The Associated General Contractors of America (AGC) released its annual industry outlook recently. More than 1,000 respondents from across the country shed light on where they are relative to 2021, what they’re expecting from the next several months, and the challenges they continue to face.
Nationally, most construction contractors are looking forward to hiring more employees in 2022 despite the ongoing supply chain and other challenges. Traditional infrastructure projects are expected to dominate in 2022 as well as industrial, healthcare, multifamily residential, and manufacturing. All these projects will require more workers.
“Contractors are, overall, very optimistic about the outlook for the construction industry in 2022,” said Stephen E. Sandherr, the [AGC’s] chief executive officer. “While contractors face challenges this year, most of those will be centered on the need to keep pace with growing demand for construction projects.”
Colorado Construction Contractor 2022 Survey
In Colorado, survey results paint a picture of an industry in active recovery. Yet, obstacles remain.
Available dollar amounts for 2022 projects are expected to lean the most toward the multifamily residential, hospital, other healthcare (clinical, testing or screening facility, medical lab), public building, data center, warehouse, and bridge/highway and K-12 school (tied). Projects not expected to see as much cash inflow are retail, private office, higher education, and power.
This is somewhat different from the Midwest as a whole, which anticipates a higher dollar volume in traditional infrastructure projects and manufacturing. Private office, retail, and higher education projects also fall to the bottom of the Midwest list; however, there are still differences in what types of projects aren’t expected to see as much activity.
59 percent of survey respondents indicated that the business has already matched or exceeded its volume from the prior year. Considering 2020 was an outlier, this is both expected and welcome news. 20 percent still responded that business volume may never go back to the way it was.
Concern over material costs is at the forefront of Colorado contractors’ biggest business concerns in 2022. Rounding out the top ten biggest concerns are:
- Worker shortages
- Supply chain disruptions
- The continued impact of the pandemic on workers, projects, or supply chain
- Impact of vaccination requirements on worker supply
- Rising direct labor costs
- Worker quality
- Federal regulations
- Other rising costs
- State and local regulations
Impact of COVID-19
The pandemic has played out in several ways. Costs have been higher, and projects have taken longer than expected to complete – unsurprising, considering the state of the national construction industry. Other contractors reported putting higher prices into bids or contracts. Fewer accounted for longer project lead times in contracts, and just over a quarter have won new projects or add-ons in 2021.
Just over half of postponed projects had been rescheduled as of the survey; however, 45 percent of canceled projects were not rescheduled. As concerning as that might appear to be, only 32 percent of projects remained unaffected in 2021. The biggest culprit for canceled or postponed projects? Unsurprisingly, rising costs. Some owners simply lost funding.
Supply chain disruptions continue to hamper growth, and Colorado contractors have dealt with supply chain disruptions in various ways. Most accelerated purchases after winning new contracts. Finding alternative suppliers was just as popular as specifying alternative materials or products. Some contractors reported stockpiling products without the guarantee of winning a contract, and 14 percent didn’t experience any significant supply chain issue at all.
86 percent of Colorado contractors expect to increase employee headcount in 2022. The majority increased by less than 25%. Almost all respondents are having a hard time filling open positions, and more than half expect that it will continue to be harder to find available workers in the coming months.
In 2021, most contractors increased base pay rates, and just under half provided additional incentives or bonuses.
Contractors are most concerned about inexperienced workers and the labor shortage when it comes to the health and safety of staff at the job site. Poor subcontractor safety and health performance are tied to a lack of cooperation among government agencies or regulators as other top health and safety concerns.
2022 technology investment plans provide a glimpse into what Colorado contractors are thinking about for the future. While most report no change in investment dollars for any type of technology, the types of software most likely to see interest are tracking, client relationship management (CRM), human resources (HR), and document management technologies. Despite the tepid interest in increasing a technology budget, most contractors do report having an IT strategy in place.
Mobile software technology is expected to be used in several ways, especially:
- Daily field reports
- Employee time tracking and approval
- Remote access to customer and job information as well as job cost and project reports
- Punch lists
- Sharing drawings, photos, and documents
The biggest IT challenges that Colorado contractors are facing include:
- Software integration
- Securing company data
- The time investment to train on new software
- Communication between field and office
- Connectivity to remote job sites
About the Survey
Colorado respondents were mostly specialty or subcontractors while 36 percent of respondents were general contractors or construction managers. Other construction stakeholders, like architects, owners or developers, and suppliers made up the rest of the responses. Most contractors operate as open-shop contractors and fewer than ten percent as union contractors.
53 percent were small businesses with revenues of $50 million or less and 37 percent had revenues between $50.1 million and $500 million. Less than ten percent reported annual revenues of more than $500 million. 80 percent of survey respondents had between 20 and 499 employees.
Overall, it appears the outlook for 2022 is positive with many construction companies dealing with labor and increasing costs proactively. The bottom line is Denver contractors need to carefully review costs when preparing a bid for new projects. If you have questions about the information outlined above or need assistance with a construction accounting or audit concern, Hanson & Co can help. For additional information call us at 303-388-1010 or click here to contact us. We look forward to speaking with you soon.