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BUSINESS SURVEY
2013 2014
BUSINESS SURVEY
GREG ANDRZEJEWSKI
FIRST CHAIRMEN OF THE BOARD, CAM Business Development Manager, PPG Industries
Dear Construction Associate, We are pleased to present you with the results of our Biennial Business and Owner Surveys, which examine activity in 2013 and the outlook for the next eighteen months. These two surveys were conducted through the joint efforts of the Construction Association of Michigan (CAM) and Plante Moran, and their continued commitment to provide accurate and timely business information to the construction industry. This years survey was issued online. This enabled a greater response due to the ease of completing and returning the questions. For those of you who took the time to complete the survey, thank you; your participation is greatly appreciated. The responses are online, as well. For those who would like a printed results booklet, please contact either CAM or Plante Moran. The survey information was compiled from the confidential survey responses by an independent survey company and developed as part of collaborative effort by CAM and Plante Moran. We have combined the results of both surveys into one single publication. The responses tell a great deal about our region, economy, and most specifically the Michigan construction industry. Results are indicative of how contractors and owners cope with the present economy; the future construction climate is also forecasted by those who are directly involved in the Michigan construction industry on a daily basis. As this years survey reflected some positive indicators, we sincerely hope that this will be an upward trend for the construction industry in Michigan. Our mantra, One Industry, One Resource, One CAM, is what we strive for continually. CAM works hard legislatively, presents helpful and timely seminars on the issues that will affect our members, and is the number one source for Construction Project Information Services in the state of Michigan. We exist as a service to our members to help make them, and their businesses, successful. Sincerely,
ABOUT
BUSINESS SURVEY
BUSINESS OUTLOOK
CO-SPONSOR
PLANTE MORAN
Serving the needs of the construction industry for 90 years. Plante Moran provides the experience and personal attention the construction industry demands. Plante Moran offers a full range of services including audit and accounting; federal, state, and local tax planning; information technology and telecommunications consulting; family business succession planning; merger and acquisition assistance; cost segregation studies; and strategic planning. For more information about Plante Morans construction team, please contact Construction Industry Group Leader: Tom Doyle | 248.223.3402 thomas.doyle@plantemoran.com plantemoran.com
BUSINESS SURVEY
TABLE
OF CONTENTS
PAGE 7 Business survey PAGE 42 Demographics and written comments
BUSINESS OUTLOOK
BUSINESS SURVEY
Produced by the Construction Association of Michigan (CAM) and the accounting firm Plante Moran, the Biennial Business Survey has been conducted for more than 20 years. The survey measures contractor opinion in several key categories.
BUSINESS SURVEY
BUSINESS OUTLOOK
BUSINESS OUTLOOK
37%
100 50
Subcontractor
Is your company union or non-union?
62% 38%
Union
Non-union
39%
Less Than $100,000
2013
100
2011
50
39% 35%
21% 23%
11% 14%
11% 8%
6% 6%
6% 4%
6% 2%
$500K 1M
$1M 2M
$2M 5M
$5M 10M
Over $10M
Trend to larger projects continues with over 29% of projects at $1Mil+, a 9 percentage point increase from 2011.
10
BUSINESS SURVEY
The average cost range of work you anticipate your company will be performing over the next 1218 months:
$5 $10M
$100,000 $500,000
31% of projects are anticipated to cost $1Mil+. This is an 11 percentage point increase from 2011.
Which type of work is currently providing your company with the most opportunities?
34%
Renovation
2011
2013
$500,000 $1M
29%
Renovation
Over $10M
$1 2M
$2 $5M
40%
100
50
BUSINESS OUTLOOK
11
What category do you anticipate providing your company the most opportunities for work in the next 1218 months?
16%
Education/Cultural/Scientific buildings Infrastructure Transport/Industrial buildings Residential Interiors/Tenant improvements Office buildings Public works projects Hotels/Motels Entertainment facilities Renewable energy Religious buildings
Which type of construction work do you see providing your company with the most opportunities over the next 1218 months?
37%
New Construction
12
BUSINESS SURVEY
How has the volume of work contracted changed over the past 12 months?
How do you anticipate the volume of work changing over the next 1218 months?
36%
5% 20% 28% 6% 4% 1%
Up more than 20% Up between 10% and 20% Up less than 10% Down 10% or less Down between 10% and 20% Down more than 10% and 20%
89% of respondents anticipate the volume of work to increase or stay the same. This is the most optimistic respondents have been in many years.
Up between 1020%
22%
2013
100
2009
50
BUSINESS OUTLOOK
13
Yes
51% of respondents
are currently doing work outside of Michigan.
If you answered yes, what percentage of your total volume of work is performed outside the state of Michigan?
33% 71%
Increasing
10 to 20 Percent
Do you anticipate that percentage increasing or decreasing in the next 1218 months?
14
BUSINESS SURVEY
No
86% of respondents
indicate the law has not affected their business.
52% No
Positive Impact
Do you anticipate the Michigan Right to Work law having an impact in the future?
54% of respondents
BUSINESS OUTLOOK
15
68%
25 Years
impact will be known.
workmanship.
H opefully we wont have to pay union wages and
Michigan Governors (while they may have been for Right to Work) have always respected labor organizations. This was a bad, bad thing that the incumbent Governor has done.
I firmly support the Right to Work law and
fringes. The cost of labor on a union contract makes it very difficult to make any money when we are already bidding at single digit margins. Clients have demonstrated a more open mind regarding locating and/or expanding in Michigan
T he law will lower wage rates. I think and believe it will have a good impact on
the overall health of the Michigan Business Industry in whole. With this said, I also believe it will benefit the workers as a result of the businesses having a positive impact.
N ow we can compete with other states. T he under funding problem of all of the construction
disadvantage.
T he simple fact that Michigan is right to work
trades pension funds has all of the contractors that are signatory to an agreement tied to those agreements for a long, long time. New open shop competition will continue to enter the market and further erode the market share of the union contractors.
I think its great.
16
BUSINESS SURVEY
SECURING WORK
SECURING WORK
17
55%
13 Month Backlog
42%
What primary method do you anticipate using for securing work in the next 1218 months?
100
50
Referral
Other
18
BUSINESS SURVEY
If you are bidding competitive work, what is the average number of bidders who have been bidding against you on each project?
54%
Less Than 5 Bidders
2013
25%
2009
Do you anticipate the number of bidders, bidding against you, increasing or decreasing in the next 1218 months?
68%
Increasing
Although the trend shows a decrease in the number of bidders on projects, contractors anticipate that trend changing.
SECURING WORK
19
How have your profit margins/mark-ups changed in bids submitted over the last 12 months?
35%
No change
Increased 5% or more Increased 2%4% Increased 1% or less Decreased 1% or less Decreased by 2%4% Decreased by 5% or more
Do you anticipate additional profit margins or mark-up pressure on your bids in the next 1218 months?
Yes
63% of respondents
This years survey shows 42% of respondents had a decrease in profit margins/mark-ups with anticipation of additional pressure going forward.
20
BUSINESS SURVEY
WORKFORCE PLANS
WORKFORCE PLANS
21
What plans do you have for your workforce over the next 1218 months?
In 2009, 26% of respondents anticipated layoffs. In 2013, 42% anticipated adding employees.
Yes
53% of respondents
are experiencing difficulty finding skilled workers.
General Contractors
Yes Yes
55% of respondents
are experiencing difficulty finding skilled workers.
No change
Subcontractors
Yes Yes
Suppliers
48% of respondents
are experiencing difficulty finding skilled workers.
58% of respondents
are experiencing difficulty finding skilled workers.
59% of respondents
are experiencing difficulty finding skilled workers.
53%
No Change
2013
100
2009
53% 60% 8% 6% 6% 1% 3% 4% 23%
50
36%
22
BUSINESS SURVEY
Over the next 1218 months, you anticipate labor availability to:
50%
Education & Training
education.
1% 13% 29% 5%
Over one-third of respondents indicated a decrease in labor availability in the next 1218 months.
become the best, most responsible workers they can. Adults need to quit thinking for kids and having them become so dependent. Its very difficult to change a persons work ethic during their peak working years, so we need to start young, like we used to in the skilled trades.
P romote skilled trades in high school and
of educating young workers with the concept that our business is not for the low-skilled or uneducated. We have got to elevate the status of our workers to being desirable.
H ave incentives for people to learn a new
trade or skill.
M aybe reach out to military organizations
realize that not all students are college material. Present a more professional image for the skilled trades.
W e might need to recruit in other areas of
schools. Let the kids know that there is pride in doing a good, hard days work, and that there are careers out there in construction.
W e are already training our own younger
the country, but also reach out to the various educational organizations here and partner with them.
staff, in-house.
W e need to stress the need for young
folks going into trade schools instead of college and stress the benefits of working with your hands.
WORKFORCE PLANS
23
How should the industry address the decrease in skilled labor? (continued)
E ncourage vocational programs in the schools; L abor unions need to relax jurisdictional restraints
increase training for the sub-trades; publicize the recovering economy to encourage workers to stay in-state and not switch their occupations.
T he easy answer is to say to train more skilled
tradesmen but that will be ineffective if there isnt a sufficient volume of work to employ them!
skilled labor. Going into middle schools and high schools would encourage the kids who dont want to go to college.
M ichigans attack on labor unions via Right to
Other
W e are a union field force. The antiquated,
outdated ways that our union operates, especially in terms of protecting laid-off workers that no company will take at the expense of preventing motivated newcomers into the field, MUST stop. This policy will be the eventual end of a unionized workforce in this area with my trade, but the union will not acknowledge it, let alone talk or implement some meaningful change.
M ake the trades more attractive to the younger
Work has destroyed the apprenticeship programs that really helped employers. Unless we gain a new respect for labor unions and their apprenticeship programs, Michigan will continue to go down the tubes.
T here have been difficulties for clients/owners/
developers to get the funding they need so they can move forward on their projects. Unless new or easier funding methods are developed, this trend will continue to hurt the construction industry at all levels.
24
BUSINESS SURVEY
FINANCIAL HEALTH
FINANCIAL HEALTH
25
Select the three strategies your company has undertaken to improve profitability:
26%
Improve Processes/ Products
2013
Cut administrative costs Staff reduction/Right-sizing Enhanced marketing Geographic expansion Design/Build projects Enhanced training Safety/Risk management
32%
2009
Staff reduction/Right-sizing Improve processes/Products Enhanced marketing Geographic expansion Design/Build projects Enhanced training Safety/Risk management
Compared to 2009 there is more focus on improving processes and less on right-sizing cost cutting.
26
BUSINESS SURVEY
How does your present cash flow situation compare to last year?
41%
General Contractor
Better than last year About the same as last year Worse than last year
2013
100
2011
2009
58% 32% 23% 33%
50
36%
2011 2009
17% 51% 31% 7% 36% 57%
Subcontractor
Better than last year About the same as last year Worse than last year
2013
30% 41% 28%
2011 2009
25% 40% 35% 7% 33% 60%
Supplier
Better than last year About the same as last year Worse than last year
2013
33% 58% 8%
2011 2009
16% 37% 47% 11% 32% 57%
2013
46% 30% 23%
2011 2009
10% 55% 35% 13% 13% 75%
FINANCIAL HEALTH
27
In the next 1218 months, how do you anticipate your cash flow position?
66% 51%
60 Days Improving
2013
100
2011
2009
66% 65%
50
24% 19%
0
35%
13%
Better
Worse
What is the average length of time it takes your company to receive final payment for work performed or materials provided?
33% More than 90 days 16% 30 days
Do you anticipate the average time it takes to be paid, improving or getting worse in the next 1218 months?
56%
2013
100
2011
2009
72%
50
56%
41%
28%
44%
59%
Improving
Getting worse
28
BUSINESS SURVEY
2013
2011
86% of respondents
Yes
68% of respondents
85% of respondents
Do you anticipate your access to credit improving in the next 1218 months?
65% of respondents
anticipate credit improvement.
FINANCIAL HEALTH
29
74%
No Claims
2013
Surveys over the last decade continue to show that most companies do not file claims of lien.
38%
No Bonded Work
42%
2011
No Bonded Work
Respondents indicate a slight uptick in bonded work.
30
BUSINESS SURVEY
No
81% of respondents
78%
Anticipate Increase in Prices
No
FINANCIAL HEALTH
31
Increase 110%
Decrease 0 10%
Increase 110%
Respondents remain optimistic about their sales and profitability for the coming year.
Decrease 0 10%
42%
Project an Increase
Compared to the prior year, your companys profitability for the coming year will:
2013
100
2009
50
33% 9% 10% 6%
32% 28%
14%
29%
48%
Project an Increase
Compared to prior year sales, your companys annual sales for the coming year will:
2013
100
2009
50
15% 10%
0
33%
9%
28%
32
BUSINESS SURVEY
What are the biggest financial challenges facing your company in the next 1218 months?
Credit & Capital
A vailable credit O ur clients are having a difficult time securing L ength of the sales cycle requiring higher prices,
funding for their projects. They have needs but no way to fund them.
L ack of significant working capital to fund larger
competition from internet or low overhead suppliers, employees looking for salary increases without enough ROI.
M aking enough money to pay for upgrades to
technology, tools, equipment and people to keep us on top of our industry and still being able to put some money away.
F inancing the construction projects - not getting
paid soon enough. Owners/CMs need good subs; they should realize the pressure they put on them forcing them to chase money.
M anaging cash flow without an outside line
but because of the difficulties with funding we asked to hold up. It is getting difficult to keep the office together and provide quality services when so many of our clients are in a holding pattern.
of credit.
C losing out and getting paid on large difficult
projects.
Profit Margins
P rofit margins continue to erode so we are
timely manner.
N o revenues to improve equipment needed, and
focusing on positioning ourselves better in the Design Build delivery method which normally produces better results.
L ow profit margins, low contract backlog,
in order to win a contract, but in the end unexpected costs and labor eats up the small profit margin we did have so we end up winning a job but losing money.
M argin pressure. Growth.
FINANCIAL HEALTH
33
What are the biggest financial challenges facing your company in the next 1218 months? (continued)
Industry & Market
T here is simply no money in projects anymore.
Other
R eplacement of depleted fleet of trucks and
Competitors are performing work at cost. We do not know how much longer we will bother staying in business. There is no money anywhere. What I mean by that is that the owners are squeezing the architects, who now generally provide horrid drawings and specifications; the general contractors underbid the work because of this, and all the fallout is laid out to the subcontractors. It has become a joke.
A nticipating and capitalizing on the market
machines due to hard times. We didnt replace much of our fleet over the last four years.
I nterest rates. S low economic recovery limiting the amount of
turnaround.
S taying competitive in the market that is
available.
F inding work to Negotiate/Design-Build. The
failure of owners to pay for completed work on projects that became nearly worthless (and therefore liens were of no use), wiped out such a significant amount of equity, that we still cannot obtain surety bonds of the size we need to return our business to anywhere near our past revenues. I dont see an end to this problem anytime soon.
C ontrolling overhead costs to get through the
banking industry is the biggest hurdle for small business owners; it needs to loosen up and start offering loans to the smaller developer/business owner. In doing so, I believe the construction industry in Michigan will take off again, and allow people to get back to work and make money.
T heres more competition in the field. B alanced growth - sales/equipment/personnel
economic downturn.
G overnmental obstructions to my business. C urrently have no financial problems - we have
34
BUSINESS SURVEY
BUSINESS CONTINUITY
BUSINESS CONTINUITY
35
Family-owned
If family-owned, how many generations has the business been in your family?
34% One generation 29% Three generations or more
Two Generations
Do you currently have a business succession plan in place or in process?
56% of respondents
Yes
2011
47% of respondents
had a succession plan in place or in process.
36
BUSINESS SURVEY
42%
Selling/ Transferring to Family
41% 3% 3% 3% 3% 5%
Selling to key management personnel Selling to a strategic buyer Establishing an ESOP Merging with another company Winding down/Liquidating Other
54%
24% Be redeemed by the company 18% Be purchased directly by my partner(s) 4% Other stock plans
BUSINESS CONTINUITY
37
52%
I have a team
of strong managers who could easily manage the business in my absence Has the recent economic downturn affected your retirement plans?
o I am proceeding with my plans 32% N 28% I have yet to begin a transition plan
40%
38
BUSINESS SURVEY
TECHNOLOGY/ SUSTAINABILITY
TECHNOLOGY/SUSTAINABILITY
39
84% Yes
2013
50
70% of respondents
regularly engage in green/ sustainable building practices.
Yes
2011
52% of respondents
regularly engage in green/sustainable building practices.
Considering implementing
Planning to implement
Currently using
40
BUSINESS SURVEY
36%
General Contractors
NO PLAN TO UTILIZE
50
36% 8%
Prefabrication Techniques
Prefabrication Techniques
Cloud computing
Subcontractors
38% 9% 53%
Prefabrication techniques
Suppliers
26% 5% 69%
Prefabrication techniques
16% 5% 79%
Integrated project delivery
25% 5% 70%
Prefabrication techniques
TECHNOLOGY/SUSTAINABILITY
41
Which new technologies do you plan on investing in over the next 1218 months?
22%
Tablets
Smart phones
CURRENTLY UTILIZING
100
PLAN TO IMPLEMENT
NO PLAN TO UTILIZE
50
12%
Smart phones
Tablets
Software upgrades
ERP systems
General Contractors
Tablets Software upgrades ERP systems Other
Subcontractors
Smart phones Tablets Software upgrades ERP systems Other
93% 7% 0%
Suppliers
Smart phones
13% 9% 78%
ERP systems
0% 0% 100%
Other
89% 4% 7%
Smart phones
9% 0% 91%
Other
71% 24% 5%
0% 0% 100%
95% 0% 5%
Yes
Job safety procedures Staff development/Training Employee benefits programs New technologies Fleet/Equipment Disaster recovery
42
BUSINESS SURVEY
43
Demographics
Generally speaking, do you consider yourself:
8% 68% 17% 12% Democrat Republican Independent No preference
44
Would you still choose to make your living in the construction industry if you were beginning your career today?
Yes
In the 20 year history of the survey, 2011 was the only time respondents replied they would not choose to make their living in construction if they were beginning their career. This trend has reversed in 2013.
Of those who answered No, the following are some of their reasons:
T he impact of the economy on the construction
hardships, the lack of opportunity to support intended growth, and other similar factors make the industry extremely stressful with limited opportunity for sustained growth.
C onstruction cycles have been around forever
could enter into, make more money on a more consistent basis. I love what I do, I love making an impact on the communities by building structures that people drive by and be proud to say that is one of my buildings. But I believe I would have been in another industry had my family not already owned and operated a family construction business, allowing me to go to college, then trade-school, and then jump right into the business without having to do any job searching.
I would most likely pursue something that didnt
but the latest recession makes me wonder if we will ever see years like Michigan saw from 1994 to 2000 again. Perhaps Michigan overbuilt during that time and we are still paying the price today. The loss of goodpaying manufacturing jobs has been another component in the decline of construction. I have had a good career in the business and have enjoyed my relationships with loyal customers. I hope that the next two to five years see Michigans economy improve.
T his profession is too unstable; I think its
available when I was in school, especially the ones related to technology. I might have tried something different.
T he very high degree of uncertainty, financial
Depot and Lowes have marketing funds to overwhelm the marketplace with perceived low cost values. But poor service has forced more legitimate suppliers (with overhead and
45
Of those who answered No, the following are some of their reasons: (continued)
employees that actually report earnings) to lower their margins resulting in little ROI, but deep risk. Imports from China and other third-world companies provide poor quality and low price, but the client expects similar pricing. Lack of acceptable ROI for the risk of sales cycles doubling or tripling adding to costs.
T heres too much government dictation; too low I have enjoyed construction, but the return for the
to get project off the ground, then built, and then paid. I think I want to be a policemen or fire fighter so I can help people and be paid for it.
T he high volatility and stress of the construction
of margins for such high risk; and the industry has become very uncaring and rude in my area.
T he construction business has turned into
a mess of mean-spirited, conniving, price shopping, unqualified people bereft of any real skill, knowledge, or substance of character. There simply isnt nearly enough money in it to compensate dealing with the hacks one encounters on a daily basis. Further, there is zero interest from any level of government in caring whether you succeed or fail. Make no mistake we succeed in spite of government.
I t is absolutely absurd to calculate our rate of
as technology.
T he culture and economy are both slowly
deteriorating due to the policies and regulations generated by the present government.
T he barriers of entry are too low - everyone thinks
return versus the risk of loss that we bear as construction company owners. No one in their right mind would view our business/industry as a smart investment of financial resources.
T here is a lack of loyalty and appreciation in this
they can be a general contractor. This creates too much competition, and we kill each other (figuratively) with cheap pricing to get the job. We then suffer through trying to perform with subs that are too cheap, owners that expect everything for nothing, and we get all of the risk!
S ubcontractors do not receive an adequate
industry. The amount of pay is not representative of the amount of work or hours we put in.
P rofit margins are too small for the amount of
46
Written Comments
At the present time, what is your biggest concern about the construction industry?
Concern: Government Regulations Solution: None Concern: Obama Solution: Vote Republican Concern: Continuing economic anxiety has delayed construction starts. Solution: Need additional tax incentives and stability. A Republican administration. Concern: Union wages and work rules. Solution: Local unions need to either combine or allow unlimited portability for union contractors. Many of our customers are national corporations that dont care or understand why we arent as competitive when we travel outside our area. Concern: My concern is that the possible abolishment of prevailing wage laws in Michigan will adversely affect my largest union-shop competitors, resulting in their loss of market share and causing them to look down-market into smaller projects and markets which we focus upon Solution: Keep Michigans existing prevailing wage laws in force. Concern: Continued growth so that we can fund our expansion plans in light of possible tightening of monetary policy. Solution: Fire all the Republicans in Congress. Concern: The underfunded union pensions. Stop the madness! The annual increases in wages will only create a reduction in work Solution: hours as the union workers are pricing themselves out of the market. There needs to be a huge adjustment to the benefit structure, and the plans need to be replaced with defined contribution plans.
47
At the present time, what is your biggest concern about the construction industry? (continued)
Concern: Right to work law is an indicator of the trend in our society to break up the construction unions. Repeal the law and restore the unions in the marketplace. This would take major Solution: changes by the unions themselves to amend some of their monopolistic policies to become more cost effective in the marketplace. Concern: Economy More available credit. Change in federal government. Solution: Concern: INDUSTRIES LEAVING MICHIGAN Having the communities back off and work with development of new construction. Solution: Concern: Soft economy Shrink government. Solution: Concern: We are a local company in the supply end--and we see some loss of business directly and thru our customers to on-line providers--e.g. Amazon.com or bricks and mortar companies with a strong on-line marketing program--who have an advantage due to not having to collect sales tax Solution: Support Market Fairness Act-currently before Congress. Concern: Insurance rates. Dont know. Solution: Concern: Payment on time and skilled labor with a good attitude and a willingness to learn and work. I wish I had an answer. Solution: Concern: L ack of ROI caused of inferior competition working for wages and not paying taxes. Lack of capable applicants for open positions. Delayed projects or projects being scrapped because budgets where way out of line Stronger immigration laws and reporting requirements. Tariffs for products manufactured Solution: outside the country. Banks required to provide a certain level of construction financing.
48
At the present time, what is your biggest concern about the construction industry? (continued)
Concern: Eroding profit margins. It will take care of itself. Solution: Concern: Without the funding sources clients will not move forward with projects. My fear is many A/E and Construction firms will close or will be so small they cant do the workload they were capable of. The financial institutions need to start investing in projects. Solution: Concern: The constant pressure to lower margins. / The lack of basic technology such as bidding done by fax and not email. / Observable lack of work ethic in the trades as a result of wage reductions and work rule changes. An increase in the price of construction so companies can make better profit margins Solution: and workers make a livable wage. / / This is not likely to happen. Concern: Customers only caring about price Less customers and more time servicing customers that prefer overall value Solution: Concern: Lack of skilled workers More training Solution: Concern: There seems to be less and less talent in the field. We find very little talent (nor interest) in actually understanding basic construction techniques nor do we find any real interest in WANTING TO ACTUALLY GET THE WORK DONE. Most all of the projects anymore are immediately adversarial due to unqualified people running them, lack of proper funding, and a ridiculous reliance upon systems or I need to check this box off mentality instead of building relationships are getting anything accomplished. Solution: There is none. The construction industry is a microcosm of the rest of our society. Mean spirited button pushers sit in front of a screen and try to run complex projects. No one is interested in actually meeting people or building relationships or trust. The people we see coming out of college are totally unprepared for the real world, but because of efficiencies are immediately put into positions of responsibility with no meaningful experience to back this up.
49
At the present time, what is your biggest concern about the construction industry? (continued)
Concern: Unrealistic expectations of owners/GCs - too demanding and people dont want to tell them no or the truth because of nature of market. / Plus all the qualified people who knew what they were doing were laid off and replaced with people who dont know anything. Solution: Fire the idiots Concern: Future skilled workers in the technical field Increased community college technical training availability Solution: Concern: Sustaining the growth we are seeing and having capable knowledgeable people to do the work Letting students know that its ok to be a tradesman...not everyone has to go to Solution: college to be successful / better pay and benefits for tradesmen and women. / This is not likely to happen. Concern: There is not enough new construction activity. Change the economic atmosphere being generated in Washington D C. Solution: Concern: Lack of projects. Very competitive market. Non-Union competition. Stay lean and right size. Solution: Concern: Steady supply of project opportunities that are fully funded. Also, Detroit bankruptcy creating fear of significant cuts/sales that would affect confidence or attractiveness to investment. Solution: Support/enable investment in Detroit and the surrounding area by investors and public funding. Lobby/educate/encourage Orr to make wise cuts/sales that increase attractiveness and stability and do not negatively impact the citys attractiveness to businesses and residents (e.g. significantly increased taxes, public safety cuts that increase crime, etc.). Additionally, increasing the competence, accountability, efficiency, and responsiveness of city employees as well as improving processes and requirements to make dealing with the city a reasonable task would be highly welcomed and inviting. Working with the city, at present, is an abysmal nightmare.
50
At the present time, what is your biggest concern about the construction industry? (continued)
Concern: Lack of private commercial development as well as lack of residential home sales. Michigan needs to develop improved strategies to bring industries into the state such Solution: as more automotive, technology and healthcare Concern: Lack of profitable work to bid. We hear all the time about the Recovery but we sure arent seeing it. Finding good work to bid and then getting a straight answer on the results reminds me of 2009. Relocate company. Solution: Concern: Volume of work. Go back to a real free market. Solution: Concern: Lack of profitable work. Solution: Elect government officials who will bring down the deficit. Concern: Most projects seem to start later in the year and the first 4 to 5 months of the year are lost. We then play catch up for the late two quarters. Solution: I would suggest that owners and builders will receive much better pricing earlier in the year when suppliers are hungry for business. Concern: Poor documents to bid from. Architects not wanting responsibility and forcing more and more on the contractors. Government force feeding the green building which puts most private projects over budget and public projects at a very high cost to build on taxpayers dime. Manufacturers and lobbyist force feeding building codes and energy codes that support their products. This increases the cost of new housing and puts it out of reach for most families. Solution: Design Build.. Government needs to stand down and let the free America and construction market work. Keep the code system to safety like it was meant to be not a marketing system for the highest giving lobby groups.
51
At the present time, what is your biggest concern about the construction industry? (continued)
Concern: Small market businesses getting loans from the banking industry. I firmly believe that if the banking industry is willing to loan to the smaller market Solution: businesses, the construction industry will once again flourish. Concern: Funding is not stable for projects. No really long term focus by government or private sector for funding. Keep educating legislators and the public that you have to invest back into the Solution: infrastructure to be a strong nation. Concern: Win/Lose mentality. Very short-term mindset of most parties. Solution: Select subs, suppliers, associates very carefully. Concern: Sustainability Solution: Spend more on reinvestment of the country. Concern: Lack of construction work and funding of projects. Solution: Im not sure but I think changes need to be made with the banks. Concern: Not enough work especially in governmental infrastructure projects. Need to take to politic out of government... they are all arguing about ideologies as our Solution: country is losing its ability to compete in a global market. Concern: Lack of motivated talent to hire / Interest rates Delayed projects or projects being scrapped because budgets where way out of line Vocational schools Solution: Concern: It is not stable yet, just a bump of increased interest today. Solution: Slowly grow our business and not get stretched too thin.
52
BUSINESS SURVEY
OWNERS SURVEY
This section of the Biennial Business Survey examines the construction industry from the clients perspectives. The focus is on plans for upcoming work, and their perceptions of Michigans construction industry and its practices.
53
54
OWNERS SURVEY
CLIENT PERSPECTIVE
CLIENT PERSPECTIVE
55
When working on a construction project, whom do you consult first about your project?
44%
Contractor
Very satisfied
Disappointed
Very disappointed
Adequate
Satisfied
63%
Best summarize your general experience with the professionalism of construction personnel during the building process:
100
50
56
OWNERS SURVEY
Excellent
Good
Poor
Which of the following would best describe your general experience with the overall construction process?
72%
Proceeded as Expected
Satisfactory
Very poor
56%
Good
What was the overall quality of the construction in your most recent project?
100
50
0%
CLIENT PERSPECTIVE
57
Which of the following would best summarize your general experience with project costs?
50%
Greater Than Expected
W ood, siding, trades M aterials and Labor
100
50
50%
50% 0%
Equal to expectations
Below expectations
58
OWNERS SURVEY
Delayed No fault
On Time
59%
Unforeseen Problems
Which of the following generally causes the most delays in project completion or closeout?
25% Communications with subcontractors 8% Communications with owners 8% Other
Ahead of schedule
On time
50%
Which of the following would best summarize your general experience with project completion times?
100
50
50% 0%
33%
17%
0%
CLIENT PERSPECTIVE
59
In your opinion, whom should you contact first to address problems with your project?
75%
55% 37%
5-10% Profit
Percentage of fees charged for construction services you believe represents profit for GENERAL CONTRACTORS:
100
50
55% 27% 9% 9%
10-20% Profit
Less than 5%
5% 10%
10% 20%
Percentage of fees charged for construction services you believe represents profit for SPECIALTY CONTRACTORS:
100
50
37% 18%
27% 9% 9%
Less than 5%
5% 10%
10% 20%
60
OWNERS SURVEY
FAIR
58% 67% 75% 67% 75%
TOO LOW
0% 0% 0% 0% 8%
Industry Fact:
National surveys taken in 2012 indicate T he average gross profit of general contractor's was approximately 6.5 percent of sales, and the average gross profit of specialty contractor's was approximately 16 percent of sales. T he before tax net income of general contractors averaged about 1.5 percent of sales, and the before tax net income for specialty trade contractors averaged about 3 percent of sales.
CLIENT PERSPECTIVE
61
62
OWNERS SURVEY
56%
Increase in Spending
23%
22%
Increase 110%
44%
Stay about the same
11%
Decrease 010%
0%
Decrease more than 10%
0%
18%
Increase 110%
64%
Stay about the same
18%
Decrease 010%
0%
Over the next 1218 months, your anticipated construction spending will:
33%
23%
Increase 110%
44%
Stay about the same
0%
Decrease 010%
0%
Decrease more than 10%
63
Rank the most challenging areas facing your business in the next 1218 months:
23%
Economy
Competition Government funding Materials/Construction costs Insurance costs Interest rates Other
Generally, how has your business performed over the last 12 months?
55%
As Expected
What do you feel the overall outlook is in your sector in the next 1218 months?
42% Better than expected 8% Worse than expected
50%
As Expected
64
OWNERS SURVEY
What are the biggest financial challenges facing your company in the next 1218 months?
S table customer base and government C ontinued Economic Recovery and Low
regulations
F inancing approval MSHDA & HUD loans P rofitability H ealth care reform, IT expenses T rying to compete with other properties that
Interest Rates
W e are on a growth trajectory to open new retail
stores in new markets. Getting local government approval of our sites and timely inspection of our construction is a challenge.
The economy S low economic growth and uncertainty about
are non-union
C ompetition
CLIENT PERSPECTIVE
65
66
OWNERS SURVEY
50%
More Than 10 Projects
How many non-residential projects has your organization been involved in planning and/or constructing in the past year?
8% 34% 0% 8% 610 projects 25 projects 1 project No projects
73%
Stay About the Same
Do you anticipate a change in the number of non-residential projects your company is planning and/or constructing in the next 12 months?
27% Increase 0% Decrease
67
42%
New Construction
50%
What type of work will be done on the majority of your projects over the next 1218 months?
42% Renovation/Retrofit 8% Maintenance
New Construction
68
OWNERS SURVEY
The range that represents the average estimated price of your projects:
25%
FUTURE PROJECTS
100
50
13%
0
13%
25% 6% 6%
12%
25%
$500K 1M
$1M 2M
$2M 5M
$5M 10M
Over $10M
PRIOR PROJECTS
100
50
13%
0
20%
13%
7%
7%
20%
20%
$500K 1M
$1M 2M
$2M 5M
$5M 10M
Over $10M
69
TECHNOLOGY/ SUSTAINABILITY
70
OWNERS SURVEY
Does a contractors ability to utilize online technologies (online job bidding, project management, plans & specs, BIM) influence your decision to hire them?
Yes Yes
indicate a contractors use of online technologies influences their decision to hire them.
67% of respondents
When hiring a contractor, do you look to see if they participate in green or sustainable building practices?
64% of respondents
look to see if contractors participate in green/sustainable building practices when hiring.
TECHNOLOGY/SUSTAINABILITY
71
73% Yes
Approve
020 Percent
Do you anticipate the number of your green or sustainable projects to increase in the next 1218 months?
55% of respondents
anticipate the number of green/ sustainable projects increasing in the next 1218 months.
64%
What is your opinion of the current green and sustainable building trends?
18% Neutral 18% Disapprove
72
OWNERS SURVEY
If you are building green or sustainable projects, do you anticipate an adequate return on investment over the life of the building?
Yes No
S afety rate Q uality trades
56% of respondents
Is your organization utilizing, or will you be utilizing, Integrated Project Delivery (IPD) methods on projects?
82% of respondents
are not, or will not be utilizing IPD methods on projects.
Which current trends or developing technologies are important to you when selecting a contractor?
TECHNOLOGY/SUSTAINABILITY
73
WRITTEN COMMENTS
74
OWNERS SURVEY
Written Comments
What is your overall perception of the construction industry?
Q uality tradespeople I mprovement in credit availability still needed. Industry has a reasonable foundation
under it now and has the potential for a 5 year upward trend, as long as interest rates remain reasonable.
T here are a good number of very qualified contractors with good ethics. They are
In your opinion, what is the single biggest problem owners experience when working with the construction industry?
C ontrolling Cost L ess than reputable GC and subs L ack of communication/trust. D uring the recession many small firms closed or big firms lost workers. While most of
our projects are large, we also have many small capital projects that we have difficulty attracting bidders to.
D elays from poor supervision.
WRITTEN COMMENTS
75
76
BUSINESS SURVEY