Congratulations on surviving, so far, this unprecedented
recession.
According to Stephen Sandherr, CEO of Associated General Contractors of America, contractors
have focused on cutting costs and increasing efficiency.
They have “learned
how to do more with less,” he said.
How do firms continue
through lean times armed with their hard-earned practice of lessened resources?
By recognizing how important
economic influences, ranging from global to local, influence businesses in the
construction industry. Traditionally, the industry has always been analyzed by
the components of construction costs and materials,
labor and mark-ups. During the past decade’s massive instability
an additional component, that of economic influences, has been added.
Unlike trying to
decipher the widely contradicting predictions of economic recovery, understanding
the economic influences for the remainder of 2012 and into 2013 provides a
clearer view of how a firm’s resources are best utilized.
Current economic components
influencing construction are:
- Improving GCP and personal income
- Rising vacancies for office/retail/hotels
- Serious spot credit access problems- muni bond market is up and bank lending is still down
- State and local tax shortfalls with deeper spending cuts
- Federal
ARRA projects’ funding slows
Beyond 2012, domestic
materials’ costs are expected to increase 2% - 4% with a 3%-5% overall bump on
all materials prices. Other issues to be considered are fast track schedules
and project delivery like IPD, and CMAR,
and the continuing technical education of an aging workforce
Positive indications
are on the horizon with airports, medical, and school bonds among other
authorized “cloud” construction projects waiting for fast approaching funding.
In planning for the
future the biggest factor to accept is that few practices or financing from
pre-2007 still exist. The new normal, born
of hardships, compromise, and resilience, is leaner and smarter.
This article was written for Sierra West Group
