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Business | Operations Management

Civil Contractors Remain Optimistic About Work Volumes Leading into 2022, but Express Growing Concerns Around Skilled Worker Shortage to Handle It

by Dodge Data & Analytics on July 15, 2021

 The latest issue of the Civil Quarterly (TCQ) from Dodge Data & Analytics reveals that most civil contractors are optimistic about the volume of work they expect in 2021 and 2022, and they anticipate both revenue and profit margin increases for their companies as a result. However, that optimism is overshadowed by increasing concerns around skilled worker shortages, including an expectation of rising costs for talent and reduced skill levels in the available workforce.

The study reveals that the volume of work for civil contractors has already increased, with 40% reporting increases to their backlogs, compared to 25% last quarter. This quarter also marks the second consecutive quarter of growth of backlogs growth to ideal levels after hitting a nadir in Q4 2020.

Civil contractors’ outlook for the near future is also positive, with two-thirds expecting a robust market in the next 12 months. The positive trend continues with more than half of civil contractors expecting increased revenues in the next 12 months, and nearly half (42%) anticipate that their profit margins will grow in that same time period. Considering the survey was conducted from April 13 to May 12, this optimism was likely fed by the expectation of the national infrastructure bill funding.

However, this has led to striking increases in their concerns about finding skilled workers. Sixty percent of contractors say their need to hire skilled workers in the next three months is high, a 17-point jump from Q4 2020 (the last time the survey included workforce data). When looking at all contractors who will be hiring, including those with more moderate needs for workers, 69% report that they expect a high degree of difficulty in finding workers, up 11 points from Q4. Yet the biggest concern is the cost of workers, with 81% of civil contractors anticipating the cost of skilled workers to increase.

These challenges lead to consequences that will affect the industry as a whole:

  • 65% say that they are challenged to meet schedule requirements due to the shortage of skilled workers
  • 51% are currently challenged to meet project budget requirements because of increased labor costs
  • 49% are putting in higher bids, which could inflate the costs of work proposed under a major package

The study also featured research on two areas and ways to address these issues: opportunities for upskilling the workforce and technology adoption trends.

Opportunities for Upskilling

The current study revealed that when it comes to training efforts, 13% of civil contractors take a minimal approach, while 36% have a robust, ongoing training program for new workers as a long-term investment to increase their skills for their company. Yet most recognize the importance of training their field staff in a variety of skills. More than three-quarters consider training on community, leadership and digital skills, along with site-specific safety issues, of moderate to high value for their field staff. The majority (79%) rely on training from supervisors, but over half (56%) now take advantage of online training tools as well. Nearly all civil contractors (86%) see the need to draw more workers under 30-years-old into the industry, with 63% believing this younger talent brings different skills, such as the capacity for faster technology adoption and the ability to collaborate digitally, to their projects.

Technology Adoption Trends

The study also re-examined the technology adoption trends first featured in the Q2 2020 report. Even before the pandemic, the use of technology onsite has been an area of growing interest for many contractors. Two particular technologies—equipment tagging and utility detection tech—are a clear standout with notably wider adoption in the first six months of 2021 than in all of 2020. Technology adoption for utility detection and drones has also seen a notable increase as they are now widely accepted and more widely used. However, technology adoption for virtual and augmented reality is still low as they are used by fewer than 10% of contractors.

The wider use of onsite technology is important because of the positive impact it can have on productivity, which is the top benefit expected by contractors from their use of these technologies. As workforce concerns grow, the need for greater productivity from existing workers will continue to grow in importance.

TCQ 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, and is based on original research collected from civil contractors and engineers. It is available for free download to help all those who have a stake 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: https://www.infotechinc.com/thecivilquarterly/.

Topics: Business, Operations Management
Civil Construction, Dodge

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