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State of the Construction Industry: March 2021 Roundup
While the construction industry waits with bated breath in early April for the Biden administration to announce the full details of a new infrastructure package — as large as $3 trillion — there were a number of other noteworthy news stories that occurred in March.
Here’s a closer look at some of the most intriguing stories:
Contractors Optimistic About Year Ahead
Contractor confidence appears to be on the rise, notes a Q1 Commercial Construction Index report released by the U.S. Chamber of Commerce in March. In the report, 87 percent of contractors surveyed expected their 2021 revenues to either remain unchanged or increase, while 86 percent voiced confidence in the U.S. markets’ ability to provide continued work over the next 12 months. Additionally, 46 percent have plans to hire more workers.
The Takeaway: This anticipated demand mirrors what we’ve been seeing as well, with contractors eager to get back to work and large projects waiting in the wings (see below). Some of this confidence can be tied to expectations of the Biden administration’s proposed infrastructure spending package as well. While the continuing pandemic has not been ideal for revenues, many contractors have used recent slowdowns to modernize their operations with connected, cloud-based technologies and digitized workflows to better scale for the growth potential ahead.
Big Projects On the Horizon
The federal infrastructure spending plan is expected to add between $1 trillion and $3 trillion worth of new public works, civil and related infrastructure projects up for grabs. In addition, a number of other hefty projects and proposals are coming that should keep contractors busy in nearly every U.S. region for years to come. Among them: the $20 billion One Central retail, dining and entertainment project in Chicago; a $7 billion commitment by Google to invest in new offices and data centers across the country; legislation proposed by House Democrats for the $205 billion High-Speed Rail Act; and a $1 billion budget approval by the State of Georgia to build much-needed new schools and learning centers across the state.
The Takeaway: The sheer number and size of potential projects ahead for contractors should mean no shortage of business. However, many of these newer projects are ambitious and complex, meaning that contractors need to be prepared to take on significantly more challenging workloads and meet modern-day project demands, such as real-time reporting, contractual obligations for modern technologies, faster project timelines and increased compliance measures. As technology has changed the construction landscape, it’s clear that the same old manual processes and workflows that were good enough in the past will not be good enough going forward. Contractors that have adopted modern technologies will be the ones reaping the rewards, while those that haven’t could find themselves hurting for business in the coming years.
Construction Labor Shortage Continues
While there appears to be no shortage of work, there is still a shortage of skilled workers. Arguably the industry’s biggest ongoing challenge since thousands of workers left for new industries amid the mid-2000s recession, the labor shortage has wreaked havoc on construction productivity. Now, a 2021 March report by the Associated Builders and Contractors (ABC), using data from recent U.S. Bureau of Labor Statistics, estimates that U.S. construction companies will need to find 430,000 more workers to meet demands. The ABC and dozens of other industry organizations have priorities recruiting and training programs. “ABC and its contractor members are working tirelessly to recruit, educate and upskill our nation’s future construction workforce, putting our money where our mouth is by investing $1.5 billion annually in workforce development initiatives to equip our craft professionals with durable and transferable skill sets,” said organization CEO Mike Bellaman.
The Takeaway: A key part of overcoming the labor shortage lies with changing the construction industry’s narrative. Younger professionals today are flocking to data and technology careers, viewing construction careers as too labor intensive, dangerous or lacking intuitive processes and workflows. As construction has embraced new technologies, leading contractors are starting to lure away talented professionals with tech-enabled construction career paths — both in the back office and in the field. The problem is that far too many contractors still have not adopted the latest technologies, and until they do, tech-savvy professionals will likely continue to spurn job opportunities — even well paying ones — in favor of other industries.
Construction Fraud Cases Highlight Need for Closer Contractor Oversight
A couple of recent cases involving fraudulent construction billing that made headlines in March are bringing the issue of better project controls and financial reporting oversight back into the spotlight. In New York, a construction firm has been charged by the U.S. Department of Justice with skimming more than $1.2 million from public works projects while acting as a subcontractor. According to documents filed last year, the company’s employees padded bogus time charges on government construction contracts. Meanwhile, a bookkeeper for a California contractor was sentenced to more than 10 years in prison for embezzling $877,000 from her employer.
The Takeaway: Traditional construction finances and reporting can take weeks, even months, to reveal a full financial picture of how contractors projects are performing. And even then, many contractors are hard pressed to find the time to dig deep into the numbers to identify what’s really going on. That leaves the door wide open for theft and manipulation by anyone involved with the project — be they an accountant, subcontractor, vendor or others. With cloud-based, connected construction solutions and advanced data analytic tools, contractors today can see and analyze the numbers in real time. This means tighter project and financial controls to prevent people from pilfering from the bottom line, or catching them before it spirals out of control.
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