Ronald J. Eagar
Grassi’s 2022 Construction and Architecture & Engineering (A&E) Survey uncovered the latest strategies that general contractors (GCs), subcontractors, architects and engineers are deploying to address price fluctuations, cash flow challenges, labor costs and more.
Here are the key takeaways the survey revealed.
Cautious Industry Optimism
Overall, surveyed companies are optimistic about the state of the industry and feel the worst of the pandemic’s financial impact is behind them. But they are unsure about the economy and its potential implications for the future.
Ongoing challenges call for cautious optimism as the economy continues to lag. The most common challenges reported were supply chain disruptions, labor shortages, inflation and cost increases. Subcontractors and A&E firms have been hit hardest — one in four reported cost increases of 20% or more, mainly from labor and materials.
The GC Advantage
The survey emphasized the advantages GCs gain from higher revenues. GCs can review cost and profitability more frequently and are more likely to embrace technology. Almost 90% have invested in technology to streamline operations and improve efficiency, compared to 61% of subcontractors and 75% of A&E firms. Keep in mind that GCs typically have more free cash flow to invest than any subcontractor.
But many other strategies were embraced just as often by subcontractors and/or A&E firms, including:
Inflation Strategies
While different segments have different strategies for dealing with inflation, purchasing ahead is one used by all respondents.
Technology Investment
Over half of the respondents say their firms are actively looking to invest in technology in the next 12 to 18 months. Interest in technology solutions (particularly remote work solutions) is exceptionally high among A&E firms.
Cybersecurity
With increased technology comes increased digital risks. As a result, most respondents have cyber insurance coverage, but this has been followed by rapidly rising premium costs. GCs and A&E firms are more likely to have employee policies to defend against cyber threats.
Risk Assessment
Respondents unsurprisingly ranked financial, supply chain and labor risks as highly significant.
Opportunities for Improvement
Among all the strategies respondents deploy, there are untapped or underutilized opportunities.
Regarding technology investments, respondents were most interested in pursuing more collaborative and project management software solutions, as well as technology-driven project monitoring/production solutions.
As automation, AI and other digital tools become increasingly mainstream, harnessing the power of more accurate financial and operational data can help better drive business decisions.
Even as optimism rises, the industry has not made a full return to pre-pandemic norms. Remote workplaces, new safety concerns, supply chain disruption and inflationary pressures will continue to create obstacles for construction and A&E firms to navigate.
Go to https://bit.ly/GrassiSurvey to download a copy of the 2022 Construction and A&E Survey report.
Our construction, architecture and engineering professionals can help you maximize the 179D deduction on completed installations and determine your eligibility for future projects. For more information, reach out to your Grassi advisor or Ronald J. Eagar at reagar@grassicpas.com.
