What Good Construction Project Documents Reveal About Shifting Market Conditions

Your construction project documents can do a lot of work for you.

It’s easy to dismiss documentation as non-productive chores. But if you store and track data from project to project, you create a living record of how market conditions around you are changing. 

If you need to know how competitive your company is, or how competitive it can be, these records are the place to start looking.

Here are three questions your construction project documents can help you answer:

Are You an Employer of Choice for Local Trades Professionals?

When so many businesses in the construction sector struggle just to hire qualified people, then being able to retain employees becomes a major competitive advantage.

Citing data from several sources, the team at Travelers reports that more than nine in 10 construction companies have trouble filling “craft and salaried positions,” and that two-third of companies “report project delays due to labor shortages.”

Those two conditions can send labor costs spiraling. If you use a tool like eSUB’s reporting software, you can look up your labor-productivity figures and identify how much billable work you get done in exchange for the salaries you pay out. If your projects are constantly marred by delays, that could mean you’re having to compete with other employers for fewer and fewer skilled tradespeople. 

One of the best ways to navigate such market conditions is to give priority to retaining your crew members. How do you do that? Pay is part of that equation. When you give people raises, do it evenly across the team, HR advisor Josh Bersin writes. Salary shouldn’t be tied to performance. If you have any kind of bonus or commission policies, however, definitely make those performance-based.

Another thing you can do to keep people engaged and content with their work: Recognize people for the good work they do. If you have tradespeople with specialized skills, make sure you’re sending them out on jobs to do the work they’re best at. Give everyone space to voice their opinions, and make sure they feel heard when they do so.

That’s what earns loyalty from employees.

Are Your Bids Keeping Pace With Inflation?

Inflation has impacted every business over the last several months. 

In construction, inflation causes all kinds of problems upstream from trade subcontractors. John Marsicano, senior director of SDI claims and financial advisory services at WTW, notes how inflationary environments shrink cash reserves, put extra cash-flow pressures on small companies (more on that below), and force businesses to do whatever they can to cut costs.

“[A] lot of clients and developers are starting to kind of back off on … some of these mega jobs that they had because of available space and inventory,” he says. “It’s not worth the squeeze to kind of invest all that money. And banks are tightening up on the cash loans and the interest rates really aren’t favorable right now to borrow a lot of cash.”

The only ways for trade contractors to push back against inflation is to cut costs or raise prices. And it’s tough for any small business to feel they have to raise prices in an economy like this one — but it’s necessary for the business to survive. 

“Consider how inflation — whether for materials or labor — could impact the final cost of a project,” says Kelly Outram, managing director and head of global contractor development at MarshMcLennan. 

“Be realistic about the increased costs and make the necessary adjustments in your bidding process. Contractors may also consider adjusting their approach to bidding by adding contingencies into the pricing models to cater for future price uncertainties and increased costs.”

Are You Taking On Extra Financial Risk? 

The theme of Billd’s 2023 National Subcontractor Market Report is subcontractors are having to carry the financial load for others in the construction sector right now. 

Two points worth mentioning from that report:

• That vast majority of subcontractors told Billd they had to pay for labor and materials before they got paid themselves. The average wait time for payment was 74 days — two and a half months.
• Nearly a third (32 percent) said their supplier terms were reduced in 2022.

“When it comes to obtaining working capital, subs aren’t in an ideal position,” Billd CEO Chris Doyle says. “They generally carry low cash balances, are owner operated, have unpredictable AR, and are not well understood by the traditional institutions that could fill their working capital gaps. These factors contribute to the fact that nearly a quarter of subs find it difficult to obtain new sources of financing.” 

When your supplier terms are getting shorter and your payment terms are getting longer, your company will feel the squeeze from both sides. And as Marsicano at WTW notes, that can have a chilling effect on your bids.

To learn how eSUB can help you get a big-picture view of the market conditions you’re operating under, schedule a demo today.

Images used under license from Shutterstock.com.