A significant - but smaller than last year - number of contractors report that customers’ projects have been delayed or cancelled because of tight credit conditions. Forty percent of responding firms report that tighter lending conditions have forced their customers to delay or cancel construction projects. Only 3 percent of firms reported having an easier time getting credit while 41 percent report no change in credit conditions.
“Unfortunately, there are almost as many causes for concern as there are signs of optimism,” said Ken Simonson, the association's chief economist. “Demand for public buildings is set to decline, manufacturing work appears to be slackening, materials prices and health care costs continue to rise and many firms are reluctant to make major investments in new equipment.”
Demand for equipment
Simonson noted that overall demand for new construction equipment is likely to remain modest in 2013. Sixty-four percent of firms plan to purchase new equipment this year, down from 70 percent last year, while 77 percent of firms plan to lease this year compared to 78 percent in 2012. Contractors are increasingly relying on leasing equipment to avoid having to pay for idle equipment during lags in construction activity, the economist noted.
Even as they shift toward more leasing, firms’ appetite for new equipment remains modest, with two-thirds of the firms planning to buy and 73 percent planning to lease $250,000 or less in equipment this year.
Contractors also report being squeezed by rising costs for health insurance and construction materials. Seventy-five percent of firms reported paying more for health care coverage in 2012, and 77 percent expect to pay even more in 2013.
Meanwhile, 88 percent of firms reported paying more for construction materials last year while 90 percent expect to pay more for their supplies this year. However, contractors are increasingly optimistic about their ability to raise bid levels. Twenty-eight percent of firms expect to increase the amount they charge for construction this year, nearly double the 15 percent of firms that increased prices in 2012.
Investing in technology
An increasing number of construction firms - 38 percent in 2012 compared to 35 percent in 2011 - report using Building Information Modeling (BIM) services, association officials noted. And 43 percent report they expect the use of BIM to increase in 2013. In addition, more firms report working on public private partnerships, which leverage private-sector dollars to finance public projects. Thirty-seven percent of firms report being involved in these kinds of projects in 2012, and 97 percent expect demand for these kinds of privately financed projects to increase or remain stable in 2013.
“The survey indicates that construction companies will continue to make investments in their IT infrastructure, specifically in areas such as enterprise content management, mobile field applications and solutions that support self-service functions,” said Roger D. Kirk, CEO, Computer Guidance Corporation.
Kirk noted that 60 percent of firms report they plan to invest in their information technology departments in 2013. He added that 73 percent of those firms report they expect to invest over $10,000 in new information technology this year. However, a relatively small percentage of firms – 11 percent – report they plan to purchase new financial and job cost software in 2013, Kirk added. Similarly, only 9 percent of firms plan to lease or finance the purchase of new financial and job cost software in 2013.