Despite projections of increased staffing levels and construction sales over the next 6 months, Associated Builders and Contractors (ABC) forecast that profit margins will decline. This is due to a variety of forces from a worldwide pandemic, project backlogs to increased competition. This phenomenon has lead to decreased construction costs for the first time in 10 years. With the added pressure of having a competitive advantage on projects with slimmer margins, more and more self-perform and subcontractors are moving towards digital solutions to stay relevant.
ABC Chief Economist Anirban Basu stated, “nearly two in five contractors expect profit margins to shrink over the next six months, with nearly 9% expecting a sharp hit to margins.” Furthermore, the Turner Construction Company’s quarterly Building Cost Index which measures costs in the non-residential building construction market in the United States highlighted construction costs decreased in the Second Quarter of 2020.
Increased competition
Competition has increased within the industry as contractors fight to secure backlog work due to the uncertainty about future opportunities. As a consequence, more contractors are bidding on current projects driving construction prices lower.
Basu further stated that “many contractors indicate that projects are being placed on hold. Some of this may be due to public health or jobsite-specific concerns, but tighter financial conditions also play a role. When projects are postponed, they remain embedded within contractor backlog, but near-term revenue suffers and the probability of outright project cancellation rises.”
The digital solution
Self-perform and subcontractors are moving towards digital solutions to manage the new safety precautions regarding COVID-19 on the jobsite and to collect real-time data on labor and equipment costs. Assignar is the operations platform for contractors looking for that competitive edge. As profit margins become slimmer, reducing admin costs and maximizing resources from workforce to equipment becomes more crucial. By eliminating paper-based manual processes, contractors are reaping the benefits of streamlined digital processes such as saving time and money on timesheet and docket collection.
“With Assignar in the hands of our team, we’ve gotten to the point where our efficiency is unparalleled” – Jassen Smigay, VP of Operations at Denver Asphalt and Concrete Services (DACS)
Denver Asphalt and Concrete Services uses Assignar to increase remote working capacity by 50%. Read DACS Case Study here
