2020 CONSTRUCTION OUTLOOK SURVEY 1 INTRODUCTION The construction - - PowerPoint PPT Presentation

2020 CONSTRUCTION OUTLOOK SURVEY

1

INTRODUCTION

The construction landscape continues to improve and grow along with the economy in Georgia. The following report is based upon an online survey of privately-held construction companies in Georgia conducted by the Construction Management Department at Kennesaw State University, in conjunction with Bennett Thrasher, LLP. The purpose of the Georgia Construction Outlook Survey is to analyze specific benchmarking data of general contractors and subcontractors in the construction industry that are headquartered in Georgia. The survey highlights:

• Financial performance and investment in the business
• Employee compensation and retention best practices
• Business strategies and concerns
• Innovation and use of technology

By analyzing and interpreting this data, a greater awareness of best practices and trends help leaders in the construction industry better understand the competitive landscape and prepare for the future. The survey report also highlights the top concerns of Georgia construction businesses and provides an economic outlook for the state of the industry.

2

SURVEY DATA

If you have any questions regarding the 2020 Construction Outlook Survey, or would like to learn more about how this data compares to your business performance, please contact

• ne of the following individuals:

Tom Jollay – Partner, Bennett Thrasher Tom.Jollay@btcpa.net

• W. Scott Hazy – Partner, Bennett Thrasher

Scott.Hazy@btcpa.net Special thanks to Khalid Siddiqi, Chair of Kennesaw State University’s College of Construction Management. This document contains proprietary and confidential information of Bennett Thrasher, LLP. Use, disclosure or reproduction is prohibited without the prior express written consent of Bennett Thrasher, LLP. For inquiries regarding reproduction or distribution of any survey data or content in these materials, please contact Allison.Lavelle@btcpa.net.

3

SURVEY ANALYSIS AND RESPONSES

4

SURVEY RESPONDENTS

The 2020 Construction Outlook Survey received 103 total responses. The four respondent categories the survey model will analyze are General Contractors, Heavy Contractors, Specialty Contractors and Home Builders. The chart on the right reflects survey results by respondent type.

Specialty Contractor 48.1% General Contractor 42.3% Heavy Contractor 5.8% Home Builder 3.8%

The data will also often compare responses by revenue ranges. The bar chart on the left is shown by revenue and respondent type.

5

Under $5M $5-9.9M $10-24.9M $50-99.9M More than $100M

General Contractor Heavy Contractor Specialty Contractor Home Builder

GENERAL CONTRACTOR INDUSTRY SEGMENT RESPONSES

Commercial/Non-Residential Residential

The majority of General Contractor survey participants work in the non-residential

• sectors. 92.5% of respondents

work in the non-residential sector and 7.5% work in the residential sector.

6

HEAVY CONTRACTOR INDUSTRY SEGMENT RESPONSES

Bridge, Tunnel & Elevated Construction Highway Water, Sewer, Pipeline, Comm, Powerline Misc Heavy

The majority of Heavy Contractors participating in the survey work in Highway (40%).

7

SPECIALTY CONTRACTOR INDUSTRY SEGMENT RESPONSES

Electrical Mechanical & Plumbing Other Plastering, Drywall, Acoustical & Insulation Roofing, Siding and Sheet metal work Glass and Glazing Work Demo and Wrecking Work Flooring Masonry Work

The highest level of participation in the survey of Specialty Contractors were Electrical (26.5%) and Mechanical & Plumbing (24.5%).

8

OVERVIEW

9

ALL CONTRACTOR TYPES BY GROSS REVENUE

Under $5M $5-9.9M $10-24.9M $25-49.9M $50-99.9M More than $100M

The data above represents the survey responses from within each revenue category. Comparing this information against the gross revenue estimates in Georgia indicates that a statistically relevant sample size from each revenue category was received for the survey.

10

AVERAGE GROSS REVENUE

2019 2018 General Contractors $460,127,407 $534,737,753 Heavy Contractors $55,125,000 $161,415,649 Specialty Contractors $127,428,201 $83,947,405 Home Builders $152,500,000 N/A All Contractors $254,513,435 $279,526,514

The variance between gross revenue figures in 2019 and 2018 is attributed to the number and variety of survey respondents.

11

GROSS REVENUE BY CONTRACTOR TYPE

General Contractors

Under $5M $5-9.9M $10-24.9M $25-49.9M $50-99.9M More than $100M

Heavy Contractors

Under $5M $5-9.9M $10-24.9M $25-49.9M $50-99.9M More than $100M

Specialty Contractors

Under $5M $5-9.9M $10-24.9M $25-49.9M $50-99.9M More than $100M 12

Home Builders

Under $5M $5-9.9M $10-24.9M $25-49.9M $50-99.9M More than $100M

GENERAL CONTRACTOR REVENUE CATEGORY BY INDUSTRY SEGMENT

13 Residential Commercial/Non-Residential Under $5M $5-9.9M $10-24.9M $25-49.9M $50-99.9M More than $100M

HEAVY CONTRACTOR REVENUE CATEGORY BY INDUSTRY SEGMENT

14

Highway Water, Sewer, Pipeline, Comm, Powerline Bridge, Tunnel & Elevated Construction Misc Heavy $10-24.9M $25-49.9M $50-99.9M More than $100M

SPECIALTY CONTRACTOR REVENUE CATEGORY BY INDUSTRY SEGMENT

Concrete Electrical Fire Protection Floor Laying & Other Floor Work Glass & Glazing Other Painting & Paper Hanging Plastering, Drywall, Acoustical & Insulation Plumbing, Heating & Air Roof, Siding & Sheet Metal Work Wrecking & Demolition Work Under $5M $5-9.9M $10-24.9M $25-49.9M $50-99.9M More than $100M 15

REVENUE COMPARISON BY AGE OF COMPANY

1-5 years 6-10 years 11-15 years 16-29 years 30+ years Under $5M $5-9.9M $10-24.9M $25-49.9M $50-99.9M More than $100M 16

CONTRACTOR TYPE COMPARISON BY AGE OF COMPANY

1-5 years 6-10 years 11-15 years 16-29 years 30+ years General Contractor Heavy Contractor Specialty Contractor Home Builder

86.41% of companies participating in the survey have been in business more than 15 years.

17

COMPARISON OF PROJECT MARGINS FROM PRIOR YEAR

Increase Decrease Remain the Same

The majority of companies have experienced an increase

• r no change in margins over the prior year. Fewer

companies are reporting that margins have decreased, possibly due to an increase in projects and bid margins.

General Contractors Heavy Contractors Specialty Contractors Home Builders Increase

43.2% 40.0% 56.0% 25.0%

Decrease

13.6% 20.0% 12.0% 1.0%

Remain the Same

43.2% 40.0% 32.0% 50.0%

2018 Outside Ring 2019 Inside Ring

18

STATUS OF CURRENT PROJECT BACKLOG OR PIPELINE FOR ALL CONTRACTORS

Higher than last year Lower than last year No change from last year

55% of survey respondents reported a higher project backlog from the prior year.

25+ 19-24 13-18 7-12 3-6 1-2

Number of Months

• f Current Backlog

19

2020 REVENUE PROJECTIONS

Increase 10% or more Increase 5-9.9% Increase 1-4.9% Less than 1% increase/decrease Decrease 1-4.9% Decrease 5-9.9% Decrease 10% or more

76.24% of companies projected an increase of revenue, which is lower than 84.38% in the previous year. 27.00% of companies indicated they expected a 10% or more increase of revenue, which is lower than 40.00% in the previous year.

20

BUSINESS STRATEGIES

No New Strategies Sale/Divestiture/Sale to ESOP Outside Capital Infusion Transfer of Ownership to Family Members Transfer of Ownership to Management Team Other Acquisition Implementation of Lean Construction Principles Expansion of Business Offerings Expansion of Geographic Reach

Expansion of Geographic Reach was a leading business strategy, followed by the Expansion of Business Offerings, which is consistent with the previous year’s strategies. There was an overwhelming response that “No New Business Strategies” would be implemented in day-to-day operations.

21

FAMILY-OWNED BUSINESS

Yes No

63% of construction businesses in Georgia are family-owned businesses.

22

ENTITY LEGAL STRUCTURE

S Corp Limited Liability Company C Corp ESOP Small Business (2 owners)

S-Corp was the largest proportion of legal entity types (58%), followed by LLC (23%) and C-Corp (17%).

23

SUCCESSION PLANS

Yes No Unsure

20% of all construction companies participating in the survey indicated they did not have a succession plan in

• place. 70% indicated they did and 12%

were unsure if they had a succession plan in place. Specialty Contractors and Heavy Contractors were the least likely to have a succession plan in place. The majority

• f all groups reported they had a

succession plan in place.

General Contractors Heavy Contractors Specialty Contractors Home Builders

Yes

76.7% 60.0% 62.0% 75.0%

No

11.6%

• 28.0%

25.0%

Unsure

11.6% 40.0% 10.0%

• 24

SALES COMPETITION STRATEGIES

Innovation Quick Completion of Projects Low Price Adapting to Customer Needs High Quality

High Quality continues to be the leading sales strategy, while more emphasis was placed on Adapting to Customer Needs as a sales strategy compared to Low Price in the previous year. Competing for sales on Innovation and Quick Completion of Projects had the lowest response rates.

25

AREAS OF INNOVATION

Product Innovation Marketing Innovation Organizational Innovation Technology Innovation Process Innovation

26.67% of companies responded that process innovation was an area of innovation that contractors were engaged in, followed by technology innovation (24.29%), organization innovation (23.81%), marketing innovation (13.33%) and product innovation (11.90%).

26

TOP CHALLENGES

Other Language Barriers Financial Visibility and Control Safety Training Succession Planning Industry Specific Training Willingness or Ability to Travel Healthcare Costs Employee Reliability Margin Pressures in Competition Attracting or Retaining Qualified Individuals

The leading challenge businesses in the construction industry in Georgia face is attracting and retaining qualified individuals. This has been a top challenge for the last three consecutive years of this survey. Competitors and employee reliability also continue to be looming concerns.

27

WORKPLACE FRUSTRATIONS

Other Marketing Business Transparency in Reporting New Business Health & Safety Competitors Personnel Issues

The leading workplace frustration in the construction industry in Georgia is personnel issues (51.14%), followed by competitors (14.77%). Both of these workplace frustrations are reported as slightly higher than last year. The quality, reliability and availability of workers noted in the responses to this survey question align with the top challenges in the industry.

28

JOB SITE CHALLENGES

Other Staying on Budget Daily Reporting Deadlines Personnel Management Subcontractor Management

The leading job site challenge in the construction industry in Georgia is Subcontractor Management (36.56%), followed by Personnel Management (19.35%), which was the leading job site challenge in last year’s survey.

29

FINANCIAL STATEMENT ASSURANCE

None of the above Compilation Review Audit 30

BONDING

Home Builder Specialty Contractor General Contractor Heavy Contractor

% of Work Bonded

Home Builder Heavy Contractor General Contractor Specialty Contractor

% of Bonding Line Utilized in Last 12 Months

68% of Heavy Contractor work is bonded, followed by General Contractors (37%), Specialty Contractors (22%) and Home Builders (20%). The average of all contractors is 31%. This average is 5% lower than last year. Participants were asked what percentage of their bonding line was utilized in the last 12 months: Specialty Contractors 36%, General Contractors 34%, Heavy Contractors 30% and Home Builders 30%. The average of all contractors is 35%. This average is 8% higher than last year.

31

PUBLIC/PRIVATE PARTNERSHIPS

Yes No

23.1% of all construction contractors responded that they engage in public/private project

• partnerships. This is 2.7%

lower than last year.

32

LOOK BACK CALCULATIONS

Yes No Unsure

17.98% of contractors reported that they do not prepare look back calculations with the preparation

• f their tax returns. 42.70% stated

they do prepare look back calculations and 39.33% said they were unsure if their company prepared look back calculations. There is a 12.14% decrease in companies preparing look back calculations compared to the previous year.

33

D/M/WBE PROJECTS

Yes No

36.26% of all Georgia contractors participate in D/M/WBE (disadvantaged, minority or woman-owned business enterprises)

• projects. Challenges for participating in

D/M/WBE projects are finding qualified partners to fulfill D/M/WBE requirements and the complexity of the required subcontractor forms.

34

DIVERSITY IN MANAGEMENT

35

Percentage of Management Team that is Female

Female Male

Percentage of Ownership/ Partners that is Female

Female Male

17.9% 14.5% Percentage of Management Team that is Female

Female Male

Percentage of Ownership/ Partners that is Female

Female Male

18.7% 10.5%

2018 2019

TECHNOLOGY

36

CYBERSECURITY

Yes No

98.9% of respondents have security controls in place to protect their company’s electronic data. 44.3% of respondents have experienced a cyber-attack in the past two years. Cybersecurity Controls Cyber-attack in the Last Two Years

37

IT BUDGET

Less than 1% 1-5% Above 5%

Contractors were asked what percentage of their gross revenue is dedicated to their Information Technology (IT) budget. The average IT budget for all contractors is 2.65%.

38

ESTIMATING SOFTWARE

Other Xactimate Fast Pipe Timberline Bluebeam Viewpoint Proprietary/Custom Sage Excel 39

23.5% of companies use Excel, 11.1% of companies use Sage and 7.4% have custom software developed for their company. The remaining 58% of companies use a variety of off the shelf solutions. Some of the “other” software solutions include Accubid, Agtek, Plainswift and Vision InfoSoft.

ERP/BUSINESS MANAGEMENT SOFTWARE

Other Proprietary Oracle Procore Foundation Timberline Viewpoint QuickBooks Sage

Sage and QuickBooks continue to be the dominant software products used by contractors for ERP/Business Management.

40

SCHEDULING SOFTWARE

Other SureTrak Sage None Proprietary Excel Microsoft Project 41

Microsoft Project continues to be the dominant software product used by contractors for scheduling purposes.

BUILDING INFORMATION MODELING (BIM) TECHNOLOGY

Yes No

31% of respondents indicated they use BIM Technology and 69% indicated they do not. Of the respondents who indicated they were using BIM technology, 55.9% have a dedicated person managing the tool, which decreased by 22.4% from last year.

42

MOBILE DEVICE ACCESS

Yes No

75.9% of respondents indicated their company uses mobile devices to access their systems, whereas 24.1% indicated they do not. Of the respondents that said they accessed their systems using a mobile device, only 35.9% use a Mobile Device Management System (MDM), which increased by 64.28% from last year.

43

FUTURE INVESTMENT IN IT

Other MDM Integrated Project Delivery Business Intelligence Plan Management Systems ERP Design Technology (BIM and modeling integration) Scheduling Software Financial Planning and Reporting Not planning on adding any new technologies Estimating Software Construction Field Technology Cloud Based Technology

Companies are increasingly focusing and investing in their IT. Survey participants indicated that cloud based technology and construction field technology are top focus areas.

44

HEALTHCARE COSTS AND BENEFITS

45

GROSS HEALTHCARE PREMIUMS

2017 Average 2018 Average 2019 Average General Contractors Home Builder Specialty Contractors Heavy Contractor All Companies

Healthcare premium increases have been a widely discussed topic over the last few

• years. The graph above indicates the increase and decrease in premiums over the last

three years. The average increase for all contractors in 2019 was 11.43%.

46

TYPES OF INSURANCE PROGRAMS UTILIZED

47

Captives Subguard Errors and Omissions Pollution Bonding Umbrella Vehicles Workers' Comp General Liability General Contractors Home Builder Specialty Contractors Heavy Contractors All Companies

HUMAN CAPITAL

48

EMPLOYMENT LEVELS

63.16% of construction companies indicated that employment levels increased from 2017 to 2018, which is an indication of the growth experienced recently in the market.

Increase Decrease Remain the Same

Employment growth levels continue to remain the same (63.11%).

2018-2019 2017-2018

49 Increase Decrease Remain the Same

FULL TIME EQUIVALENT (FTE) DATA

Contractor Type Average All FTE General Contractors 261 Heavy Contractors 234 Specialty Contractors 462 Home Builders 155 All Contractors 353

The table above provides the average number of Full Time Equivalent (FTE) by contractor type as well as the average of all contractors.

50

AVERAGE NUMBER OF HR TEAM MEMBERS

Contractor Type Average Revenue/ HR Team Member HR Team Members/Total FTE General Contractors $11,376,777 14.94% Heavy Contractors $7,350,000 2.56% Specialty Contractors $3,021,671 8.87% Home Builders $28,593,750 2.59% All Contractors $10,691,889 8.10%

51

RECRUITING STRATEGIES

When asked what strategies are being implemented to recruit employees, Advertising and Job Postings is the top recruiting strategy, followed by Word of Mouth. Both of these strategies were below Campus Recruiting and Benefits and Compensation last year.

52

Training and Programs Promotion from Within None Company Culture and Reputation Employee Referral Bonuses Campus Recruiting and Career Fairs Benefits and Compensation Corporate Recruiter Word of Mouth Advertising and Job postings

LABOR RETENTION STRATEGIES

None Job Offerings, Stability and Flexibility Company Culture Training and Development Benefits and Compensation

Benefits and Compensation continues to be the top strategy implemented when looking to retain labor and create a sustainable workforce. This retention strategy is nearly double all other combined responses in this category. Comments from participants in the survey detailed some specific strategies to retain their current labor force that include the need to provide improved work-life balance and a culture of accountability.

53

MANAGEMENT TURNOVER

The average turnover rate for survey respondents is 14%. New opportunities and compensation were the leading factors that contributed to management turnover in an increasingly competitive labor market.

No Turnover 1 to 5% 6 to 10% 11 to 20% More than 20%

% of Management Turnover

54

Restructuring Wouldn't relocate Moved Retirement Personal Performance Did not fit culture Compensation New Opportunity No Turnover

PROFITABILITY

55

NET INCOME AND MARGINS

Average Net Income 2019 Margin 2018 Margin General Contractors 3.11% 12.37% Heavy Contractors 10.76% 8.21% Specialty Contractors 13.17% 10.79% Home Builders 8.71% N/A All Contractors 6.03% 11.30%

56

NET INCOME/FULL TIME EQUIVALENT

Average Net Income/FTE 2019 2018 General Contractors $52,922 $53,739 Heavy Contractors $20,272 $28,047 Specialty Contractors $35,289 $20,930 Home Builders $64,509 N/A All Contractors $41,129 $34,303 AVERAGE NET INCOME/FTE OF ALL CONTRACTORS BY REVENUE CATEGORY

Under $5M $5-9.9M $10-24.9M $25-49.9M $50-99.9M More than $100M 2019 2018 57

AVERAGE GROSS REVENUE FOR FULL TIME EQUIVALENT EMPLOYEES BY CONTRACTOR TYPE

2018 Average Gross Revenue All FTE Field FTE Non-Field FTE General Contractors $1,028,387 $1,948,272 $2,885,268 Heavy Contractors $290,935 $332,223 $3,204,783 Specialty Contractors $228,203 $444,721 $1,226,990 All Contractors $572,465 $1,084,508 $2,018,407 2019 Average Gross Revenue All FTE Field FTE Non-Field FTE General Contractors $1,106,765 $3,215,176 $1,687,738 Heavy Contractors $157,051 $178,110 $1,328,313 Specialty Contractors $740,291 $2,137,850 $1,132,426 Home Builders $192,981 $270,877 $671,078 All Contractors $483,014 $806,273 $1,204,735

58

COMPENSATION

59

PRESIDENT/CEO

President/CEO Minimum Maximum 2019 Average Salary 2018 Average Salary General Contractors $88,500 $400,000 $238,925 $242,135 Heavy Contractors $150,000 $500,000 $327,000 $250,000 Specialty Contractors $46,800 $650,000 $265,495 $181,767 Home Builders $73,000 $73,000 $73,000 N/A All Contractors $46,800 $650,000 $255,540 $211,181

60

CHIEF FINANCIAL OFFICER (CFO)

CFO Minimum Maximum 2019 Average Salary 2018 Average Salary General Contractors $45,000 $200,000 $135,936 $143,667 Heavy Contractors $78,000 $225,000 $150,750 $350,000 Specialty Contractors $50,000 $385,000 $142,205 $118,714 Home Builders $63,000 $63,000 $63,000 N/A All Contractors $45,000 $385,000 $136,121 $138,900

61

PROJECT MANAGER

Project Manager Minimum Maximum 2019 Average Salary 2018 Average Salary General Contractors $80,000 $140,000 $102,428 $98,200 Heavy Contractors $90,000 $125,000 $108,750 $105,000 Specialty Contractors $50,000 $150,000 $123,300 $80,545 Home Builders $60,000 $60,000 $60,000 N/A All Contractors $50,000 $150,000 $97,094 $91,259

62

HR MANAGER

HR Manager Minimum Maximum 2019 Average Salary 2018 Average Salary General Contractors $40,000 $105,000 $72,052 $67,855 Heavy Contractors $50,000 $90,000 $73,125 NSD Specialty Contractors $35,000 $125,000 $69,931 $63,467 Home Builders $80,000 $80,000 $80,000 N/A All Contractors $35,000 $125,000 $71,334 $65,504

63

ESTIMATOR

Estimator Minimum Maximum 2019 Average Salary 2018 Average Salary General Contractors $60,000 $160,000 $89,053 $91,720 Heavy Contractors $75,000 $120,000 $100,375 $80,500 Specialty Contractors $50,000 $150,000 $81,058 $72,778 Home Builders $33,300 $45,000 $39,150 N/A All Contractors $50,000 $160,000 $84,519 $83,644

64

SUPERINTENDENT

Superintendent Minimum Maximum 2019 Average Salary 2018 Average Salary General Contractors $55,000 $125,000 $90,759 $85,416 Heavy Contractors $75,000 $100,000 $86,750 $100,000 Specialty Contractors $49,000 $150,000 $83,410 $74,571 Home Builders $80,000 $80,000 $80,000 N/A All Contractors $49,000 $150,000 $86,985 $81,445

65

FOREMAN

Foreman Minimum Maximum 2019 Average Salary 2018 Average Salary General Contractors $45,000 $85,000 $65,236 $57,682 Heavy Contractors $65,000 $80,000 $72,125 $76,000 Specialty Contractors $41,600 $125,000 $64,345 $58,589 Home Builders N/A N/A N/A N/A All Contractors $41,600 $125,000 $65421 $59,114

66

PAY INCREASES

Pay Increases 2019 Expected Average 2018 Average General Contractors 7.98% 5.1% Heavy Contractors 5.70% 4.3% Specialty Contractors 4.73% 6.0% Home Builders 8.33% N/A All Contractors 6.43% 5.5%

67 Under $5M $5-9.9M $10- 24.9M $25- 49.9M $50- 99.9M $100- 249.9M 2018 Average 6.5% 5.9% 8.3% 6.1% 5.2% 6.6% 2019 Average 5.0% 10.6% 6.9% 5.6% 5.0% 5.6%

Upper Management

Yes- Objective Yes- Subjective No

BONUSES

Field Workers

Yes- Objective Yes- Subjective No

Project Manager

Yes- Objective Yes- Subjective No

Management

Yes- Objective Yes- Subjective No

Estimator

Yes- Objective Yes- Subjective No

Administrative

Yes- Objective Yes- Subjective No 68

Thank You

69