CONNstruction - Spring 2011 - (Page 13)

newsandviews Industry Survey Reveals Contractors’ Guarded Outlook for the Future By John W. Butts AGC Executive Director A recent industry news flash caught my eye: AIA’s Billings Index reached 52 points in November 2010, the highest it has been since December 2007. Since any reading over 50 is said to indicate expansion nine to 12 months into the future, such a measure would be cause for optimism. Breaking down that standard even further, it appeared that the Northeast received the highest regional index at 51.1. However, before we start celebrating the good news, we need to understand that those numbers reflect the design side of the equation and that the construction side may not start seeing any kind of boost in that activity until 2012 at the earliest. In the course of trying to glimpse into the construction crystal ball for 2011, I turned to a source trusted widely for its expertise and insight of trends within the construction industry – FMI, management consultants and investment bankers to the engineering and construction industry. Every quarter, FMI surveys a broad sector of construction firm executives on issues that are trending in the industry. The results are published in its quarterly Nonresidential Construction Index (NRCI) Report. FMI’s latest report for the fourth quarter 2010 produced some interesting results, some not entirely surprising for those contractors living the recession every day. The report not only provides a perspective on contractors’ outlook for 2011, but it also explains the real impact the recession has had – both good and bad – on construction firms. In its summary, the report states, “The results of the fourth quarter NRCI show the slow emergence of the construction industry from a three-year slumber. While the economy has been hitting the snooze button for the last three years, contractors have been working harder, because they have less work to do…. Our brief look at the recession is not just for the sake of nostalgia; we want to know what to expect next year. More of the same.” Indeed, those contractors who responded to FMI’s survey believe the economy will only slightly improve in 2011 from last year, but factors such as increasing foreclosures and banks’ continued tightening of credit are having a dampening effect on whatever optimism they have. Cost of materials and labor continue to edge up while prices for completed projects remain flat. Those surveyed say they are still paying more for materials, which makes it even tougher to make any money in a hyper-competitive market. And labor costs are up, most likely because of labor agreements and more overtime as contractors may be unwilling to hire new workers. Contractors’ overall productivity and efficiency is improving. This has been a continuing trend in the industry during the recession, probably the result of heavy downsizing and doing more with fewer personnel. Prefabrication and modularization is a growing trend in the industry, driven by BIM and the need to control costs, increase quality, and deliver projects faster. “Although this trend has been growing slowly for years, the recession and new technologies are set to increase the use of manufacturing processes and environments for construction,” the report explains. Most contractors were disappointed by the federal stimulus program and would only support another one if they knew the money would be targeted to infrastructure spending and not covering state and local governments’ deficits. One of the report’s more interesting observations was the following: “One of the concerns expressed by many panelists was that passing the stimulus bill prevented Congress from passing a new transportation bill.” Regardless of the bad effects of the recession, contractors have seen some benefits such as streamlined processes, a leaner but more productive workforce, and deeper strategic thinking about their companies such as chasing new markets. The report goes on to say, “In brief, tough times do bring some good things, even if the change is often painful, with one caveat expressed by a panelist, ‘The longer this recession lingers, the good changes that have been put into place lose their benefits.’” CONNstruction / Spring 2011 / 13

Table of Contents for the Digital Edition of CONNstruction - Spring 2011

CONNstruction - Spring 2011
Banking on our Future
Innovative Alternative Methods to Finance Infrastructure Projects on the Horizon
Ahead: 2011 Labor Front
Industry Survey Reveals Contractors’ Guarded Outlook for the Future
Executive Summary
2010 Training, Educational Programs and Safety Roundtables
Safety and Training
Legislative and Government Relations
Government and Industry Related Groups
Labor Relations
Member Benefits and Services
2010 Officers and Board of Directors
2010 CCIA Divisions and Activities
Turner Construction Company – Saint Francis Hospital
Loureiro Engineering Associates, Inc. – Wheeler Clinic’s Northwest Village
CCIA Annual Membership Meeting & Holiday Reception
CRBA Fall Dinner Meeting
Index to Advertisers/

CONNstruction - Spring 2011