2013-2014 cam biennial business survey

BUSINESS SURVEY1 CONSTRUCTION ASSOCIATION OF MICHIGAN

2013 2014BIENNIAL BUSINESS SURVEY OUTLOOK

BUSINESS SURVEY2

Dear Construction Associate,

We are pleased to present you with the results of our Biennial Business and Owner Surveys, which examine activity in 2013 and the outlook for the next eighteen months. These two surveys were conducted through the joint efforts of the Construction Association of Michigan (CAM) and Plante Moran, and their continued commitment to provide accurate and timely business information to the construction industry.

This year’s survey was issued online. This enabled a greater response due to the ease of completing and returning the questions. For those of you who took the time to complete the survey, thank you; your participation is greatly appreciated. The responses are online, as well. For those who would like a printed results booklet, please contact either CAM or Plante Moran. The survey information was compiled from the confidential survey responses by an independent survey company and developed as part of collaborative effort by CAM and Plante Moran.

We have combined the results of both surveys into one single publication. The responses tell a great deal about our region, economy, and most specifically the

GREG ANDRZEJEWSKIFIRST CHAIRMEN OF THE BOARD, CAMBusiness Development Manager, PPG Industries

Michigan construction industry. Results are indicative of how contractors and owners cope with the present economy; the future construction climate is also forecasted by those who are directly involved in the Michigan construction industry on a daily basis.

As this year’s survey reflected some positive indicators, we sincerely hope that this will be an upward trend for the construction industry in Michigan. Our mantra, “One Industry, One Resource, One CAM,” is what we strive for continually. CAM works hard legislatively, presents helpful and timely seminars on the issues that will affect our members, and is the number one source for Construction Project Information Services in the state of Michigan. We exist as a service to our members to help make them, and their businesses, successful.

Sincerely,

Greg AndrzejewskiCAM Chairman of the Board

BUSINESS SURVEY4

The Construction Association of Michigan (CAM) was founded in 1885 as the Builders Exchange of Detroit and Michigan. Celebrating its 129th year in 2014, CAM is the oldest and largest construction association in North America. CAM is headquartered in Bloomfield Hills, MI, with a second division in Saginaw, known as CAM Tri-Cities. CAM is a not-for-profit organization comprised of 2,600 members. CAM is supported by annual dues and service fees, and is governed by a 12-member Board of Directors elected annually by the membership. CAM members are comprised of general contractors; subcontractors; equipment and materials suppliers; architects; engineers; and service firms (attorneys, financial management, etc.).

The association is an essential information network for the Michigan construction industry. It publishes Construction Project News, a daily report containing complete details on Michigan projects out for bid. Construction Pre-View, a weekly publication, keeps CAM members “in the know” with news of proposed projects. With advanced software, members can access entire plans and news at their office via CAM-Online.

The CAM Buyers Guide is the most widely-used tool in the construction industry. Published yearly, the Buyers Guide is a directory containing each CAM member firm alphabetically and in classified categories. The CAM Buyers Guide is available in print, online via the CAM website at www.cam-online.com, and is also accessible through a mobile app for Smart Phones. CAM Magazine, “The Voice of the Construction Industry,” is recognized as the leading monthly industry magazine covering construction news, business trends, current projects, and construction technology in Michigan. CAM Magazine is in print and also online at www.cammagazineonline.com and has readers worldwide. The magazine maintains a

THE CONSTRUCTION ASSOCIATION OF MICHIGAN

ABOUT strong social media presence via Facebook, LinkedIn and Twitter.

CAMTEC, the training and education division of CAM, offers industry-specific classes and seminars on relevant topics within today’s construction industry, along with the latest technology and trends. Courses are also available to be conducted onsite. With a full-time qualified Safety Professional/Instructor on staff, the CAMSAFETY department offers free, on-site and hands-on safety training to all CAM members. Under a grant from MIOSHA, training encompasses Focus Four hazards: Falls; Caught-in; Struck by; and Electrocutions. CAMSAFETY also offers many classes, including OSHA 10- and 30-Hour.

The CAM Labor Relations Program provides quality labor relations assistance and information, at no additional cost, to union contractors employing carpenters, cement masons, laborers, or operating engineers in southeast Michigan. CAM retains a full-time lobbyist, Lansing-based Kindsvatter Dalling and Associates. CAM recently formed the CAM Government Affairs Committee, which is run by its on-staff labor attorney. The Government Affairs Committee’s role is to identify governmental issues and/or trends which impact upon the construction industry in Michigan.

Along with the services mentioned above, CAM also offers Health Insurance through CAM Administrative Services; Workers’ Compensation Insurance through CAM Comp; and superior banking service through the Construction Federal Credit Union.

For more information about any of these CAM services, or to inquire about CAM membership, please contact the CAM Marketing Department at 248.972.1000 or via the CAM website at: www.cam-online.com.

5BUSINESS OUTLOOK

Serving the needs of the construction industry for 90 years. Plante Moran provides the experience and personal attention the construction industry demands. Plante Moran offers a full range of services including audit and accounting; federal, state, and local tax planning; information technology and telecommunications consulting; family business succession planning; merger and acquisition assistance; cost segregation studies; and strategic planning.

For more information about Plante Moran’s construction team, please contact Construction Industry Group Leader:

Tom Doyle | 248.223.3402 [email protected]

plantemoran.com

PLANTE MORAN

CO-SPONSOR

BUSINESS SURVEY6 TABLE OF CONTENTS

PAGE 7 Business survey

PAGE 42 Demographics and written comments

PAGE 52 Owners survey

PAGE 73 Written comments

7BUSINESS OUTLOOK

5

BUSINESS SURVEY

Produced by the Construction Association of Michigan (CAM) and the accounting firm Plante Moran, the Biennial Business Survey has been conducted for more than 20 years. The survey measures contractor opinion in several key categories.

BUSINESS SURVEY8

BUSINESS OUTLOOK

9BUSINESS OUTLOOK

Describe your primary business

37%Subcontractor

23% General contractor18% Architect/Engineer 8% Equipment/Material supplier 4% Manufacturer of equipment or materials10% Other

Is your company union or non-union?

100

50

0

Union Non-union

38%

62%

Average cost range of work that your company is currently performing:

39%Less Than $100,000

Trend to larger projects continues with over 29% of projects at $1Mil+, a 9 percentage point increase from 2011.

20132013 2011100

50

0

$100K– 500K

Less than$100K

$1M– 2M

$5M– 10M

$500K– 1M

$2M– 5M

Over $10M

6% 4%6% 6%11% 8%11% 14%21% 23%39% 35%

6% 2%

BUSINESS SURVEY10

31% of projects are anticipated to cost $1Mil+. This is an 11 percentage point increase from 2011.

The average cost range of work you anticipate your company will be performing over the next 12–18 months:

40%Less Than $100,000

100

50

0

Less

than

$1

00,0

00

$500

,000

–

$1M

$2 –

$5M

$100

,000

–

$500

,000

$1 –

2M

$5 –

$10

M

Ove

r $10

M

40%18% 11% 10% 7% 8% 6%

Which type of work is currently providing your company with the most opportunities?

2013

2011

34%Renovation

Renovation

33% New construction12% Additions11% Maintenance11% Retrofit

29%24% New construction15% Additions19% Maintenance13% Retrofit

New construction and renovation show an up-tick from 2011.

11BUSINESS OUTLOOK

Which type of construction work do you see providing your company with the most opportunities over the next 12–18 months?

37%New Construction

33% Renovation13% Retrofit10% Maintenance 7% Additions

What category do you anticipate providing your company the most opportunities for work in the next 12–18 months?

16%Health/Welfare Buildings/ Hospitals

15% Education/Cultural/Scientific buildings13% Infrastructure13% Transport/Industrial buildings10% Residential 9% Interiors/Tenant improvements 7% Office buildings 6% Public works projects 3% Hotels/Motels 3% Entertainment facilities 3% Renewable energy 1% Religious buildings

BUSINESS SURVEY12

36%How do you anticipate the volume of work changing over the next 12–18 months?

89% of respondents anticipate the volume of work to increase or stay the same. This is the most optimistic respondents have been in many years. About the Same

5% Up more than 20%20% Up between 10% and 20%28% Up less than 10% 6% Down 10% or less 4% Down between 10% and 20% 1% Down more than 10% and 20%

How has the volume of work contracted changed over the past 12 months?

The 2013 survey indicates a positive trend from 2009. D

own

mor

e th

an 2

0%

Dow

n 10

%

or le

ss

Dow

n be

twee

n 10

–20%

Abo

ut th

e sa

me

Up

mor

e th

an 2

0%

22%About the Same

2013100

50

0

2009

12%3% 6% 3% 8%

22%9%

48%

Up

less

th

an 1

0%

16%

Up

betw

een

10–2

0%

18% 22%7% 10% 15%

13BUSINESS OUTLOOK

33%10 to 20 Percent

27% 20 to 50 percent25% Less than 10 percent15% 50 percent or more

Are you currently doing work outside the state of Michigan?

YesIf you answered yes, what percentage of your total volume of work is performed outside the state of Michigan?

51% of respondents are currently doing work outside of Michigan.

71%Increasing

Do you anticipate that percentage increasing or decreasing in the next 12–18 months?

BUSINESS SURVEY14

Positive Impact

Do you anticipate the Michigan “Right to Work” law having an impact in the future?

Has the Michigan “Right to Work” law affected your business?

No

No

86% of respondents indicate the law has not affected their business.

54% of respondents do not anticipate a future impact.

52%Has Michigan’s “Right to Work” law had a positive or negative impact?

15BUSINESS OUTLOOK

How long will it be before your business is affected?

68%2–5 Years

27% 1 year or less 5% More than 5 years

Additional “Right to Work” comments related to business impact:

• This will help to bring more work to the area.

• I think it’s a great thing and will reduce construction costs, which will encourage new project starts.

• Our current work contract will expire before any impact will be known.

• Worst thing to happen in Michigan. Previous Michigan Governors (while they may have been for Right to Work) have always respected labor organizations. This was a bad, bad thing that the incumbent Governor has done.

• I firmly support the “Right to Work” law and feel it will benefit the state of Michigan.

• I feel it should have always been that a person has the right to choose for them self.

• Union competitors no longer have a cost disadvantage.

• The simple fact that Michigan is right to work has increased the probability of a potential client coming to Michigan

• It is a good law in the long run. The immediate impact is negative for a union contractor.

• It will attract new business.

• I’m anticipating lower quality of contractor workmanship.

• Hopefully we won’t have to pay union wages and fringes. The cost of labor on a union contract makes it very difficult to make any money when we are already bidding at single digit margins. Clients have demonstrated a more open mind regarding locating and/or expanding in Michigan

• The law will lower wage rates.

• I think and believe it will have a good impact on the overall health of the Michigan Business Industry in whole. With this said, I also believe it will benefit the workers as a result of the businesses having a positive impact.

• Now we can compete with other states.

• The under funding problem of all of the construction trades pension funds has all of the contractors that are signatory to an agreement tied to those agreements for a long, long time. New open shop competition will continue to enter the market and further erode the market share of the union contractors.

• I think it’s great.

BUSINESS SURVEY16

SECURING WORK

17SECURING WORK

Compared to 2009, companiesare seeing backlogs stabilize.

What primary method do you anticipate using for securing work in the next 12–18 months?

42%Competitive Bidding— Invitation Only

100

50

0

Open competitive bidding—

public work

17%

Referral

13%

Competitive bidding— invitation

only

42%

Negotiate directly

with owner

25%

Other

3%

How much new work do you currently have backlogged?

55%1–3 Month Backlog

23% 4–6 months16% 7–12 months 6% More than 1 year

BUSINESS SURVEY18

If you are bidding competitive work, what is the average number of bidders who have been bidding against you on each project?

Do you anticipate the number of bidders, bidding against you, increasing or decreasing in the next 12–18 months?

54%Less Than 5 Bidders

42% 5–10 bidders 1% 10–15 bidders 3% 15 or more bidders

68%Increasing

42% 5–10 bidders23% 10–15 bidders10% 15 or more bidders

2013

2009

Less Than 5 Bidders

25%In the current survey only 4% of projects had 10 or more bidders compared to 2009, which had 33%.

Although the trend shows a decrease in the number of bidders on projects, contractors anticipate that trend changing.

19SECURING WORK

How have your profit margins/mark-ups changed in bids submitted over the last 12 months?

Do you anticipate additional profit margins or mark-up pressure on your bids in the next 12–18 months?

35%No change

6% Increased 5% or more 13% Increased 2%–4% 4% Increased 1% or less 7% Decreased 1% or less16% Decreased by 2%–4%19% Decreased by 5% or more

Yes 63% of respondents anticipate additional profit margin or mark-up pressures.

This year’s survey shows 42% of respondents had a decrease in profit margins/mark-ups with anticipation of additional pressure going forward.

BUSINESS SURVEY20

WORKFORCE PLANS

21WORKFORCE PLANS

What plans do you have for your workforce over the next 12–18 months?

53%

Yes

No Change

2013100

50

0

2009

Add

full-

time

empl

oyee

s

36%

8% 6%

60%

3%23%

No

chan

ge

53%

Add

par

t-tim

e em

ploy

ees

6%

Layo

ff pa

rt-tim

e em

ploy

ees

1%

Layo

ff fu

ll-tim

e em

ploy

ees

4%

Is your company experiencing difficulty finding skilled workers?

Yes

Yes

Yes

Yes

55% of respondents are experiencing difficulty finding skilled workers.




In 2009, 26% of respondents anticipated layoffs. In 2013, 42% anticipated adding employees.

General Contractors Subcontractors

Suppliers Architects & Engineers


BUSINESS SURVEY22

Over the next 12–18 months, you anticipate labor availability to:

50%Stay the Same

1% Increase significantly13% Increase slightly 29% Decrease slightly 5% Decrease significantly

Over one-third of respondents indicated a decrease in labor availability in the next 12–18 months.

How should the industry address the decrease in skilled labor?

Education & Training

• We need better training programs in higher education.

• Start educating kids to think for themselves to become the best, most responsible workers they can. Adults need to quit thinking for kids and having them become so dependent. It’s very difficult to change a person’s work ethic during their peak working years, so we need to start young, like we used to in the skilled trades.

• Promote skilled trades in high school and realize that not all students are college material. Present a more professional image for the skilled trades.

• We might need to recruit in other areas of the country, but also reach out to the various educational organizations here and partner with them.

• Our industry needs to do a better job of educating young workers with the concept that our business is not for the low-skilled or uneducated. We have got to elevate the status of our workers to being desirable.

• Have incentives for people to learn a new trade or skill.

• Maybe reach out to military organizations or partner with them in some way?

• Put shop programs and training back in schools. Let the kids know that there is pride in doing a good, hard day’s work, and that there are careers out there in construction.

• We are already training our own younger staff, in-house.

• We need to stress the need for young folks going into trade schools instead of college and stress the benefits of working with your hands.

23WORKFORCE PLANS

• Encourage vocational programs in the schools; increase training for the sub-trades; publicize the recovering economy to encourage workers to stay in-state and not switch their occupations.

• The easy answer is to say to train more skilled tradesmen — but that will be ineffective if there isn’t a sufficient volume of work to employ them!

Other

• We are a union field force. The antiquated, outdated ways that our union operates, especially in terms of protecting laid-off workers that no company will take at the expense of preventing motivated newcomers into the field, MUST stop. This policy will be the eventual end of a unionized workforce in this area with my trade, but the union will not acknowledge it, let alone talk or implement some meaningful change.

• Make the trades more attractive to the younger generation and fire Obama.

• Labor unions need to relax jurisdictional restraints and recognize that defined benefits do not work anymore.

• The unions have to start recruiting earlier for skilled labor. Going into middle schools and high schools would encourage the kids who don’t want to go to college.

• Michigan’s attack on labor unions via “Right to Work” has destroyed the apprenticeship programs that really helped employers. Unless we gain a new respect for labor unions and their apprenticeship programs, Michigan will continue to go down the tubes.

• There have been difficulties for clients/owners/developers to get the funding they need so they can move forward on their projects. Unless new or easier funding methods are developed, this trend will continue to hurt the construction industry at all levels.

How should the industry address the decrease in skilled labor? (continued)

BUSINESS SURVEY24

FINANCIAL HEALTH

25FINANCIAL HEALTH

Select the three strategies your company has undertaken to improve profitability:

26%Improve Processes/Products

19% Cut administrative costs14% Staff reduction/Right-sizing10% Enhanced marketing10% Geographic expansion 8% Design/Build projects 7% Enhanced training 6% Safety/Risk management

25% Staff reduction/Right-sizing 17% Improve processes/Products10% Enhanced marketing 9% Geographic expansion 4% Design/Build projects 1% Enhanced training 2% Safety/Risk management

2013

2009

Cut Administrative Costs

32%

Compared to 2009 there is more focus on improving processes and less on right-sizing cost cutting.

BUSINESS SURVEY26

How does your present cash flow situation compare to last year?

Better than last year

41%About the Same as Last Year

2013100

50

0

2011 2009

36%21%

46%33%

10%

32%

58%41%

Worse than last year

23%

About the same as last year

According to respondents, cash flow has improved since 2009.

40% 17% 7%

37% 51% 36%

23% 31% 57%

2013 20092011




33% 16% 11%

58% 37% 32%

8% 47% 57%

2013 20092011




46% 10% 13%

30% 55% 13%

23% 35% 75%

2013 20092011




30% 25% 7%

41% 40% 33%

28% 35% 60%

2013 20092011




General Contractor Subcontractor

Supplier Architects & Engineers

27FINANCIAL HEALTH

In the next 12–18 months, how do you anticipate your cash flow position?

What is the average length of time it takes your company to receive final payment for work performed or materials provided?

66%About the Same as Last Year

2013100

50

0

2011 2009

66% 65%51%

About the same

Worse

10% 16%35%

Better

24% 19% 13%

51%60 Days

33% More than 90 days16% 30 days

56%Improving

Do you anticipate the average time it takes to be paid, improving or getting worse in the next 12–18 months?

2013

100

50

0

2011 2009

Improving Getting worse

59%44%

72%56%

41%28%

BUSINESS SURVEY28

Is your equity position sufficient to manage your cash flow needs?

Do you have access to a line of credit?

Do you anticipate your access to credit improving in the next 12–18 months?

Yes Yes

Yes

Yes

86% of respondents indicated their equity position is sufficient.

68% of respondents indicated their equity position was sufficient.

85% of respondents have access to a line of credit.

65% of respondents anticipate credit improvement.

2013 2011

29FINANCIAL HEALTH

Have you filed a claim of lien in the past 12 months?

What percentage of the work you perform is bonded?

74%No Claims

38%No Bonded Work

30% 10 percent23% 20 to 40 percent 9% 41 percent or more

25% 1–5 Claims 1% More than 5 claims

Surveys over the last decade continue to show that most companies do not file claims of lien.

28% 10 percent17% 20 to 40 percent14% 41 percent or more

2011

No Bonded Work42%

2013

Respondents indicate a slight uptick in bonded work.

BUSINESS SURVEY30

Is your company having more difficulty securing sufficient bonding capacity?

Do you anticipate materials prices changing in the next 12–18 months?

78%Anticipate Increase in Prices

81% of respondents are not having an increased difficulty securing sufficient bonding capacity.No

Have you been able to obtain escalation clauses in your contracts?

No48% No44% Haven’t tried 8% Yes

21% Stay the same 1% Anticipate decrease in prices

31FINANCIAL HEALTH

Compared to prior year sales, your company’s annual sales for the coming year will:

48%Project an Increase

2013100

50

0

2009

Dec

reas

e m

ore

than

10

%

14%

40%

Sta

y ab

out

the

sam

e

28%20% 21%

Dec

reas

e 0

–10%

10%9%

Incr

ease

1–

10%

33%10%

Incr

ease

m

ore

than

10

%

15%

Respondents remain optimistic about their sales and profitability for the coming year.

Compared to the prior year, your company’s profitability for the coming year will:

42%Project an Increase

2013100

50

0

2009

Dec

reas

e 0

–10%

14%29%

Dec

reas

e m

ore

than

10

%

12%26%

Incr

ease

m

ore

than

10

%

9% 10%

Incr

ease

1–

10%

33%

6%

Sta

y ab

out

the

sam

e

32% 28%

BUSINESS SURVEY32

What are the biggest financial challenges facing your company in the next 12–18 months?

Credit & Capital

• Available credit

• Our clients are having a difficult time securing funding for their projects. They have needs but no way to fund them.

• Lack of significant working capital to fund larger jobs (i.e. access to credit, etc.)

• Collections are always a problem, especially for extra work and retentions.

• Customers requiring longer payment terms.

• We have clients that have potential projects but because of the difficulties with funding we asked to hold up. It is getting difficult to keep the office together and provide quality services when so many of our clients are in a holding pattern.

Cash Flow & Collections

• Cash flow due to retentions not being paid in a timely manner.

• No revenues to improve equipment needed, and no monies to increase salaries.

• Cash management and fee suppression.

• Continuing to expand in select markets and finding ways to quickly become cash flow positive in those markets.

• Manage cash flow to support large contracts with large materials requirements.

• Length of the sales cycle requiring higher prices, competition from internet or low overhead suppliers, employees looking for salary increases without enough ROI.

• Making enough money to pay for upgrades to technology, tools, equipment and people to keep us on top of our industry and still being able to put some money away.

• Financing the construction projects - not getting paid soon enough. Owners/CMs need good subs; they should realize the pressure they put on them forcing them to chase money.

• Managing cash flow without an outside line of credit.

• Closing out and getting paid on large difficult projects.

Profit Margins

• Profit margins continue to erode so we are focusing on positioning ourselves better in the Design Build delivery method which normally produces better results.

• Low profit margins, low contract backlog, increases in labor and material costs.

• Having to bid projects at such low margins in order to win a contract, but in the end unexpected costs and labor eats up the small profit margin we did have so we end up winning a job but losing money.

• Margin pressure. Growth.

33FINANCIAL HEALTH

Industry & Market

• There is simply no money in projects anymore. Competitors are performing work at cost. We do not know how much longer we will bother staying in business. There is no money anywhere. What I mean by that is that the owners are squeezing the architects, who now generally provide horrid drawings and specifications; the general contractors underbid the work because of this, and all the fallout is laid out to the subcontractors. It has become a joke.

• Anticipating and capitalizing on the market turnaround.

• Staying competitive in the market that is available.

• Finding work to Negotiate/Design-Build. The banking industry is the biggest hurdle for small business owners; it needs to loosen up and start offering loans to the smaller developer/business owner. In doing so, I believe the construction industry in Michigan will take off again, and allow people to get back to work and make money.

• There’s more competition in the field.

• Balanced growth - sales/equipment/personnel are all growing at the same time.

Other

• Replacement of depleted fleet of trucks and machines due to hard times. We didn’t replace much of our fleet over the last four years.

• Interest rates.

• Slow economic recovery limiting the amount of new construction work.

• Increased taxes.

• The effects of the Great Depression, particularly failure of owners to pay for completed work on projects that became nearly worthless (and therefore liens were of no use), wiped out such a significant amount of equity, that we still cannot obtain surety bonds of the size we need to return our business to anywhere near our past revenues. I don’t see an end to this problem anytime soon.

• Controlling overhead costs to get through the economic downturn.

• Governmental obstructions to my business.

• Currently have no financial problems - we have been in business for 70 years.

What are the biggest financial challenges facing your company in the next 12–18 months? (continued)

BUSINESS SURVEY34

BUSINESS CONTINUITY

35BUSINESS CONTINUITY

What structure best describes your business?

If family-owned, how many generations has the business been in your family?

70%

37%

Family-owned

Two Generations

17% Parent company13% Private branch

34% One generation29% Three generations or more

Do you currently have a business succession plan in place or in process?

Yes Yes56% of respondents currently have a succession plan in place or in process.

2013 2011

47% of respondents had a succession plan in place or in process.

BUSINESS SURVEY36

Which of the following is the key element of your strategy?

In the event of your death, your stock would:

42%

54%

Selling/ Transferring to Family

Pass to My Heirs Through My Estate

41% Selling to key management personnel 3% Selling to a strategic buyer 3% Establishing an ESOP 3% Merging with another company 3% Winding down/Liquidating 5% Other

24% Be redeemed by the company18% Be purchased directly by my partner(s) 4% Other stock plans

37BUSINESS CONTINUITY

If you were to leave your company tomorrow:

Has the recent economic downturn affected your retirement plans?

52%

40%

I have a team of strong managers who could easily manage the business in my absence

Yes — My Plans Are on Hold or Delayed

29% I have management that needs further development

19% I have no capable management and will need to hire someone from outside my organization

32% No — I am proceeding with my plans28% I have yet to begin a transition plan

BUSINESS SURVEY38

TECHNOLOGY/ SUSTAINABILITY

39TECHNOLOGY/SUSTAINABILITY

Which of the following online technologies is being utilized by your company?

Does your company regularly engage in green or sustainable building practices?

No

inte

rest

in

this

tech

nolo

gy

Cur

rent

lyus

ing

84%Online Plans andSpecifications

ONLINE PLANS ANDSPECIFICATIONS

100

50

0

Con

side

ring

impl

emen

ting

Pla

nnin

g to

impl

emen

t

84%

2% 6% 9%

64%

2% 8%26%

46%

7%

70%

27%

ONLINE JOB BIDDING ONLINE PROJECTMANAGEMENT

Yes 70% of respondents regularly engage in green/ sustainable building practices.

Online technologies are being utilized more extensively in the industry.

52% of respondents regularly engage in green/sustainable building practices.

Yes2013 2011

BUSINESS SURVEY40

Prefabrication Techniques

100

50

0

Cloud computing

Integrated project delivery

36%

18%34%

8% 15% 24%

56%67%

42%

CURRENTLY UTILIZING PLAN TO IMPLEMENT NO PLAN TO UTILIZE

Does your company currently utilize:

36%Prefabrication Techniques



Prefabrication techniques


53%9%

38%

70%5%

25%



45%10%45%

69%5%

26%



72%14%14%

52%29%19%



59%15%26%

79%5%16%

Cloud computing

Cloud computing

49%24%27%

24%38%38%

Cloud computing

Cloud computing

36%18%46%

50%20%30%


Which new technologies do you plan on investing in over the next 12–18 months?

Do you have plans to invest in any of the following?

Yes62% Job safety procedures68% Staff development/Training50% Employee benefits programs69% New technologies52% Fleet/Equipment 9% Disaster recovery

CURRENTLY UTILIZING PLAN TO IMPLEMENT NO PLAN TO UTILIZE

Smart phones

Smart phones

Software upgrades

Software upgradesTablets Tablets


0%0%

100%

5%0%

95%

5%20%75%

24%33%43%

5%24%71%

10%10%81%

41%18%41%

68%11%21%

100%0%0%

100%0%0%

Other OtherERP

systemsERP

systems

Smart phones

Smart phones

Software upgrades

Software upgradesTablets Tablets


0%7%

93%

7%4%

89%

21%32%46%

33%13%55%

10%30%60%

16%18%66%

78%9%13%

75%13%12%

100%0%0%

91%0%9%

Other OtherERP

systemsERP

systems

100

50

0

Smart phones

93%

3% 4%

Tablets

54%

22% 24%

Software upgrades

68%

20% 12%

ERP systems

18% 13%

69%22%Tablets

BUSINESS SURVEY42

DEMOGRAPHICS AND WRITTEN COMMENTS

43DEMOGRAPHICS & COMMENTS

Generally speaking, do you consider yourself:

What is the last grade of school you completed?

Is a woman a majority-owner (51% or more) of this business?

Is this a minority-owned (excluding female-owned) business?

8% Democrat 68% Republican17% Independent12% No preference

92% No 8% Yes

99% No 1% Yes

Demographics

Where are you located in the state of Michigan?33% Oakland County24% Wayne County14% Macomb County10% Mid-Michigan 1% Balance of Detroit Metro18% Other

26% Post-graduate degree 49% College degree16% Some college 5% Vocational/Tech. school 4% High school

How long has your company been in business?20% More than 30 years20% 15 to 30 years10% 5 to 15 years 5% Less than 5 years

What is your title?10% Chief executive officer (CEO) 39% President14% Chief financial officer (CFO)37% Other

What is your approximate age?11% 65 years–over33% 45–54 years11% 35–44 years 2% 21–34 years

44

Would you still choose to make your living in the construction industry if you were beginning your career today?

Yes37% Yes34% No29% Unsure

In the 20 year history of the survey, 2011 was the only time respondents replied they would not choose to make their living in construction if they were beginning their career. This trend has reversed in 2013.

• The impact of the economy on the construction industry creates some uncertainty; so I’m not sure, if I had to decide today.

• We work too hard for the money we make.

• There are many other markets/industries one could enter into, make more money on a more consistent basis. I love what I do, I love making an impact on the communities by building structures that people drive by and be proud to say that is one of my buildings. But I believe I would have been in another industry had my family not already owned and operated a family construction business, allowing me to go to college, then trade-school, and then jump right into the business without having to do any job searching.

• I would most likely pursue something that didn’t involve managing so many people.

• There are more career options today that weren’t available when I was in school, especially the ones related to technology. I might have tried something different.

• The very high degree of uncertainty, financial

Of those who answered “No,” the following are some of their reasons:

hardships, the lack of opportunity to support intended growth, and other similar factors make the industry extremely stressful with limited opportunity for sustained growth.

• Construction cycles have been around forever but the latest recession makes me wonder if we will ever see years like Michigan saw from 1994 to 2000 again. Perhaps Michigan overbuilt during that time and we are still paying the price today. The loss of good-paying manufacturing jobs has been another component in the decline of construction. I have had a good career in the business and have enjoyed my relationships with loyal customers. I hope that the next two to five years see Michigan’s economy improve.

• This profession is too unstable; I think it’s impossible to reasonably forecast the future.

• Suppliers with deep pockets like Home Depot and Lowes have marketing funds to overwhelm the marketplace with perceived low cost values. But poor service has forced more legitimate suppliers (with overhead and


employees that actually report earnings) to lower their margins resulting in little ROI, but deep risk. Imports from China and other third-world companies provide poor quality and low price, but the client expects similar pricing. Lack of acceptable ROI for the risk of sales cycles doubling or tripling adding to costs.

• There’s too much government dictation; too low of margins for such high risk; and the industry has become very uncaring and rude in my area.

• The construction business has turned into a mess of mean-spirited, conniving, price shopping, unqualified people bereft of any real skill, knowledge, or substance of character. There simply isn’t nearly enough money in it to compensate dealing with the hacks one encounters on a daily basis. Further, there is zero interest from any level of government in caring whether you succeed or fail. Make no mistake – we succeed in spite of government.

• It is absolutely absurd to calculate our rate of return versus the risk of loss that we bear as construction company owners. No one in their right mind would view our business/industry as a ‘smart investment’ of financial resources.

• There is a lack of loyalty and appreciation in this industry. The amount of pay is not representative of the amount of work or hours we put in.

• Profit margins are too small for the amount of project management involved.

• I have enjoyed construction, but the return for the effort is not there.

• I’d be in the financial industry.

• I am too old to continue to be battered around to get project off the ground, then built, and then paid. I think I want to be a policemen or fire fighter so I can help people and be paid for it.

• The high volatility and stress of the construction industry is difficult to stomach sometimes.

• I would look into a more profitable business, such as technology.

• The culture and economy are both slowly deteriorating due to the policies and regulations generated by the present government.

• The barriers of entry are too low - everyone thinks they can be a general contractor. This creates too much competition, and we kill each other (figuratively) with cheap pricing to get the job. We then suffer through trying to perform with subs that are too cheap, owners that expect everything for nothing, and we get all of the risk!

• Subcontractors do not receive an adequate reward for the risk that is taken in the construction industry.

• No, because it is too stressful - and bidding projects for free is not worth the return on investment.

Of those who answered “No,” the following are some of their reasons: (continued)

46

At the present time, what is your biggest concern about the construction industry?

Written Comments

Concern: Government Regulations Solution: None

Concern: Obama Solution: Vote Republican

Concern: Continuing economic anxiety has delayed construction starts. Solution: Need additional tax incentives and stability. A Republican administration.

Concern: Union wages and work rules. Solution: Local unions need to either combine or allow unlimited portability for union contractors.

Many of our customers are national corporations that don’t care or understand why we aren’t as competitive when we travel outside our area.

Concern: My concern is that the possible abolishment of prevailing wage laws in Michigan will adversely affect my largest union-shop competitors, resulting in their loss of market share and causing them to look down-market into smaller projects and markets which we focus upon

Solution: Keep Michigan’s existing prevailing wage laws in force.

Concern: Continued growth so that we can fund our expansion plans in light of possible tightening of monetary policy.

Solution: Fire all the Republicans in Congress.

Concern: The underfunded union pensions.Solution: Stop the madness! The annual increases in wages will only create a reduction in work

hours as the union workers are pricing themselves out of the market. There needs to be a huge adjustment to the benefit structure, and the plans need to be replaced with defined contribution plans.


Concern: Right to work law is an indicator of the trend in our society to break up the construction unions.

Solution: Repeal the law and restore the unions in the marketplace. This would take major changes by the unions themselves to amend some of their monopolistic policies to become more cost effective in the marketplace.

Concern: EconomySolution: More available credit. Change in federal government.

Concern: INDUSTRIES LEAVING MICHIGANSolution: Having the communities back off and work with development of new construction.

Concern: Soft economySolution: Shrink government.

Concern: We are a local company in the supply end--and we see some loss of business directly and thru our customers to on-line providers--e.g. Amazon.com or bricks and mortar companies with a strong on-line marketing program--who have an advantage due to not having to collect sales tax

Solution: Support Market Fairness Act-currently before Congress.

Concern: Insurance rates.Solution: Don’t know.

Concern: Payment on time and skilled labor with a good attitude and a willingness to learn and work.

Solution: I wish I had an answer.

Concern: Lack of ROI caused of inferior competition working for wages and not paying taxes. Lack of capable applicants for open positions. Delayed projects or projects being scrapped because budgets where way out of line

Solution: Stronger immigration laws and reporting requirements. Tariffs for products manufactured outside the country. Banks required to provide a certain level of construction financing.

At the present time, what is your biggest concern about the construction industry? (continued)

48

Concern: Eroding profit margins.Solution: It will take care of itself.

Concern: Without the funding sources clients will not move forward with projects. My fear is many A/E and Construction firms will close or will be so small they can’t do the workload they were capable of.

Solution: The financial institutions need to start investing in projects.

Concern: The constant pressure to lower margins. / The lack of basic technology such as bidding done by fax and not email. / Observable lack of work ethic in the trades as a result of wage reductions and work rule changes.

Solution: An increase in the price of construction so companies can make better profit margins and workers make a livable wage. / / This is not likely to happen.

Concern: Customers only caring about priceSolution: Less customers and more time servicing customers that prefer overall value

Concern: Lack of skilled workersSolution: More training

Concern: There seems to be less and less talent in the field. We find very little talent (nor interest) in actually understanding basic construction techniques nor do we find any real interest in WANTING TO ACTUALLY GET THE WORK DONE. Most all of the projects anymore are immediately adversarial due to unqualified people running them, lack of proper funding, and a ridiculous reliance upon ‘systems’ or ‘I need to check this box off’ mentality instead of building relationships are getting anything accomplished.

Solution: There is none. The construction industry is a microcosm of the rest of our society. Mean spirited ‘button pushers’ sit in front of a screen and try to run complex projects. No one is interested in actually meeting people or building relationships or trust. The people we see coming out of college are totally unprepared for the real world, but because of ‘efficiencies’ are immediately put into positions of responsibility with no meaningful experience to back this up.



Concern: Unrealistic expectations of owners/GC’s - too demanding and people don’t want to tell them no or the truth because of nature of market. / Plus all the qualified people who knew what they were doing were laid off and replaced with people who don’t know anything.

Solution: Fire the idiots

Concern: Future skilled workers in the technical fieldSolution: Increased community college technical training availability

Concern: Sustaining the growth we are seeing and having capable knowledgeable people to do the work

Solution: Letting students know that it’s ok to be a tradesman...not everyone has to go to college to be successful / better pay and benefits for tradesmen and women. / This is not likely to happen.

Concern: There is not enough new construction activity.Solution: Change the economic atmosphere being generated in Washington D C.

Concern: Lack of projects. Very competitive market. Non-Union competition.Solution: Stay lean and right size.

Concern: Steady supply of project opportunities that are fully funded. Also, Detroit bankruptcy creating fear of significant cuts/sales that would affect confidence or attractiveness to investment.

Solution: Support/enable investment in Detroit and the surrounding area by investors and public funding. Lobby/educate/encourage Orr to make wise cuts/sales that increase attractiveness and stability and do not negatively impact the city’s attractiveness to businesses and residents (e.g. significantly increased taxes, public safety cuts that increase crime, etc.). Additionally, increasing the competence, accountability, efficiency, and responsiveness of city employees as well as improving processes and requirements to make dealing with the city a ‘reasonable’ task would be highly welcomed and inviting. Working with the city, at present, is an abysmal nightmare.


50

Concern: Lack of private commercial development as well as lack of residential home sales.Solution: Michigan needs to develop improved strategies to bring industries into the state such

as more automotive, technology and healthcare

Concern: Lack of profitable work to bid. We hear all the time about the “Recovery” but we sure aren’t seeing it. Finding good work to bid and then getting a straight answer on the results reminds me of 2009.

Solution: Relocate company.

Concern: Volume of work.Solution: Go back to a real free market.

Concern: Lack of profitable work.Solution: Elect government officials who will bring down the deficit.

Concern: Most projects seem to start later in the year and the first 4 to 5 months of the year are lost. We then play catch up for the late two quarters.

Solution: I would suggest that owners and builders will receive much better pricing earlier in the year when suppliers are hungry for business.

Concern: Poor documents to bid from. Architects not wanting responsibility and forcing more and more on the contractors. Government force feeding the green building which puts most private projects over budget and public projects at a very high cost to build on taxpayers dime. Manufacturers and lobbyist force feeding building codes and energy codes that support their products. This increases the cost of new housing and puts it out of reach for most families.

Solution: Design Build.. Government needs to stand down and let the free America and construction market work. Keep the code system to safety like it was meant to be not a marketing system for the highest giving lobby groups.



Concern: Small market businesses getting loans from the banking industry. Solution: I firmly believe that if the banking industry is willing to loan to the smaller market

businesses, the construction industry will once again flourish.

Concern: Funding is not stable for projects. No really long term focus by government or private sector for funding.

Solution: Keep educating legislators and the public that you have to invest back into the infrastructure to be a strong nation.

Concern: Win/Lose mentality. Very short-term mindset of most parties.Solution: Select subs, suppliers, associates very carefully.

Concern: SustainabilitySolution: Spend more on reinvestment of the country.

Concern: Lack of construction work and funding of projects.Solution: I’m not sure but I think changes need to be made with the banks.

Concern: Not enough work especially in governmental infrastructure projects.Solution: Need to take to politic out of government... they are all arguing about ideologies as our

country is losing its ability to compete in a global market.

Concern: Lack of motivated talent to hire / Interest rates Delayed projects or projects being scrapped because budgets where way out of line

Solution: Vocational schools

Concern: It is not stable yet, just a bump of increased interest today.Solution: Slowly grow our business and not get stretched too thin.


BUSINESS SURVEY52

OWNERS SURVEY This section of the Biennial Business Survey examines the construction industry from the clients’ perspectives. The focus is on plans for upcoming work, and their perceptions of Michigan’s construction industry and its practices.


5

OWNERS SURVEY54

CLIENT PERSPECTIVE

55CLIENT PERSPECTIVE

When working on a construction project, whom do you consult first about your project?

What areas were you less than pleased with?

Best summarize your general experience with the professionalism of construction personnel during the building process:

44%

63%

Contractor

Satisfied to Very Satisfied

36% Architect13% Financial institution 7% Attorney

100

50

0

Very

sa

tisfie

d

13%

Sat

isfie

d

50%

Ade

quat

e

31%D

isap

poin

ted

0%Ve

ry

disa

ppoi

nted

6%

• Dishonesty

• Keeping completion time commitments

OWNERS SURVEY56

What was the overall quality of the construction in your most recent project?

56%Good

100

50

0

Exc

elle

nt

19%

Goo

d

56%

Sat

isfa

ctor

y

19%

Poor

6%

Very

poo

r

0%

Which of the following would best describe your general experience with the overall construction process?

72%Proceeded as Expected

14% Smoother than expected14% More conflicts than expected


Which of the following would best summarize your general experience with project costs?

What areas caused the excess costs?

50%Greater Than Expected

100

50

0

Greater than expected

50%

Equal to expectations

50%

Below expectations

0%

• Wood, siding, trades

• Underestimate of materials cost

• Lack of competitive bidding for some packages. We have had difficulty getting any bids on some of our projects.

• Materials and Labor

• Site prep and water retention

OWNERS SURVEY58

Which of the following would best summarize your general experience with project completion times?

Which of the following generally causes the most delays in project completion or closeout?

50%On Time

100

50

0

Ahe

ad o

f sc

hedu

le

0%

On

time

50%

Del

ayed

—

No

faul

t

33%

Del

ayed

—

Con

tract

or’s

faul

t

17%

Del

ayed

—

Ow

ner’s

faul

t

0%

59%Unforeseen Problems

25% Communications with subcontractors 8% Communications with owners 8% Other


In your opinion, whom should you contact first to address problems with your project?

Percentage of fees charged for construction services you believe represents profit for GENERAL CONTRACTORS:

Percentage of fees charged for construction services you believe represents profit for SPECIALTY CONTRACTORS:

75%

55%

37%

General Contractor/Construction Manager

10-20% Profit

5-10% Profit

17% Engineers 8% Architects

100

50

0

18%

Less than 5%

37%

5%– 10%

27%

10%– 20%

9%

20%– 30%

9%

More than 20%

100

50

0

27%

Less than 5%

9%

5%– 10%

55%

10%– 20%

9%

More than 20%

OWNERS SURVEY60

What is your perception of fees earned by the following construction professionals?

Architects 42% 58% 0% Engineers 33% 67% 0% General contractors 25% 75% 0% Specialty contractors 33% 67% 0%Tradespeople 17% 75% 8%

TOO HIGH FAIR TOO LOW

Industry Fact:National surveys taken in 2012 indicate

• The average gross profit of general contractor's was approximately 6.5 percent of sales, and the average gross profit of specialty contractor's was approximately 16 percent of sales.

• The before tax net income of general contractors averaged about 1.5 percent of sales, and the before tax net income for specialty trade contractors averaged about 3 percent of sales.


FINANCIAL HEALTH AND OUTLOOK

OWNERS SURVEY62

Compared to the prior year:

56%Increase in Spending

Your company’s annual sales for the coming year will:

Your company’s profitability for the coming year will:

Over the next 12–18 months, your anticipated construction spending will:

Increase more than 10%

Increase More than 10%

Increase More than 10%

Increase 1–10%

Increase 1–10%

Increase 1–10%

Decrease 0–10%

Decrease 0–10%

Decrease 0–10%

Stay about the same

Stay about the same

Stay about the same

Decrease more than 10%



23%

0%

33%

22%

18%

23%

44%

64%

44%

11%

18%

0%

0%

0%

0%

63FINANCIAL HEALTH AND OUTLOOK

Rank the most challenging areas facing your business in the next 12–18 months:

Generally, how has your business performed over the last 12 months?

23%

55%

Economy

As Expected

17% Competition15% Government funding15% Materials/Construction costs13% Insurance costs13% Interest rates 4% Other

27% Better than expected18% Worse than expected

What do you feel the overall outlook is in your sector in the next 12–18 months?

50%As Expected

42% Better than expected 8% Worse than expected

OWNERS SURVEY64

What are the biggest financial challenges facing your company in the next 12–18 months?

• Stable customer base and government regulations

• Financing approval MSHDA & HUD loans

• Profitability

• Health care reform, IT expenses

• Trying to compete with other properties that are non-union

• Competition

• Continued Economic Recovery and Low Interest Rates

• We are on a growth trajectory to open new retail stores in new markets. Getting local government approval of our sites and timely inspection of our construction is a challenge.

• The economy

• Slow economic growth and uncertainty about government and economy


CONSTRUCTION PROJECT ACTIVITY

OWNERS SURVEY66

How many non-residential projects has your organization been involved in planning and/or constructing in the past year?

Do you anticipate a change in the number of non-residential projects your company is planning and/or constructing in the next 12 months?

50%

73%

More Than 10 Projects

Stay About the Same

8% 6–10 projects 34% 2–5 projects 0% 1 project 8% No projects

27% Increase 0% Decrease

67CONSTRUCTION PROJECT ACTIVITY

What type of work was done on the majority of your projects?

What type of work will be done on the majority of your projects over the next 12–18 months?

42%

50%

New Construction

New Construction

41% Renovation/Retrofit 9% Addition/Expansion 8% Maintenance

42% Renovation/Retrofit 8% Maintenance

OWNERS SURVEY68

The range that represents the average estimated price of your projects:

25%Future ProjectsOver $10M

PRIOR PROJECTS

100

50

0

$5M– 10M

20%

$1M– 2M

7%

$2M– 5M

7%

$500K– 1M

13%

$100K– 500K

20%

Less than$100K

13%

Over $10M

20%

FUTURE PROJECTS

100

50

0

$5M– 10M

12%

$2M– 5M

6%

$1M– 2M

6%

$500K– 1M

25%

Less than$100K

13%

$100K– 500K

13%

Over $10M

25%

69CONSTRUCTION PROJECT ACTIVITY

TECHNOLOGY/ SUSTAINABILITY

OWNERS SURVEY70

Does a contractor’s ability to utilize online technologies (online job bidding, project management, plans & specs, BIM) influence your decision to hire them?

When hiring a contractor, do you look to see if they participate in green or sustainable building practices?

Yes

Yes

67% of respondents indicate a contractors use of online technologies influences their decision to hire them.

64% of respondents look to see if contractors participate in green/sustainable building practices when hiring.


What percentage of your projects are currently green or sustainable?

73%0–20 Percent

Do you anticipate the number of your green or sustainable projects to increase in the next 12–18 months?

Yes 55% of respondents anticipate the number of green/ sustainable projects increasing in the next 12–18 months.

What is your opinion of the current green and sustainable building trends?

64%Approve

27% More than 50 percent

18% Neutral18% Disapprove

OWNERS SURVEY72

If you are building green or sustainable projects, do you anticipate an adequate return on investment over the life of the building?

Is your organization utilizing, or will you be utilizing, Integrated Project Delivery (IPD) methods on projects?

Which current trends or developing technologies are important to you when selecting a contractor?

Yes

No

56% of respondents anticipate adequate ROI over the life of the building.

82% of respondents are not, or will not be utilizing IPD methods on projects.

• Safety rate

• Quality trades

• Shared documents — cloud access to data

• BIM, Project Management Programs


WRITTEN COMMENTS

OWNERS SURVEY74

What is your overall perception of the construction industry?

In your opinion, what is the single biggest problem owners experience when working with the construction industry?

• Quality tradespeople

• Improvement in credit availability still needed. Industry has a reasonable foundation under it now and has the potential for a 5 year upward trend, as long as interest rates remain reasonable.

• There are a good number of very qualified contractors with good ethics. They are professionals who want to do a good job and earn a fair income.

• A good job and earn a fair income.

• Progressive, competent, responsive.

• Controlling Cost

• Less than reputable GC and subs

• Lack of communication/trust.

• During the recession many small firms closed or big firms lost workers. While most of our projects are large, we also have many small capital projects that we have difficulty attracting bidders to.

• Delays from poor supervision.

Written Comments

75WRITTEN COMMENTS

BUSINESS SURVEY76

2013-2014 cam biennial business survey

Documents

cam members

construction project

survey information

future construction

construction preview

cam tricities

michigan projects

state of michigan