Construction Productivity: Impacts from the Construction Labor Shortage | Construction Podcast

Listen to “A Podcast That Builds” host Ben Johnson and Dodge’s Donna Laquidara-Carr discuss the findings from the 2017 Q4 CCI Report, including insights into improving construction productivity and updates on the construction labor shortage. Below is a transcript of this construction podcast.

Ben Johnson:    

Welcome to "A Podcast That Builds", construction industry experts, keeping you in the know with news trends and analysis that will shape the future of building. And today we are talking about the fourth quarter CCI Report, and back with us today is Donna Laquidara-Carr. Welcome Donna.

 

Donna Laquidara-Carr: 

  Thank you, Ben. I'm fairly pleased to be here today.

 

Ben Johnson:    

Since we're talking about the CCI again today. Can you quickly remind our listeners what the CCI is?

 

Donna Laquidara-Carr: 

Sure. So, every quarter we survey GC's and trade contractors about how they feel about their business and we do that to create this index. And we've, for the index itself, we focus on three specific items, revenue, backlog and their confidence in being able to secure new business. However, we don't just a survey on that, we want to understand the issues that are feeding into that. So, every quarter we ask them about some of the same things as their profit margins, like their ability to access financing and their concerns about the construction labor shortage. And finally, every quarter we also asked them about a unique topic or trend that to capture how the industry is evolving.

 

Ben Johnson:    

Great. Perfect. And the obvious question here, what do the new CCI numbers suggest about the current state of construction?

 

Donna Laquidara-Carr: 

All right, well, the new CCI number for the fourth quarter is 74, which is again, another positive number for the overall industry. And one thing that's nice about this quarter is now we have four quarters of data. We can take a look back and see how things are evolving. And we do see that that CCI number has remained steady pretty much through 2017. A little bit up, a little bit down, but always in the 70s. So, we, you know, we see that as an overall optimistic view of the construction state of the construction industry right now.

 

Ben Johnson:    

And that's always good to hear. And the overarching theme we've heard through your, your visits here to the podcast have been on the construction labor shortage. So, we've talked a lot about them. And what is this fourth quarter CCI say in terms of anything new or developments or current findings?

 

Donna Laquidara-Carr: 

Sure. Well. Certainly, the one thing it certainly reinforces is that the construction Labor shortage is still a serious issue and we expect that to continue for quite a while. But there was a little bit of an interesting change when we look at the data just for the general contractors this time. In the past, about half of the general contractors are between 55 and 59% over the last three quarters have said yes, they're very highly concerned about the construction labor shortage. This quarter the number dropped down to 45% now again, this is just one quarters worth of data and we will need to see what happens over the next few quarters to see if it's a trend or just something that happens. You know, they're actually rating this a 10-point scale and to be in that category of very concerned, they have to say their level of concern is an 8 through a 10 if a bunch of people picked a seven rather than an eight, we might see a drop like that.

So, we do want to make sure that it's consistent. However, it is pretty striking to see a 10-percentage point drop off the lowest level that we've seen in the last three quarters. So, we think this truly is notable with the trade contractors. We don't see that much. We do see a lot of variability, but we see them bouncing down and up and down and up. So, but the one thing I do want to say about trade contractors though is that they are consistently more concerned about the availability of skilled labor than GC's. They have been the entire year. So, for instance, in this quarter when 45% of the GC's said they were concerned about finding skilled labor, 67% of the trade contractors said the same thing. And when you look across 2017, the percentage of trade contractors reporting this concern is always higher than 60%, whereas it's been below 60% in the 50% range for the general contractors.

 

Ben Johnson:    

That was very interesting. Yeah. Good to see. We have some consistency though. It helps verify the findings overall and outside of labor. Are there any other interesting changes across quarters when you look back at all of 2017?

 

Donna Laquidara-Carr: 

Well, one thing that did kind of pop out this time is, you know, all throughout 2017 we'd been asking contractors whether they believe they will spend more on tools and equipment this year, investing in equipment, generally a sign of optimism. You do that when you expect your business to grow and when you have enough capital to make those investments. And in Q4 a higher percentage of trade contractors report that they expect to invest more in tools and equipment than did in the previous quarters. So, in Q4, it's 70% who say that they're going to invest more in tools and equipment, whereas you know, it would, the highest percentage before that was in Q2 was 65% but the lowest in Q1 was 53% so you can see the leap from Q1 and 53% to Q four and 70% is pretty dramatic. GC's are a lot less volatile on this point. They tend to stay in a 10-point range between 41% and 51%. So again, even though the trade contractors are the ones more concerned about skilled labor, there also tend to be a little bit more optimistic, tend to be more interested in investing in their business and their business throughout 2017.

 

Ben Johnson:    

So, the spotlight this quarter was on construction productivity and various ways to improve it. Did any surprising findings emerge out of this this quarter?

 

Donna Laquidara-Carr: 

Yes, there were some surprising findings, but I do want to start with some of the things we were sort of expecting to find that did come out because sometimes it's important to just reinforce your expectations on these things to see that we are tracking the industry appropriately. First, we saw that a lot of contractors really do believe that there is a need to improve efficiency while only 2% of the GC's and 15% of the trade contractors say that they think that their job site is efficient enough and doesn't need improvement. So that is pretty compelling evidence that there's some wide recognition in the industry that there's a lot of changes that can be made. There was strong agreement that improving construction productivity would have the biggest impact on improving efficiency and that was something we expected to see. We did also see a lot of attention to job site logistics and project management as very impactful on as ways to improve the job sites’ construction productivity.

So those, those were great. But what was surprising to me personally, what was surprising was the importance that contractors placed on soft factors. Things like communication and improved training. Now when it comes to their top issue, construction productivity perhaps that isn't that surprising, being able to communicate effectively, being able to train appropriately. These are things that one would expect contractors to definitely expect to influence job site efficiency. However, what about things like job site logistics when the top factors for job site logistics include a just in time material deliveries and the top one is training on management organizational skills rather than all the tools that are available now to improve a job site. Logistics. It was just a little bit surprising and it perhaps suggests that contractors are a little conservative about the technologies and what they can do to improve things.

However, with GC's there were a few interesting things that came out. Lean was very big for GC's, far bigger than it was for contractors in terms of ways to improve labor productivity and ways to improve job site logistics. When you consider the fact that just in time material deliveries, which is an aspect of lean did perform very well on the survey. The other area where GC's were up embracing technology a little bit more is BIM. A Lot more GC's recognized it as important for improving the use of advanced tools on site that was 41% and 21%. A decent percentage also think it improves construction productivity. So, they really reinforce that split in the industry between GC adoption of BIM and trade slightly lagging behind in that.

 

Ben Johnson:    

Alright. So, we've there are definitely some tools that could be used, but what do we know some of the factors that are keeping contractors from improving job site efficiency right now?

 

Donna Laquidara-Carr: 

Yeah. Right. The clear answer to that that came out of the survey is the challenges of Implementation. They're not that worried about cost had a relatively low percentage who said it was a top obstacle. More than half those said that it was time constraints and the effort to get their workforce to embrace change. Those were the obstacles that they pointed to. And interestingly, again, GC's really came in and said that these were bigger obstacles than trade contractors too. So, the question is, you know, that I still ponder is what, how do you think we can make these changes easier to adopt? What can we do to help move the industry along? And I think that's still an open question and a really important one if we're going to see improve job site efficiency.

 

Ben Johnson:    

Yeah, absolutely. The tools are there. It's just implementing them that's the hard part. So short term, what changes do you expect to see in, in 2018 for instance?

 

Donna Laquidara-Carr: 

Well, it's interesting because right now as I've said, the contractors are very optimistic, but when we look at the dodge outlook for 2018, which is still quite positive, it does show a flattening of the market though that we're kind of getting to the peak of this growth period that we've been in for a while. So, we're wondering whether in 2018 as we go through that year, we'll start to see the contractors who are definitely on the tail end of the construction cycle of the design and construction cycle if we'll start to see them reflect this a little bit more. And one other point too as a researcher, we're really excited going into 2018 with this particular index because this will give us a whole second year of data and that will definitely deepen and enrich our understanding of our findings as we go along. The more data we have, the more we can really say about the, the, the next set of findings. So, we're really pleased to be moving into 2018 and to see how the index evolves.

 

Ben Johnson:    

Yeah, absolutely. No, we have a, we have one year under the belt, but the more data, the better the tool becomes. And we have many more quarters to come. So, thank you again, Donna, for joining us today.

 

Donna Laquidara-Carr: 

Alright, it's a pleasure. And you know, we, like I said, we look forward to seeing where 2018 brings us.

 

Ben Johnson:    

Absolutely. And I'll certainly be seeing you in the new year with the Q1 2018 CCI Report. And that'll do it for this episode of "A Podcast That Builds". To download a free copy of the report referenced in today's show, the CCI or Commercial Construction Index, visit construction.com, hit Toolkit and Reports. Visit Dodge at construction.com or by calling 877-784-9556. Thanks for joining. We'll see you next time.