Upstate New York contractors and construction businesses want to “do what they do better.” That’s one of the key findings of the 2016 Upstate New York Contractors State of the Industry Study that the Bonadio Group released July 20. Rochester–based Bonadio describes itself as upstate’s “largest independent provider of accounting, consulting, and financial services.” In all, […]
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Upstate New York contractors and construction businesses want to “do what they do better.”
That’s one of the key findings of the 2016 Upstate New York Contractors State of the Industry Study that the Bonadio Group released July 20. Rochester–based Bonadio describes itself as upstate’s “largest independent provider of accounting, consulting, and financial services.”
In all, 44 contractors participated in the survey, according to a Bonadio Group spokesperson.
The study found that construction companies are hiring additional employees and expanding the scope of services and capabilities, as well as looking for ways to trim costs, reduce bid prices, and improve productivity.
As they pursue improved performance, construction companies have put a “greater emphasis” on boosting productivity, with 54 percent of firms saying they noted an increase in 2015. The figure represents a 21 percent rise compared to the 2014 survey, which yielded a 33 percent increase in that area.
“We’re finding that the competition is pretty fierce in the construction industry,” says Mike Smith, partner and construction-team leader at Bonadio Group.
“Everybody’s just trying to get a little bit of a leg up on the competitor by being a little bit more efficient.”
The respondents indicated plans to boost productivity either through processes or through hiring and training, he adds.
He spoke to CNYBJ on Aug. 23 from his office in Albany.
The information contained in this year’s report has been designed to help construction-industry executives evaluate their position and standing on issues ranging from financial-management techniques to economic outlook.
Findings
More than half of the survey participants identified hiring additional employees as an “important mechanism” to generate increased profitability.
Along with hiring and training construction employees, the survey’s “key” findings focused on topics that included technology, productivity, and safety and risk management.
Survey results indicate that technology, based on the type of work a company performs, can be an investment that can “prove to be profitable and yield a strong return on investment (ROI),” according to Bonadio.
“If you improve your processes, you get a little bit more efficient — productivity and profitability should therefore follow,” says Smith.
Safety and risk management has also grown in importance in the construction industry, with 54 percent of contractors surveyed referring to it as an important strategy in improving overall profitability.
“It isn’t a direct driver of profitability, but it’s part of their tool kit,” says Smith.
Respondents say having healthy employees keeps their rates for workers’-compensation insurance low, maintains their knowledge in the workplace, and prevents the need to train someone new, he adds.
“So, more and more, over the last few years, construction contractors have seen the importance of safety and … risk management,” says Smith.
Contracts
The Bonadio survey found that 48 percent of the contracts that respondents serviced were in the public sector, while 52 percent focused on jobs in the private sector, according to the Bonadio report.
Respondents also indicated that about seven of 10 contracts are based on competitive bids, while three of 10 are negotiated.
The data also indicates that the average number of competitors per bid has decreased from what was reported in 2014.
At that time, 55 percent of respondents said that, on average, they faced six to 10 competitors; today, that number has dropped to 42 percent.
The impact of this decrease in competition is reflected in a slight increase in bid-success rates.
For example, 11 percent of respondents indicated a bid-success rate of more than 50 percent in this survey, compared to a rate of 7 percent in the 2014 survey, the Bonadio report said. At the same time, 33 percent of respondents indicated a bid-success rate of between 26 percent and 50 percent, compared to 27 percent of respondents in the 2014 survey.
Overall, the effects of competition are “still” preventing bid-success rates from reaching pre-recession levels.
The figures also demonstrate that “consolidation has occurred inside the industry, reducing the number of competitive bidders. However, margins remain low, despite contracts being easier to win,” the Bonadio report said.
About the survey
The Bonadio Group organized the 2016 Upstate New York Contractors State of the Industry Study into four sections.
They include overall aggregated results; results for small-sized companies (less than $9.9 million in revenue), results for medium-sized companies ($10 million to $49.9 million), and results for large-sized companies (more than $50 million).
The Bonadio Group conducted the survey online between February and March of this year, says Smith.
Since 2016 is an even-numbered year, this survey focused on the state of the industry.
In odd-numbered years, the study hones in on construction firms’ benefits and compensation, says Smith.
Contact Reinhardt at ereinhardt@cnybj.com