Civil Quarterly: Costs Are Up but so Are Profit Expectations

Civil contractors continue to be optimistic about their business prospects in the 1Q2022 survey published in the latest edition of the Civil Quarterly (TCQ) from Dodge Construction Network.

The passage of the Infrastructure Investment and Jobs Act (IIJA) is driving some optimism about work, revenue and profits. However, the federal measure is expected to exacerbate existing labor and supply chain concerns.

The report, produced in partnership with Infotech, Hexagon, Command Alkon and Digital Construction Works (DCW), is based on a quarterly survey of civil contractors and engineers conducted in November 2021. The findings show that 76 percent of civil contractors are highly confident about finding work in the next year, and over half expect their businesses to experience profit margin increases.

However, even though 49 percent expect the IIJA to positively impact their business in the next 12 months and 72 percent in the next two years, they also expect it to increase their challenges:

• 77 percent believe it will make skilled workers more difficult to find
• 67 percent believe it will increase the cost of skilled labor
• 64 percent believe it will exacerbate existing supply chain issues While skilled labor shortages have been a chronic problem for contractors for many years, supply chain challenges have increased dramatically in the last year, with scarcities and delays not seen for decades on projects. In fact, 71 percent of civil contractors now report moderate to severe impacts on their projects due to the supply chain challenges, and 52 percent believe it will take more than a year for the supply chain to return to normal. Yet, with profit margin expectations still high, many civil contractors are clearly finding strategies to help mitigate these issues. The most frequently utilized, according to the survey, are:
• Working with a supplier/distributor with whom they have a relationship (71 percent)
• Adding time to their project schedule based on expected delays (57 percent)
• Having project owners more engaged in materials procurement (41 percent) When asked to rate the effectiveness of strategies they use, relationship-based methods (working with suppliers/distributors and having project owners engage in procurement) were most frequently rated as helpful by over two-thirds of those who utilize these approaches.

These findings suggest that contractors’ relationships are critical to weathering the challenges based on circumstances outside their control.

The Civil Quarterly provides a quarterly snapshot of the current business health of contractors operating in this dynamic environment and explores trends in the industry. The report is the result of a partnership with Founding partner Infotech, Platinum partner Hexagon and Gold partners Command Alkon and Digital Construction Works. It is based on original research collected from civil contractors and engineers and is available for free download to inform stakeholders in the U.S. civil construction industry. Future editions will continue to address a wide range of related topics providing a comprehensive view of this complex and ever-changing segment of the construction economy. Click here to download a copy.