Despite the improving employment outlook, many NC contractors are embracing new technologies and techniques like Public Private Partnerships, BIM or lean construction concepts to cope with decreasing revenue and ever tighter margins.
In a recently released Associated General Contractor of America survey, contractors are most pessimistic about the private office market, where 56 percent expect activity to decline, followed by the retail, warehouse and lodging market, where 52 percent expect less activity. Contractors are most optimistic about the hospital & higher education market, where 32 percent expect growth and the power market, where 29 percent expect growth. However, even for those markets, 36 percent of contractors expect the hospital & higher education market to shrink and 32 percent expect the power market to contract. Read More.
The survey suggests contractors' low expectations may be driven by the fact most firms expect stimulus-funded construction activity will decline this year. Clear majorities of firms (ranging from 56 percent to 66 percent) expect stimulus spending in every market segment to decline in 2011. Meanwhile, only 30 percent of firms report they plan to perform stimulus-funded work this year, down from the 45 percent that reported performing stimulus-funded work in 2009 or 2010.
“The stimulus propped up many construction jobs during the past two years,” said Ken Simonson, the association's chief economist, noting that firms reported one-in-five employees were involved in stimulus-funded projects during the past 12 months. “The stimulus is already becoming a thing of the past in most contractors' minds.”
Bid levels will remain very competitive this year. According to the survey, 29 percent of firms report they plan to lower bid levels in 2011. That follows a year when 74 percent of firms reported lowering bid levels, including seven percent who reported lowering bid levels to the point they lost money performing the work.
“In the face of tough market conditions, many firms are focusing on operating efficiencies and expense reduction, positioning themselves well to take advantage of a resurgent construction market,” said Michael Feigin, Navigant’s managing director for construction. “Construction firms are doing this, in part, by adopting new technologies and new techniques like BIM and lean construction.”
Growing numbers of firms plan to embrace new construction modeling technology known as Building Information Modeling (BIM) this year, Feigin noted. While only 5.8% percent of construction firms in NC currently use the technology, 50 percent expect that number to increase in 2011. Demand for green construction also continues to grow, with 13 percent of NC firms reporting working on Leadership in Energy and Environmental Design (LEED) registered projects in 2010 and 30 percent expecting that number to grow this year.
Growing numbers of firms plan to work on public private partnerships (PPP), perhaps driven by tight public sector budgets. A number of NC construction firms report working on PPPs in 2010, and 38% of the NC firms surveyed expect that number to increase this year. Nearly half, 46 percent, of NC firms reporting, implemented lean construction concepts in 2010 as a way of minimizing waste of materials, time and effort. Read More.
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