Associated Builders and Contractors

Associated Builders and Contractors Names 82 Winning Projects Across U.S.

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By KERRY SMITH, EDITOR, ST. LOUIS CONSTRUCTION NEWS AND REVIEW MAGAZINE

The Associated Builders and Contractors in mid-March announced a total of $2.14 billion worth of construction across 82 projects as the winners of its 33rd Annual Excellence in Construction Awards.

The EIC Awards are bestowed on projects coast to coast that demonstrate innovation, design-build excellence and productivity, according to Milton Graugnard, 2023 national chairman of the ABC’s board of directors.

“The Excellence in Construction Awards are the cornerstone competition in our industry, honoring the project teams that exemplify the best of the best in merit shop construction,” Graugnard said.

Winners include the National WWI Memorial in Washington D.C., the Mount Olympus Indoor Water Park in Lake Delton, Wisconsin and the Thibodaux Regional Medical Center’s Cancer Institute in Thibodaux, Louisiana. “Every one of these projects is exemplary and shows the diversity of what the merit shop construction industry builds and how we build projects safely, on time and on budget.”

The EIC Awards honor every member of the construction team – the contractor, owner, architect and engineer. Winning projects are judged on complexity, attractiveness, unique challenges that were overcome, completion time, innovation and safety.

A full list of winners is available here.

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Economists Point to 5 Key Construction Economic Indicators in 2023

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By KERRY SMITH, EDITOR, ST. LOUIS CONSTRUCTION NEWS AND REVIEW MAGAZINE

Five key economic indicators together create a mixed forecast for contractors in 2023.

Architecture billings’ positive streak ends, construction backlog remains steady, material prices remain volatile, labor shortages continue, and construction input costs rise are the five key indicators to watch in 2023, construction economists say.

According to Associated Builders and Contractors Chief Economist Anirban Basu, architecture firms’ positive billing streak is likely to begin to turn downward in 2023. The Architecture Billing Index, produced by the American Institute of Architects, remained positive until October 2022 when it began decreasing dramatically. But Basu says a lag in when overall economic factors – such as inflation – hit the design-build industry means contractors might not feel the pain until another year or more.

“For many contractors, 2023 does not stand to be the problematic year,” Basu said. “It’s more likely to be in 2024 or 2025, if in fact the U.S. economy enters recession in 2023.”

Construction backlog in 2023 is projected to remain steady, according to Associated General Contractors Chief Economist Ken Simonson. While commercial and industrial construction backlogs posted their largest monthly decline in October 2022 since July of 2020, the influx of infrastructure project work in the new year will buoy overall backlog numbers.

“I expect a big pickup in 2023 in infrastructure investment as money from the Infrastructure Investment and Jobs Act starts to be awarded and contractors get to work on those projects,” Simonson said.

In the private sector, he adds that manufacturing construction – especially for semiconductor manufacturing plants and electric vehicle battery components and battery charging manufacturing plants break ground.

Construction economists agree that material prices, the third key indicator, will remain volatile in 2023. Simonson says that while lumber and plywood prices have ebbed, cement and diesel costs remain problematic for contractors due to continuing shortages. “The U.S. hasn’t added any cement production since 2009 even though demand is growing,” he said.

Labor shortages, the fourth key indicator, will continue throughout 2023. Federal infrastructure work, much of it that will be underway in 2023, promises to keep demand for construction workers high, job opening rates up and wages rising as well.

Construction input costs, the final economic indicator, will continue to rise in the new year. Inflation, high wages and other price increases cut into contractors’ bottom lines during 2022, driven in large part by materials, labor and other project expenses.

Simonson predicts some selective reductions in materials costs and supply chain bottlenecks but adds that recessionary fears are likely to slow the rate at which costs are passed on.

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56% of Contractors Nationwide Say Worker Shortage Trumps Supply Chain Woes

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By KERRY SMITH, EDITOR, ST. LOUIS CONSTRUCTION NEWS AND REVIEW MAGAZINE

At Construction Executive’s Dec. 14 economic update and 2023 forecasting session, Associated Builders and Contractors Chief Economist Anirban Basu said the U.S. economy’s “overheated” condition is likely to continue manifesting a prolonged and profound worker shortage in construction, and is also making it tough for estimators to accurately price future builds.

By “overheated,” Basu is referring to a fast-growing economy that is reaching the limits of its capacity to meet existing demand.

The Federal Reserve’s action and inaction, unchecked inflation during 2021 and 2022 and relative scarcity/supply chain delays of construction materials are additional factors contributing to contractors’ challenges during 2023 and beyond, he said.

During the national ABC forecasting webinar earlier this month, contractors were polled as to the greatest challenge impacting their firms at the close of 2022. A total of 56 percent identified skills/worker shortage as the number-one impediment, followed by 28 percent who ranked supply chain and/or materials issues as their biggest hurdle.

“Oil and natural gas prices have soared during 2022, inflation has increased substantially and supply chains remain unpredictable,” said Basu. “And yet, contractors’ leading challenge – even more than it was a year ago – is finding enough workers to get the job done. I find that remarkable. As an economist, I would’ve expected to see some impact on the demand for construction services, but it’s still not that way. It still speaks to a market that is more characterized by demand than by capacity to meet that demand.”

Year 2022 has also been defined by a series of profound interest rate increases, Basu said, adding that the Federal Reserve did not raise rates at all during 2021, leaving inflation to broaden as a result of numerous economic events and pressures. “We are seeing the worst of inflation behind us,” he said, “but inflation will continue to remain problematic in 2023.”

Russian’s invasion of Ukraine in February 2022, he noted, sparked the global market’s response of soaring prices in energy and other construction inputs. While the U.S. inflation rate is more tempered now at year’s end than it was in June 2022, Basu said inflationary pressures have been transmitted from one period to the next, creating somewhat of a self-fulfilling prophesy for the construction industry as contractors and others build inflationary expectations of what transpired in 2022 into their project cost estimates for 2023 and beyond.

“Public-sector construction has a good outlook for the next five years at least,” he said. “But privately financed construction will likely continue to face capacity issues in terms of human capital.”

A leading upstream indicator going forward into 2023 and 2024, according to Basu, will be the volume of work that flows to design firms next year. “Contractors are saying they still have healthy backlogs of work through 2023,” said Basu. “But if we see upstream design firm activity dry up, then we’ll anticipate that 2024 isn’t going to be as strong for contractors.”

Demand throughout 2023 for construction of data centers, fulfillment centers and healthcare builds is expected to remain robust, according to Basu.

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Construction Industry Investment Declines, Hiring Slows Due to Talent Scarcity

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By KERRY SMITH, EDITOR, ST. LOUIS CONSTRUCTION NEWS AND REVIEW MAGAZINE

For 10 of the past 12 calendar quarters, investment in nonresidential construction has declined.

According to an analysis released in early November by the Associated Builders and Contractors, investment in nonresidential structures fell at an annual rate of 15.3 percent in the third quarter of 2022. ABC Chief Economist Anirban Basu says it’s the steepest decline since Q2 2020.

Investment in residential projects nationwide declined by a whopping 26.4 percent over the same time period.

Despite this decrease in investment, contractors building commercial and industrial projects expect their sales to rise over the next six months, according to the ABC’s Construction Confidence Index.

The association’s Construction Backlog Indicator – an index that reflects the amount of nonresidential construction work expected to be performed in the months ahead – shows that U.S. commercial and industrial contractors’ work backlog today averages nine months, 1.4 months longer than a year ago. Contractors attribute increased backlog to a hefty increase in heavy industrial projects, including a 21.5 percent increase in manufacturing-related construction spending.

As far as construction talent is concerned, the Associated General Contractors of America reports that last month the industry added only 1,000 employees nationwide. The industry continues boosting wages for hourly workers as firms battle to locate and hire qualified workers from a still-shrunken labor pool.

Hourly earnings rose from $33.41 in October 2021 to $35.27 in October 2022.

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