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Sat June 19 2021

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US contractors take stock a year into the pandemic

12 Mar Soaring materials costs, supply-chain problems and project cancellations are continuing to have an impact on the US construction industry one year into the pandemic, according to a new survey.

Associated General Contractors of America (AGC) officials have warned that industry will have a hard time recovering unless the president and Congress act promptly. They urged for steps to be taken to eliminate tariffs on key materials, address shipping backups and boost funding for new infrastructure to help the industry recover.

One year after the pandemic struck, construction firms are experiencing soaring materials costs, widespread supply-chain problems, and continuing project deferrals and cancellations, according to the new survey that AGC has released.

“The survey results make it clear that the construction industry faces a variety of challenges that threaten to leave many firms and workers behind, even as some parts of the economy are recovering or even thriving,” said Ken Simonson, the association’s chief economist. “The pandemic has left the supply chain for a range of key construction components in tatters and undermined demand for a host of private-sector projects.”

Simonson said that 93% of the survey’s respondents reported that the pandemic has driven up their costs. Four out of five are spending more on personal protective equipment, sanitisers and other health-related expenses. More than half say that projects are taking longer than previously.

Costs and delayed deliveries of materials, parts and supplies are vexing many contractors. Nearly 85% report those costs have increased over the past year. In addition, nearly three-quarters of the firms are currently experiencing project delays and disruptions, mainly due to shortages of materials, equipment or parts. Nine out of ten firms that are incurring such delays cite backlogs and shutdowns at domestic producers, such as factories, mills, and fabricators. Half of the firms also blame backlogs or shutdowns at foreign producers.

More than three-quarters of the firms report having projects cancelled or postponed in the past year, including more than one out of five who have reported that a 2021 project has been cancelled or postponed.

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Meanwhile, only a fifth of respondents say they have won new projects or add-ons to existing projects as a result of the pandemic.

In a sign that the pandemic has had very different effects on construction firms, about one-third of firms say business matches or exceeds year-ago levels, while another third say it will take more than six months to reach that mark, and a fifth say they don’t know.

Respondents in the northeast are the most pessimistic about the outlook, followed by firms in the south. Firms from the Midwest are split along the same lines as the full survey, while respondents in the west are more optimistic, on balance.

Despite these differences in experience to date and the near-term outlook, contractors from all regions, project types, and firm sizes are almost equally bullish about their hiring expectations over the next 12 months. Across nearly all subgroups, roughly three out of five respondents expect to add employees over the coming 12 months. Only 10% to 15% of firms in any category expect to reduce their headcount.

“Contractors need Washington officials to cut tariffs and address the shipping and supply chain problems that are driving costs and contributing to project delays,” said Brian Turmail, the association’s spokesman. “They also expect the president will keep his word and get significant new infrastructure investments enacted as quickly as possible.”

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