Success in the construction industry requires the ability to cost effectively create the building envelope, structure or support systems such as electrical, plumbing or HVAC. It also requires sharp project management skills to ensure that labor, materials, supplies and equipment are properly scheduled and managed. The ability to manage unexpected scheduling and other surprises reflects management’s skill. However, beyond the day-to-day, management needs to be aware of trends and issues impacting the industry and develop a plan to address them.
A recently issued report by the Associated General Contractors of America, 2018 Construction Outlook Survey – Minnesota Results, offers this important information. The study surveyed various Minnesota industry companies to uncover key challenges and issues for 2018. To help clients, prospects and others, we have provided a summary of key information below.
A total of 33 Minnesota companies, including general contractors, subcontractors, suppliers, service providers and other ancillary providers, participated in the survey. The revenues ranged across the board, from less than $10 million to more than $500 million, with 19 percent of respondents reporting revenue between $10 million or less and 22 percent reporting revenue between $100 million and $500 million. The total number of employees varied as well, with 12 percent reporting between one and twelve employees and 15 percent reporting 500 or more employees.
- Top Concerns in 2018: The industry has several concerns going into 2018, but the most pressing is the increase in indirect costs. All respondents indicated the rise of indirect labor costs (such as recruiting and retention) is a top concern. The other main concerns were worker shortages (57 percent), 40 percent indicated a lack of infrastructure investment (40 percent) and the rise in direct labor costs, such as wages and benefits (40 percent). Other concerns mentioned include rising material costs, internal company process inefficiencies and worker quality.
- Collaboration Tools: To drive efficiencies through the project, many companies are turning to collaborative project delivery tools. According to the survey, 78 percent are using design build tools, 44 percent are using design assist, 15 percent are engaging in public/private partnerships and 11 percent are using Integrated Project Delivery (IPD) programs. When asked about the use of Building Information Modeling (BIM), 19 percent indicated they intend to increase the use of BIM, 26 percent said they expect a minimal usage increase and 37 percent expected not to use it at all.
- Mobile Software Technology Usage: The need to carefully manage project costs has created the need to use mobile technology for real-time reporting. According to the survey, 84 percent of respondents use it for daily field reports, 72 percent use it to access customer and job information from the field, 68 percent use it to share drawings and photos, 64 percent use it to track employee time and timecard approval and 52 percent use is to access job costs and field project reports. Other uses include scheduling, change management and equipment tracking.
- Current Hiring Conditions: The need for qualified and well-trained labor has been a consistent theme in the industry, and it appears Minnesota companies not exempt from it. According to the survey, 55 percent of respondents are having a tough time filing both salaried and craft worker positions, 7 percent are having a tough time filing only craft worker positions, 17 percent are having difficulty filing salaried positions and 10 percent are not experiencing any issues with hiring.
- Benefit/Pay Changes: One way companies are coping with the tightened labor market is by expanding benefits and/or increasing pay to attract and retain labor. According to the survey, 64 percent of respondents increased base pay, 46 percent provided more incentive pay and bonuses, 11 percent paid more overtime, and 18 percent increased employee contributions and benefits. What’s interesting is that 21 percent of respondents indicated they are not considering any increases or changes to the amount of pay and benefits offered.
While the challenges of attracting and retaining labor continues, so does the strong demand for construction services. It appears management will need to continue to be innovative in finding new ways to leverage their existing labor force while attracting new labor. The integration of technology such as mobile applications, BIM and other software will continue to help in this area. If you have questions about the survey and its findings or need assistance with a construction tax, accounting or audit issue, we can help.