The Current Construction Environment and its Impact for General Contractors
Like any other industry, the construction sector has gone through a lot of changes due to COVID-19 and the resulting impact on the economy and businesses. The construction environment has constricted in many ways, all while the need for construction has expanded, causing a trickle-down effect for general contractors.
The construction sector is going through a lot of difficulties To start with, businesses have limited capital, and the firms who’ve availed loan facilities are on the verge of defaulting. While Fed money came available for some quick fixes, longer-term capital has been a struggle to acquire as banks are tightening their lending and have stricter qualifications. All while construction materials have seen a sudden surge in prices; for example, the 38% increase we have witnessed in lumber prices in the past three months.
As high unemployment rates continue and stimulus relief tapers off, many people have started their own small businesses as a means to earn income. Consequently, it has led to the birth of many new entrants “specializing” in the construction and excavation business, as they turn to trades in an attempt to capitalize on the boom in the construction industry. Most of these new businesses have significantly less experience, offer low-quality service, have no insurance, and/or are scammers. As a result, general contractors, businesses, and homeowners who deal with them have to bear additional rework costs by a professional and qualified contractor.
Regretfully, this happens relatively often, but it’s occurring even more lately. Here are two project examples from the past month. The first was for a contractor doing a commercial building. As the contractor explained to us, in an attempt to save money, they hired the “low-bid” excavation company for regrading work around the existing building pad and parking structures. That excavation company ended up “biting off more than they could chew” and left the job a half-done wreck. In another instance, a local small business allowed an “experienced” contact with a skid steer to level and grade several sites. We were hired on the backend to do the finish blading and lay some material, at which time it became evident that the sites were poorly engineered, causing us to have to go back and rip up all their work and redo it. Unfortunately, that leads to significantly higher costs for the client. And this type of thing is happening more often with the influx of underqualified contractors.
However, there are also many positive factors encouraging construction growth. In the residential space, COVID-19 has led to a sharp increase in the work-from-home trend. This resulted in a surge in demand for home construction projects such as room remodels, pool installations, and landscape (re)design. Additionally, there’s been a reverse in urbanization as more families are moving further out looking for homes in suburban and rural areas. This has caused an increase in new home construction and remodel.
And in the business world, government grants and subsidies have been helping businesses to weather the storm and providing access to free and low-cost capital. Even so, there has been a bifurcation of the “haves” and “have nots”. Businesses who were previously set up for the contactless environment, or were able to adapt quickly to it, have been able to weather COVID-19 and some have even soared as a result of lower competition. While others struggled, lost a lot of business and some closed their doors permanently. This dynamic has led to growth in the mergers and acquisitions market, creating an even greater need in the construction and excavation industries for demolition, building, and remodeling services.
Finally, on the local front, in Texas Snowmageddon resulted in a lot of damaged homes, businesses, pools, and irrigation due to busted pipes, and dead landscaping. Increasing the need for excavation, construction, and landscaping services. Add all that to the fact that we are entering the busy season for construction and we have a recipe for a very busy and interesting year.
Keeping all the above factors in mind, the need to rigorously select your contractors, who do quality and insured work, is even more critical. Ensure you’re working with contractors with the experience and in-depth knowledge of how to properly complete a job to ensure long-term cost and effort savings. The right contractor will advise you about what needs to be done and can partner with you to find the most cost-prohibitive ways to execute any project.
Art Ward, co-owner of A&B Excavation, takes pride in his reputation as a third-generation operator with unmatched skills and industry knowledge. He works closely with our general contractor and homebuilder clients to discuss their goals and establish the project objectives according to their needs. Our qualified staff is made up of only the most highly experienced operators who you can trust to do the job right the first time. And we maintain an open discussion with our clients throughout the project to adjust plans with your changing needs. To partner up with a premium excavation company, give Art a call at 940-536-9784.