and industry trends that are driving the growth in our Transportation and Environmental business segments, including ISTEA and TEA-21. These trends
have created a large number of infrastructure projects throughout the United States, which are subject to increasingly complex governmental regulations. The market could level out or shrink slightly until a new Federal transportation funding bill is
passed. The potential impact is currently minimal, but increases as time passes until the bill is passed. Projects/programs that depend on the Federal gas tax funding are being delayed, which may eventually lead to a temporary reduction in demand
for the services we provide.

In 2005, the economy was in a period of slow recovery with improving private sector corporate profitability,
while investment in residential housing development continued at high rates. Federal spending remained strong especially in the area of national defense, which increased opportunity and fortified our strategy for greater balance between the public
and private sectors. The state and local government markets remained weak but the market for our specialized services in the area of risk and emergency management strengthened due in part to hurricanes and wild fires. Near term expectations are for
the Federal Department of Defense and Homeland Security sectors to remain strong. As the economy expands its recovery, we expect the private sector to strengthen. State and local government markets will remain weak but will improve as increased tax
revenue from private sector recovery trickles into the government sector.



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##### Table of Contents

In recent years, significant environmental laws at the federal, state and local levels have been enacted
in response to public concern over the health of the nations air, water, and natural resources. Those laws and their implementation through regulation affect numerous industrial and governmental actions and form a key market driver for the
services of our Environmental business segment. Two federal environmental laws, The Safe Drinking Water Act of 1974 and the Clean Water Act of 1972, continue to drive this segment of our business. Pursuant to these laws, Congress has authorized
significant monies to assist state and local governments. According to the EPA, as much as $23 billion a year will be needed for construction and upgrade of water and wastewater treatment facilities over the next 20 years.

Segment Results of Operations

Our businesses are
reported as four segments, reflecting our management methodology and structure:

Activities in the Transportation Services business segment
generally involve planning, design, right of way acquisition, development and design of intelligent transportation services and program construction management services for multiple transportation modes, including interstate and primary highways,
toll roads, arterials, bridges, transit systems, airports and port facilities. The Program Management group of our Transportation segment provides many of its governmental clients the necessary resources to manage large infrastructure programs from
concept through construction. Services include planning, programming, and contract support.

The Construction Management segment provides a
wide range of services including planning, traffic engineering, intelligent transportation systems (ITS), corridor planning, highway design, structural design, alternate project delivery, program management, toll facility design,
aviation services, multi-modal/transit systems and right-of-way. In fiscal year 2006, this segment added at-risk construction management projects to its services. We also may act as the program director of a project whereby on behalf of the owner of
the project, we provide scheduling, cost estimating and construction observation services for the project, or our services may be limited to providing construction consulting. We currently serve transportation departments in 19 states and perform
toll services in 9 states for both public and private toll clients.

The Civil Engineering segment provides architectural engineering and
general civil engineering as well as specialized services to public and private clients. Included in these services are: site engineering and surveys, infrastructure engineering, master planning, disaster mitigation planning and response,
infrastructure protection, asset management, emergency management and architectural and landscape architecture design.

The Environmental
Services business segment focuses on the delivery of planning, design and construction management services for private and public sector clients related to air quality management, flood insurance studies, energy planning, hazardous and solid waste
management, ecological studies, wastewater treatment, water resources, environmental toxicology analysis, aquatic treatment systems and water supply and treatment.

The accounting policies of the segments are the same as those described in the notes to the accompanying condensed consolidated financial statements. We evaluate performance based on operating income (loss) of the
respective segments. The discussion that follows is a summary analysis of the primary changes in operating results by segment for the three-month periods ended December 31, 2005 as compared to 2004.

Net earned revenue represents the net effect of gross revenues less direct reimbursable expenses. Direct reimbursable expenses are primarily comprised of
subcontractor costs and other direct non-payroll reimbursable charges including travel and travel related costs, blueprints and equipment where the Company is responsible for procurement and management of such cost components on behalf of the
Companys clients. These direct reimbursable expenses are principally passed through to our clients with minimal or no mark-up. Indirect salaries represent wages earned by technical personnel not assigned to client billable projects and
administrative and support personnel wages as well.



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##### Table of Contents

|                                   |  |                                 |        |   |          |       |   |      |   |          |  |       |  
|---------------------------------- |  | ------------------------------- | ------ | - | -------- | ----- | - | ---- | - | -------- |  | ----- | -
|                                   |  | Three Months Ended December 31, |       
|(Dollars in thousands) (Unaudited) |  | 2005                            |        |   | % of NER |       |   | 2004 |   | % of NER | 
|Transportation Services            |  |                                 |        |   |          |       |   |      |   |          |  |       |  
|Engineering fees                   |  | $                               | 46,988 |   |          | 129.0 | % |      | $ | 43,631   |  | 127.9 | %
|Direct reimbursable expenses       |  |                                 | 10,554 |   |          | 29.0  |   |      |   | 9,516    |  | 27.9  |  
|                                   |  |                                 |        |   |          |       |   |      |   |          |  |       |  
|Net earned revenues (NER)          |  |                                 | 36,434 |   |          | 100.0 |   |      |   | 34,115   |  | 100.0 |  
|Direct salaries and direct costs   |  |                                 | 12,951 |   |          | 35.5  |   |      |   | 12,885   |  | 37.8  |  
|Indirect salaries                  |  |                                 | 7,591  |   |          | 20.8  |   |      |   | 7,161    |  | 21.0  |  
|General and administrative costs   |  |                                 | 12,288 |   |          | 33.7  |   |      |   | 10,311   |  | 30.2  |  
|Misappropriation loss              |  |                                 | (445   | ) |          | (1.2  | ) |      |   | 715      |  | 2.1   |  
|Investigation related expenses     |  |                                 | 1,638  |   |          |       |   |      |   |         |  |       |  
|                                   |  |                                 |        |   |          |       |   |      |   |          |  |       |  
|Total costs and expenses           |  |                                 | 34,023 |   |          | 93.4  |   |      |   | 31,072   |  | 91.1  |  
|                                   |  |                                 |        |   |          |       |   |      |   |          |  |       |  
|Operating income                   |  | $                               | 2,411  |   |          | 6.6   | % |      | $ | 3,043    |  | 8.9   | %
|                                   |  |                                 |        |   |          |       |   |      |   |          |  |       |  
|Construction Management            |  |                                 |        |   |          |       |   |      |   |          |  |       |  
|Engineering fees                   |  | $                               | 21,103 |   |          | 120.5 | % |      | $ | 19,125   |  | 130.7 | %
|Direct reimbursable expenses       |  |                                 | 3,593  |   |          | 20.5  |   |      |   | 4,494    |  | 30.7  |  
|                                   |  |                                 |        |   |          |       |   |      |   |          |  |       |  
|Net earned revenues (NER)          |  |                                 | 17,510 |   |          | 100.0 |   |      |   | 14,631   |  | 100.0 |  
|Direct salaries and direct costs   |  |                                 | 6,736  |   |          | 38.5  |   |      |   | 6,269    |  | 42.8  |  
|Indirect salaries                  |  |                                 | 3,343  |   |          | 19.1  |   |      |   | 2,899    |  | 19.8  |  
|General and administrative costs   |  |                                 | 6,354  |   |          | 36.3  |   |      |   | 4,671    |  | 31.9  |  
|Misappropriation loss              |  |                                 | (230   | ) |          | (1.3  | ) |      |   | 324      |  | 2.2   |  
|Investigation related expenses     |  |                                 | 847    |   |          |       |   |      |   |         |  |       |  
|                                   |  |                                 |        |   |          |       |   |      |   |          |  |       |  
|Total costs and expenses           |  |                                 | 17,050 |   |          | 97.4  |   |      |   | 14,163   |  | 96.8  |  
|                                   |  |                                 |        |   |          |       |   |      |   |          |  |       |  
|Operating income                   |  | $                               | 460    |   |          | 2.6   | % |      | $ | 468      |  | 3.2   | %
|                                   |  |                                 |        |   |          |       |   |      |   |          |  |       |  
|Civil Engineering                  |  |                                 |        |   |          |       |   |      |   |          |  |       |  
|Engineering fees                   |  | $                               | 31,918 |   |          | 115.5 | % |      | $ | 40,684   |  | 169.6 | %
|Direct reimbursable expenses       |  |                                 | 4,279  |   |          | 15.5  |   |      |   | 16,698   |  | 69.6  |  
|                                   |  |                                 |        |   |          |       |   |      |   |          |  |       |  
|Net earned revenues (NER)          |  |                                 | 27,639 |   |          | 100.0 |   |      |   | 23,986   |  | 100.0 |  
|Direct salaries and direct costs   |  |                                 | 10,077 |   |          | 36.5  |   |      |   | 8,876    |  | 37.0  |  
|Indirect salaries                  |  |                                 | 4,190  |   |          | 15.2  |   |      |   | 4,637    |  | 19.3  |  
|General and administrative costs   |  |                                 | 8,198  |   |          | 29.7  |   |      |   | 6,312    |  | 26.3  |  
|Misappropriation loss              |  |                                 | (297   | ) |          | (1.1  | ) |      |   | 437      |  | 1.8   |  
|Investigation related expenses     |  |                                 | 1,093  |   |          |       |   |      |   |         |  |       |  
|                                   |  |                                 |        |   |          |       |   |      |   |          |  |       |  
|Total costs and expenses           |  |                                 | 23,261 |   |          | 84.2  |   |      |   | 20,262   |  | 84.5  |  
|                                   |  |                                 |        |   |          |       |   |      |   |          |  |       |  
|Operating income                   |  | $                               | 4,378  |   |          | 15.8  | % |      | $ | 3,724    |  | 15.5  | %
|                                   |  |                                 |        |   |          |       |   |      |   |          |  |       |  
|Environmental Services             |  |                                 |        |   |          |       |   |      |   |          |  |       |  
|Engineering fees                   |  | $                               | 28,457 |   |          | 123.1 | % |      | $ | 24,177   |  | 122.4 | %
|Direct reimbursable expenses       |  |                                 | 5,348  |   |          | 23.1  |   |      |   | 4,418    |  | 22.4  |  
|                                   |  |                                 |        |   |          |       |   |      |   |          |  |       |  
|Net earned revenues (NER)          |  |                                 | 23,109 |   |          | 100.0 |   |      |   | 19,759   |  | 100.0 |  
|Direct salaries and direct costs   |  |                                 | 7,540  |   |          | 32.6  |   |      |   | 6,964    |  | 35.2  |  
|Indirect salaries                  |  |                                 | 5,427  |   |          | 23.5  |   |      |   | 4,946    |  | 25.0  |  
|General and administrative costs   |  |                                 | 9,016  |   |          | 39.0  |   |      |   | 6,904    |  | 34.9  |  
|Misappropriation loss              |  |                                 | (326   | ) |          | (1.4  | ) |      |   | 478      |  | 2.4   |  
|Investigation related expenses     |  |                                 | 1,202  |   |          |       |   |      |   |         |  |       |  
|                                   |  |                                 |        |   |          |       |   |      |   |          |  |       |  
|Total costs and expenses           |  |                                 | 22,859 |   |          | 98.9  | % |      |   | 19,292   |  | 97.6  | %
|                                   |  |                                 |        |   |          |       |   |      |   |          |  |       |  
|Operating income                   |  | $                               | 250    |   |          | 1.1   | % |      | $ | 467      |  | 2.4   | %
|                                   |  |                                 |        |   |          |       |   |      |   |          |  |       |  



25



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##### Table of Contents

Three Months Ended December 31, 2005 Compared to Three Months Ended December 31, 2004

Engineering Fees



|                        |  |                                |         |      |   |          |  |   |          |   |  |       |  
|----------------------- |  | ------------------------------ | ------- | ---- | - | -------- |  | - | -------- | - |  | ----- | -
|                        |  | Three Months EndedDecember 31, |         |      |   |          |  |  
|(Dollars in thousands)  |  | 2005                           |         | 2004 |   | $ Change |  |   | % Change |  
|Transportation Services |  | $                              | 46,988  |      | $ | 43,631   |  | $ | 3,357    |   |  | 7.7   | %
|Construction Management |  |                                | 21,103  |      |   | 19,125   |  |   | 1,978    |   |  | 10.3  | %
|Civil Engineering       |  |                                | 31,918  |      |   | 40,684   |  |   | (8,766   | ) |  | -21.5 | %
|Environmental Services  |  |                                | 28,457  |      |   | 24,177   |  |   | 4,280    |   |  | 17.7  | %
|                        |  |                                |         |      |   |          |  |   |          |   |  |       |  
|Total Engineering Fees  |  | $                              | 128,466 |      | $ | 127,617  |  | $ | 849      |   |  | 0.7   | %
|                        |  |                                |         |      |   |          |  |   |          |   |  |       |  

Engineering fees for the three-month period ended December 31, 2005, were $128.5 million
compared to $127.6 million in the same period in 2004, representing a slight increase of 0.7%. All segments experienced increases in engineering fees, except the Civil Engineering segment.

In the Transportation Services segment, engineering fees increased 7.7% to $47.0 million in the three-month period ended December 31, 2005 from
$43.6 million in the same period in 2004. The increase was due to increase in work assignments with the TxDOT in the Central Region, partly offset with a decrease in projects with the Nevada DOT in the Western Region.

Engineering fees in our Construction Management segment increased 10.3% to $21.1 million in the three-month period ended December 31, 2005 from
$19.1 million in the same period in 2004. The increase is due to additional work with existing customers in the Southeast Region, including Georgia and Florida DOTs. In addition, the Construction Management segment experienced significant growth in
their Construction Consulting practice. This increase was partly offset by the winding down of work related to the hurricane disaster response projects that hit Florida in calendar years 2004 and 2005. The Construction Management segment benefited
from these projects in the three-month period ended December 31, 2004. Also offsetting part of the increase in engineering fees for the three-month period ended December 31, 2005 was a reduction in engineering fees for the Central Region
as a result of a job ending in Arkansas and the ramp down of a TTA project in Austin.

Engineering fees in our Civil Engineering segment
decreased 21.5% to $31.9 million in the three-month period ended December 31, 2005 from $40.7 million in the same period in 2004. The significant decrease in engineering fees was due primarily to the winding down of the work related to the
hurricane response projects that hit Florida in calendar years 2004 and 2005. In the first quarter of fiscal year 2005, the Civil Engineering segment greatly benefited from the management and administration of debris removal in the areas affected by
the hurricanes. This reduction in engineering fees also reduced the amount of reimbursable expenses for the current quarter, as explained below. During the first quarter of fiscal year 2006, this segment started some new large lump sum contracts
with the Department of Defense, partly offsetting the overall decrease in engineering fees.

Our Environmental Services segment experienced
growth in its engineering fees for the three-month period ended December 31, 2005 as compared to the same period in 2004. Engineering fees increased 17.7% to $28.5 million in the three-month period ended December 31, 2005 from $24.2
million in the same period in 2004. The Environmental Services engineering fees benefited from organic growth, including two significant new contracts with FEMA and the State of Georgia and a new contract with the California Department of
Water Resources. Additionally, this segment also benefited from the impact of the LWC acquisition, which was acquired on February 1, 2005. The impact in engineering fees, in the current quarter, from the LWC acquisition was approximately $1.3
million.



26



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##### Table of Contents

Net Earned Revenue



|                          |  |                                |         |      |   |          |  |          |        |  |      |  
|------------------------- |  | ------------------------------ | ------- | ---- | - | -------- |  | -------- | ------ |  | ---- | -
|                          |  | Three Months EndedDecember 31, |         |      |   |          | 
|(Dollars in thousands)    |  | 2005                           |         | 2004 |   | $ Change |  | % Change |       
|Transportation Services   |  | $                              | 36,434  |      | $ | 34,115   |  | $        | 2,319  |  | 6.8  | %
|Construction Management   |  |                                | 17,510  |      |   | 14,631   |  |          | 2,879  |  | 19.7 | %
|Civil Engineering         |  |                                | 27,639  |      |   | 23,986   |  |          | 3,653  |  | 15.2 | %
|Environmental Services    |  |                                | 23,109  |      |   | 19,759   |  |          | 3,350  |  | 17.0 | %
|                          |  |                                |         |      |   |          |  |          |        |  |      |  
|Total Net Earned Revenues |  | $                              | 104,692 |      | $ | 92,491   |  | $        | 12,201 |  | 13.2 | %
|                          |  |                                |         |      |   |          |  |          |        |  |      |  

Net earned revenue (NER) was $104.7 million during the three-month period ended
December 31, 2005 as compared to $92.5 million for the same period in 2004, representing an increase of 13.2%. This increase was directly related to the significant decrease in direct reimbursable expenses, as explained below.



|                                   |  |                                 |        |          |      |   |      |   |          |  |      |  
|---------------------------------- |  | ------------------------------- | ------ | -------- | ---- | - | ---- | - | -------- |  | ---- | -
|                                   |  | Three Months Ended December 31, |       
|(Dollars in thousands)             |  | 2005                            |        | % of NER |      |   | 2004 |   | % of NER | 
|Transportation Services            |  | $                               | 10,554 |          | 29.0 | % |      | $ | 9,516    |  | 27.9 | %
|Construction Management            |  |                                 | 3,593  |          | 20.5 | % |      |   | 4,494    |  | 30.7 | %
|Civil Engineering                  |  |                                 | 4,279  |          | 15.5 | % |      |   | 16,698   |  | 69.6 | %
|Environmental Services             |  |                                 | 5,348  |          | 23.1 | % |      |   | 4,418    |  | 22.4 | %
|                                   |  |                                 |        |          |      |   |      |   |          |  |      |  
|Total Direct Reimbursable Expenses |  | $                               | 23,774 |          | 22.7 | % |      | $ | 35,126   |  | 38.0 | %
|                                   |  |                                 |        |          |      |   |      |   |          |  |      |  

In addition, the change in our NER is affected by the fluctuation in our direct reimbursable
expenses. Direct reimbursable expenses is primarily comprised of subcontractor costs and other direct non-payroll reimbursable charges including travel and travel related costs, blueprints and equipment where the Company is responsible for
procurement and management of such cost components on behalf of the Companys clients. These direct reimbursable expenses are principally passed through to our clients with minimal or no mark-up. As a percentage of NER, direct reimbursable
expenses decreased by 15.3% to 22.7% in the three-month period ended December 31, 2005 from 38.0% in the same period in 2004. The decrease was driven principally by the Civil Engineering segment.

Direct reimbursable expenses for our Transportation Services segment increased as a percentage of NER by 1.1% to 29.0% for the three-month period ended
December 31, 2005 from 27.9% in the same period in 2004. This increase was due primarily to an increase in subcontractors during the three-month period ended December 31, 2005.

In our Construction Management segment, direct reimbursable expenses as a percentage of NER decreased by 10.2% to 20.5% in the three-month period ended
December 31, 2005 from 30.7% in the same period in 2004. This decrease was primarily due to a market shift from direct reimbursable projects to more lump sum and all-inclusive billing rates contracts in the Central and Southeast regions. The
shift started in fiscal year 2005 and has continued into fiscal year 2006.

Direct reimbursable expenses in the Civil Engineering segment
decreased as a percentage of NER by 54.1% to 15.5% in the three-month period ended December 31, 2005 from 69.6% in the same period in 2004. The decrease was primarily due to a significant reduction in subcontractors costs related to debris
removal from the Florida hurricanes in calendar 2004 and 2005. In the first quarter of 2005, the Civil Engineering incurred significant subcontractors costs, including travel and lodging costs, for the hundreds of employees overseeing debris
removal in the areas affected by the disasters.



27



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##### Table of Contents

Our Environmental Services segment experienced an increase of 21.1% in direct reimbursable expenses for
the three-month period ended December 31, 2005 when compared to the same period in 2004. As a percentage of NER, direct reimbursable expenses increased by 0.7% to 23.1% for the three-month period ended December 31, 2005 from 22.4% in the
same period in 2004. The increase was due primarily to an increase use of subcontractors.

Operating Income



|                                                                                             |  |                                 |        |          |      |   |      |   |          |  |      |  
|-------------------------------------------------------------------------------------------- |  | ------------------------------- | ------ | -------- | ---- | - | ---- | - | -------- |  | ---- | -
|                                                                                             |  | Three Months Ended December 31, |       
|(Dollars in thousands)                                                                       |  | 2005                            |        | % of NER |      |   | 2004 |   | % of NER | 
|Transportation Services                                                                      |  | $                               | 2,411  |          | 13.8 | % |      | $ | 3,043    |  | 20.8 | %
|Construction Management                                                                      |  |                                 | 460    |          | 1.7  | % |      |   | 468      |  | 2.0  | %
|Civil Engineering                                                                            |  |                                 | 4,378  |          | 18.9 | % |      |   | 3,724    |  | 18.8 | %
|Environmental Services                                                                       |  |                                 | 250    |          | 0.2  | % |      |   | 467      |  | 0.5  | %
|                                                                                             |  |                                 |        |          |      |   |      |   |          |  |      |  
|Total Operating Income                                                                       |  |                                 | 7,499  |          | 7.2  | % |      |   | 7,702    |  | 8.3  | %
|                                                                                             |  |                                 |        |          |      |   |      |   |          |  |      |  
|Misappropriation Loss (Recoveries) and Investigation and Related Costs, net                  |  |                                 | 3,482  |          | 3.3  | % |      |   | 1,954    |  | 2.1  | %
|                                                                                             |  |                                 |        |          |      |   |      |   |          |  |      |  
|Total Operating Income before Misappropriation Loss and Investigation and Related Costs, net |  | $                               | 10,981 |          | 10.5 | % |      | $ | 9,656    |  | 10.4 | %
|                                                                                             |  |                                 |        |          |      |   |      |   |          |  |      |  

Operating income was $7.5 million in the three-month period ended December 31, 2005 as
compared to $7.7 million in the same period in 2004 representing a decrease of 2.6%. The decrease in total operating income is primarily the result of $4.8 million in investigation and related costs incurred during the three-month period ended
December 31, 2005, offset by a gain from recovered assets of $1.3 million and a misappropriation loss of $2.0 million for the three-month period ended December 31, 2004. All segments, except the Civil Engineering segment, had decreases in
operating income in the three-month period ended December 31, 2005 as compared to the same period in 2004. Operating income, as a percentage of NER, decreased by 1.1% to 7.2% in the three-month period ended December 31, 2005 from 8.3% in
the same period in 2004. All segments, except the Civil Engineering segment, experienced decrease in operating income as a percentage of NER, in the three-month period ended December 31, 2005 as compared to the same period in 2004.

We believe that operating income before misappropriation loss and investigation and related costs is a useful measure in evaluating our results of
operations because the misappropriation loss, recoveries and investigation and related costs are unusual items which do not reflect the costs or revenues of our provision of services in the given year. While the misappropriation occurred over a long
period, the recoveries and investigation costs are realized when recovered or incurred and not in relation to the period when the misappropriation occurred. We believe this measure is helpful for us and for our investors to evaluate the results of
our operations and make comparisons between periods.

Operating income before misappropriation loss and investigation and related costs,
net was $11.0 million in the three-month period ended December 31, 2005 as compared to $9.7 million in the same period in 2004, representing an increase of 13.7%. This increase was due primarily to the shift to more lump sum contracts in the
Construction Management segment and the improvement in NER by the Civil Engineering segment caused by a reduction in direct reimbursable expenses and the addition of lump sum contracts with the Department of Defense. Operating income before
misappropriation loss and related costs, net, as a percentage of NER, increased slightly by 0.1% to 10.5% in the three-month period ended December 31, 2005 from 10.4% in the same period in 2004. Misappropriation loss and investigation and
related costs, net are treated as corporate overhead costs, and as such, are allocated to each respective segment. The allocation is based on the segments proportionate share of general and administrative (G&A) costs to total
Company G&A costs.



28



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##### Table of Contents

As a percentage of NER, the Transportation Services segments operating income decreased by 7.0% to
13.8% in the three-month period ended December 31, 2005 from 20.8% in the same period in 2004. This decrease in primarily driven by the increase in misappropriation loss and investigation related costs, net. As a percentage of NER, the
Transportation Services segments operating income before misappropriation loss and investigation and related costs, net decreased by 1.1% to 9.9% in the three-month period ended December 31, 2005 from 11.0% in the same period in 2004.
This decrease experienced by the Transportation Services segment was driven by lower multipliers on some contracts.

The Construction
Management segment experienced a decrease in operating income as a percentage of NER of 0.3% to 1.7% in the three-month period ended December 31, 2005 from 2.0% in the same period in 2004. This decrease in primarily driven by the increase in
misappropriation loss and investigation related costs, net. The Construction Management segment experienced an increase in operating income before misappropriation loss and related costs, net, as a percentage of NER of 0.8% to 6.2% in the
three-month period ended December 31, 2005 from 5.4% in the same period in 2004. This increase was primarily due to a market shift from direct reimbursable projects to more lump sum and all-inclusive billing rates contracts in the Central and
Southeast regions. The shift started in fiscal year 2005 and has continued into fiscal year 2006.

As a percentage of NER, the Civil
Engineering segment operating income increased by .1% to 18.9% in the three-month period ended December 31, 2005 from 18.8% in the same period of 2005. The increase was primarily driven by the reduction in direct reimbursable expenses, offset
by the increase in misappropriation loss and investigation related costs, net. As a percentage of NER, the Civil Engineering segment operating income before misappropriation loss and investigation and related costs, net increased by 1.4% to 18.7% in
the three-month period ended December 31, 2005 from 17.3% in the same period of 2005. The Civil Engineering growth in NER for the three-month period ended December 31, 2005 was impacted by the reduction in direct reimbursable expenses, as
explained above, and the addition of several large lump sum contracts with the Department of Defense in the first quarter of fiscal 2006.

As a percentage of NER, the Environmental Services segment operating income decreased by 0.3% to 0.2% in the three-month period ended December 31, 2005 from 0.5% in the same period in 2004. This decrease in primarily driven by the
increase in misappropriation loss and investigation related costs, net. As a percentage of NER, the Environmental Services segment operating income before misappropriation loss and investigation and related costs, net increase slightly by 0.1% to
4.9% in the three-month period ended December 31, 2005 from 4.8% in the same period in 2004. This increase was primarily due to the additional work with FEMA, the State of Georgia and California Department of Water Resources, as previously
explained.

Costs

Costs consist principally of direct salaries that are chargeable to clients and overhead and general and administrative expenses.



29



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##### Table of Contents

Direct Salaries and Direct Costs



|                                       |  |                                 |        |          |      |   |      |   |          |  |      |  
|-------------------------------------- |  | ------------------------------- | ------ | -------- | ---- | - | ---- | - | -------- |  | ---- | -
|                                       |  | Three Months Ended December 31, |       
|(Dollars in thousands)                 |  | 2005                            |        | % of NER |      |   | 2004 |   | % of NER | 
|Transportation Services                |  | $                               | 12,951 |          | 35.5 | % |      | $ | 12,885   |  | 37.8 | %
|Construction Management                |  |                                 | 6,736  |          | 38.5 | % |      |   | 6,269    |  | 42.8 | %
|Civil Engineering                      |  |                                 | 10,077 |          | 36.5 | % |      |   | 8,876    |  | 37.0 | %
|Environmental Services                 |  |                                 | 7,540  |          | 32.6 | % |      |   | 6,964    |  | 35.2 | %
|                                       |  |                                 |        |          |      |   |      |   |          |  |      |  
|Total Direct Salaries and Direct Costs |  | $                               | 37,304 |          | 35.6 | % |      | $ | 34,994   |  | 37.8 | %
|                                       |  |                                 |        |          |      |   |      |   |          |  |      |  

Direct salaries and direct costs primarily includes direct salaries and to a lesser extent
unreimburseable direct costs. Direct salaries and direct costs were $37.3 million for the three-month period ended December 31, 2005, as compared to $35.0 million for the same period in 2004, representing an increase of 6.6%. This increase is
directly related to the increase in NER. As a percentage of NER, direct salaries and direct costs experienced a decrease in the three-month period ended December 31, 2005 from the same period in 2004. On a Company basis, direct salaries and
direct costs as a percentage of NER decreased by 2.2% to 35.6% for the three-month period ended December 31, 2005 from 37.8% in the same period in 2004.

Direct salaries and direct costs for the Transportation Services segment remained flat for the three-month periods ended December 31, 2005 as compared to the same period in 2004. However, as a percentage of NER,
direct salaries and direct costs decreased by 2.3% to 35.5% in the three-month period ended December 31, 2005 from 37.8% for the same period in 2004, reflecting improvements in capturing labor billable costs to clients.

Direct salaries and direct costs in the Construction Management segment increased 7.4%, and as a percentage of NER, direct salaries and direct costs
decreased by 4.3% to 38.5% in the three-month period ended December 31, 2005 from 42.8% in the same period in 2004. This decrease is due to higher profitability resulting from the shifting of direct reimbursable projects to lump sum and
all-inclusive billing rates contracts in the Central and Southeast regions, as previously explained.

As a percentage of NER, direct
salaries and direct costs decreased by 0.5% to 36.5% in the three-month period ended December 31, 2005 from 37.0% in the same period in 2004. This decrease was due in part to addition of the lump sum contracts with the Department of Defense, as
previously explained.

Direct salaries and direct costs in the Environmental Services segment increased 8.3% to $7.5 million in the
three-month period ended December 31, 2005 from $ 7.0 million in the same period in 2004. This increase was due primarily to the professional staff added with the acquisition of LWC, as previously explained.



30



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##### Table of Contents

General and Administrative Costs, including Indirect Salaries

The other component of costs is indirect costs, which include indirect salaries, and general and administrative costs.



|                        |  |                                 |        |          |      |   |      |   |          |  |      |  
|----------------------- |  | ------------------------------- | ------ | -------- | ---- | - | ---- | - | -------- |  | ---- | -
|                        |  | Three Months Ended December 31, |       
|(Dollars in thousands)  |  | 2005                            |        | % of NER |      |   | 2004 |   | % of NER | 
|Transportation Services |  | $                               | 7,591  |          | 20.8 | % |      | $ | 7,161    |  | 21.0 | %
|Construction Management |  |                                 | 3,343  |          | 19.1 | % |      |   | 2,899    |  | 19.8 | %
|Civil Engineering       |  |                                 | 4,190  |          | 15.2 | % |      |   | 4,637    |  | 19.3 | %
|Environmental Services  |  |                                 | 5,427  |          | 23.5 | % |      |   | 4,946    |  | 25.0 | %
|                        |  |                                 |        |          |      |   |      |   |          |  |      |  
|Total Indirect Salaries |  | $                               | 20,551 |          | 19.6 | % |      | $ | 19,643   |  | 21.2 | %
|                        |  |                                 |        |          |      |   |      |   |          |  |      |  

Indirect salaries increased 4.6% to $20.6 million during the three-month period ended
December 31, 2005 from $19.6 million in the same period in 2004. Indirect salaries as a percentage of NER decreased by 1.6% to 19.6% in the three-month period ended December 31, 2005 from 21.2% in the same period in 2004.

Indirect salaries for the Transportation Services segment increased 6.0% to $7.6 million in the three-month period ended December 31, 2005 from $7.2
million in the same period in 2004. Transportation Services experienced a slight decrease in indirect salaries as a percentage of NER of 0.2% to 20.8% in the three-month period ended December 31, 2005 to 21.0% in the same period in 2004 The
slight decrease reflects improvements in capturing labor billable costs to clients during the current quarter.

The Construction Management
segment experienced an increase in indirect salaries of 15.3% to $3.3 million in the three-month period ended December 31, 2005 from $2.9 million in the same period in 2004. This increase reflects expenditures for marketing and business
development. As a percentage of NER, indirect salaries decreased by 0.7% to 19.1% in the three-month period ended December 31, 2005 as compared to 19.8% in the same period in 2004. This decrease was due as a result of NER growing at a faster
rate than the increase in indirect salaries for the current quarter.

Indirect salaries for the Civil Engineering segment decreased 9.6% to
$4.2 million in the three-month period ended December 31, 2005 from $4.6 million in the same period in 2004. As a percentage of NER, indirect salaries decreased by 4.1% to 15.2% in the three-month period ended December 31, 2005 from 19.3%
in the same period in 2004. This decrease resulted from the decrease in direct reimbursable expenses and improvements in chargeability resulting from the new lump sum contracts with the Department of Defense, as previously explained.

The Environmental Services segment experienced an increase in indirect salaries of 9.7% to $5.4 million in the three-month period ended December 31,
2005 from $4.9 million in the same period in 2004. As a percentage of NER, indirect salaries decreased by 1.5% to 23.5% in the three-month period ended in December 31, 2005 as compared to 25.0% in the same period in 2004. This decrease was due
to the growth in engineering fees and NER resulting from the organic growth in this segment, including two significant new contracts with FEMA and the State of Georgia and a new contract with the California Department of Water Resources, as
previously explained.



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|                                     |  |                                 |        |          |      |   |      |   |          |  |      |  
|------------------------------------ |  | ------------------------------- | ------ | -------- | ---- | - | ---- | - | -------- |  | ---- | -
|                                     |  | Three Months Ended December 31, |       
|(Dollars in thousands)               |  | 2005                            |        | % of NER |      |   | 2004 |   | % of NER | 
|Transportation Services              |  | $                               | 12,288 |          | 33.7 | % |      | $ | 10,311   |  | 30.2 | %
|Construction Management              |  |                                 | 6,354  |          | 36.3 | % |      |   | 4,671    |  | 31.9 | %
|Civil Engineering                    |  |                                 | 8,198  |          | 29.7 | % |      |   | 6,312    |  | 26.3 | %
|Environmental Services               |  |                                 | 9,016  |          | 39.0 | % |      |   | 6,904    |  | 34.9 | %
|                                     |  |                                 |        |          |      |   |      |   |          |  |      |  
|Total General & Administrative Costs |  | $                               | 35,856 |          | 34.2 | % |      | $ | 28,198   |  | 30.5 | %
|                                     |  |                                 |        |          |      |   |      |   |          |  |      |  

General and administrative (G&A) costs increased 27.2%, to $35.9 million in the
three-month period ended December 31, 2005 from $28.2 million in the same period in 2004. G&A, as a percentage of NER, increased by 3.7% to 34.2% in the three-month period ended December 31, 2005 from 30.5% in the same period in 2004.
All segments experienced increases in G&A as a percentage of NER for the three-month period ended December 31, 2005 as compared to the same period in 2004. The majority of the increase is primarily related to increased medical insurance
premiums and flex benefits of $1.1 million), insurance costs of $0.6 million), rent expense for real estate of $0.6 million), payroll taxes of $0.4 million), deferred compensation of $0.9 million) and vehicle and equipment leases and related
expenses of $.3 million. We also incurred additional expenses for professional fees, incentive compensation, travel and related expenses, and software and computer supplies. These costs are generally considered corporate costs which benefit all
segments and are allocated to the respective segments based on the individual segments proportionate share of G&A costs as compared to total Company G&A costs.

Misappropriation Loss and Investigation and Related Costs

During the three months ended
December 31, 2005, the Company recorded a gain from recovered assets totaling $1.3 million and incurred approximately $4.8 million in costs to investigate and quantify the impact of the embezzlement, and in costs related to the recovery and
maintenance of certain assets. During the three months ended December 31, 2004, the Company recorded a misappropriation loss of $2.0 million. The gain from recovered assets, the misappropriation loss and the investigation and related costs have
been allocated to our segments based on the individual segments proportionate share of G&A costs to total Company G&A costs.

Income
Taxes

The income tax provisions were $3.6 million and $3.1 million, or effective tax rates of 50.7% and 42.8% for the three-month
periods ended December 31, 2005 and 2004, respectively.

For the past several years, the Company has generated research and
development tax credits related to certain qualifying costs. The qualifying costs relate primarily to the Companys project costs which management believes involved technical uncertainty. These research and development costs were incurred by
the Company in the course of providing services generally under long-term client projects, thereby creating costs associated with recognizable revenue under the project. Because the Company has been unable to utilize the entire amount of research
and development tax credits it has generated each year, the condensed consolidated balance sheets reflect a deferred tax asset of $5.5 million and $5.5 million as of December 31, 2005 and September 30, 2005, respectively, for the unused
research and development tax credit carry forwards. The credits will expire beginning 2017 through 2022.



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The Companys effective tax rate is based on expected income, statutory tax rates and tax planning
opportunities available in the various jurisdictions in which the Company operates. Significant judgment is required in determining the effective tax rate and in evaluating the Companys tax positions. The Company establishes reserves when,
despite its belief that the tax return positions are fully supportable, it believes that certain positions, if challenged, will likely be resolved unfavorably to us. These reserves are adjusted in light of changing facts and circumstances, such as
the progress of a tax audit or current developments in tax law. The Companys annual tax rate includes the impact of reserve provisions and changes to reserves. While it is often difficult to predict the final outcome or the timing of
resolution of any particular matter, the Company believes that its reserves reflect the probable outcome of known tax contingencies. Resolution of the tax contingencies would be recognized as an increase or decrease to the Companys tax rate in
the period of resolution.



|2. | Financial Condition and Capital Resources
|-- | -----------------------------------------

Cash Flows from
Operating Activities

Net cash used in operating activities totaled $9.8 million for the three-month period ended December 31, 2005
as compared to net cash used in operating activities of $13.4 million in the same period in 2004. The improvement in net cash used in operating activities during the three-month period ended December 31, 2005 was due primarily to a small
increase in accounts receivable relative to the increase in net earned revenues. This improvement was partly offset by a reduction in accounts payable and accrued expenses. The reduction in payables and accrued expenses reflects payments made to
vendors and consultants during the three-month period ended December 31, 2005.

Approximately 80% of our revenues are billed on a
monthly basis. The remaining amounts are billed when we reach certain stages of completion as specified in the contracts. Payment terms for accounts receivable and unbilled fees, when billed, are net 30 days. Unbilled fees decreased 5.9%, to $65.6
million at December 31, 2005 from $69.7 million at September 30, 2005.

Accounts receivable increased 4.8%, to $70.7 million at
December 31, 2005, from $67.5 million at September 30, 2005 primarily due to slower collections. The allowance for doubtful accounts was $1.3 million and $1.2 million at December 31, 2005 and September 30, 2005, respectively.

During fiscal year 2007, we have incurred additional costs in connection with the investigations and with the restatement of our
previously issued consolidated financial statements. We have incurred $7.8 million during the remaining nine months of fiscal year 2006. We have also incurred, during fiscal year 2007, an additional $3.7 million in investigation related legal
expenses and approximately $800,000 in overhead rate and financial statement audit related expenses during fiscal year 2007. Additionally, we expect to spend approximately $23.2 million in client reimbursements during fiscal year 2007, and an
additional $5.8 million thereafter. We may also incur additional fees and penalties from various government regulatory agencies as a result of the final outcome of the ongoing investigations.

Cash Flows from Investing Activities

Net cash used
in investing activities was $2.0 million and $1.9 million for the three-month periods ended December 31, 2005 and 2004, respectively. Investing activity was primarily related to fixed asset purchases, such as survey equipment, computer
equipment, furniture and leasehold improvements.

During the three-month period ended December 31, 2004, we completed one acquisition.
On October 1, 2004 we acquired 100% of the stock of Croslin Associates, Inc. for a purchase price of $727,000, net of cash acquired, comprised of $397,000 in cash, $30,000 held in escrow and 11,111 shares of our common stock valued at
approximately $300,000.



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Cash Flows from Financing Activities

Net cash used in financing activities for the three-month period ended December 31, 2005 was $3.2 million, as compared to net cash provided by financing activities of $13.5 million in the same period in 2004. The
decrease in net cash used in financing activities was primarily attributable to the reduction in borrowings under our line of credit of $13.2 million and an increase in the payments for repurchase of common stock from employees of $3.8 million.

Capital Resources

We have a $58
million line of credit agreement, inclusive of $10 million in letters of credit, with Bank of America, N.A. (the Bank). The original expiration date on the line of credit is June 30, 2008. The letters of credit reduce the maximum
amount available for borrowing. As of December 31, 2005 and September 30, 2005, we had letters of credit totaling $3.4 million, respectively. No amounts have been drawn on any of these letters of credit. As a result of the issuance of
these letters of credit, the maximum amount available for borrowing under the line of credit was $54.6 million as of December 31, 2005 and September 30, 2005, respectively. Although our most significant source of cash has historically been
generated from operations, in the event that cash flows from operations are insufficient to cover our working capital needs, we would access our revolving line of credit facility.

The interest rate (4.89% and 4.36% at December 31, 2005 and September 30, 2005, respectively) on the revolving line of credit ranges from LIBOR
plus 50 basis points to prime minus 125 basis points if our funded debt coverage ratio is less than 2.5. The range increases to LIBOR plus 75 basis points to prime minus 100 basis points if our funded debt coverage ratio is between 2.5 and 3.0.
There were no amounts outstanding under the revolving line of credit as of December 31, 2005 and September 30, 2005, respectively.

On March 19, 2001, the Company entered into a mortgage note with an original principal amount of $9.0 million due in monthly installments starting on April 16, 2001, with interest. Interest on the mortgage is LIBOR plus the
floating rate margin of not less than 65 basis points and not greater than 90 basis points. A balloon payment is due on the mortgage on March 16, 2011. The effective interest rate on the mortgage note was 5.02% and 4.51% at December 31,
2005 and September 30, 2005, respectively. We used an interest rate swap (the Swap) agreement in order to minimize the adverse impact of the floating interest rate characteristics of the Companys long term debt obligations.
The swap effectively converted the floating interest rate on the note payable to a fixed rate of 6.28%. On March 16, 2006, the Companys swap expired. Our adjustable rate mortgage calls for an interest rate based on the 30 day LIBOR plus a
margin of .065%. We do not anticipate entering into any additional swap agreements.

Our capital expenditures are generally for purchases
of property and equipment. The Company spent $1.9 million and $1.9 million on such expenditures for the three-month period ended December 31, 2005 and 2004, respectively.

On April 30, 2006, we acquired 100% of the stock of EIP Associates (EIP) for $6.0 million, net of cash acquired of $15,000, comprised of
$5.5 million in cash, $334,000 accrued additional purchase price and $200,000 held in escrow.

A stock offering usually takes place on an
annual basis for a one week period during the month of March. The Company suspended the stock offering window for March 2006 until the final impact of the restatement of the Companys consolidated financial statements was
determined. The Company is planning to open the stock window for fiscal year 2007 in June 2007. During this offering, shares of the Companys common stock will be available for sale to employees of the Company, pursuant to The PBSJ
Corporation Stock Ownership Plan.



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The stock window will also allow existing
shareholders to offer shares of common stock for sale to the Company. Under the corporate by-laws, the Company has the first right of refusal to purchase these shares. If the Company declines to purchase the offered shares, they are offered to
the Employee Profit Sharing and Stock Ownership Plan and Trust (ESOP) and then to all shareholders. The Company believes it will be able to fund purchases it chooses to execute using cash from operations and accessing the revolving credit line
facility, if necessary. Should the number of shares offered for sale potentially cause the Company to violate its debt covenants, the Company would restrict the purchase of shares until compliance is achieved. As of April 30th, 2007 there were 6,668,606 shares held by employees with a total value of approximately $162.3 million.

We believe that our existing financial resources, together with our cash flow from operations and availability under our revolving line of credit, will
provide sufficient capital to fund our operations for fiscal year 2006 and beyond.

Inflation

The rate of inflation has not had a material impact on our operations. Moreover, if inflation remains at its recent levels, it is not expected to have a
material impact on our operations for the foreseeable future.



|3. | Off-Balance Sheet Arrangements
|-- | ------------------------------

We do not have any
off-balance sheet arrangements other than operating leases for most of our office facilities and certain equipment. Minimum operating lease obligations payable in future years are presented below in Contractual Obligations.



|4. | Related Party Transactions
|-- | --------------------------

We lease office space
in a building which houses our Marietta, Georgia operations from BCE Properties, which is owned and controlled by James Belk. Mr. Belk is a former owner of Welker and a Vice-President and Project Director of ours. The lease was assumed in
connection with our acquisition of Welker in March 2003. The rental cost of the space is $17,600 per month. On May 31, 2006, the lease expired and was not renewed. In June 2006, we moved our Marietta, Georgia operations to a new location.

We lease office space in a building which houses our Missoula, Montana operations from Cedar Enterprises, which is owned and controlled by
Charlie K. Vandam. Mr. Vandam is a former owner of LWC and a Senior Program Manager of ours. The lease was assumed in connection with our acquisition of LWC in February 2005. The rental cost of the space is $9,500 per month.

We lease office space in a building which houses our Helena, Montana operations from Prickly Pear Enterprises, which is owned and controlled by Paul
Callahan. Mr. Callahan is a former owner of LWC and a Vice-President and Senior Division Manager of ours. The lease was assumed in connection with our acquisition of LWC in February 2005. The rental cost of the space is $1,800 per month.

At the annual meeting of the shareholders held on January 28, 2005, the shareholders approved a proposal to authorize the Company to
execute an agreement with Richard Wickett, our former Chairman of the Board from 2002 to February 2005 and former Chief Financial Officer from 1993 to 2004, to allow him to retain his 138,607 shares of the Companys stock, exclusive of his
shares owned through the Companys Employee Profit Sharing and Stock Ownership Plan and Trust (ESOP), upon retirement and offer for sale the shares, in blocks of 46,000, 46,000 and 46,607 shares in February 2005, 2006 and 2007,
respectively, at a price determined at the valuation at the fiscal year end immediately preceding the redemption period.



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Pursuant to the Companys by-laws, the
Company is permitted to repurchase stock by delivery of a promissory note to the employee. On February 23, 2006 the Company repurchased 46,000 shares and 3,400 shares, respectively, of the Companys stock from Richard Wickett and Kathryn
Wilson in the original principal amounts of $1.2 million and $92,000, respectively. The shares were repurchased for $27.00 per share which represents the September 30, 2004 share price. During the second quarter of 2006, the Company recorded an
accrual of $49,400 for the difference between the purchase price and the September 30, 2005 share value of $28.00. The notes currently bear interest at the rate of 7.5% per annum and such rate is adjusted to the then current prime rate of
Bank of America on December 31stof each year. Accrued interest and $1 of principal is due monthly on the notes
with all remaining principal and accrued interest due and payable on the five year anniversary of the date of issuance.

On February 13, 2007, the Company repurchased an additional 46,607 shares of the
Companys stock from Richard Wickett in the original principal amount of $1.0 million. The additional shares were purchased for $22.40 which represents 80% of the September 30, 2005 share price, pending completion of the evaluation of the
Companys stock as of September 30, 2006. In fiscal year 2007, the Company recorded a liability for the difference between the purchase price and the September 30, 2006 share value. The 2007 note currently bears interest at the rate
of 8.25% per annum and such rate is adjusted to the then current prime rate of Bank of America on December 31stof each year. Accrued interest and $1 of principal is due monthly on the notes with all remaining principal and accrued interest due and payable on the five year anniversary of the date of issuance. The notes are subject to the
Companys right of set off, which permits the Company to set off all claims it may have against the payee against amounts due and owing under the notes.



|5. | Recent Accounting Pronouncements
|-- | --------------------------------

On
February 15, 2007, the Financial Accounting Standards Board (FASB) issued SFAS No. 159 (SFAS 159), The Fair Value Option for Financial Assets and Financial Liabilities, which allows an entity the
irrevocable option to elect fair value for the initial and subsequent measurement for certain financial assets and liabilities on a contract-by-contract basis. Subsequent changes in fair value of these financial assets and liabilities would be
recognized in earnings when they occur. SFAS 159 further establishes certain additional disclosure requirements. SFAS 159 is effective for the Companys financial statements for the fiscal year ending September 30, 2009, with earlier
adoption permitted. Management is currently evaluating the impact and timing of the adoption of SFAS 159 on the Companys consolidated financial statements.

In September 2006, FASB issued SFAS No. 158 (SFAS 158), Employers Accounting for Defined Benefit Pension and Other Postretirement Plans. This standard requires an employer to
recognize the overfunded or underfunded status of a defined benefit postretirement plan (other than a multiemployer plan) as an asset or liability in its statement of financial position and to recognize changes in that funded status in the year in
which the changes occur through comprehensive income. The Company is required to adopt the recognition and related disclosure provisions of SFAS 158 for the fiscal year ending September 30, 2007. The Company is also required to adopt the
measurement provisions of SFAS 158 for the fiscal year ending September 30, 2009. The Company is still evaluating the impact of this standard on its consolidated financial statements.

In September 2006, the FASB issued SFAS No. 157 (SFAS 157), Fair Value Measurements. SFAS 157 prescribes a single
definition of fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The accounting provisions of SFAS 157 will be effective for
the Company for the fiscal year ending September 30, 2009. The Company does not believe the adoption of SFAS 157 will have a material impact on its consolidated financial statements.



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In September 2006, the SEC issued Staff Accounting Bulletin No. 108 (SAB 108). SAB 108
addresses how the effects of prior year uncorrected misstatements should be considered when quantifying misstatements in current year financial statements. SAB 108 requires companies to quantify misstatements using a balance sheet and income
statement approach and to evaluate whether either approach results in quantifying an error that is material in light of relevant quantitative and qualitative factors. When the effect of initial adoption is material, companies will record the effect
as a cumulative effect adjustment to beginning of year retained earnings. SAB 108 will be effective for the Company for the fiscal year ending September 30, 2008. The Company does not believe the adoption of SAB 108 will have a material impact
on its consolidated financial statements.

In July 2006, the FASB issued Interpretation (FIN) No. 48 Accounting
for Uncertainty in Income Taxes  an interpretation of FASB No. 109 (FIN 48). This interpretation establishes guidelines and thresholds that must be met for the recognition and measurement of a tax position taken or
expected to be taken in a tax return. The provisions of FIN 48 are effective for fiscal years beginning after December 31, 2006. The Company is currently evaluating the impact of adopting FIN 48 on its consolidated financial statements.

In November 2005, the FASB issued FASB Staff Position (FSP) FAS 115-1 and FAS 124-1, The Meaning of
Other-Than-Temporary Impairment and Its Application to Certain Investments, ( FSP 115-1 and 124-1) which address the determination as to when an investment is impaired, whether that impairment is other than temporary, and the
measurement of an impairment loss. FSP 115-1 and 124-1 also includes accounting considerations subsequent to the recognition of an other-than-temporary impairment and requires certain disclosures about unrealized losses that have not been
recognized as other-than-temporary impairments. The guidance in FSP 115-1 and 124-1 amends FASB Statement No. 115, Accounting for Certain Investments in Debt and Equity Securities, and Accounting Principles Board
(APB) Opinion No. 18, The Equity Method of Accounting for Investments in Common Stock. FSP 115-1 and 124-1 is effective for reporting periods beginning after December 15, 2005. The adoption of FSP
115-1 and 124-1 did not have a material impact on our consolidated financial statements.

In May 2005, the FASB issued SFAS No. 154
(SFAS 154), Accounting Changes and Error Corrections (SFAS 154), which replaces APB Opinion No. 20 Accounting Changes and SFAS No. 3 Reporting Accounting Changes in
Interim Financial Statements. SFAS 154 requires that a voluntary change in accounting principle be applied retrospectively with all prior period financial statements presented on the new accounting principle. SFAS 154 also requires that a
change in method of depreciating or amortizing a long-lived non-financial asset be accounted for prospectively as a change in estimate, and correction of errors in previously issued financial statements should be termed a restatement. SFAS 154 is
effective for accounting changes and correction of errors made in the first annual reporting period beginning after December 15, 2005. We early adopted SFAS 154 and have reported and disclosed the correction of errors in our previously reported
consolidated financial statements in accordance with SFAS 154. The other reporting and disclosure requirements of SFAS 154 did not have a material impact on our consolidated financial statements.

In December 2004, the FASB issued SFAS No. 123 (revised 2004), Share-Based Payment (SFAS 123(R)), which is a
revision of SFAS 123, Accounting for Stock-Based Compensation. SFAS 123(R) supersedes APB Opinion No. 25, Accounting for Stock Issued to Employees. SFAS No. 123(R) requires all share-based payments to employees,
including grants of employee stock options, to be recognized in the financial statements based on their fair values, beginning with the first annual period beginning after December 2005, with early adoption encouraged. We are required to adopt SFAS
123(R) in our first quarter of fiscal year 2007, beginning October 1, 2006. The Company is currently evaluating the impact of adopting SFAS 123(R) on our consolidated financial statements.



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In December 2003, the FASB issued Interpretation No. 46 (revised December 2003),
Consolidation of Variable Interest Entities (FIN 46R), which replaced FIN 46. FIN 46R addresses how a business enterprise should evaluate whether it has a controlling interest in an entity through means other than
voting rights. This interpretation requires a variable interest entity to be consolidated by a company if that company is subject to a majority of the risk of loss from the variable interest entitys activities or is entitled to receive a
majority of the entitys residual returns or both. The interpretation also requires disclosures about variable interest entities that the company is not required to consolidate but in which it has a significant variable interest. We are
required to adopt FIN 46R immediately for entities created after December 31, 2003 and at the beginning of fiscal year 2006 for all other entities. The adoption of FIN 46R did not have a material impact on our consolidated financial statements.



|6. | Critical Accounting Policies
|-- | ----------------------------

For a discussion of
our critical accounting policies, see Managements Discussion and Analysis of Financial Condition and Results of Operations, in our Form 10-K for the fiscal year ended September 30, 2006 which is being filed simultaneously with
this Form 10-Q.



|Item 3. | Quantitative and Qualitative Disclosures about Market Risk
|------- | ----------------------------------------------------------

We are subject to interest rate risk through outstanding balances on our variable rate debt. We may mitigate this risk by paying down additional outstanding balances on our variable rate loans, refinancing with fixed
rate permanent debt or obtaining cash flow hedges. We do not hold market-risk sensitive instruments for trading purposes. We entered into one derivative financial instrument, a swap agreement, to hedge cash flows related to the LIBOR interest rate
risk. On March 10, 2006, our swap expired. We hold no other financial instruments or derivative commodity instruments to hedge any market risk, nor do we currently plan to employ them in the near future. Our adjustable rate mortgage calls for
an interest rate based on the 30-day LIBOR plus a margin of .065%. We do not anticipate entering into any additional swap agreements.

The
interest rate (4.89% and 4.36% at December 31, 2005 and September 30, 2005, respectively) on our revolving line of credit and mortgage note ranges from LIBOR plus 50 basis points to prime minus 125 basis points, if our funded debt coverage
ratio is less than 2.5. The range increases to LIBOR plus 75 basis points to prime minus 100 basis points if our funded debt coverage ratio is between 2.5 to 3.0. We mitigate interest rate risk by continually monitoring interest rates and electing
the lower of the LIBOR or prime rate option available under the line of credit or mortgage note. As of December 31, 2005, the fair value of the debt approximates the outstanding principal balance due to the variable rate nature of such
instruments.

The interest rates under our revolving line of credit and mortgage note are variable and accordingly we have exposure to
market risk. To the extent that we have borrowings outstanding, there is market risk relating to the amount of such borrowings. We estimate that a one-percentage point increase in interest rates for debt outstanding of $7.8 million as of
December 31, 2005 would have resulted in additional annualized interest costs of approximately $78,000. This analysis did not consider the impact of the swap since it expired in March 2006. As of April 30, 2007, debt outstanding has
increased to $28.2 million primarily due to payments made for client reimbursements under our line of credit. We estimate that a one-percentage point increase in interest rates for this debt would result in additional annualized interest costs of
approximately $282,000.

The sensitivity analysis, described above, contains certain simplifying assumptions (for example, it does not
consider the impact of changes in prepayment risk or credit spread risk). Therefore, although it gives an indication of our exposure to changes in interest rates, it is not intended to predict future results and our actual results will likely vary.



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|Item 4. | Controls and Procedures
|------- | -----------------------

Attached as exhibits to this Form 10-Q are certifications of our Chief Executive Officer (CEO) and Chief Financial Officer (CFO), which are required in accordance with Rule 13a-14 of the Securities Exchange Act of
1934, as amended (the Exchange Act).

Evaluation of disclosure controls and procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in the reports that the Company files
or submits under the Securities and Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SECs rules and forms, and that such information is accumulated and communicated to the Companys
management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required financial disclosure.

As of the end of the period covered by this report, the Company carried out an evaluation, under the supervision and with the participation of the Audit Committee and management, including the Chief Executive Officer
and Chief Financial Officer, of the effectiveness of the design and operation of the Companys disclosure controls and procedures pursuant to Exchange Act Rule 13a-15(e). Based upon, and as of the date of, this evaluation, the Chief Executive
Officer and Chief Financial Officer concluded that the Companys disclosure controls and procedures were not effective, because of the material weaknesses discussed below. In light of the material weaknesses described below, the Company
performed additional procedures to ensure that the consolidated financial statements are prepared in accordance with generally accepted accounting principles. Accordingly, management believes that the financial statements included in this Annual
Report fairly present in all material respects the Companys financial condition, results of operations and cash flows for the periods presented.

Material Weakness in Internal Control Over Financial Reporting

A material weakness (within the meaning of the Public
Company Accounting Oversight Board (PCAOB) Auditing Standard No. 2) is a control deficiency, or combinations of control deficiencies, that results in more than a remote risk that a material misstatement in our annual or interim
financial statements will not be prevented or detected. The Company identified the following material weaknesses:

1) Entity-Level Controls

The Company did not design and maintain effective entity-level controls as defined in Internal ControlIntegrated Framework
published by the Committee of Sponsoring Organizations of the Treadway Commission(COSO). This deficiency relates to the risk assessment component of internal control as defined by COSO. Specifically:

The Company did not conduct a formal fraud risk assessment to consider the risk of material misstatements due to fraud, giving consideration to potential
fraud schemes, or other internal or external factors such as pressures or incentives affecting the Company. A fraud risk assessment is designed to identify and evaluate fraud risk factors that could enable fraud to occur within the organization. The
fraud risk assessment involves an expanded focus on considerations of where fraud risk factors may exist within the entity and the potential fraud schemes that could be perpetrated.

This condition constitutes deficiencies in both the design and operation of entity-level controls.



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2) Inadequate Controls Related to the Closing and Financial Reporting Cycles

Several significant deficiencies in the design and operating effectiveness of internal controls over the monthly close, quarterly, and year-end reporting
cycles were identified which were considered material weaknesses when aggregated. Specifically, the significant deficiencies include inaccurate and untimely bank reconciliations, reconciliations of year-end journal entries to the general ledger and
identification and accounting for loss contracts in progress on a timely basis. The affected accounts include cash, fixed assets, unbilled fees, accounts payable, engineering fees and direct reimbursable expenses.

Status of Remediation of Prior Year and Currently Identified Material Weaknesses

We have implemented several changes to our internal control over financial reporting in response to the material weaknesses identified in our 2005 Form 10-K and those described above. To address the material
weaknesses, we have implemented the following procedures:



| |  |  | We have emphasized certain controls and improved the controls designed to safeguard our cash assets and have implemented additional segregation of duties.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | We have enhanced our expertise by hiring new accounting and finance personnel with substantial knowledge of financial accounting principles and procedures
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | We have engaged consultants with significant expertise in the areas of income tax and governmental accounting to advise and provide support in these areas.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Controls have been enhanced to restrict access to software, operating systems and Company data along with a review of access privileges.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------



| |  |  | We have begun hiring additional internal audit professionals who will be responsible for performing the fraud risk assessment and monitoring the Companys
internal controls.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Changes in Internal Control Over Financial Reporting

Except as described above, there have been no changes to the Companys internal control over financial reporting that occurred during the
Companys fiscal quarter ended December 31, 2005, that have materially affected, or are reasonably likely to affect, the Companys internal control over financial reporting.

Inherent Limitations on Effectiveness of Controls

The Companys management, including the CEO
and CFO, does not expect that our disclosure controls or our internal control over financial reporting will prevent or detect all error and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not
absolute, assurance that the control systems objectives will be met. The design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Further,
because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, within the
Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Controls can also be circumvented by the individual acts
of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that
any systems design will succeed in achieving its stated goals under all potential future conditions. Projections of any evaluation of a systems control effectiveness into future periods are subject to risks. Over time, controls may
become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures.



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PART II. Other Information



|ITEM 1. | Legal Proceedings
|------- | -----------------

We are party to
several pending legal proceedings arising from our operations. We believe that we have sufficient professional liability insurance such that the outcome of any of these proceedings, individually and in the aggregate, will not have a material adverse
effect on our financial position or results of operations. However, if our insurance company were to deny coverage for a significant judgment or if a judgment were entered against us in an amount greater than our coverage, it could adversely affect
our results of operations and financial position.

We maintain a full range of insurance coverages, including workers compensation,
commercial general liability (which includes property coverage), commercial automobile, and professional liability (which includes pollution coverage). Our professional liability coverage is on a claims-made basis meaning the coverage
applies to claims made during a policy year regardless of when the causative action took place. All other coverages are occurrence-basis meaning that the policy in place when the injury or damage occurred is the policy that responds
regardless of when the claim is made. Our professional liability limits per policy year are $45 million with a per claim deductible of $125,000 plus an annual aggregate of $3 million. Based on our experience with claims and lawsuits we believe that
the current levels of coverage are adequate for all of our present operational activities although such coverages may not prove to be adequate in all cases. A successful catastrophic claim or aggregate of several large claims in amounts in excess of
our insurance coverages in any policy year could have a material adverse effect on our financial position and results of operation.

In
July 1998, we entered into an agreement with West Frisco Development Corporation (WFDC) to provide various services, among which was a flood plain study to be used by WFDC, the City of Frisco and FEMA. In 2003, the City of Frisco
retained the services of a third-party architecture and engineering firm in connection with the extension and widening of Teel Road which lies within the greater drainage basin included in the Companys original flood plain study. This
architecture and engineering firms assessment of the flood plain study determined that the Company used incorrect assumptions when calculating the size of the drainage culverts required for the increased development of the areas
transportation infrastructure. Based on this assessment, the Company has entered into negotiations with the City of Frisco to correct the drainage needs to support the Teel Road expansion project. As a result, the Company had recorded an estimated
liability of $3.1 million to cover the costs associated with correcting the drainage needs of the Teel Road expansion project. Included in this estimate is the purchase of a parcel of land for $1.5 million, the remaining balance of $1.6 million is
reflected in other liabilities in the accompanying condensed consolidated balance sheets as of December 31, 2005.

Misappropriation
Loss

In March 2005, subsequent to the issuance of the Companys 2004 financial statements, we discovered misappropriations of
Company funds by our former Chief Financial Officer and two former employees who worked in our information systems and treasury departments, collectively, (the participants). The participants colluded and circumvented controls to
misappropriate funds and conceal the misappropriations possibly beginning as early as 1993 until the misappropriations were discovered.

Shortly after this discovery, an investigation sub-committee was formed comprised of the three outside members of our Corporate Audit Committee. These three outside members were subsequently appointed to the Board of Directors and became
the three members of the Audit Committee of the Board of Directors. The Audit Committee retained independent counsel to conduct an investigation and advise the Audit Committee in connection with the investigation. The independent counsel retained
forensic accountants, including accountants experienced in conducting forensic audits for companies that perform contracts for federal, state and local governments to assist with the investigation.



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The investigation team discovered that at least $36.6 million was misappropriated between January 1,
1998 and the discovery of the misappropriations in March 2005. The amount misappropriated prior to January 1, 1998 could not be determined because certain data for the period prior to January 1, 1998 was unavailable. The participants in
the embezzlement scheme used several methods to misappropriate the funds while engaging in conduct to conceal the misappropriated amounts. This conduct included among other things, recording and changing normal recurring journal entries and
overstating accruals in prior periods to facilitate improper write-offs of misappropriated funds.

The Company determined that the
misappropriation scheme led to the overstatement of overhead rates that the Company used to determine billings in connection with certain of our government contracts. As a result, some of our government clients were overcharged for the
Companys services. During the review of the overhead rate calculations, the Company identified certain instances of costs erroneously included in our overhead cost pool which were unallowable under applicable regulations and an error in our
calculation of our overhead rate, which related to certain general and administrative costs. The Company determined that the unallowable costs and general and administrative errors also led to the overstatement of overhead rates which the Company
used in connection with certain government contracts.

The Audit Committee, at the direction of the Corporate Board, disclosed the
overstatement of our overhead rate to our clients and other appropriate government agencies, including the Department of Justice (DOJ). We have been cooperating with our clients and such agencies to determine the amount of our
reimbursement obligations and any other amounts we may be obligated to pay in order to resolve these issues. The DOJ and certain other governmental entities have been investigating the misappropriations and the overstatement of overhead rates.

In July 2006, we entered into a settlement agreement with the State of Texas Department of Transportation which resolves all claims that
the State of Texas may have had against us for overpayments related to the restatement of overhead rates on billings on or before April 30, 2006 under contracts with that agency based on our payment of approximately $5.4 million and provides
for the determination of the appropriate overhead rate for billings after April 30, 2006. In November 2006, we entered into a settlement agreement with the Florida Department of Transportation which resolves all claims that agency may have had
against us for the overstatement of rates on billings through September 30, 2005 (and with respect to cost contracts through September 30, 2006) under our contracts with them based on our payment of approximately $12.5 million. This
settlement agreement also provided for the determination of the appropriate overhead rate refund for fiscal year 2006 billings under fixed price contracts. The refund amount was finalized in March 2007 and totaled $0.4 million.

In January 2007, we reached a settlement agreement with the Department of Justice, Civil Division on behalf of it and all other federal agencies with
which we have contracts to resolve all federal claims including claims under the Federal Civil False Claims Act, related to the overstatements of overhead rates on our contracts with federal agencies. The agreement requires approximately $6.5
million of reimbursement payments for all contract amounts through September 30, 2005.

The settlements described above, excluding
those settlements which were paid during the three-month period ended December 31, 2005, are included in the accrued reimbursement liability in the Companys condensed consolidated balance sheet at December 31, 2005. We are in discussions with
our remaining government clients to enter into settlement agreements in order to satisfy any refund obligations, which are in various stages of settlement.

Our Board of Directors, with the assistance of the CAC and the Audit Committee, instituted immediate corrective actions and began implementing long-term measures to implement new financial controls and establish
procedures to safeguard assets and to establish more accurate accounting and financial reporting practices. These long-term measures are included within our new Ethics and Compliance Program.



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In an effort to recover assets that were misappropriated, the Company has instituted lawsuits against
certain persons who received money from one or more of the participants in the embezzlement scheme. The Company continues to incur costs associated with such lawsuits, and the Company may not prevail in these lawsuits. In the event that the Company
does prevail, the Company may not actually recover assets from the persons who were sued by the Company.

In the course of our
investigation of the accounting irregularities and misappropriations, it was determined that there were possible violations relating to past political contributions by us and certain of our employees. The United States Attorneys Office
for the Southern District of Florida (Miami) and the Federal Bureau of Investigation have conducted an investigation relating to improper campaign contributions including improper use of political action committees. We produced documents and other
information to the government and fully cooperated with the authorities. Criminal charges have been filed against two of the Companys former chairmen. Authorities have verbally informed the Companys external legal counsel that unless
adverse additional information is discovered they do not intend to charge the Company. At the present time, we believe it is unlikely that criminal charges will be filed against us in this matter, but the authorities are not precluded from bringing
charges, and circumstances may change.

The United States Securities & Exchange Commission is also conducting an investigation of
the accounting irregularities and misappropriations of funds described above. We are fully cooperating with the investigation and have produced documents and other information to the commission. At the present time, we are unable to predict the
likely outcome of this investigation.



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|ITEM 1A. | Risk Factors
|-------- | ------------

In addition to the factors discussed
elsewhere in this Report, the following risks and uncertainties could materially adversely affect the Companys business, financial condition, and results of operations. Additional risks and uncertainties not presently known to the Company or
that the Company currently deems immaterial also may impair the Companys business operations and financial condition.

Certain Risks Related to
Our Marketplace and Our Operations

We are involved in litigation, legal proceedings and governmental investigations, which could have a material
adverse effect on our profitability and financial position.

We are involved in litigation, legal proceedings and governmental investigations that
are significant and described in more detail in Item 3 Legal Proceedings. Such litigation, proceedings and investigations could have a material adverse effect on our profitability and financial position if decided adversely.

Unpredictable downturns in the financial markets, and reduced federal, state and local government budget spending could cause our revenues to
fluctuate and adversely affect our revenue and operating results.

Downturns in the financial markets can impact the capital expenditures of our
clients. In particular, our private sector clients, and the markets in which we provide services, may from time to time experience periods of economic decline. Any prolonged downturn in the financial markets could negatively impact our ability to
determine demand for our services. We cannot be certain that economic or political conditions will be generally favourable or that there will not be significant fluctuations adversely affecting our industry as a whole or key markets we target.

The demand for our government related services is contingent upon the level of government funding for new and existing infrastructure projects. As such,
government funding is dependent upon policy objectives being in line with infrastructure needs. Any shift in policy away from these initiatives can impact our ability to secure current funding for projects and obtain new projects.

We operate in a highly competitive market. If we are unable to offer competitive services, our business may be adversely affected.

We have numerous competitors in the various marketplaces in which we operate. Our competitors range from large diversified firms having substantially greater financial
resources and a larger technical staff than us, to smaller more specialized, low cost structure niche firms. It is not possible to estimate the extent of competition which our present or future activities will encounter because of changing
competitive conditions, customer requirements, technological developments, political environments and other factors.

We continue to see significant price
competition and customer demand for higher service completion levels. There is also significant price competition in the marketplace for federal, state and local government contracts as a result of budget issues, political pressure and other factors
beyond our control. Our operating results could be negatively impacted should we be unable to achieve the necessary revenue growth to sustain profitable operating margins within our service lines.

Pending or future governmental audits could result in findings which require downward adjustments of our revenue; and, under certain circumstances, could cause us
to incur significant liabilities or restrict our business activities.

We are party to numerous contracts with government agencies, which require
strict compliance with applicable laws, regulations, standards and contractual requirements. These agencies routinely conduct financial statement audits, attestation audits, or performance audits of their contracts to detect and report material
non-compliance, fraud, internal control deficiencies, and to ensure adherence to generally accepted government auditing standards which include AICPA fieldwork standards.



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If these audits identify costs which have been incorrectly billed, either directly or indirectly, to government
contracts, the government agencies may not reimburse us for these costs, or if we have already been reimbursed, we may be required to refund these reimbursements.

Our internal controls may not prevent or detect specific isolated or deceitful violations of applicable laws, regulations, standards or contractual requirements. If these agencies determine that we or one of our subcontractors has engaged
in illegal conduct, we may be subject to civil or criminal penalties, and this may impair our ability to obtain new work.

We derive a significant
portion of our engineering fees from a few clients, and the loss of these clients could have a material adverse impact on our financial performance.

In fiscal 2006, we derived approximately 25% of our engineering fees from various districts and departments of the FDOT and the TxDOT under numerous contracts. While we believe the loss of any individual contract would not have a material
adverse effect on our results of operations and would not adversely impact our ability to continue work under our other contracts with these clients, the loss of all the FDOT or the TxDOT contracts would have a material adverse effect on our results
of operations by causing a material decrease in our engineering fees and profits.

Our backlog is subject to cancellation and unexpected adjustments,
which could have a negative impact on future earnings.

Backlog represents the revenues associated with contracted task orders which are scheduled
to commence in future periods, less previously recognized revenue on such task orders. Projects may remain in our backlog for prolonged periods of time prior to commencement, and our ability to realize revenues from our backlog is contingent on the
availability of funding from federal, state and local government agencies. Most government agency contracts contain cancellation clauses, which if exercised, would cause a reduction in our backlog, and adversely affect future revenues. Future
project cancellations and scope adjustments could further reduce the dollar amount of our backlog and the revenues and profits that we actually earn.

If we are unable to accurately estimate the revenues, costs, time and resources on our contractual commitments, we may incur a lower profit or loss on the contract.

We generally earn revenue for the services we provide through three principal types of contracts; cost-plus, time-and-materials, and fixed price contracts.
Cost-plus contracts are usually subject to negotiated ceiling amounts, and limit the recovery of certain specified indirect costs. If we underestimate our costs, and our costs exceed the contract ceiling amount, we may not be reimbursed for such
costs. Under time-and-materials contracts, we negotiate hourly billing rates and charge our clients based on actual time expended. If we underestimate our total contract costs, we may not recover these costs from our client, and the project may not
be profitable for us. Under fixed price contracts, we receive a fixed sum negotiated in advance, regardless of actual costs incurred. If we underestimate our revenue and costs for the specified scope of work, we may experience significant over-runs
and negatively impact profit margin or realize a loss on the contract. Under these types of contracts, we bear the inherent risk that actual performance cost may exceed the estimated contract price.

If we are unable to retain and recruit highly qualified personnel to fulfill our contractual obligations, our business may be adversely affected.

Our employees are our most valuable resource. Many of our technical personnel are highly specialized in their respective disciplines. Since we
derive substantially all of our engineering fees from services performed by our professional staff, our failure to retain and attract professional staff could negatively impact our ability complete our projects and secure new contracts.



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Failure to meet the covenants of our existing revolving credit facility could result in the loss of use of our
available line of credit.

Failure to meet any of the covenant terms of our existing revolving credit facility could result in an event of default.
If an event of default occurs, and we are unable to receive a waiver of default, our lender may increase our borrowing costs, restrict our ability to obtain additional borrowings, accelerate all amounts outstanding or enforce their interest against
all collateral pledged. In the past, we have obtained written waivers of default from our lender, but no assurances can be given that we will be able to obtain the necessary waivers in the future. In addition, we can not declare dividends or incur
additional debt without written approval from our lender, which could significantly restrict our ability to raise additional capital. Our inability to raise additional capital could lead to working capital deficits that could have a materially
adverse effect on our operations in future periods.

We may be negatively impacted as a result of litigation or other proceedings relating to past
political contributions by us and certain of our employees.

In the course of our investigation of the accounting irregularities and
misappropriation, it was determined that there were possible irregularities relating to past political contributions by us and certain of our employees. The United States Attorneys Office for the Southern District of Florida and the
Federal Bureau of Investigation are now conducting an investigation into this matter. An unfavorable resolution or outcome resulting from this investigation may cause irreparable damage to our reputation and negatively impact our ability to
secure new contracts with existing governmental clients.

Certain Risks Related to Owning Our Stock

Because no public market exists for our stock, the ability of our shareholders to sell their common stock is limited.

There is no public market for our common stock. In order to provide some liquidity to our shareholders, we have historically maintained a limited annual stock offering
period, which we call the stock window. The stock window has permitted existing shareholders to offer their shares for sale back to us during a predetermined period at a price determined by an appraisal. Although the stock window is intended to
provide some liquidity to shareholders, the aggregate number of shares offered for sale during the stock window may be greater than the aggregate number of shares sought to be purchased by authorized buyers. As a result, sell orders may be prorated,
and shareholders may not be able to sell all of the shares they desire to sell during the stock window. We did not open the stock window in fiscal year 2006, and there is no guarantee the stock window will be open or will not be delayed in future
periods. Shareholders who desire to sell their shares in the future will only be able to do so if there are authorized buyers willing to purchase such shares during an open stock window.

The ability of shareholders to sell or transfer their common stock is restricted.

Only our employees,
directors, and The PBSJ Employee Profit Sharing and Stock Ownership Plan and Trust (ESOP) may own our common stock. We have incorporated significant restrictions on the transfer of our common stock which limit our shareholders
ability to sell their stock. All shares must be initially offered for sale back to us at the price determined by an appraisal. If we decline to purchase the shares, the ESOP Plan may purchase such shares. Should the ESOP Plan decline to purchase the
shares, the shareholders may offer their shares for sale to other shareholders who are full-time employees. The other shareholders have the right to purchase such shares based on each shareholders proportionate ownership of all issued shares.
Because our shares are subject to transfer restrictions, shareholders who desire to sell all their shares may not be able to do so.

Pursuant to the
Companys by-laws, the Company is permitted to repurchase stock by delivery of a promissory note to the employee. Because the principal payable pursuant to any such promissory note may be paid at any time prior to the five year anniversary of
the date of issuance, a stockholder may not receive a cash payment for his shares until such five year anniversary.



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Because we do not intend to pay dividends, our shareholders will benefit from an investment in our common stock
only if our stock price appreciates.

We have never declared or paid dividends to holders of our common stock. We expect to retain all future
earnings for investment in our business, and do not expect to pay any cash dividends in the near future. As a result, the positive return of an investment in our common stock is solely dependable on future appreciation in value of our common stock
and future earnings. There is no guarantee that our stock will appreciate in value or even maintain the original price at which it was purchased.

The value of our stock may be negatively impacted by current and future governmental agency investigations.

An unfavorable
resolution or outcome resulting from working with various government agencies to resolve the amount or reimbursement obligations may result in a material adverse impact to our enterprise value, and may adversely impact the future value of our share
price. In addition, we are currently under investigation by the United States Attorneys Office for the Southern District of Florida and the Federal Bureau of Investigation for possible irregularities relating to past political contributions
made by us and certain of our employees. In the event that criminal charges are filed against the Company, the future value of our share price may be impacted.



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|ITEM 2. | Issuer Purchases of Equity Securities by Issuer and Affiliated Purchasers
|------- | -------------------------------------------------------------------------



|                         |  |                                      |  |                            |       |                                                                               |   |                                                                         |  
|------------------------ |  | ------------------------------------ |  | -------------------------- | ----- | ----------------------------------------------------------------------------- | - | ----------------------------------------------------------------------- | -
|                         |  | Total Number ofSharesRepurchased (1) |  | AveragePrice PaidPer Share |       | Total Number of SharesPurchased as Part ofPublicly AnnouncedPlans or Programs |   | Maximum Number ofShares That May BePurchased Under thePlans or Programs
|October 1 - October 31   |  | 40,136                               |  | $                          | 28.00 |                                                                               |  |                                                                         | 
|November 1 - November 30 |  | 149,322                              |  | $                          | 28.00 |                                                                               |   |                                                                         |  
|December 1 - December 31 |  | 98,595                               |  | $                          | 28.00 |                                                                               |   |                                                                         |  
|                         |  |                                      |  |                            |       |                                                                               |   |                                                                         |  
|Total                    |  | 288,053                              |  | $                          | 28.00 |                                                                               |  |                                                                         | 
|                         |  |                                      |  |                            |       |                                                                               |   |                                                                         |  



|(1) | During fiscal 2006, any stock repurchases totaling more than $300,000 were paid to employees at 90% of
the total value in cash, and 10% of total value by delivery of a promissory note.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|ITEM 3. | Defaults Upon Senior Securities
|------- | -------------------------------

None.



|ITEM 4. | Submission of Matters to a Vote of Security Holders
|------- | ---------------------------------------------------

None.



|ITEM 5. | Other Information
|------- | -----------------

None.



|ITEM 6. | Exhibits
|------- | --------

A list of exhibits to this Report is set
forth in the Exhibit Index appearing elsewhere in this Report and is incorporated herein by reference.



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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to
be signed on its behalf by the undersigned, thereunto duly authorized.



|                    |  |  |  |                                                  
|------------------- |  |  |  | -------------------------------------------------
|                    |  |  |  | The PBSJ Corporation                             
|                    |  |  |  | (Registrant)                                     
|                    |  | 
|                    |  |  |  | /s/ John B. Zumwalt                              
|Dated: May 24, 2007 |  |  |  | John B. Zumwalt                                  
|                    |  |  |  | Chairman and Chief Executive Officer             
|                    |  | 
|                    |  |  |  | /s/ Donald J. Vrana                              
|Dated: May 24, 2007 |  |  |  | Donald J. Vrana                                  
|                    |  |  |  | Senior Vice President and Chief Financial Officer



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EXHIBIT INDEX



|              |  |                                                                                                                                                                                                                                                         
|------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|ExhibitNumber |  | Description                                                                                                                                                                                                                                             
|31.1          |  | Rule 13a-14(a) certification by John B. Zumwalt, III, Chairman and Chief Executive Officer.                                                                                                                                                             
|              | 
|31.2          |  | Rule 13a-14(a) certification by Donald J. Vrana, Senior Vice President and Chief Financial Officer.                                                                                                                                                     
|              | 
|32            |  | Certification of by John B. Zumwalt, III, Chairman and Chief Executive Officer and Donald J. Vrana, Senior Vice President and Chief Financial Officer, pursuant to 18 U.S.C. 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.



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