By Ro Bhatia, CEO, PlanHub
One industry that will continue to face prolonged changes into and throughout 2023 is the construction industry. While it was able to weather the economic pandemic slowdown, it is not immune to the issues of labor demand, volatile pricing, and inflation.
Data as a Resource
Over the past quarter century, technology and digitization have transformed our economy, but construction has been a relatively change-averse, “old school” industry. While some construction companies have already begun using technology as a tool, many are still slow to adopt these changes. Construction historically has been one of the slowest industries to adopt new technology, so it is no surprise that there is a gap in utilizing data as a resource.
Even as many begin to embrace technology and the promise of data, too many general contractors and subcontractors still primarily use spreadsheets, whiteboards, paper-based processes, or other methods instead of construction tech platforms. That simply will not work in a rapidly evolving industry.
Thankfully, more construction professionals realize the opportunities effective preconstruction solutions can provide their business. To get a clear view of not just the challenges construction professionals face every day, but also the role technology plays in the industry, PlanHub issued its inaugural State of the Industry report. We reviewed the internal platform activity of 26,000 contractors, over 250,000 subcontractors, and an industry-wide survey, the results showed great positivity.
According to our survey, 82% of general contractors and 80% of subcontractors plan to grow their businesses in 2023.
● Embracing Technology. Since the beginning of 2021, a 324% increase was seen in the number of general contractors posting their first projects, and projects with strong activity increased 231%.
● More Bid Activity. General contractors increased their invitations to bid (ITBs) by 35%.
● Increasing Opportunity. Subcontractors have responded to adversity by seeking new ways to find business. Subcontractors expanded their reach by listing up to 20% more trades in which they work and expanded their service area by nearly 50%.
According to our research, over one-third of specialty contractors plan to increase investment in construction technology in 2023 to streamline functions, improve productivity and drive revenue.
PlanHub’s data is consistent with reports of greater utilization of technology across the industry to increase efficiency, improve bidding and takeoff, better track assets, mitigate labor shortages and more. According to McKinsey, the impacts of COVID have spurred new construction technology innovation and accelerated its adoption. In fact, investment in construction technology increased by $25 billion between 2014 and 2019 and increased by an additional $4.5 billion in 2021.
Instead of combing through old bidding documents, spreadsheets and Post-It notes, the right construction planning and management solutions will digitize all the critical information that contractors and subcontractors use most often. Software solutions provide quick and easy document replication, streamline bidding and other critical processes, and save precious time and money.
Changing Economic Landscape
Contractors and subcontractors are caught in a vise of rising materials costs, a serious and growing skilled labor shortage, and ongoing supply chain issues that drive up costs and delay projects. For instance, the price of steel, a major component of data center construction, fluctuated dramatically, rising over 200% from March 2020 to mid-2021 before finally easing this past summer. Other critical materials have risen 19.2% year over year and 35.6% since the beginning of the pandemic.
The cost of construction materials is about 35% to 60% of the overall construction cost. For the last three years, record inflation has driven up the cost of construction projects while also creating new risk management challenges for contractors. The construction industry weathered the pandemic economic slowdown better than most industries, but significant barriers to success remain.
Thankfully, supply chain bottlenecks that plagued the industry have eased, and some prices have even fallen, but contractors and subcontractors continue to face severe material cost challenges. The digital revolution can help contractors and subcontractors maximize efficiencies, save money and mitigate rising inflation.
Skilled Labor in 2023
The Association of Builders and Contractors (ABC) estimates that construction will need to hire 590,000 additional workers on top of the normal hiring pace in 2023 in order to keep up with demand.
Unfortunately, the hard truth is that young people aren’t as attracted to the construction industry. At the beginning of 2023, general contractors and subcontractors will still be searching for wells of skilled talent, but the talent pool is continuing to dry up.
In order to appeal to younger workers, the industry needs to adopt the latest construction technology to match the skills and knowledge this generation has learned coming out of school and other vocational programs. If construction companies are still doing material take-offs using a scale ruler and highlighter, it will be much tougher to attract estimators who are used to performing take-offs electronically.
These solutions won’t just help attract young talent, they help construction professionals thrive and grow. By leveraging digital solutions such as comprehensive construction planning and management technology, contractors and subs can better prepare for the challenges ahead by improving their critical business functions and collaboration relationships.
General contractors and subcontractors can now rely on digital solutions that streamline efficiencies, increase collaboration and improve margins through greater productivity. By using innovative construction planning and management technology now, construction professionals can improve critical business functions, strengthen collaboration, and be better prepared for the challenges ahead.
Ro Bhatia is the CEO of PlanHub, the leading cloud-based preconstruction platform that enables general contractors, subcontractors, and suppliers to connect and collaborate on construction projects across the US. PlanHub was created by contractors, for contractors, to simplify the construction bidding process.