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Weathering the Storm

Although the world is beginning to find a new normal in the fallout from the pandemic, uncertainty remains for many industries, including construction. Despite labor shortages, rising costs and evolving regulations for contractors, with intentional pivots and careful planning, growth and profits can still be realized. With due diligence, there are ways to navigate the post-storm muddy waters.

People and supply

2021 required rapid modifications for construction businesses to survive and adequately respond to the unique changes and new requirements presented by the pandemic. The Great Resignation presented record high monthly turnover rates across industries of 2.9%, the highest rates since 2000, according to Harvard University data.

Construction is one industry that has been most adversely affected by these changes in skilled labor, and it continues to struggle to find talent to fill a surge of job openings. Covid-19 outbreaks have shut down whole production facilities and work sites for days or weeks as necessitated by Centers for Disease Control and Prevention guidelines. High rates of unemployment resulted in massive shutdowns of production at many levels, leading to lower volumes of available goods worldwide. Supply-chain issues that resulted from labor shortages continue to affect construction.

In addition, many experienced laborers decided to retire or resign because of rapid changes they were not equipped to handle. The younger generation has been continually pushed toward college, and those newly entering the skilled labor force have years of training and apprenticeships ahead of them to gain key competencies, leaving a gap in available skilled tradespeople.

Construction companies that are faring the best in attracting skilled workers are those that invest in technology. The construction industry, however, lags others in its commitment to invest in and implement new technology.

Responding to changing employee demands has been critical in the past, but it is not enough to thrive in the future. Workers’ broader needs, evolving technology requirements, reconsiderations of physical workspace, and Byzantine tax issues continue to affect the construction industry. To combat labor shortages and attract a younger generation of skilled workers, construction companies need to embrace innovation and invest in technology.

Leveraging technology

We are in the midst of a people-driven fifth industrial revolution. The rising generation of skilled workers does not want to deal with antiquated manual processes riddled with paper and outdated software.

Construction remains far behind in adopting new technology to improve operations, reduce supply-chain inefficiencies and manage labor. The pandemic, labor shortages and supply-chain issues forced many companies to adopt technology and move from yesterday’s systems to work more efficiently.

Remote accessibility has proved to be of paramount importance since the pandemic, and it is a priority that is here to stay. An emerging, younger workforce demands modern solutions that allow access to data, building plans and supply information anytime, anywhere, on any device.

Using technology can also help manage labor amid shortages. Implementing systems to provide more efficient scheduling and monitoring of job sites is important for all construction business going forward. As the industry grapples with how to survive with a shrinking workforce, contractors can use technology to improve efficiencies for their current workers.

Construction companies should focus on finding integrated technology that can help to eliminate repetitive administrative work and automate unnecessary manual work that does not add value. Software packages for the construction industry continually strive to improve workflows, automate routine tasks, and enable contractors to make more informed decisions based on current data.

Taking a strategic approach to implementing new technology and cybersecurity measures, akin to building a sturdy home, will help to maximize resiliency, increasing the ability of a construction business to survive post-pandemic storms.

Go lean

In these times of perpetual uncertainty and continued supply-chain disturbances, construction companies are challenged to rethink old systems and methods. Resource scarcity and price surges continue to shape the industry and will determine how the industry will evolve.

Lean construction is considered a relationship-focused production management process. It seeks innovative solutions to maximize supply and productivity and minimize waste. This process can ultimately deliver higher returns to the customer. The lean method, once used primarily in manufacturing, now has benefits for several industries, including construction.

As environmental and health regulations continue to change, going lean can set many construction companies up for success by establishing an environment built on productivity and innovation.

Fluctuations and negotiations

Price fluctuations have been pervasive during the pandemic and appear to be the houseguests that overstay their welcome. In the months and years to come, contractors need to review all contracts for language related to cost adjustments and price fluctuations. Extra due diligence, careful reviewing, and an understanding of project specs and plans are imperative. Some contracts may allow for flexibility in material types, brands and quality if everything still fits within the specs of the project; others may not. Invoices should be thoroughly reviewed to ensure that taxes are appropriately applied because not all suppliers are focused on this.

Underbidding on projects with no room to adjust for supply or cost adjustments can negatively affect any contractor. Most contractors do not know if they are going to make or lose money until the last 10% of the project—at which point it is too late in many contracts to make adjustments. Contracts with escalation clauses allow for flexibility in fluctuations in labor wages or supply.

Leveraging streamlined technology and real-time data can help forecast pricing and place reasonable bids. Improving systems can help contractors with cash management, projections, scenario planning and agile forecasting. Better electronic exchanges of information between systems can speed up the approval process for change orders and can streamline communication with general contractors and subcontractors.

Building tomorrow: Final Thoughts

Lingering uncertainty poses many challenges to construction businesses. Labor shortages, supply-chain issues, inflation, and outdated technology create roadblocks for construction companies to succeed. Properly managing a dwindling workforce, implementing new integrated technologies, and proactively forecasting and negotiating contracts will allow construction businesses to thrive amid adversity.

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