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
Industry Research | Aug 11, 2017
NCARB releases latest data on architectural education, licensure, and diversity
On average, becoming an architect takes 12.5 years—from the time a student enrolls in school to the moment they receive a license.
Market Data | Aug 4, 2017
U.S. grand total construction starts growth projection revised slightly downward
ConstructConnect’s quarterly report shows courthouses and sports stadiums to end 2017 with a flourish.
Market Data | Aug 2, 2017
Nonresidential Construction Spending falls in June, driven by public sector
June’s weak construction spending report can be largely attributed to the public sector.
Market Data | Jul 31, 2017
U.S. economic growth accelerates in second quarter; Nonresidential fixed investment maintains momentum
Nonresidential fixed investment, a category of GDP embodying nonresidential construction activity, expanded at a 5.2% seasonally adjusted annual rate.
Multifamily Housing | Jul 27, 2017
Apartment market index: Business conditions soften, but still solid
Despite some softness at the high end of the apartment market, demand for apartments will continue to be substantial for years to come, according to the National Multifamily Housing Council.
Market Data | Jul 25, 2017
What's your employer value proposition?
Hiring and retaining talent is one of the top challenges faced by most professional services firms.
Market Data | Jul 25, 2017
Moderating economic growth triggers construction forecast downgrade for 2017 and 2018
Prospects for the construction industry have weakened with developments over the first half of the year.
Industry Research | Jul 6, 2017
The four types of strategic real estate amenities
From swimming pools to pirate ships, amenities (even crazy ones) aren’t just perks, but assets to enhance performance.
Market Data | Jun 29, 2017
Silicon Valley, Long Island among the priciest places for office fitouts
Coming out on top as the most expensive market to build out an office is Silicon Valley, Calif., with an out-of-pocket cost of $199.22.
Market Data | Jun 26, 2017
Construction disputes were slightly less contentious last year
But poorly written and administered contracts are still problems, says latest Arcadis report.