The construction industry has faced many hurdles, including an ongoing labor shortage, rising cost of materials, supply chain disruptions and evolving technology that has made it difficult for contractors to keep up. Meanwhile nonresidential construction is feeling promising tailwinds — according to Insulation Outlook’s 2023 survey, respondents were most optimistic about infrastructure, power and federal construction projects. A 2023 report from Deloitte noted that “transportation infrastructure construction spending increased 9.4% year-over-year in August 2023.” These types of projects include crumbling bridges and highways riddled with potholes, which need immediate updates and renovations.
The renovation of the aging infrastructure in the U.S. has been a long time coming, and the federal government has made it a top priority, throwing considerable resources into the construction industry with the Inflation Reduction Act. Approximately 80 projects are slated to enhance infrastructure resilience, including $60 million in funding for South Dakota to improve two sections of BIA Route 33, $14 million for Philadelphia to rehabilitate two deteriorating bridges and $56.4 million to Iowa for the replacement of the 86-year-old Arc of Justice Bridge. Moreover, unplanned disasters like March’s Francis Scott Key Bridge accident in Baltimore suggests that contractors must act fast on bidding and bonding and have a plan in place to jumpstart work as soon as possible.
As competition for public works projects heats up, contractors need to be adequately prepared to take on this influx of projects and ultimately win these bids. By leveraging emerging technologies, they can position themselves to outperform competitors, secure project bids and propel their businesses forward.
Understanding the Always-Evolving Construction Industry
The rising costs of materials and increased interest rates forced many contractors to postpone projects last year. In fact, according to that same Insulation Outlook report, 37% of respondents reported having to postpone and reschedule their projects in 2023. As these projects continue to get rescheduled, the need for workers is slated to increase in the back half of 2024. From the same survey, 69% of respondents expect to add to their head count to accommodate the growing number of projects that are expected in 2024. However, economic conditions are putting a strain on the industry; 64% of contractors surveyed noted that rising interest rates and financing costs were a big concern in the coming years. With ongoing market volatility, financing for these contractors could prove to be a major burden and prevent them from taking on lucrative projects. Further, the onslaught of extreme weather, from hurricanes to floods and droughts, has impacted the construction industry.
Since the onset of the COVID-19 pandemic, supply chain disruptions have plagued the industry, presenting another significant challenge. While some improvement has been seen, supply chain issues persist and are far from returning to pre-pandemic levels. The complexity inherent in today's construction industry demands that contractors rethink their strategies. Embracing digital solutions represents a pivotal shift in alleviating these burdens and equipping contractors with a competitive edge.
Integrating Technology Into Businesses
Small and medium nonresidential construction companies need to achieve more with fewer resources, with little room for error and under tremendous pressure to stretch small profit margins. The introduction of technology has already been imperative in unearthing operational efficiencies across construction business functions. With the industry still slow to adopt digital technology, the companies that make even small moves away from manual processes stand to gain a competitive edge. They will be able to do things faster, use fewer manual resources, and make more strategic and educative decisions. One of the first decisions contractors make on any project is the bid.
Speeding to Win the Bid
The traditional process to obtain bids and performance bonds is known to be a lengthy and time-consuming process. As more public infrastructures in the U.S. are deemed safety hazards and earmarked for immediate repair, contractors need the agility to swiftly win bids and issue bonds instantaneously. Readily available technology solutions have helped to ease the burden of obtaining bid bonds by putting constructors in the driver’s seat, providing them control to adjust bids, update works in progress, obtain additional credit, and order performance and payment bonds. Some technology platforms empower contractors to directly obtain power of attorney from insurance providers, eliminating intermediaries. This grants contractors full control over their bids and other bonds throughout the entire process.
As supply chain disruptions continue, material costs and pricing will fluctuate as certain materials may be in higher demand, thus making it harder to access. Digital tools enable contractors to rapidly update their bids to accommodate these fluctuating costs, wherever and whenever they need.
AI Tools to Satisfy Demand & Mitigate Risks
The introduction of new technologies, such as generative AI and traditional AI analytics, could prove essential as these renovation projects continue to emerge. AI can assist in streamlining project scope, especially in helping to navigate exceptionally large and complex projects. It also gives contractors the power to vet these projects for potential bids, assess the feasibility of different project plans, and monitor supply timelines to help ensure that projects stay on track and ease the burden of scheduling issues and cost overruns.
Integrating AI solutions can also help contractors mitigate certain risks, by identifying potential hazards, uncertainties and solidifying project timelines. Strong risk management is crucial for contractors to avoid safety hazards, damage to property or materials, and misplaced or lost materials. AI tools can help prevent costly mistakes, ultimately resulting in better cash flow management.
Technology to Alleviate the Worker Shortage
Contractors are continually facing obstacles in effectively hiring labor to help keep pace with the growing demand for these renovations. According to an outlook report from Associated Builders and Contractors (ABC), this year the construction industry will need to attract “an estimated 546,000 additional workers on top of the normal pace of hiring to meet the demand for labor.” The outlook also reported that nearly 1 in 4 construction workers are older than 55. The industry could potentially lose 25% of their current workforce due to retirement, which makes attracting and retaining talent all the more pressing. Integrating tech, such as AI, can help ease this burden and allow contractors to quickly and easily screen potential employees, so contractors can focus on their growing projects list.
What’s Next?
According to Dodge Construction Network’s 2024 Outlook, public works construction, will grow by 17% in 2024. With this onslaught of new infrastructure renovations, contractors should be embracing technology to help prepare and win bids. The industry is primed for technological adoption, and those who adopt it early stand to gain a significant competitive advantage, paving the way for long-term success.
