Coming out of 2020 – one of the most turbulent economic years in history –the construction industry faces several market realities and technology challenges, as well as exciting opportunities.
The pandemic caused widespread project delays, job cancellations and payment delays to contractors and subcontractors. There were shortages of products and materials.
Looking ahead, there may not be enough backlogged construction work to sufficiently reinvigorate the business this year.
And there aren’t enough people in the construction industry who have enough digital skills to help with automating processes and improving productivity.
But there’s a bright side. There are many opportunities for growth especially using digital technologies and building the United States infrastructure.
Here you’ll find out more about these challenges and opportunities in detail. We’ll offer recommendations to help your business start fresh and flourish in 2021.
Biggest challenges for the construction industry
Not surprisingly, because of the pandemic the construction market has slowed down.
A Deloitte survey after the U.S. presidential election last November finds that the electronics and construction industry lost $60.9 billion in gross domestic product (GDP) because of the pandemic. Total jobs fell by roughly 6.5 million. This eliminated two years of GDP gains and four years of job increases.
Our Middle Market Spending Trends Report, which explored spending trends across middle market companies, finds that spending dropped two percent in both the second and third quarter.
Many construction projects got postponed or delayed because of the pandemic.
In its fourth quarter 2020 report, the U.S. Chamber of Commerce found 83 percent of contractors endured project delays on some projects due to the coronavirus outbreak, and 85 percent expect these delays to continue into at last the first few months of this year.
Slow payments affect many industries— including construction. Nearly half (49 percent) of construction payments are not made on time. And according to Levelset’s National Construction Payments Report, it takes an average of 83 days for construction companies to receive payments.
Shortage of digital skills
Many industries struggle to find tech-savvy professionals with digital skills and the construction industry ranks high on that list.
How serious a challenge is this?
The Chamber of Commerce report notes 83 percent of contractors continue to report moderate to high levels of difficulty in finding skilled workers.
The industry uses too many manual, paper-based processes, reducing efficiency and information exchanges.
Market opportunities for the construction industry
Despite all these significant challenges, the construction industry has reasons to be optimistic about growth this year and opportunities to improve its operations and productivity.
In fact, 68 percent of engineering and construction executives describe the outlook for the industry as “somewhat or very positive.”
Government-funded infrastructure projects have emerged as bright spots for new construction business.
Nearly half (46 percent) of engineering and construction executives note that new public infrastructure work will be a significant part of their business, and 14% are looking to form public-private partnerships to access these opportunities.
The report specifies that more than $1 trillion could be spent on U.S. infrastructure upgrades this year. These projects could be funded in part by the U.S. federal government’s $900 billion relief package associated with the pandemic.
Growing use of digital technologies
During this year more construction companies are likely to invest in digital technologies to become more competitive, automate their systems, use less paper and increase productivity.
The Deloitte survey found 76 percent are likely to invest in at least one digital technology in 2021. They’re investing to reduce operating costs, improve productivity and accelerate payments.
Given all these challenges and opportunities, what should you do next? We have two recommendations.
First, focus on payment delays because they’re one of the construction industry’s biggest challenges with huge financial impacts. When payments arrive late, problems spread throughout the business from finance to supply chain to operations to marketing to customer service to sales.
Late payments slow the entire business while straining relationships with customers, suppliers and vendors. When your company pays late, you risk losing customers and damaging your company’s brand.
How can you avoid late payments?
It starts by assessing your current system for processing invoices and making payments. Is it manual? Do your employees spend a lot of time entering invoice data and chasing executives for approvals that steals time from bidding on construction projects? Are you using lots of paper processes including paper checks?
These processes tend to be slow, insecure and mistake-prone. As a result, your business pays vendors and suppliers late or sends incorrect amounts.
To overcome this, learn as much as you can about technology such as AP automation, that streamlines your payment processes. It’s essential for speeding up secure, mistake-free payments.
Explore infrastructure business opportunities
Second, explore opportunities to win business building infrastructure projects. Anticipate more opportunities to build government infrastructure this year than last given the funding likely to be allocated for these projects.
Move fast to learn all you can about which infrastructures projects will most likely receive the most amount of funding and which ones offer your construction business the biggest business opportunities.
Pursue them. With creative, enterprising and persistent pursuit of these new construction business ventures, you’ll start fresh and accelerate growth in this exciting new year.