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

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.”

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

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Respondents also cited low-quality design and construction documents, outdated and unrealistic schedules, lack of coordination with general contractors, and change order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

Download DOWNLOAD THE REPORT

We offer the following recommendations in the hope that they will help step up the pace of high-performance building reconstruction in the U.S. and Canada. We consulted many experts for advice, but these recommendations are solely the responsibility of the editors of Building Design+Construction. We welcome your comments. Please send them to Robert Cassidy, Editorial Director: rcassidy@sgcmail.com.