Sources: Procore Technologies, Inc., Carpinteria, Calif.; Dodge Construction Network, Hamilton, N.J.; CP staff
2022 Top Business Issues for Specialty Contractors finds concrete contractors trail their steel, electrical, mechanical, and plumbing counterparts in financial performance. Published by Dodge Construction Network and construction management software developer Procore Technologies, the report highlights key issues impacting leading trades: profitability, workforce management and technology adoption.
SPECIALTY CONTRACTOR PROFIT MARGINS
Authors aim to help specialty contracting businesses better understand recurring trends while broadening industry awareness of the advantages that can be created by leveraging digital solutions. Among their conclusions surrounding concrete, steel, electrical, mechanical and plumbing contractor responses to Dodge Industry Insights Research division surveys:
• Labor shortage and supply chain afflictions continue. More than 90 percent of specialty contractors report their projects have been negatively affected by a skilled-labor shortage. Experts anticipate the current human capital dearth to worsen: On average, 33 percent of the current workforce across the five leading construction trades is likely to retire in the next five years.
The labor shortage, alongside supply chain disruptions, is having a significant impact. About one third of specialty contractors (31 percent) cannot pass materials cost increases on to owners on half or more of their projects. This constraint is highest among steel contractors (43 percent), who face a very volatile cost market. To counter the negative impact of labor shortages, specialty contractors most frequently cite construction technology investments to improve productivity.
• Rework significantly impacts profit margins. Specialty contractors identify poor resource management (i.e. labor, materials, equipment) and poor client communication as top drivers of rework. The former factor often spawns unplanned rework, a key drain on productivity, schedule management and cost control. In addition, unbillable change orders represent major lost revenue, especially for larger contractors. On average, Dodge Industry Insight survey respondents indicate that 30 percent of project revenue is lost because of unbilled and unpaid change orders.
• Leveraging technology can help alleviate pressing challenges. Specialty contractors report that up to 20 percent of workers’ time is currently spent on low-productivity tasks, such as tracking down information or documenting information on paper. An average of 39 percent of survey respondents confirm they primarily use whiteboards, spreadsheets and other outdated processes. A lack of standardized processes hurts field-to-office communication, negatively impacting a construction team’s overall effectiveness.
“The challenges specialty contractors face highlight the need for a connected platform built to address their needs,” says Procore Head of Product, Specialty Contractors Will Lehrmann. “Several key [2022 Top Business Issues] takeaways show that the power of technology can help improve productivity and efficiency—as well as combat the workforce and skill shortages—that many specialty contractors are still facing.”
In order for contractors to advance and evolve to meet the needs of their clients, the report suggests company leaders identify where inefficiencies are present within their organizations and adopt more dynamic technological solutions to address them. Best practices for technology evaluation and implementation include: Identifying needs before evaluating options; phased roll-out plan; structured process for engaging stakeholders; and, metrics to determine success.
“Specialty trade contractors are vitally important to the construction industry,” affirms Dodge Construction Network Senior Director of Industry Insights Steve Jones. “Dodge and Procore partnered on this research so these companies can better understand how their peers are performing and what could improve their critical outcomes. We hope these insights will help them operate more safely, efficiently and profitably.”