All construction firms face an uphill battle on the road to recovery following the pandemic. However, small and medium-sized construction companies face even more significant challenges in their recovery.
The Upcoming Boom
Experts predict that a post-pandemic boom is on its way, and savvy construction firms can take advantage of this. The Senate passing the $1.2 trillion infrastructure plan is one indication of a construction boom to come. Another is the fact that the Federal Reserve expects a 7% increase in the economy. But that’s not the only thing on the horizon.
The Specific Challenges in Construction
All companies in construction will be facing the following significant challenges.
Lack of Protection with Public Projects
Many firms hope to gain projects from the passing of the Infrastructure Bill. But these will be public projects, and public projects don’t have the same protections as private ones. For example, most don’t let firms place a lien if an invoice is unpaid and include cost escalation clauses.
Hyperinflation
Economists predict that we are about to see the most crucial inflation period in decades. Even a 2% inflation increase per year, which is standard, leads to a significant increase in the cost of construction materials. Hyperinflation is likely to drive up the prices even more.
Labor and Material Shortages
The supply chain issues combined with brief pauses in production during the height of the pandemic mean that there is also a shortage of materials. These include steel, plywood, and PVC pipe. When construction firms can get these materials, they are more expensive.
Labor costs are also on the rise. This is expected as labor costs rise more quickly during inflation.
How Construction Firms Can Maximize Their Recovery
While small and medium-sized construction firms face more enormous challenges on the path to recovery, it is still possible. Experts have offered several suggestions to help maximize recovery.
Invest in Digital Technologies
SMB construction businesses must digitize and embrace automation. This will allow them to meet deadlines and ensure cashflow.
This extends to aspects of construction that can rely on technology andfactors such as bookkeeping. Examples include 4D simulation, real-time progress tracking, and digital workflow management.
Access Capital
Experts also suggest that small and medium businesses in construction work to get faster access to capital. The good news is that banks want to expand their construction portfolios. However, for businesses to take advantage of this, they must have clear financials.
Rebalance Supply Chains
When possible, SMBs should also work to rebalance their supply chains to be more resilient instead of focusing on efficiency. Savvy construction companies are working on securing critical materials and building their inventory.
Construction firms should keep these problems and possible solutions in mind.
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