One year after the pandemic struck, construction firms are experiencing soaring materials costs, widespread supply-chain problems, and continuing project deferrals and cancellations, according to a new survey that the Associated General Contractors of America released today. Association officials urged Congress and the Biden administration to take steps to eliminate tariffs on key materials, address shipping backups and boost funding for new infrastructure to help the industry recovery.
“The survey results make it clear that the construction industry faces a variety of challenges that threaten to leave many firms and workers behind, even as some parts of the economy are recovering or even thriving,” said Ken Simonson, the association’s chief economist. “The pandemic has left the supply chain for a range of key construction components in tatters and undermined demand for a host of private-sector projects.”
Simonson noted that an overwhelming 93% of the survey’s respondents report the pandemic has driven up their costs. Four out of five are spending more on personal protective equipment, sanitizers, and other health-related expenses. More than half say that projects are taking longer than previously.
Costs and delayed deliveries of materials, parts, and supplies are vexing many contractors. Nearly 85% report those costs have increased over the past year. In addition, nearly three-fourths of the firms are currently experiencing project delays and disruptions, mainly due to shortages of materials, equipment or parts. Nine out of ten firms that are incurring such delays cite backlogs and shutdowns at domestic producers, such as factories, mills, and fabricators. Half of the firms also blame backlogs or shutdowns at foreign producers.
More than three-fourths of the firms report having projects canceled or postponed in the past year, including more than one out of five with a 2021 project that has been canceled or postponed. Meanwhile, only one-fifth of respondents say they have won new projects or add-ons to existing projects as a result of the pandemic.
In a sign that the pandemic has had very different effects on construction firms, about one-third of firms say business matches or exceeds year-ago levels, while another third say it will take more than six months to reach that mark, and one-fifth say they don’t know. Respondents in the Northeast are the most pessimistic about the outlook, followed by firms in the South. Firms from the Midwest are split along the same lines as the full survey, while respondents in the West are more optimistic, on balance.
Despite these differences in experience to date and the near-term outlook, contractors from all regions, project types, and firm sizes are almost equally bullish about their hiring expectations over the next 12 months. Across nearly all subgroups, roughly three out of five respondents expect to add employees over the coming 12 months. Only 10 to 15% of firms in any category expect to reduce their headcount.
“Contractors need Washington officials to cut tariffs and address the shipping and supply chain problems that are driving costs and contributing to project delays,” said Brian Turmail, the association’s spokesman. “They also expect the President will keep his word and get significant new infrastructure investments enacted as quickly as possible.”
View the survey results.
Related Stories
Market Data | Sep 21, 2020
Washington is the US state with the most value of construction projects underway, says GlobalData
Of the top 10 largest projects in the Washington state, nine were in the execution stage as of August 2020.
Market Data | Sep 21, 2020
Construction employment declined in 39 states between August 2019 and 2020
31 states and DC added jobs between July and August.
Market Data | Sep 21, 2020
6 must reads for the AEC industry today: September 21, 2020
Four projects receive 202 AIA/ALA Library Building Award and Port San Antonio's new Innovation Center.
Market Data | Sep 18, 2020
Follow up survey of U.S. code officials demonstrates importance of continued investment in virtual capabilities
Existing needs highlight why supporting building and fire prevention departments at the federal, state, and local levels is critical.
Market Data | Sep 18, 2020
6 must reads for the AEC industry today: September 18, 2020
Sagrada Familia completion date pushed back and energy code appeals could hamper efficiency progress.
Market Data | Sep 17, 2020
6 must reads for the AEC industry today: September 17, 2020
Foster + Partners-designed hospital begins construction in Cairo and heat pumps are the future for hot water.
Market Data | Sep 16, 2020
6 must reads for the AEC industry today: September 16, 2020
REI sells unused HQ building and Adjaye Associates will design The Africa Institute.
Market Data | Sep 15, 2020
7 must reads for the AEC industry today: September 15, 2020
Energy efficiency considerations for operating buildings during a pandemic and is there really a glass box paradox?
Market Data | Sep 14, 2020
6 must reads for the AEC industry today: September 14, 2020
63% of New York's restaurants could be gone by 2021 and new weapons in the apartment amenities arms race.
Market Data | Sep 11, 2020
5 must reads for the AEC industry today: September 11, 2020
Des Moines University begins construction on new campus and the role of urgent care in easing the oncology journey.