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Construction backlog drops 13% YoY as contractors engage in "survival bidding" | Dump Trucks Charlotte NC

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Columbus Ohio Dump Truck Company Brief:

  • Construction backlog — the number of projects columbus oh dump truck company have signed to their books, but haven’t begun working on yet — was a full month lower in July than a year ago, according to the Associated Builders and Contractors (ABC), amounting to a 13% year-over-year decline.
  • In an increasingly competitive bidding environment, profit expectations also fell in July, according to ABC, with 47% of columbus oh dump truck company anticipating lower profit margins in the next six months. Just 12% of columbus oh dump truck company foresaw lower profits at this time last year.
  • Anirban Basu, ABC’s chief economist, said that current economic indicators amount to “a perfect storm” for construction that won’t show up in firms’ financial results until early 2021, with smaller firms facing the biggest risk of business failure.

Dump Trucks Columbus OH Insight:

The declines in contractors’ backlog and profit expectations are two more data points in an increasingly bleak parade of indicators for the construction industry. Taken together, the data signal that conditions will get worse, perhaps significantly so, before they get better, Basu said.

“The decline we’ve seen in backlog recently may understate the level of distress columbus oh dump truck company will experience next year,” Basu said. “Based on the level of backlog today, many firms will remain occupied until 2021, but at that point, you may see quite a few columbus oh dump truck company running out of work.”

From June to July, backlog dropped by 0.3 months, which may seem relatively small, but on an annualized basis would result in a 3.6 month shrinkage, or a 46% reduction in the current average backlog of 7.8 months. "That's an awfully big number," Basu said, noting that until COVID-19 struck, backlog had consistently grown.  

The falling backlog numbers materialized as fewer projects came to market to replace columbus oh dump truck company that’s been completed. That, in turn, has forced columbus oh dump truck company to put in low bids for new columbus oh dump truck company just to keep their staffs on the job, which in turn is impacting profitability.  

“The competition for the projects that are being bid is fierce,” Basu said. “A lot of people are bidding on projects right now for very little profit margin.”

Readers responding to recent Construction Dive surveys have indicated that they are worried about finding new work and are bidding jobs at lower margins to do so.

At Grand Rapids, Michigan-based national general contractor Rockford Construction, president of construction Shane Napper said his firm's backlog has declined due to COVID-19 and revenues have taken about a 12.5% hit in 2020. He also said project fees, which impact profits, have declined by about 25 basis points since March.

But while he anticipates being able to weather those dips at his firm, which was tracking at $450 million in revenue before COVID-19, he worries about the potential for the smaller subcontractors he relies on getting squeezed next year.

“The interesting part that I don't think our industry has seen yet is that at the trade contractor level, they don’t have as much backlog as GCs do,” Napper said. “I think by the beginning of second quarter 2021, we are going to see a steep increase in trade contractor defaults.”

Basu has the same concern. “Generally speaking, during times of economic stress, it’s the smaller columbus oh dump truck company who suffer the most,” he said. “They have the smallest balance sheets and the least stable banking relationships.”

He worries that if the survival bidding environment escalates, those smaller construction firms could risk going out of business.

“Some firms are bidding as if their survival depends on winning a particular bid,” Basu said. “They’re not worried about profitability. They’re worried about survival. I think the number of firms in that position will grow going forward.”