Numerous industry reports and surveys estimate constant growth in the construction industry. However, the growth now shows a small 4.8% increase as compared to the double digit growth seen in earlier years. Irrespective of that, a sense of optimism still prevails. With a positive outlook and continuous growth in the industry, what could possibly be the issues faced by the construction industry?
Top 5 Issues in 2019
Finances are one of the main problems facing the industry. Construction executives have a responsibility and duty to provide livelihood to the people who work for them and their families. For this reason, it is significant that their company has a positive cash flow. Unluckily, in a lot of instances, subcontractors end up not receiving the payment for work they have completed. Subcontractors have filed claims against many owners and general contractors in charge of various major projects because of this reason.
In the majority cases, the costs for the project is front-loaded by subcontractors and their employees and suppliers get paid. However, they have to wait for payments from the owners or general contractor who often dispute the payment even though the work is done.
The problem is that simply getting billed for the work does not act as proof that the work was completed. It is important for subcontractors to develop practices that can ensure that they do not end up in a hopeless scenario. The best way to provide irrefutable proof for any payments on claims is to visually document any job site issues through notes and photos, document any hours, disruptions, and delays and have documentation such as change orders, submittals with signed approvals, etc.
Retirement of Baby Boomers
All over the nation, there is a large number of baby boomers going into retirement on a daily basis. This statistic is troubling, considering that as much as 54% of construction managers belong to the boomer generation. So, when they retire, with them departs all of the experience and necessary knowledge they acquired through their entire career. It is important for construction executives to find a way to familiarize the young generation of hires with this knowledge as it can prove to be helpful during a time when there is a shortage of labor. A lot of construction companies are actively reaching out to improve recruitment into the trades. Some companies are also working on a mentorship program to help dissolve the gap between the boomers and younger workers.
Wide Ranges of technology used by General Contractors
Every time a general contractor makes use of new technology, it is expected that the subcontractors utilize the same technology to collaborate. The problem is that subcontractors deal with numerous general contractors, all utilizing a different software. It can get overwhelming for subcontractors to learn so many solutions just to meet their general contractor’s requirements. This arrangement is only beneficial to the general contractors. Using the general contractor’s solutions for project management can be a drawback for subcontractors. This is because the system and its files are owned by the GC. So, if there is a claim or dispute, it is possible for the general contractor to revoke the subcontractor’s access and alter information according to their needs.
Unfavorable Terms in Contracts
There is a lot of inherent financial risk when it comes to construction projects. A huge risk is shifted towards the subcontractor by disjointed interests. More and more subcontractors are receiving contracts that have unfavorable terms such as warranty coverage, consequential impacts, and liquidated damages. Any deadlines missed can directly impact their wallet. However, a lot of the delays experienced by subcontractors are due to unforeseen circumstances and it is often not their fault. For this reason, it is important to document any schedule changes, lost hours, disruption, or delays to ensure you are protected against liquidated damages.
Working at a construction site is inherently a risky job which makes workers compensation and insurance a costly outflow. The safety of workers is jeopardized due to unsafe practices. It is important that contractors make sure that appropriate safety procedures are followed by their team to diminish any risks.
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