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Optimism Materializes

BY SHERYL S. JACKSON
[Editor’s note: Results of the AGC and Computer Guidance 2013 Construction Hiring and Business Outlook survey presented in this article are based upon preliminary results collected as of Dec. 6, 2012 from almost 800 respondents. Final results of the survey, which ended mid-December, as well as detailed analysis of the data, will be available on the AGC of America website in first quarter 2013.]

The prediction for the construction industry is not filled with gloom and doom, but no significant growth is expected in 2013, according to the AGC and Computer Guidance 2013 Construction Hiring and Business Outlook survey of AGC member firms.

Although survey respondents are predicting 2013 to be fairly comparable to 2012 for new business, over 34 percent believe the construction market will begin to grow again in 2014. When asked to predict if 2013 available-dollar volume of projects in different market segments would vary from 2012 projects, 40 percent or more of respondents answered it would be comparable for most segments. Hospital/higher education is one category for which 34.6 percent of respondents expect higher-dollar volume with only 35.4 percent of respondents expecting comparable levels.

“The information for the hospital and higher education construction segment in expected increases in construction is positive,” says Ken Simonson, chief economist, AGC. The news is less positive for the public building and K-12 school segments with only 14.9 percent and 18 percent, respectively, of respondents predicting higher-dollar volumes and slightly more than 41 percent of respondents predicting lower-dollar volume of projects in these two segments.

Overall, survey respondents seem to be more optimistic than they were last year, says Simonson. “Even though 34 percent believe the market will grow in 2014, 29.4 percent report plans to add employees in 2013 and only 10.1 percent plan layoffs.”

The number of employees in 2012 for companies participating in the survey did not change for 32.1 percent and increased for 35.5 percent of respondents. Layoffs occurred for 32.4 percent. Companies that added employees did not increase staff size significantly, with 67.3 percent adding 15 or fewer employees.

A static workforce makes sense in a slow economy, points out Simonson. “Companies want to keep good employees throughout the slow times, so they may work longer hours rather than add staff, use the time for training, or assign them non-construction duties to keep them on the payroll,” he explains. “Over 29 percent of respondents indicate a plan to add more employees in 2013, which reflects their  expectation  of growth in 2014.” Slightly more than 81 percent of employers planning to add employees will add up to 15 employees and 10.1 percent will add more than 25 employees.

Adding employees will increase overhead costs, including the cost of health insurance. The majority of respondents (76.6 percent) report higher cost of providing health insurance in 2012 and approximately 79 percent expect costs to be even higher in 2013. Almost 6 percent do not plan to offer health care insurance in 2013 (up from 5 percent in 2012), and 2.6 percent plan to offer less health care insurance in 2013.

TECHNOLOGY ADOPTION ENHANCES PRODUCTIVITY
One of the reasons members of the construction industry have not increased the size of their workforce, even when they have new business, is technology that improves productivity and cuts construction costs. When asked if Building Information Modeling (BIM) is used in their companies, 36.7 percent responded positively.

“BIM is a 3-D modeling software that can simulate building a design to identify potential intersection points that don’t meet properly or a clash of different systems,” says Roger D. Kirk, chief executive offi cer of Computer Guidance, co-sponsor of the 2013 Construction Hiring and Business Outlook survey. As almost 37 percent of survey respondents know, costs are better managed when design issues are addressed before construction begins. “Everyone in the construction industry is trying to do more with less and technology, such as BIM, is one tool that can help people achieve productivity goals cost-effectively.”

While less than 40 percent of respondents use BIM, information technology is an important part of everyone’s business. Over 60 percent of respondents say they plan to invest in their information technology departments in 2013, with almost 44 percent of those respondents planning to spend between $10,000 and $50,000.

Only 10.5 percent of respondents indicated that they were planning to buy new financial and cost software, points out Kirk. “This is not a surprise,” he says. Although the life cycle of software for many industries is seven to 12 years, construction industry software has a life cycle of 12 or more years. “Because the adoption rate of financial and job costing software has increased in the past five years, it makes sense that most firms do not need to replace their software.”

EQUIPMENT PURCHASES DOWN
Not surprisingly, the purchase or lease of construction equipment was down in 2012. Almost 31 percent of respondents did not purchase equipment and 21 percent did not lease equipment in 2012. $100,000 or less was spent by those that did purchase (32.6 percent) or lease (41.5 percent). The outlook for 2013 is not any better with 36 percent of respondents reporting they will not purchase and 23.5 percent saying they will not lease equipment. Once again, $100,000 or less will be spent by the majority, with 30 percent buying less than $100,000 and 41.5 percent leasing less than $100,000 of equipment.

AGC members paid more for construction materials in 2012 with almost 75 percent reporting materials price increases between 1 and 10 percent. However, for 2013, 71.4 percent of survey respondents expect price increases of between 1 and 10 percent.

Two of the survey questions asked AGC members about public-private partnerships as well as certification for green or energy efficiency. The percentage of respondents who were not contracted to work on public-private partnership projects in 2012 is 65 percent. The majority of those who did receive contracts for public-private projects (28.1 percent) handled between one and five projects.

In spite of the national focus on energy efficiency and sustainability, 57.7 percent of respondents reported 5 percent or less of their buildings or structures ultimately certified as green or energy efficient. Only 11.6 percent reported that more than 25 percent of their projects were ultimately certified. No change is expected for 2013 by 62.6 percent of respondents but almost 32 percent expect the share of their work in 2013 that is certified green or energy efficient to increase between 1 and 100 percent.

OVERALL RESULTS POSITIVE
Data collected by the survey will be analyzed and compared to results of previous year surveys to identify trends and provide AGC members with information they can use in their business projections. “We use data from other sources to enhance our predictions but the most important, real-time information comes from our 30,000 member firms,” explains Brian Turmail, executive director, public affairs, AGC. Providing information that comes from all areas of the construction industry is an important service for members, he says. “Who is better to provide the information we can use to forecast opportunities in our industry than the people who work in the industry every day?”

While the survey results are slightly more positive than previous year surveys, Turmail was surprised at the actual survey responses. “Anecdotally, I was hearing a more positive outlook but although the survey results are not dramatically more positive, they do show we are definitely headed in the right direction.”

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