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overview
Since the COVID-19 pandemic, a variety of challenges and risks have impacted contractors and the way they do business. Despite these challenges, many contractors have shown tremendous resilience and adaptability that has enabled them to overcome obstacles like inflation, supply chain, labor shortages, and more.
So, how have they done it?
Our new report, developed in collaboration with Dodge Construction Network, surveyed over 150 general and specialty trade contractors to dig into the top risks they face and the strategies they’ve implemented to mitigate them. While many of the tactics they reported using to manage risks weren’t very effective, there was one that was—collaborating with their surety.
Download the full report or view the insights below to learn more.
Since 2020, most contractors have experienced moderate or higher impacts on their companies from the eight key risks shown in the chart below.
Risks with the widest impact on construction companies since 2020
High-impact risks:
Inflation
Long lead times for building products/materials
Difficulty finding/retaining skilled workers
Rising wages for workers
Lack of availability for building products/materials
Contracts that shift risks to your company
Increase in large, multiyear projects
Issues with worker health and well-being
High impact on their company
Moderate impact on their company
Expect it to have an impact in the next two years
Inflation: Contractors have faced significant challenges from rising costs with 96% reporting moderate to high impact.
Supply chain challenges: Long lead times and product shortages have affected nearly all contractors with 96% reporting moderate to high impact.
Labor shortages: 95% of contractors surveyed report the struggle to find and retain skilled workers has had a moderate to high impact.
74%
22%
66%
64%
32%
55%
54%
41%
79%
44%
46%
53%
37%
49%
41%
17%
43%
25%
19%
40%
16%
10%
38%
12%
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Best practices for managing the top risks in construction
The most effective means of managing inflation risks is increasing margins on projects.
Over 75% of contractors use the three most effective means shown in the chart to reduce risk due to inflation; however, only a small share find them to be very effective.
Increasing margins on projects
87%
14%
66%
Changing contract terms to make subcontractors assume more risk due to inflation
79%
9%
64%
Changing contract terms with client to protect company from inflation risks
77%
15%
62%
Undertaking fewer projects
54%
6%
38%
Working with clients to manage risk
Two main strategies for working with clients to manage risk were identified
Setting appropriate expectations
1
Collaboration
2
Setting appropriate client expectations about supply chain and inflation risks has an overall positive impact on project performance. By doing so, contractors report:
Nearly all contractors who collaborate with their clients on managing supply chain and inflation risks experience increased satisfaction and better adherence to project schedules and budgets.
76%
69%
69%
47%
increased client satisfaction
adherence to project schedule
adherence to project budget
positive impact on claims/legal issues
88%
82%
80%
52%
increased client satisfaction
adherence to project schedule
adherence to project budget
positive impact on claims/legal issues
Use
Somewhat effective
Very effective
Many technologies help improve project performance, but are underutilized by contractors.
The chart below highlights the benefits of the five most frequently used technologies in this study.
Impact of technology use on projects
70%
Integrated platform
Improve budget performance
Budget performance
Most contractors using estimation/takeoff software, integrated platforms, and BIM find that it improves budget performance.
While these tools have many benefits for project performance, contractors find they are not an effective way to mitigate labor and supply chain risks. To learn more about technology and risk in construction, download the full report.
Inflation
Making substitutions based on availability rather than performance
93%
28%
63%
Enhancing relationships with distributors
89%
15%
68%
Increasing margins on projects
86%
14%
63%
Seeking opportunities to purchase directly from manufacturers
83%
10%
72%
The most effective means of managing supply chain challenges is making substitutions based on availability. 93% of contractors use this tactic, and 28% find it to be very effective.
Many of the other strategies in this chart rate 15% or fewer, suggesting that contractors still struggle to find solutions that effectively manage supply chain challenges.
Utilizing technology to better manage supply chain
54%
7%
46%
Contract terms for subcontractors to assume more supply chain risks
77%
8%
65%
Seeking out locally manufactured products
79%
20%
59%
Contract terms for clients to assume more supply chain risks
81%
14%
64%
Working with labor unions
55%
16%
45%
Utilizing temp agencies
62%
4%
43%
Increasing engagement with educational institutions
75%
4%
60%
Increasing investment in training resources
81%
11%
61%
Increasing investment in technology designed to increase productivity
84%
10%
68%
Offering better compensation packages
90%
16%
75%
Building stronger relationships with key subcontractors
96%
41%
49%
Building stronger relationships with key subcontractors is the most effective way to manage skilled worker shortages.
Offering better compensation packages is used by 90% of contractors, but only 16% find this tactic to be very effective.
Although used less frequently, 16% rated working with labor unions as very effective, which is higher than many strategies shown in this graphic.
Inflation
Supply chain challenges
Supply chain challenges
Labor shortages
Labor shortages
79%
63%
28%
12%
Average frequency: 29% of projects
Collaborate more in the last 3 years
Average frequency: 16% of projects
Collaborate more in the last 3 years
GCs
Trade contractors
Credit/Surety risks
91%
Compliance risk
79%
Subcontractor management risk
78%
Contractual specification risk
76%
Material procurement risks
68%
Cost escalation
58%
Reputation risks
50%
Over half of contractors that collaborate with their sureties report a positive impact on many different risks, including:
Collaboration with surety providers
By working with their sureties more, contractors have an opportunity to effectively manage a variety of risks that extend far beyond basic credit and surety risks.
While collaborating with a surety is an effective risk mitigation tool, most general and trade contractors do so on less than one third of their projects.
To learn more about this research, including methodology and sources, download the full report.
Download full report
Download the full report to learn more.
Download the full report for more information about managing the top risks in construction.
To learn more about working with clients to manage risk, including ways to increase collaboration, download the full report.
Budget performance
50% or more see improved
schedule performance from using integrated platforms, BIM, and reality capture technologies.
Schedule performance
Profitability
Over half report profitability
increases due to their use of BIM, estimation/takeoff software, and integrated platforms.
Profitability
Safety
The technology with the
biggest impact on safety
by far is fleet management software/apps.
Safety
Schedule performance
20%
81%
56%
10%
60%
70%
67%
BIM
20%
40%
50%
43%
Reality capture technologies
44%
40%
36%
36%
Fleet management apps/software
2%
56%
28%
80%
Estimation/Takeoff software
Improve schedule performance
Improve profitability
Improve safety