Dodge: Civil contractors are optimistic about 2021
Latest findings from The Civil Quarterly show expected increases in profit margins, opportunities for work.
Dodge Data & Analytics’ latest findings from The Civil Quarterly (TCQ) found that civil contractors are increasingly optimistic about the outlook for new business over the next 12 months. The report confirms that contractors have had a challenging year but believe that the market will rebound in 2021. It also details the impact that the pandemic has had on businesses, with most contractors reporting their backlog levels have dropped against their ideal level of backlog for the third quarter in a row, from a ratio of 92 in Q2 to 79 in Q4.
Among the civil contractors surveyed in Q4, TCQ found:
- More than half (58%) say that they have high or very high confidence in the market’s ability to provide them with new business in the next 12 months, up six points from the previous quarter.
- One-third (32%) are also expecting to see their profit margins increase in that time frame, compared with 25% in Q3.
- The majority (65%) of those expecting an increase in profit margin or revenue also expect to see more opportunities for work.
- Nearly half (45%) believe this increased pipeline will allow them to be more selective about targeting more profitable work.
However, the future outlook isn’t entirely bright. The challenge of finding skilled workers has remained consistent with levels reported in Q2 2020. Given civil contractors’ optimism about the volume of work available over the next year, it is not surprising that the majority of those surveyed (66%) expect the cost of skilled workers to increase in the next six months, a 13 point increase over Q2 data.
In addition to regular business conditions, the Q4 report focuses on two emerging trends that could have a long-term influence on the industry: digital twins and remote inspection. While still not widely adopted across the industry, both are receiving increased attention.
Digital Twins:
Just 10% of those surveyed were familiar with the digital twins concept, and even fewer (9%) have had project owners express interest in digital twins. However, despite these low percentages, the majority (71%) of contractors believe that at least some owners will seek to create digital twins in the future, indicating a need for handover materials to support that goal.
Typically, a digital twin uses a building information model (BIM) as its base, but Q4 data found that only 39% of the contractors are currently using BIM. This suggests that the industry is not yet prepared to support owner interest in digital twins, despite their belief that it is likely to occur. It also suggests that contractors well-versed in BIM may have a competitive advantage in the future.
Remote Inspection:
Remote inspections are also not yet widely used. Only 14% of the industry report experience with them, and of that number, only half state experience prior to the start of the pandemic -- revealing that the need to reduce in-person interactions did not have a major impact on inspections. The Q4 report findings confirm the industry is in the early adopter phase of using these tools.
However, it also confirmed that more than half of contractors -- including the majority of those with experience with remote inspections and over half of those without -- expect that the share of inspections done remotely will increase over the next three years.
Dodge Data & Analytics will be conducting a series of webinars on the findings of this report, looking at these critical trends. More information will be provided soon.
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.
Learn more at www.construction.com.
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