Poor productivity cost U.S contractors as much as $40 billion last year

U.S. contractors lost between $30 billion and $40 billion in 2022 due to poor labor productivity, according to a new report from FMI Corp. The survey focused on self-performing contractors, those typically engaged as a trade partner to a general contractor.

The productivity problem seems to be getting worse, the report says. Almost half (45%) of respondents to a survey conducted during the summer saw declining labor productivity, with only 23% noting improvement.

“Labor is the largest, riskiest, yet most controllable variable cost,” the report says. “Managed well, labor productivity can significantly improve bottom-line margins. Managed poorly, labor overruns, or exceeding labor budgets, can wipe out contractor profitability.”

Respondents say 11% to 15% of field labor costs are wasted or unproductive, but better management practices could reduce labor spending by 6% to 10%, or $15 billion to $25 billion. That level of improvement would result in a 50% to 100% boost to profitability.

Respondents also cited low-quality design and construction documents, outdated and unrealistic schedules, lack of coordination with general contractors, and change order 
inefficiencies as key concerns.