Bonadio report: Upstate construction industry improves since 2012

The upstate New York construction industry has seen a “positive improvement” in the last couple years, according to the 2014 Upstate New York Contractors State of the Industry Study that The Bonadio Group released.

About 75 respondents provided information for this year’s findings, the report says.

Headquartered in Rochester, The Bonadio Group is an accounting and business-advisory firm that operates nine offices in upstate New York, including Syracuse and Geneva, along with New York City and Rutland, Vt.

The Bonadio Group conducted the online survey in the early part of 2014, says Scott Cresswell, a partner in the Bonadio Group’s commercial division. He is also a certified construction-industry financial professional.

Since 2014 is an even-numbered year, this survey focused on the state of the industry.

In odd-numbered years, the survey hones in on construction firms’ benefits and compensation, Cresswell says.

The information contained in the report is designed to help construction-industry executives evaluate their position and standing on issues ranging from financial-management techniques to economic outlook in order to provide an assessment on whether their organization is competitive with other area construction companies, according to Bonadio.

Industry issues
The construction study focused on contracts, including success rate on bids and average number of bidders, average dollar size of contracts, and status of backlog.

The survey found 63 percent of contractors reported bid-success rates of less than 25 percent, which is down from the 75 percent of contractors indicating the same rate during the 2012 survey.

The report also found the average number of competitors per bid is “similar” to what was reported in 2012. That year, 52 percent of respondents said that, on average, they faced six to 10 competitors. The latest survey lists that figure at 55 percent.

The respondents also indicated a “shift” in the average contract size, according to the Bonadio report.

More than 73 percent reported an average contract size of under $5 million, a figure that is down from the 93 percent reporting an average contract size of under $5 million in the 2008 survey.

At the same time, 35 percent of all respondents said their backlog has “decreased” from last year.

Bonding, future outlook
The Bonadio report also focused on surety-bonding issues, including percentage of work bonded and difficulty of obtaining bonds, along with company profitability.

The survey found 75 percent of respondents said that their surety bonding is the same as it was in 2013, but 13 percent of respondents claimed that surety bonding was either “harder or much harder” to secure.

It also found that, on an overall basis, 74 percent of respondents said that 50 percent or less of their work was bonded, which is up from 69 percent reporting a 50 percent bonding rate in 2012.

In analyzing those figures, Cresswell says contractors in 2012 were still working with contracts that involved money from the federal stimulus package a few years earlier.

“Whenever you’re dealing with government dollars, the bond is absolutely required. But when you’re dealing with more private dollars, then bonds are not always required from private companies,” says Cresswell.

The figures are just indicative of the “mix of work” the contractors have,” he adds.

The survey also found 85 percent of survey respondents reported a profit in 2013. It also found more than 48 percent of survey respondents said that they will seek construction projects in new geographic areas, while nearly 20 percent said they will seek projects in new specialty areas.

The study examined future outlook, including revenue projections, economic outlook, and other issues considered “critical.”

The report found that the contractors’ outlook is “much brighter” than in years past, with 58 percent of respondents describing themselves as either slightly or very optimistic. At the same time, about 14 percent of respondents said they were either slightly or very pessimistic.

When asked about revenue projections for 2014, 59 percent of respondents said they expect an increase, 11 percent expect a decrease, and 31 percent expect no change.

The Bonadio report noted survey respondents indicated retaining and attracting qualified personnel (38.2 percent) and the economy (25.4 percent) as the two “most important” issues facing contractors.

 “A good part of that is because … everyone seems to be thinking that their revenue and profits are going to be growing over the next couple of years,” says Cresswell.

Those two issues were also the top two concerns indicated in the 2012 Bonadio report, only in reverse order two years ago.

About the respondents
The Bonadio Group sought responses from small (under $9.9 million in annual revenue), medium (between $10 million and $49.9 million), and large (more than $50 million) contractors.

Small construction firms provided 47 percent of the responses; medium-sized firms, 40 percent; and the large firms provided 13 percent of the responses.

The survey found 84 percent of responding contractors have been in business for more than 16 years and 60 percent have operated for more than 30 years.

At 55 percent, the percentage of family-owned businesses in this year’s survey is down from 62 percent in 2008, the report found.

About 26 percent of respondents said they plan to sell or transition their business within the next five years, according to the survey data.

Contact Reinhardt at ereinhardt@cnybj.com