Grassi Advisors & Accountants, in collaboration with leading industry association partners, released the findings of the 2022 Construction and Architecture & Engineering (A&E) Survey this summer. This year’s survey was designed to uncover the strategies that contractors, subcontractors, architects and engineers are deploying to address price fluctuations, cash flow challenges, labor shortages, rising job costs and more.
The findings were released in an authoritative benchmarking report to help business leaders measure their progress, understand the greatest risks facing the industry today, and discover how their peers are adopting technology and other operational enhancements to drive growth and innovative change.
Here are the key takeaways the survey revealed.
Cautious Industry Optimism
Overall, surveyed companies are relatively optimistic about the state of the industry and feel the worst of the pandemic’s financial impact is behind them. A&E firms are especially optimistic that revenue will increase in 2022.
Of course, many new and lingering challenges call for cautious optimism as the construction and A&E economies continue to lag. The most common challenges reported were supply chain disruptions, inflation and cost increases. Most companies reported cost increases associated with office/support staff in the past 12 months. Subcontractors and A&E firms have been hit hardest, with around one in four reporting cost increases of 20% or more.
The GC Advantage
The survey emphasized the financial and operational advantages that GCs gain from their higher revenues. For example, GCs have the capacity to review cost and profitability much more frequently than subcontractors or A&E firms. GCs are also much more likely to embrace technology – almost 90% have invested in technology and innovations to streamline operations and improve efficiency, compared to 61% of subcontractors and 75% of A&E firms.
However, many other strategies were embraced just as often, if not more, by subcontractors and/or A&E firms. These include:
Inflation Strategies
While different segments of the Construction and A&E industries have different strategies for dealing with inflation, purchasing ahead is a strategy used by all segments. General contractors (GCs) are more likely to use purchase agreements and to work with customers to accept change orders. Subcontractors are more likely to stockpile. The top strategy for A&E firms is to address project scope creep.
Technology Investment
Over half of all respondents say their firms are actively looking to invest in technology in the next 12-18 months. Interest in technology solutions is exceptionally high among A&E firms, particularly in the area of remote working solutions.
Cybersecurity
With increased technology comes increased digital risks. As a result, most respondents have cyber insurance coverage. Not surprisingly, GCs and A&E firms are more likely to have employee policies in place to defend against cyber threats, and GCs are more likely to have implemented cybersecurity at remote sites. Subcontractors are more likely to outsource their cybersecurity.
Risk Assessment
In assessing all areas of risk, respondents unsurprisingly ranked financial, supply chain and labor as highly significant, but concerns vary by entity. Subcontractors are more likely to identify financial and supply chains as top-three risks. A&E firms stand out as concerned about labor shortages and cybersecurity. And safety is more of a concern for GCs.
Opportunities for Improvement
Among all of the strategies respondents are already deploying, they identified several others as being untapped or underutilized opportunities for improvement.
In the area of technology investment, respondents were most interested in pursuing more collaborative and project management software solutions.
Remote workplaces continue to be a work in progress, particularly in the area of fraud control. While most respondents feel confident that controls are sufficient to deter fraud in the office, they are less confident in their ability to protect against fraud in remote environments.
When it comes to harnessing the power of data, A&E firms are less satisfied than GCs and subcontractors with the financial and operational information they receive. As automation, artificial intelligence and other digital tools become increasingly mainstream, this is a highly accessible opportunity for A&E firms and their construction counterparts to generate meaningful data on which to base their business decisions and plans.
Even as optimism rises, it is clear that the industry has not made a full return to pre-pandemic norms. Remote workplaces, new safety concerns, supply chain disruption and inflationary pressures will continue to create obstacles for construction and A&E firms to navigate. The strategies uncovered in Grassi’s 2022 Construction and A&E Survey can go a long way toward overcoming them.
To receive a free copy of the survey report and learn more about the innovative strategies of high-performing construction and A&E companies, visit learn.grassiadvisors.com/2022CAEIndustrySurveyReportDownload.
