I read an interesting market report on the construction industry put out by Davis Langdon. The report outlines some very important issues that the industry will be facing over the next 3 years. We’re entering new territory and companies will need to be creative and flexible as they navigate through the ups and downs that are coming our way. Here are some of the obvious items that we should all be thinking about:

- In the short term prices are being driven down as bidders compete for fewer projects.

- Pool of Contractors is currently shrinking which is likely to cause greater inflation in 2011 when market demand increase.

- Credit crunch, problems with cash flow and other financial factors are likely to cause greater contractor and subcontractor failures. Expect Projects to start carrying higher contingencies in these uncertain times. Also likely to see increased cost for insurance and performance bonds at all levels.

-The Global Economy is likely to cause large cost fluctuations in Steel, Copper, and Oil as we’ve seen over the past 5 years. Owners and Bidders involved with fixed price contracts for long term projects will need to manage these risks. Think about reimbursements and commodity contingencies.

- Labor prices are expected to dip slightly as unions are forced to renegotiate agreements made during the recently strong market however we’re not likely to see huge cuts in labor cost.

- Slow moderate growth in the range of 3-5% for the next few year will produce better long term stability as we try and recover the nearly 40% decline we’ve seen over the past few months.

It’s amazing how quickly the market can come crashing down and how long it will most likely take to re-build. Which reminds me, they just tore down another house in my neighborhood. It took them 2 days to drop the house and will probably take them around 300 days to build it’s new modern replacement. If these two things are related in anyway which I know they really aren’t, but stick with me,  we’re in for a long road to recovery however in the end we’ll have a new rebuilt industry that should be better than before. I know it’s not a great annalogy but one we can all relate too. One thing is for certain is that we’re going to see many variables affect the industry over the next few years, hang on and try to enjoy the ride.

This entry was posted on Saturday, July 18th, 2009 at 8:31 am and is filed under Uncategorized, US Stimulus Bill. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.