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Dear Construction Associate, We are pleased to present you with the results of our Biennial Business and Owner Surveys, which examined activity in 2005 and the outlook for 2006. These two surveys represent CAM’s continued commitment to provide accurate and timely business information. For your convenience, we have combined the results of both surveys into one single publication. This allows you to quickly compare the answers of construction industry professionals with those of their clientele. The responses tell a great deal about our region, economy, and, most specifically, the Michigan construction industry. Results indicate that construction work opportunities are holding steady, client satisfaction is up, and new construction continues to lead work opportunities. However, those surveyed continue to express concerns shared with many other industries: Will there be an adequate labor supply to meet the needs of the marketplace? Will there be new business ventures in Michigan that will generate new construction work? Are our leaders working to help the construction industry by attracting more people to our state, and providing training to ensure that we have a skilled work force to meet our needs today and tomorrow? Who will succeed when competition for work in our market is tighter than ever before? I urge you to take time to thoroughly review this important compilation of answers from those who work directly in the Michigan construction industry. If you have questions, or would like additional copies, please contact CAM’s Office of Industry Relations at 248.972.1000. Thank you,
Frank Nutt, Jr. Chairman, Construction Association of Michigan President, North Electric Co.
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About the Construction Association of Michigan The mission of the Construction Association of Michigan (CAM) is to provide its members with the programs and services they need to be successful in the very competitive construction industry. CAM serves more than 3,700 members representing subcontractors; equipment and material suppliers; general contractors; construction managers; and providers of legal, design, and financial services. Founded in 1885, it is the oldest and largest construction association in North America. The association is an essential information network for the Michigan construction industry. It publishes Construction Project News, a daily report containing complete details on Michigan projects out for bid. Construction Pre-View, a weekly newsletter, keeps CAM members “in the know” with news of proposed projects. With advanced software, members can access entire plans and news at their office via CAM-Online. The Construction Buyers Guide, published annually, is the premier directory of Michigan construction. It lists all relevant information on thousands of construction-related companies. The Construction Buyers Guide can also be accessed online at CAM’s website, www.cam-online.com. CAM Magazine, “The Voice of the Construction Industry,” is recognized as the leading monthly industry magazine covering construction news, business trends, and construction technology in Michigan. CAM’s Training and Education Center (CAMTEC) offers industry-specific classes and seminars on construction project management, marketing, and other timely issues. These courses can even be taught on site. CAMSAFETY provides all the training and documentation assistance needed by contractors today. Companies can use CAM’s Certified Safety Consultant to ensure that their workers and their job sites are in complete compliance with current safety regulations. CAM produces the Design & Construction Expo, the largest annual construction trade show in the Midwest. This show displays the latest construction products and services as well as hosting seminars, demonstrations, and advancement courses. The CAM Labor Relations Program provides quality labor relations assistance and information at no additional cost to union contractors employing carpenters, cement masons, laborers, or operating engineers in southeast Michigan. CAM Administrative Services offers health insurance, CAM-COMP, which serves the need for workers’ compensation insurance. Construction Federal Credit Union provides CAM members superior banking service. For more information about these or any other CAM services, please contact the CAM Marketing Department at 248.972.1000.
Co-Sponsor: Plante & Moran, PLLC Serving the needs of the construction industry for more than 80 years, Plante & Moran is Michigan’s largest certified public accounting and management consulting firm with offices throughout the Great Lakes Region. Plante & Moran provides the experience and personal attention the construction industry demands, offering a full range of services including audit and accounting; federal, state, and local tax planning; information technology and telecommunications consulting; family business succession planning; merger and acquisition assistance; cost segregation studies; and strategic planning. For more information about Plante & Moran’s construction team, please contact Tom Doyle at 248.223.3402 or thomas.doyle@plantemoran.com. 2
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Biennial Business Survey Produced by the Construction Association of Michigan (CAM) and the accounting firm Plante & Moran, PLLC, the Biennial Business Survey has been conducted for more than 14 years. The survey measures contractor opinion in three categories: construction outlook, financial health, and industry perception.
Owner Business Survey This survey examines the construction industry from the clients’ perspective. The two-part questionnaire asks owners and construction clients about plans for upcoming work and their perceptions of Michigan’s construction industry and its practices. More than 2,500 survey participants were selected at random from CAM’s Daily Construction Project News division, which monitors construction activity throughout the state. The survey received an impressive response, the majority of which were gleaned from public entities including municipalities, county agencies, and state contracting offices.
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Table of Contents Page 5.
Business Survey
Page 17.
Business Survey Written Comments
Page 19.
Owner Survey
Page 28.
Owner Survey Written Comments
Please note: Percentages in the survey may not add up to 100% due to rounding.
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Business Survey
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Business Outlook
Contractors, Suppliers, Architects, and Engineers
In terms of construction type, please rank the top five categories that are presently providing your company with the most opportunities for work? 2005
According to respondents, new construction slightly outpaces renovation as the leading source of current work opportunities. Retrofit, addition, and maintenance projects are providing virtually the same level of work as in the 2003 survey.
30%
23%
21%
20%
18%
19%
18%
Retrofit
Additions
Maintenance
10% 0%
New Construction Renovation
In terms of type of structure, what category of work is presently providing your company with the most opportunities for work? 2003 Ranking (Overall) 1. Education/Cultural/Scientific Buildings 2. Residential/Single-Family 3. Office Buildings 4. Transportation/Industrial 5. Health/Welfare/Hospitals 6. Public Works Projects 7. Residential/Multi-Family 8. Retail Stores/Outlets 9. Infrastructure 10. Religious Buildings 11. Hotels/Motels 12. Entertainment/Recreation
2005 Ranking (Overall) 1. Office Buildings 2. Educational/Cultural/ Scientific 3. Retail Stores/Outlets 4. Transportation/Industrial 5. Health/Welfare/Hospitals 6. Public Works Projects 7. Religious Buildings 8. Residential/Single-Family 9. Hotels/Motels 10. Residential/Multi-Family 11. Entertainment Facilities 12. Infrastructure
2001 Ranking (Overall) 1. Office Buildings 2. Transportation/Industrial 3. Education/Cultural/Scientific Buildings 4. Health/Welfare/Hospitals 5. Residential/Multi-Family 6. Public Works Projects 7. Retail Stores/Outlets 8. Religious Buildings 9. Residential/Single-Family 10. Infrastructure 11. Entertainment/Recreation 12. Hotels/Motels
Office construction again accounts for the largest percentage of building opportunities, after losing that leading status in the prior survey. Educational facilities remain a solid source of work, and, despite hard economic times, retail projects showed a substantial increase.
In terms of project cost, what category of work is providing your company with the most opportunities? (Average) 50% 40%
40% 30%
31%
20% 13%
10%
4%
3%
2%
$2.1 million $5 million
$5.1 million -$10 million
$10.1 million and over
6%
$1.1 million $2 million
$500,000 $1 million
$100,001 $500,000
$100,000 or less
0%
The average number of high-end construction projects remains mostly unchanged. However, perhaps due to rising costs, projects in the $100,000 to $500,000 range were up significantly over those in the $100,000 or less category, which the majority of contractors reported in the previous survey as being their largest source of new work. 6
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In terms of project cost, what category of work is providing your company with the most opportunities? (Average) 2005 Ranking (overall) 1. Less than $50,000 2. $50,000–$ 100,000 3. $250,000–$500,000 4. $100,000–150,000 5. $150,000–$250,000 6. $500,000–$750,000 7. $750,000–$ 1 million 8. $1 million–$2 million 9. $2 million–$5 million 10. $5 million–$10 million 11. $10 million–$20 million 12. More than $20 million
2003 Ranking (overall) 1. Less than $50,000 2. $50,000–$100,000 3. $250,000–$500,000 4. $750,000–$1 million 5. $1 million–$2 million 6. $100,000–$150,000 7. $150,000–$250,000 8. $500,000–$750,000 9. $2 million–$5 million 10. $5 million–$10 million 12. More than $20 million 11. $10 million–$20 million
2001 Ranking (overall) 1. Less than $50,000 2. $250,000–$500,000 3. $50,000–$100,000 4. $1 million–$2 million 5. $2 million–$5 million 6. $150,000–$250,000 7. $100,000–$150,000 8. $750,000–$1 million 9. $500,000–$750,000 10. $5 million–$10 million 11. $10 million–$20 million 12. More than $20 million
1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12.
1999 Ranking (overall) Less than $50,000 $250,000–$500,000 $50,000–$100,000 $150,000–$250,000 $1 million–$2 million $500,000–$750,000 $2 million–$5 million $750,000–$1 million $100,000–$150,000 $5 million–$10 million $10 million–$20 million More than $20 million
Project values increased significantly due to the rising cost of construction materials. The largest boost was recorded in projects costing between $100,000 to $500,000. Information gathered by CAM has indicated record costs for steel and asphalt, which could be a contributing factor.
How has the volume of work for which you have contracted changed over the past 12 months?
17%
17%
16% 13%
13% 12%
12%
11% 10% 8%
8%
8%
7%
Down more than 20%
Down between 10% and 20%
Down between 5% and 10%
Down 5% or less
About the same
Up more than 20%
Up between 10% and 20%
Up between 5% and 10%
0%
Up 5% or less
4%
Almost 40 percent of all respondents reported their volume of work increased by five percent or more from previous levels. Approximately 30 percent reported a decrease of five percent or more.
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Securing Work
Contractors, Suppliers, Architects, and Engineers
How much new work do you currently have backlogged? 41%
Results indicate that backlogged projects remain consistent with levels reported in the previous survey, with none of the categories varying by more than 3 percent from the 2003–2004 edition.
40%
32%
29%
24% 16%
16%
10%
8% 2% 0%
Less than one month
2 to 3 months
4 to 5 months
6 -12 months
More than 12 months
What is your primary method for securing new construction work? 41% 40%
Competitive bidding is still the leading method, and, in fact, 62 percent of contractors reported using a form of competitive bidding as their primary method for obtaining new work. Contractors now list negotiating directly with an owner as fourth in importance rather than its third place ranking two years ago. Securing work with an in-house development staff remained the same as in the last survey at 5 percent.
35% 30% 25% 21% 20% 15%
15%
14%
10% 5%
5% 0%
2% Competitive bidding (open bidding)
Competitive bidding (invitation only)
Referral
Negotiate directly with owner
In-house development staff
Other
If you are bidding competitive work, what is the average number of bidders who have been bidding against you on each project? 2005 55%
2003
55%
50%
46%
45%
50%
40% 39%
40%
30% 30%
20% 20%
10%
10%
2% 1%
0%
6%
5% Less than 5
5 to 10
10 to 15
15 or more
0%
Less than 5
5 to 10
10 to 15
15 or more
Nearly 55 percent of contractors reported that fewer than five other contractors are competing against them during the bidding process. Only 46 percent reported the same in 2003. 8
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Work Force Plans
Contractors, Suppliers, Architects, and Engineers
Is your company experiencing difficulty finding skilled workers? 2005
2003
2001
Yes
41%
44%
64%
No
56%
54%
34%
2%
2%
1%
No answer
Difficulty in finding skilled workers is not as large a concern as it was just four years ago. Again, based upon the information that CAM monitors, this could be attributed to a drop in demand for workers as building has slowed, coupled with an increase in trained workers as a result of the training drive initiated in early 2000.
What plans do you have for your work force over the next six months? 60%
More than half (54 percent) of respondents indicated that they do not plan any change in the staff levels. The most significant change, since the previous survey, is related to respondents who plan to layoff full-time employees. This category went from 7 to 13 percent.
54% 50%
40%
30% 23% 20% 13% 10%
5% 3%
0%
Add full-time employees
Add part-time employees
No change in number of employees
Lay off full-time employees
Lay off part-time employees
Over the next two years, you anticipate labor shortages to: Compared with 23 percent in 2003, 28 percent of respondents expect an increase in labor shortages.
2005
2003
2001
Stay the same
50%
52%
35%
Increase slightly
22%
19%
14%
6%
4%
3%
14%
18%
35%
Decrease significantly
3%
3%
11%
No answer
5%
4%
2%
Increase significantly Decrease slightly
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What plans do you have for your work force over the next six months? (SECTOR BREAKDOWN)
General Contractors
Subcontractors 80% 70% 60%
50%
47%
40%
40%
30%
30%
25%
20%
6%
6% Stay the same
Add full-time
Add part-time
Lay off full-time
Lay off part-time
10% 0%
17% 4%
Stay the same
Add full-time
Add part-time
3% Lay off full-time
Lay off part-time
Architects, Engineers, Real Estate Developers
Suppliers 80%
80%
70%
70%
65%
60%
60%
50%
50%
40%
40%
30%
73%
30%
21%
20%
6%
10%
6% 0%
Stay the same
Add full-time
20%
20%
10% 0%
20%
20%
17%
10% 0%
54%
50%
Add part-time
Lay off full-time
Lay off part-time
0%
7% Stay the same
Add full-time
0%
0%
Add part-time
Lay off full-time
Lay off part-time
More contractors plan on laying off workers. Most businesses anticipate little variance in staffing levels with changes mirroring those in the previous CAM survey.
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Financial Health
Contractors, Suppliers, Architects, and Engineers
Rank the most challenging areas facing the construction industry within the next two years. It is interesting to note that “sources of future work� was listed as a challenge by 17 percent of respondents, compared with 13 percent in the previous CAM survey.
40%
30% 26% 21% 20% 17% 12%
Growth management
Shortage/ training of labor
Insurance cost escalation
Sources of future work
Economic decline
Competition
0%
4% 1%
1%
Shortage/ Training of management
3%
Interest rate fluctuations
3%
Information technology
4%
Litigation
5%
Government Spending
10%
Rank the three strategies your company has undertaken to improve profitability.
Cut operating costs Improving process/products Enhanced marketing Design/Build projects Staff reduction Geographic expansion Enhanced training Safety/Risk management Reduced training
2005
2003
2001
25% 20% 15% 10% 10% 9% 6% 4% 0%
31% 22% 14% 12% 7% 8% 3% 2% 0%
25% 25% 13% 15% 5% 8% 10% 3% 0%
As has happened in so many industries, it appears that the current trend in profitability enhancement has been to cut staff where possible and train those who remain.
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Are you considering any of the following in the next 18 months? 60%
The point of concern in this area is that 27 percent of respondents do not want to “go it alone” any more. They would prefer to either sell their business or join with another company. Interestingly, 54 percent did not answer this question. From the CAM perspective we’re curious about direct correlations: Was the exact answer not available? Were respondents reluctant to respond? CAM will address this outside of the survey.
54% 50%
40%
30%
18%
20%
13% 10%
0%
No answer
Developing a succession plan
Joint venture
7%
7%
Selling your business
Purchasing/Merging with another company
How does your present cash flow situation compare to last year? 50%
40%
37% 31%
31 %
A higher number of contractors reported their cash flow position has improved compared to the same time period in 2003, when only 21 percent marked “better.” Also a significantly lower number of contractors reported that cash flow had worsened from previous levels.
30%
20%
10%
0%
Wose than last year
About the same as last year
Better than last year
What is the average length of time it takes your company to receive final payment for work performed or materials provided?
30 days 60 days More than 90 days No answer
2005 14% 29% 55% 1%
2003 13% 30% 57% 0%
2001 25% 44% 30% 1%
More than half of respondents reported that they still, on average, have to wait more than 90 days to receive final payment. Subcontractors are experiencing the longest wait of all construction professionals.
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What percentage of your total sales do you maintain in equity?
Less than 5% of total sales 5–10% 10–20% More than 20% No answer
2005 30% 27% 13% 12% 17%
2003 31% 26% 16% 11% 16%
2001 33% 25% 13% 10% 19%
Equity as a percentage of total sales has remained constant during the first half of this decade.
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Have you filed a Claim of Lien in the past six months? 60%
The percentage of responses shows that more than half of respondents have not filed Claims of Lien. It is worth noting that the last three CAM surveys have shown that many companies do not file Claims of Lien. This survey indicates 54 percent, which is consistent with previous surveys.
54% 50%
40%
28%
30%
20% 9%
10%
0%
No claims
Less than 3
3 to 5
3%
3%
3%
5 to 10
More than10
No answer
How have material prices for your business changed in the past six months? Almost everyone surveyed reported price increases. Many published reports have indicated the increased demand in commodities has affected pricing worldwide and in the U.S. 2003 68% 7% 25%
2005 94% 2% 4%
Increase in prices Decrease in prices Stayed about the same
2001 74% 6% 20%
Compared to 2004 sales, your company’s annual sales for 2005 will: 30%
While only 43 percent experienced an increase in sales in the 2003 survey, 60 percent of respondents’ sales increased in 2005.
27% 25%
20%
20%
15%
13%
12%
12%
10%
8%
7%
5%
0%
Increase 1% to 5%
Increase 6% to 14%
Increase more than 15%
Stay about the same
Decrease 0% to 10%
Decrease more than 11%
No answer
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Technology
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Contractors, Suppliers, Architects, and Engineers
Are you planning a technology investment in the next year? 60%
2005
60%
2003 52%
49%
50%
50%
39%
40%
39%
40%
30%
30%
20%
20%
9%
10%
10%
5%
4% 0%
No investment
Yes, a small investment
Yes, significant investment
No answer
3% 0%
No investment
Yes, a small investment
Yes, significant investment
No answer
What is the likelihood that your company will take advantage of the following technologies? Online job bidding 50%
50%
40% 27%
30%
20%
20%
20%
15%
10% 0%
Planning to implement in the next year
Considering implementing
No interest in this technology
0%
No answer
14%
14%
Considering implementing
No interest in this technology
10%
10%
6%
Currently using
Company website
40%
32% 30%
51%
Currently using
Planning to implement in the next year
12%
No answer
Currently, 61 percent of respondents have or plan to have a company website within the next year. This is up compared to the previous survey (56 percent).
There was a slight increase compared with the 2003 survey in which 22 percent of respondents said they were currently using this technology.
Online blueprints 50%
44%
40% 30% 22% 20% 12%
10%
10% 0%
14
Currently using
BIENNIAL BUSINESS SURVEY 2005
Planning to implement in the next year
Considering implementing
No interest in this technology
13%
No answer
There has been a steady and noticeable leap in interest in this technology since the 2003 survey. That year only 40 percent had used or planned to use the technology within the next year. In this year’s survey, 56 percent of respondents have used or plan to use online blueprint technology within the next year.
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Policies & Procedures
Contractors, Suppliers, Architects, and Engineers
What plans, if any, do you have for the following policies and procedures? Enhance current Job safety procedures Staff development/training Substance abuse testing Employee benefit programs Minority employment Employee theft policies Handicapped employment
72% 46% 41% 30% 29% 29% 13%
Reduce current
Plan to implement
Don’t plan to implement
Don’t know
No answer
1% 2% 2% 19% 2% 1% 0%
5% 11% 6% 4% 6% 9% 5%
6% 12% 21% 13% 17% 20% 27%
3% 11% 12% 13% 25% 21% 33%
12% 18% 17% 22% 21% 20% 22%
Nearly three quarters of respondents plan to enhance job safety procedures in the near term; likewise, respondents indicated their intention to increase substance abuse testing and staff development efforts in the short term.
What percentage of your construction work does a Michigan-based architectural or engineering firm design? 2005 11% 7% 10% 17% 21% 22% 10%
Less than 10 percent 10 to 30 percent 30 to 50 percent 50 to 70 percent 70 to 90 percent More than 90 percent No answer
2003 14% 7% 6% 14% 25% 25% 8%
2001 12% 5% 8% 13% 23% 25% 14%
1999 15% 8% 8% 11% 24% 21% 13%
A major change occurred in this category since the last CAM survey. In 2003, half of the respondents stated that 70 percent or more of their work was designed by a Michigan-based architectural or engineering firm. In this survey, only 43 percent gave that response.
Bidding Cycle (provided by CAM Construction Project News Group) 700 600 534
500
457
472
493
489 454
460
423 360
511
503
411
400
400
408 349
346 318
281
200
214
214
Dec-04
294
Nov-04
300
477
293
100
Sep-05
Aug-05
Sep-05
Aug-05
Jul-05
Jun-05
May-05
Apr-05
Mar-05
Feb-05
Jan-05
Oct-04
Sep-04
Aug-04
Jul-04
Jun-04
May-04
Apr-04
Mar-04
Feb-04
Jan-04
0
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Respondent Demographics
Contractors, Suppliers, Architects, and Engineers
Which of the following designations best describes your primary business?
In which county are you located in the state of Michigan?
General Contractor Subcontractor Equipment/Material supplier Equipment/Supplies manufacturer Architect/Engineer Real estate developer
Wayne County Oakland County Macomb County Balance of Detroit SMSA Mid-Michigan West Michigan Tri-City/Thumb Area North Lower Michigan Upper Peninsula No answer
15% 48% 14% 5% 5% 2%
Generally speaking, do you consider yourself to be: Republican Democrat Independent No preference No answer
65% 10% 9% 8% 8%
What is your personal net worth? Less than $50,000 $50,000–$99,999 $100,000–$499,999 $500,000–$1 million $1 million–$2 million More than $2 million No answer
2% 2% 21% 22% 13% 20% 21%
What is the last grade of school you completed? High school Vocational/Technical school Some college College degree Post-graduate degree No answer
12% 4% 22% 49% 9% 5%
Is a woman a majority-owner (51 percent or more) of this business? Yes No No answer
11% 87% 2%
Approximately how long has your company been in business? 5 years or less 5 to 10 years 10 to 15 years 15 to 20 years 20 to 30 years More than 30 years No answer
BIENNIAL BUSINESS SURVEY 2005
7% 12% 12% 10% 22% 36% 1%
What is your title? President Chief Executive Officer Chief Financial Officer Chief Operating Officer Other No answer
66% 7% 3% 3% 16% 4%
What is your approximate age? 21–34 35–44 45–54 55–64 65–Over No answer
3% 23% 37% 22% 11% 4%
Is this a minority-owned (excluding femaleowned) business? Yes No No answer
16
28% 32% 14% 11% 2% 2% 6% 1% 0% 3%
4% 95% 1%
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Written Comments
Contractors, Suppliers, Architects, and Engineers
At the present time, what is your biggest concern about the construction industry? • “No new sources of new construction.” • “Health care cost. Workers comp cost. Fuel cost. Illegal (no SS card) workers.” • “Competitors are pricing projects artificially low knowing they will not be profitable simply to secure work in a tight market.” • “Lack of funding for municipal growth and infrastructure revitalization.” • “Developers quit investing in new projects.” • “The economy in Michigan has to change in order for the construction industry to be competitive or even survive.” • “We must abolish Single Business Tax and encourage investment.” • “New apprentices seem to join for high hourly wage and benefits, not for the love of the trade. Their look, attitude, tardiness, and work ethic show this.” • “Too many people unlicensed and doing under-the-table work that is not up to code.” • “As a supplier, we are last to see the $$$ and it seems to get worse each year.”
Solution Suggestions: • “Mandate a minimum of Michigan-based companies for every large project.” • “Hold poor performing contractors responsible for shoddy work.” • “Create less costly health care programs for small businesses.” • “Send illegal workers back home or make them pay taxes.” • “Michigan must learn to be less dependent on auto industry.” • “The state’s governor and legislature need to stop bickering and attract businesses.” • “Promote an atmosphere of good ethical business practices.” • “Improve online license check system.”
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Written Comments
Contractors, Suppliers, Architects, and Engineers
(Continued)
Would you still choose to make your living in the construction industry if you were beginning your career today? 100%
The responses to this question certainly underscore how construction today is a very challenging industry. Interestingly, in the 2003 CAM Survey, 75 percent responded “yes” and only 25 percent responded “no.”
75% 59% 50%
33% 25%
0%
1% Yes
Of those who answered “no,” the following are some of their reasons:
18
•
“You have to front your work and hope to be paid after the project is complete.”
•
“We seem to make less than we did fifteen years ago.”
•
“Too many labor-restrictive rules in the field. Too many unscrupulous customers.”
•
“Competitive bid margins are not enough to cover costs.”
•
“I’m working way too hard to make this little.”
•
“Stress, stress, stress.”
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No
Unsure
7% No answer
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Owner Survey
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Client Perspective
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Owners, Developers, and Construction Clients
Which of the following would best summarize your general experience with the professionalism of construction personnel during the building process? 60%
What was the overall quality of your last construction project? 60%
55%
56%
50%
50% 40%
40%
40%
30%
30% 23%
20%
20%
10% 0%
10%
4% Pleased/ Satisfied
Adequate
16% 5%
0%
Disappointed
Good
Excellent
Satisfactory
Poor
Which of the following would best summarize your general experience with the overall construction process? 2005
2003
2001
Smoother than expected
10%
5%
8%
Proceeded as expected
73%
78%
59%
More conflicts than expected
16%
17%
25%
Which of the following would best summarize your general experience with project costs?
20
2005
2003
Greater than expected
40%
39%
Equal to expectations
56%
57%
Below expectations
4%
4%
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Which of the following would best summarize your general experience with project completion times? 60% 52% 50%
A great change for the better occurred concerning the issue of completion times since the last survey. More than half of the reported projects came in on or ahead of schedule. A 10 percentage point drop was noted regarding delays being cited as caused by contractors. In the last survey, 32 percent of owners cited contractors as the cause of delays as compared with just 22 percent in this survey.
40%
30% 22%
23%
20%
10% 2% 0%
On time
Delayedcontractor at fault
Delayedno fault
Delayedowners at fault
1%
1%
Ahead of schedule
Other
Which of the following generally causes the most delays in project wrap-ups?
According to this survey, communication breakdown issues comprise the main source of construction delays, accounting for 44 percent of project delays. Add to that the 10 percent of respondents who cited quality of labor as a delay factor, and it appears that service issues comprise the main cause of construction delays. From the CAM perspective, while unforeseen problems appear to be a larger issue for the industry to contend with, if more planning were involved we’d be curious to see if this number would adjust accordingly.
40%
30%
28% 25%
20%
10%
8%
10%
12%
4% 0%
Unforeseen problems
Communications with subcontractors
Other
Quality of labor
Communications with project manager
Communications with owners
1%
1%
Quality of products
Owner delays
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In your opinion, who should you contact first to address problems with your project? 70%
68%
60% 50% 40% 30% 20%
15%
12% 10%
2% 0%
General contrators/ construction managers
Architects
Engineers
Tradespersons
1% Specialty contractors
When doing construction planning, which of the following do you first consult about your projects? Every category, with the exception of architects, showed a gain from the previous survey. In 2003, 62 percent of owners surveyed said that they would first consult an architect when planning a new project. In this survey that response rate dropped to 43 percent.
50% 43% 40% 30% 20%
20%
15%
10% 0%
7%
Architect
What percentage of the money charged for construction services do you believe represents profit for contractors? Less than 5% 5–10% 10–20% 20–30% 30–40% 40–50% More than 50%
2005 3% 31% 28% 25% 7% 3% 1%
2003 6% 32% 32% 21% 5% 1% 2%
It is proof that owners believe contractors are making more profit than they actually are when one quarter of all the owners surveyed believe profit margins for contractors are between 20 to 30 percent. 22
BIENNIAL BUSINESS SURVEY 2005
Contractor
Other
Financial institution
9% 4% Accountant
2% No answer
Attorney
What is your perception of fees earned by the following construction personnel? Architects Engineers General contractors Trades Specialty contractors
Too high
Too low
Fair
49% 39% 22% 20% 37%
7% 3% 2% 5% 2%
39% 54% 72% 71% 54%
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Financial Health and Outlook
Owners, Developers, and Construction Clients
Compared to your 2004 sales, you anticipate your company’s annual sales for 2005 will be: Owners
Contractors
40%
30% 27% 35%
35%
25% 30%
20%
20%
26% 25%
20%
15%
18%
13%
17% 15%
12%
12%
10%
12%
8%
10%
0%
5%
5%
4%
5%
0% Increase 1% to 5%
Increase 6% to 14%
Increase more than 15%
Stay about the same
Decrease 0% to 10%
Decrease more than 11%
7%
Increase 1% to 5%
No answer
Increase 6% to 14%
Increase more than 15%
Stay about the same
Decrease 0% to 10%
Decrease more than 11%
No answer
Almost half of all respondents anticipate an increase in future sales for 2005, which is lower than the contractors’ outlook (48% of owners versus 60% of contractors). However, more contractors (20%) than owners (17%) expect their 2005 sales to decline.
Rank the three most challenging areas facing your business within the next two years. Contractors
Owners 40%
40%
30%
30%
26%
25%
21% 20%
20%
17%
17%
17%
12% 9%
3%
3%
Growth management
Shortage/ training of labor
Insurance cost escalation
Sources of future work
Economic decline
Other
Shortage/ Training of management
Intrest rate fluctuations
Information technology
Litigation
Government Spending
Growth management
4% 1%
1%
Shortage/ Training of management
4%
0% Shortage/ training of labor
Insurance cost escalation
Sources of future work
Economic decline
0% Competition
5%
5% 2%
Interest rate fluctuations
3%
Information technology
3%
Litigation
6%
4%
4%
Government Spending
6%
10%
Competition
10%
In 2003, the top three challenges facing business owners were, in this order: the economy, competition, and finding sources of future work. In 2005, the top three concerns were the economy, government spending, and insurance costs. While concern about the economy and rising insurance costs are affecting everyone, the fact that many municipal agencies took part in this survey explains the high level of concern about government spending.
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Generally speaking how has your business fared over the last 12 months? 2005
2003
2001
Better than expected
19%
25%
32%
Approximately the same
54%
45%
53%
Worse than expected
12%
24%
6%
No answer
14%
5%
9%
What do you feel the overall outlook is for your business sector in the next year? 2005
2003
2001
Expect it to be good
18%
34%
37%
About the same
49%
45%
45%
Worse than expected
19%
15%
8%
No answer
14%
6%
10%
More respondents in this survey expressed pessimism about the future as compared to their outlook in 2003.
24
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Construction Project Activity
Owners, Developers, and Construction Clients
How many non-residential projects have you personally been involved in planning and/or executing within the past 24 months? 40% 35%
30% 23% 19%
20%
9%
10%
8% 4% 2%
0%
No Projects
1 Project
2-5 Projects
6-10 Projects
11 - 50 Projects
More than 50 Projects
No answer
Of the respondents, 63 percent stated that they are personally involved in planning and/or executing 10 projects or fewer. That is a 3 percent rise from the previous survey. However, in the 2003 survey, nearly 20 percent stated they were involved in 10 to 50 projects, and in this survey that response rate dropped to 8 percent.
What type of work was done on the majority of your projects? 2005
50%
2003
50% 41% 40%
40% 35%
30%
30%
20%
18%
10%
10%
0%
7%
New Construction
Renovation
Addition to Existing Facility
Retrofit
Ongoing Maintenance
5%
Other
7%
No answer
Do you plan to be involved in the planning and/or executing of any construction projects within the next 24 months? Yes No No answer
2005 66% 31% 3%
20%
20%
18%
2003 80% 17% 3%
17% 10%
10%
5% 0%
New Construction
Renovation
Addition to Existing Facility
Retrofit
Ongoing Maintenance
3%
3%
Other
No answer
Please specify what type of work will be done on the majority of your upcoming projects? New construction Renovation Retrofit Ongoing maintenance Addition to existing facility
2005 51% 15% 13% 9% 16%
2003 51% 21% 12% 7% 11%
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Please select a range that represents the average estimated price of your projects.
2005
30%
2003
30%
26% 22% 20%
20%
20%
17% 15%
14% 12% 10%
13% 10%
10% 5%
4%
0%
14%
11%
$100,000 or less
$100,000 $500,000
$500,001$1 million
4%
$1.1 million- $2.1 million- $5.1 million- $10.1 million$2 million $5 million $10 million and higher
0%
$100,000 or less
$100,000 $500,000
$500,001$1 million
$1.1 million- $2.1 million- $5.1 million- $10.1 million$2 million $5 million $10 million and higher
Please select a range that represents the average estimated price of each of your upcoming projects. 2005
30%
2003
30%
24% 22%
20%
20%
20%
20%
20%
19% 17%
13%
12%
10%
10%
10%
8%
6% 5%
4%
0%
26
$100,000 or less
$100,001 $500,000
$500,001$1 million
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$1.1 million- $2.1 million$2 million $5 million
$5.1 million$10 million
$10 million and higher
0%
$100,000 or less
$100,001 $500,000
$500,001$1 million
$1.1 million- $2.1 million$2 million $5 million
$5.1 million$10 million
$10 million and higher
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Technology
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Owners, Developers, and Construction Clients
What types of technology would you consider for future projects? (building local exchange carriers)
BLEC
Advanced voice/data cabling
Have implemented
4%
27%
18%
42%
Plan to implement
2%
16%
21%
17%
Never plan to implement
5%
5%
10%
6%
Not familiar with this technology
56%
24%
22%
8%
No answer
34%
27%
29%
27%
Alternative Standard telecommunicahigh-speed tions providers internet access
What challenges have you faced regarding the implementation of technology in new construction and renovation projects? 40%
40%
38%
36%
30%
20% 16%
15% 10%
10%
0%
Too expensive
Unsure of needs
Ability to expand to future technology changes
Lack of options/ contractors
Other
No answer
Note: Percentages exceed 100% due to multiple responses
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Written Comments
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Owners, Developers, and Construction Clients
What is your overall perception of the construction industry? Positive responses: • • •
“I’ve heard horror stories, but, for the most part, I’ve been blessed to work with excellent construction contractors.” “Most in the industry are good, hard working people.” “Deal with reputable contractors and you will have no problems.”
Negative responses: • • • •
“Lack of professionalism on the part of younger supervisors.” “There is a continuing decline in quality workmanship and a general ignorance of regulations.” “Some contractors cut corners.” “Not doing what is promised when it is promised.”
In your opinion, what is the single biggest problem owners experience when working with the construction industry? • • • • • •
28
“Lack of communication between all parties involved with the project.” “Contractor’s failure to stay on schedule.” “Seems to me the architect is never at fault, the buck is passed to the contractor and then to the owner to foot the bill.” “Misunderstandings, confusion, misinterpretation, getting everyone on the same page is challenging.” “Contractors sometimes have too many jobs going at the same time and can’t keep promises they make.” “Costs for materials, fuel, and equipment change quickly.”
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Construction Association of Michigan 43636 Woodward • P.O. Box 3204 • Bloomfield Hills, MI 48302-3204
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