Contractors today are in an enviable position. All summer long, construction spending in the U.S. has been surging past the $1 trillion mark monthly. Experts believe demand for all types of infrastructure investment will hold steady and backlogs for the next six to 12 months through 2018 should be as good or better than in 2017.
But even in rosy economic times, a myriad of risks is always lurking. When it comes to managing risk in the construction industry, there are plenty of potential hazards to go around. Everything from the most basic things like insuring the company truck and your equipment in the field to making sure your data and customer’s data is safe from cyber attacks, the list goes on and on.
Are Risks Dragging Down Productivity and Profits?
Maybe not all risks are as obvious when it comes to how you manage your profitability and productivity. On a daily basis, today’s contractors struggle with risks that are both within and beyond their control. Whether you’re in the roofing or plumbing trade, these issues may seem all too familiar:
- Are incomplete design documents putting us at risk? In a new survey, Managing Risk in the Digital Age, conducted by the Associated General Contractors of America Management and FMI Corp., more than 90% of contractors reported receiving design documents that were less than complete. Another 40% of respondents planned to move design services in-house. The Willis Towers Watson (Construction Risk Index) Survey also showed that 92% of survey respondents reporting incomplete design documents as proving detrimental to their success. The 350 senior executives surveyed said they fear that the growing demands for preconstruction efficiencies are hurting many construction companies. To solve this, the Index said, companies will have to demonstrate a commitment to exploring new ideas and take advantage of digitization and new technologies.
- Are we taking risks by choosing the wrong projects to bid on? The Construction Risk Index Survey also noted that the average general contractor was earning a net profit margin of 1.46%. Even though the pressure is on to bid and win more projects, many contractors are resisting the very tech tools that could help them streamline their estimating process. The FMI Survey noted that contractors are only innovating “around the edges” and adopting technology in a piecemeal fashion (or not at all) but not fundamentally transforming their business approaches.
- Are manual processes and spreadsheets adding undue risk to our bids? The FMI Survey also points to the fact that construction firms continue to operate the same way they did 10-20 years ago. Today’s construction businesses must weigh whether to keep putting themselves at risk by preparing bids with manual and error-prone spreadsheets. Experts say nearly 94% of spreadsheets contain errors. If labor and materials are underestimated, your business could end up winning the low bid and losing money on the job. Even worse, spreadsheets offer no version control, which can result in substantial re-work. While spreadsheets may have the lowest bar for ease-of-use, they also make it more difficult to consolidate data input.
Hiring the Right People
For many of these issues, the common denominators are people and technology. It seems most contractors are either worried about hiring enough skilled workers in today’s booming construction economy or having the right tech tools for their workforce.
Having a tech-savvy, skilled workforce is one of the best ways to ensure you can overcome these challenges. However, this is proving an uphill struggle for many with nearly 90% of contractors facing a shortage of skilled workers and 67% struggling to find supervisory staff, according to the FMI Survey.
Much of this concern is due to retiring Baby Boomers. Companies across the construction spectrum are facing a wide range of skills shortages. As a result, the construction industry will have to look to technology to fill the gaps as they begin to focus away from finding enough warm bodies to building an environment where they can retain the right skill sets and backgrounds. This is getting increasingly tough as the market has become more and more competitive for crucial roles like construction estimators.
Some experts even speculate that the need for talent could have a serious and long-term impact on the construction industry. Attracting the next generation of workers, especially Millennials, will be tough for many construction companies. For example, the FMI Survey showed that 88% of firms encounter risks related to a lack of skilled craft workers and 67% face risks associated with the limited number of available field supervisors.
Stop Struggling and Start Innovating
When it comes to profitability and bidding the right work, adopting innovative, new technology is undoubtedly the only road forward. Consider for a minute that the FMI Survey showed that industry stakeholders expect to see more change within the next five years than there has been in the last 50 years. Working smarter, not harder, has never been more critical.
As a proverbial late adopter, the construction industry must commit to exploring new ideas and take advantage of digitization and new technologies. Truly, tech tools are abundant as billions of dollars are pouring into the construction technology sector. The win-win is that construction companies who invest in the right tech tools will have an easier time hiring and retaining the right skill sets in a tight labor market.
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