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Tue June 22 2021

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US contract cancellations outstrip wins

29 Oct 20 More US contractors are reporting cancelled projects than starts, according to latest government data.

Associated General Contractors of America (AGC) found that construction firms are experiencing widespread project deferrals and cancellations, along with disruptions to ongoing work and few new project awards. The economic damage from the pandemic is dragging down industry employment in metro areas across the country, according to a new AGC survey and its analysis of new government data.

Association officials urged Congress to pass new coronavirus relief measures to head off further job losses.

“The survey results make it clear that the months-long pandemic is undermining demand for projects, disrupting vital supply chains and clouding the industry’s outlook,” said Ken Simonson, the association’s chief economist. “Without new federal relief measures, these challenges pose a significant threat to current construction employment levels.”

Simonson noted that three-quarters of survey respondents report having a scheduled project postponed or cancelled. He added that is up from the 60% of contractors who reported a cancelled project in our August survey and 32% who did so in June. Meanwhile, only 23% of contractors report working on new or expanded construction projects as a result of the pandemic, about the same percentage as in June.

The coronavirus is also disrupting projects that are still under way, Simonson said. Seventy-eight percent of respondents report they are currently experiencing project delays or disruptions, up from 57% in June. In particular, 42% of firms are experiencing disruptions due to a shortage of construction materials, equipment or parts. In addition, 35% are experiencing disruptions because of a shortage of craftworkers and/or subcontractors.

In one bit of good news, however, only 7% of firms are experiencing disruptions because of a shortage of personal protective equipment.

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Shrinking demand and disrupted operations are shaking many contractors’ faith in the future, the survey showed. Thirty-four percent of respondents report they do not expect their firm’s volume of business will return to pre-pandemic levels for at least a year.

Delays, disruptions and uncertainty threaten to undermine employment levels in the construction sector. In fact, 30% of firms report they have already furloughed or terminated employees because of the coronavirus, said AGC. That is likely why construction employment fell during the past year in most metro areas, Simonson added. Construction employment fell in 234, or 65%, of 358 metro areas between September 2019 and September 2020. Construction employment was stagnant in 38 other metro areas, meanwhile, and only 86 metro areas added construction jobs during the past year.

Simonson said that a majority of firms report they plan to cut jobs or abstain from adding new employees during the coming year. Twenty percent expect their headcount will shrink while 42% report they do not plan to add to the size of their headcount during the next 12 months.

Most firms participating in the survey, 78%, cited a preference for new federal relief measures to mitigate against the impacts of the coronavirus. Among the measures firms are hoping Washington officials will enact are new federal investments in infrastructure, liability reforms that protect responsible firms from frivolous coronavirus suits and a new highway and transportation bill.

As a result, association officials urged congressional leaders to recall legislators right after the election to pass new coronavirus relief measures. In particular, the construction officials called on Congress to new infrastructure investments, liability reforms and an additional round of Paycheck Protection Program loans.

“As our survey shows, the pandemic and efforts to mitigate its spread have deeply wounded the economy, depressing demand for many types of commercial construction projects,” said Stephen Sandherr, the association’s chief executive officer. “Congress can end the downward economic slide and help create needed new construction jobs by passing measures to boost demand and protect honest employers.”

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