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Owners Uneasy About Construction Future

Wednesday, November 28, 2012

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Facility owners are not feeling confident about responding to the challenges the construction industry faces on the road to a full recovery, a new survey reveals.

Economic shifts, project funding, compliance and permitting, availability of qualified partners, and a dwindling skilled labor force are all issues of concern to buyers of engineering and construction services,  engineering and construction industry consultant FMI reports in its 2012 Owners’ Survey.

Rob Aylward / U.S. Navy

Many buyers of construction and engineering services are worried about their ability to address project funding, lack of a skilled workforce, and other industry challenges.

Interestingly, the survey respondents—representing a broad range of construction industry sectors, geographies and types of owners—note that they are most confident in their response to “contractor failures,” with 55 percent reporting confidence in their response.

The findings were presented at the Construction Users Roundtable (CURT) 2012 national conference on Nov. 13 in Orlando, FL.

‘Clearing of Darkness’

“At its peak in 2006, the construction industry represented more than $1 trillion of economic activity, roughly 9 percent of nominal gross domestic product (GDP),” according to FMI. “The industry has contracted every year since then. The burst of the housing bubble, the credit crisis, and the ensuing recession reduced the industry to roughly 70 percent of its 2006 size in 2012 and to only 5 percent of nominal GDP.”

However, the group notes that that dark cloud is “clearing.” Construction put-in-place volumes in 2012 are expected to end the year 5 percent higher than in 2011, according to FMI forecasts.

“While recovery still faces tremendous headwinds, pockets of prosperity do exist,” FMI said.

The Owners Survey questions focused on understanding how owners are coping with the current environment, what challenges they believe the future environment holds, and how prepared they feel to handle those issues.

Stifled Projects Still an Issue

Despite the improvements reported, construction and engineering project delays are affecting 83 percent of FMI's respondents, and project cancellations are affecting 41 percent, according to the survey.

The most common reason for delays, cited by 58 percent of those experiencing them, is changes in project scope. Other reasons cited include budget cutbacks (32 percent); regulatory delays (32 percent); lack of funding (29 percent), and uncertainty in the economy/markets (26 percent).

Highlights of Survey

The survey found many owners grappling with a variety of future challenges. For example:

  • 72 percent of those worried about the impact of limited project funding are not confident in their response to the challenge.
  • More than 50 percent of those worried about the impact of limited internal staffing and skilled labor are not confident in their responses to these issues.
  • While only 20 percent of respondents are worried about the availability of qualified planning, design and construction partners, nearly 90 percent of those respondents are not confident in how they are responding to the issue.
  • Availability of project funding is the top concern for owners, with 50 percent of respondents anticipating a moderate to high impact on their capital programs.
  • More than one-third of respondents believe regulatory compliance and permitting will have a significant impact on their capital programs.
  • High unemployment has not led to an abundance of top talent for owners, as the availability of both internal staffing and skilled labor are expected to adversely affect capital programs.

About the Survey, FMI

Sixty percent of the respondents represented publicly traded stock corporations and private organizations; government organizations at the federal, state and local levels made up 40 percent, according to FMI.

Based in Raleigh, NC, FMI offers management consulting, investment banking, and research to the engineering and construction industries.


Tagged categories: Architects; Building owners; Construction; Designers; Engineers; Industry surveys; Market

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