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Managing a successful business requires the skills needed to deliver the right product or service, but also requires the tacit understanding of how to do so in a profitable way. There are dozens of contractors specializing in services, including roof installation and repair, plumbing, electrical, and even elevators and other such systems. What makes them different is how they manage their business, from providing customer service, bidding on projects, communicating with customers, the craftsmanship of work, and pricing. While management needs to pay careful attention to these variables, they also need to be aware of the latest industry trends, changes, and best practices. Fortunately, the Associated General Contractors of American recently issued 2018 Construction Outlook Survey – California Results. The survey offers valuable information for construction companies as they assess 2018 and beyond. To help clients, prospects, and others, JLK Rosenberger has provided a summary of key information below.
A total of 81 California companies, including general contractors, subcontractors, suppliers, service providers, architects, engineers, and other ancillary providers, participated in the survey. The revenues ranged across the board, from less than $10 million to more than $500 million, with 25 percent of respondents reporting revenue of $10 million or less and 19 percent reporting revenue between $100 million and $500 million. The total number of employees at these companies also varied with 31 percent reporting 500 or more employees to 13 percent reporting ten or fewer employees. The variation in the employee and revenue size of the company provides a broad base from which data was obtained.
- Top Concerns in 2018 – The industry has several concerns going into 2018, but the most pressing in California is the growth in state and local regulations. According to the survey, 43 percent of respondents indicated growing regulations are their primary concern; 35 percent indicated that worker shortages were a concern; 33 percent cited growth in federal regulations; 31 percent identified increased competition for local projects; and 28 percent identified worker quality as a top concern. Other issues raised included safety, rising cost of subcontractors, and the rising cost of materials.
- Hiring Trends – While not identified as a concern for California companies, the ability to attract and retain labor appears to be a challenge for many companies. According to the survey, 62 percent of respondents are having a tough time filling both salaried and craft worker positions; 12 percent are having a tough time filling craft worker positions only while 9 percent are having trouble filing salaried positions only. The rest of the respondents indicated no trouble filing positions or are currently not expected to conduct additional hiring in 2018.
- Hiring Market – While some companies are struggling to find experienced candidates, there is some concern about the hiring market for construction labor. According to the survey, 57 percent of respondents expect the hiring market to continue to be difficult; 31 percent expect it to be become more difficult while 1 percent expect it to become easier.
- Union Workers – A key consideration for how companies provide compensation is whether employees belong to a union. According to the survey, 36 percent of respondents employ union labor for all their projects; 23 percent employ union labor for most of their projects; 22 percent are an exclusively open shop while 19 percent are primarily an open shop but sometimes employ union labor as needed.
- Training Investment – To help companies manage through the tight labor market, some are turning to additional training to refine existing skills and impart new ones to existing employees. According to the survey, 63 percent of respondents indicated they will increase their training programs while 35 percent indicated they will stay the same. What’s interesting is that none of the participants indicated they will be decreasing the amount of training offered.
- Benefit/Pay Changes – One way companies are coping with the tightened labor market is by expanding benefits and/or increasing pay to attract and retain labor. According to the survey, 60 percent of respondents increased base pay; 25 percent paid additional incentives and bonuses; 24 percent increased contributions or employee benefits; 21 percent paid more overtime; and 16 percent indicated they have not increased pay or incentives but are strongly considering it.
The construction industry continues to experience a period of growth and prosperity. As government agencies, companies, and developers continue building; the opportunities will not dry up. However, the challenge appears to be finding new ways to attract and retain talent while concurrently leveraging technology to realize additional efficiencies. If you have questions about the survey or need assistance with a construction tax, audit, or accounting issue, JLK Rosenberger can help. For additional information, please call us at 949-860-9902, or click here to contact us.