With summer coming to a close, and fall right around the corner, most contractors are working at a hectic pace, and have all the work they can handle.
In this edition, we’ll take a look at the statistics on construction backlog, and also examine what the industry is doing to keep up with technology changes.
Construction Backlog
Almost every contractor that we meet with asks us a similar question. What are other firms seeing out there in the market in terms of activity? The Associated Builders and Contractors publishes a monthly report called the “ABC Construction Backlog Indicator” to help those in the industry keep a pulse on the work that is coming down the pipeline. While it just captures a snap-shot in time, monitoring the monthly reports over an extended period can really reveal either strength or weakness in the overall economy at least for the upcoming year.
Average backlog for the industry as a whole, reported in total months, was 8.8 for June of 2019, which was a modest decrease over the 8.9 months reported for May. Infrastructure construction led the way with a 9.2 month backlog. Regionally, the South market was the strongest with 10.3 months. The backlog for the Middle States actually declined from 9 months in May to 7.5 months in July. In terms of size, companies with over $100 million in revenue topped the list with backlog standing at 13.3 months. Companies between $30-$50 million in volume were at 8.8 months and those with revenue below $30 million were averaging around 8.2 months.
Ultimately, higher backlog numbers will give company owners and managers more security and peace of mind. Nevertheless, firms should be conscious to be selective and take the jobs that offer the best return on investment based on their expertise, location, and experience with the owner or general contractor. Your bank and bonding company will want to make sure that you have adequate working capital to perform on the backlog, and that you are not biting off more than you can chew.
Technology Changes
Regardless of the industries we serve, there is no doubt that technology has been changing how we operate and do our jobs. We can only anticipate that these rapid changes will continue into the future. The construction industry has often received a reputation for being slow to adapt to and adopt new technology. I don’t think this stigma always holds true, as there are many contractors who proactively are on the cutting edge of implementing practices such as cloud computing, electronic document management, project and contract management software, and mobile devices in the field.
As is the case in most industries, it is easier to initiate and explore technology upgrades when business is going good. The current strong economy gives contractors a potential opportunity to enhance their technology culture and reputation which will hopefully prove to have longer-term benefits. A recent study by PlanGrid and FMI Corporation noted that the industry is losing billions of dollars as a result of lost labor time stemming from poor data management, miscommunication, and dealing with mistakes and rework. According to the study, the increases in productivity and cost savings from implementing technology can be substantial.
The investment in the technology is just step one in the equation. Actually training the end-users and utilizing the technology tends to be the more difficult task. The previously mentioned study also reported that 75% of contractors provide mobile devices to their field supervisors and project managers, but only 18% are actually using the technology consistently. Rolling out technology on a small scale or test basis, with identified champions will help increase the likelihood of adoption and success.
Data security is also a huge for all companies regardless of size and industry. Hackers and scammers are constantly working to access confidential information that they can exploit. A recent survey from the Associated General Contractors revealed that 42% of respondents do not have a mobile security plan in place. Only 21% cited keeping data secure from hackers as a prime challenge. The opportunity to move data to the cloud can provide a relatively inexpensive means to obtaining more security over your information as well as enhanced backups versus maintaining it internally.
We hope you’ve enjoyed this edition of YHB’s construction industry quarterly update. Finish strong during the second half of the year. We look forward to speaking with you soon.
