Contractors are using their boots on the ground experience to predict the future and many are thinking optimistically. Turning the corner on a new year, here are insights from the Dodge Construction Network’s survey of contractors and civil engineers from small and large construction companies. Spoiler alert: backlogs are boosting confidence.
Surprisingly Optimistic
For Construction Pros shares this summation from Stephen Jones, senior director of industry insights and research at Dodge Data & Analytics: “The contractors this quarter continue to remain optimistic about the flow of work into the market, and their backlog levels continue to be nearly at capacity….Civil engineers, who represent the pipeline of future work, are even more bullish, reporting current backlogs to be 50% over their ideal levels. But the pace of their backlog increases is slightly lower this quarter, suggesting the market may be starting to stabilize.” The contractors feeling the most optimistic base the possibility of increased revenue and profit margins on factors such as:
- Expectations of more work (61%)
- Targeting more profitable work (61%)
- Expectation of increased public funding for infrastructure (55%)
- Expectation of fewer competitors bidding projects (28%)
- More efficient workforce (25%)
On the other hand, the contractors anticipating lower revenue and profit margins cited these possible reasons: contractors expecting lower revenue and profit margins, pointed to the following reasons for the possible change:
- Economic downturn reducing the number of private projects (60% of respondents this reason)
- Increased number of competitors bidding projects and pushing down pricing (44%)
- Delays in new projects due to reduced projected public revenue (29%)
- Insufficient public revenue to support new projects (21%)
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Insights on Backlogs
According to the findings from Dodge Data and Analytics, some contractors are seeing a leveling off following two quarters of growth, but, “Most reported working near at-capacity levels. Nearly half, or 41%, said their backlog has increased during the previous six months. About 36% of small contractors reported that their backlogs increased, while 47% of large contractors noted the same….When it comes to revenue, 50% of large companies, 37% or mid-size companies and 29% of small contractors expect an increase in revenue in the coming year, the report stated. Most of those are expecting an increase in profit margins, as well.”
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