The construction industry is one of the largest sectors in the US economy. Nearly $1.4T worth of structures are constructed each year and employs more than seven million workers.
As history has shown, the construction industry is resilient and will adapt to create a “new normal”. We can expect projects to cost more, take longer to start, longer to finish, but will be offset by strong demand across most sectors.
A few challenges the construction industry is facing today:
Shortage of Qualified Workers – Employment woes in the industry were exacerbated by the pandemic the past two years. At the end of November 2021, there were 345,000 unfilled construction jobs. Studies have shown that the United States needs 1,000,000 new construction workers in the next 2 years. Modular construction and technology have allowed some companies to do “more with less”. Digital tools, such as drones, software, robotics, 3-D printing have created new highly skilled jobs in an industry that was falling behind in innovation. We still have a long way to go, but progress has been made.
Supply Chain Disruption and Materials Sourcing Issues – We’ve all seen the news and 2021 was a rough year. 2022 has proven to be a challenge as well. Some construction materials are still not readily available. Sourcing issues are made worse by stockpiling of materials. Since long-term price lock is a thing of the past, coupled with thin inventory, construction materials, which are normally purchased as needed, are now purchased in bulk, and stored at the job site (or warehouse) by the owner or contractor to be used for the duration of the project. Stock-piling of inventory includes oil and natural gas products (think gas and diesel), which further exacerbates the price hikes we all see at the pump. Stock-piling fixes one problem but creates further strain on the supply chain. It’s also created a new issue not normally seen in prior years. Some of these stored materials may not be covered by the builder’s risk policy if materials are not stored behind a fence and locked up. Not all contracts allow for payment of stored materials, so it could create unforeseen insurance and cash flow issues on a project. Alternative construction materials such as bendable concrete and mass timber help mitigate some of the supply chain problems, but these materials are price-prohibitive and not widely adopted, so their demand is limited.
Covid-19 variants continue to pop up and could wreak havoc on worker safety, morale, and labor participation. Lessons have taught us to have a safety plan in place and adhere to it. An unsafe work environment will not be tolerated by employees or project owners.
Inflation readings show that we are experiencing the highest inflation rate since 1982. It is coming in at 6.8% (as of Nov 2021). The flip side is it could help companies get signed contracts, increase backlog, and at the same time fill jobs. It’s strange to think about, but it could push builders into getting contracts signed now versus waiting. Interest rates appear to be headed higher based on recent FOMC meeting minutes, so the longer an owner waits to issue contracts and get a project underway, the more expensive it could be. Additionally, as consumer buying power is pushed to the breaking point, many potential workers will look for other jobs and careers, opening the door to recruitment into the construction industry. Some of the potential workers that have left the workforce may decide to jump back in as well to fix household budget shortfalls.
Cybercrime – Ransomware, social engineering, and cyberattacks are not only frustrating, but they have a significant impact on a company’s time and money. Looking back in 2021, 75% of construction-related companies experienced a cyber incident. Some incidents can take a week or more to rectify, and if a customer’s personal data is breached legal issues can drag on for years. Cyber claims such as invoice manipulation, deceptive fraud, and computer funds transfer are first party losses to the insured and not automatically covered by a crime policy or a cyber policy. These are add-on coverages, so be sure and read policy language. The number of cyberattacks will only increase in 2022-2023, so if you do not have a plan to safeguard your IT resources, now is the time to create it and prevent the headaches that come along with a cyber breach event.
Weather – For our contractors on the coasts, 2021 and 2022 were busy hurricane years with record rainfall for the southern U.S. 2023 is forecasted to be more of the same.
With nearly 40 million lightning strikes hitting the ground each year in the US, lightning prevention technology has become an industry standard.
Advice from Capitol Electronics for Construction Companies &/or Developers Facing these unique challenges.
- Remain diligent in revising contracts with your attorney to address the issues we see coming down the pipe.
- Drill down on project delays beforehand in the contract, so there are no surprises.
- Go overboard on communication. Communication goes a long way to prevent “challenges,” from becoming “problems.”
- Always remember to document!
- Explore opportunities for saving money such as installing CMCE lightning suppression devices in place of traditional lightning rod protection systems.
Capitol Electronics works with developers to save money by providing lightning prevention devices that protect 393 square feet , do not require power, are easy to install, and cost approximately 30 to 40% less than lightning rod systems!