how 2013 trends in construction industry will prepare you to succeed in 2014
TRANSCRIPT
How 2013 Trends Can Help You Succeed in 2014
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Is The Economic Recovery Real?
$0
$300,000
$600,000
$900,000
$1,200,000
2005 2006 2007 2008 2009 2010 2011 2012 2013
Total Construction SpendingSource: U.S. Census Bureau, Construction Spending Amounts in Millions
Recession Story In The Construction Industry
Good News Bad News2012 and 2013 Overall Growth Growth was tiny increments
Jobs Report Solid for most of 2013 Job losses in December 2013
Recovery Numbers Predicted for 2014 Predicted for 2013 & largely unrealized.
Housing numbers are strong. They aren’t that strong.
Industry expected to grow in 2014 Growth numbers are still conservative
Sources: 1.Construction Executive: 2014 Construction Economic Outlook: Is a Real Recovery Ahead? 2.New York Times: Sudden Rise in Home Demand Takes Builders By Surprise 3.AGC of America: December 2013 Press Release On Construction Employment Statistics 4.AIA: Consensus Construction Economic Forecast Report
Why It MattersConfidence in economic recovery will justify investing into your company’s growth.
Why It MattersUnderstanding the growth trends of the industry will help you predict cash flow, revenue, and business expectations
Cautious OptimismTrend 1: 2013
“No one liked the recession, but some contractors are going to hate the recovery, too.”
Thomas Schleifer, Ph.DDel E. Webb School of ConstructionENR Viewpoints: Beware The Recovery
Cautious OptimismTrend 1: 2013
0%
25%
50%
75%
100%
YEARS: 1 2 3 4 5
failure rates
Recovery Makes Things Worse
3xWORSE DURING
RECOVERYTHAN DOWNTURN
ENR Viewpoints: Beware The Recovery
Cautious OptimismTrend 1: 2013
Financial Struggle To Meet Cash Demands With Small Cash Reserves
Long Recession Made Companies Cash Poor
Strong Economy Will Require Companies To Grow Into New Demand
Growth Eats Cash
Cautious OptimismTrend 1: 2013
Cautious OptimismTrend 1: 2013
!A. Respect the Caution, and Don’t
Outrun Your Runway
B. Pay Close Attention to Cash Flow, Aging Receivables, DSOs
C. Protect Projects Against Non-Payment (i.e. Lien Rights)
D. Waiting for Retainage, Little Concessions Can Add Up
E. Commit to Credit, Lien, & Collection Policies
Handle The Trend:
Financial Risk ShiftsTrend 2: 2013
"We must lead the industry kicking and screaming ... to
payment reform.”
- Bigane Wilson Photo by Steve Hill, ENR
- Bigane Wilson Photo by Steve Hill, ENR
Financial Risk ShiftsTrend 2: 2013
Epic Battle Over Who Loses If Money Runs Out On A Project
Mechanics lien laws provide contractors remedy in event of non-payment
Contracts start to include “no lien clauses.” Courts void these provisions as anti-public policy
Contracts start to include “pay when paid” clauses. Courts say this is only a “timing” clause
“Pay when paid” turns into “pay if paid.” Many courts declaring this void as against public policy.
Notice Claim Provisions now appearing in contracts with strict claim periods.
1791 40’s 60’s 80’s 2000
Financial Risk ShiftsTrend 2: 2013
Financial Risk ShiftsTrend 2: 2013
PAY WHEN PAIDPAY IF PAID
DELAY DISPUTES & DAMAGESWORKMANSHIP DISPUTES
CHANGE ORDER RESTRICTIONS
INDEMNITY PROVISIONS
RETAINAGE PROVISIONS
CLAIM NOTICE RULES
Financial Risk ShiftsTrend 2: 2013
Your Contract Is FILLED
With Provisions Shifting THE RISK Of A Project
ONTO YOU
!A. Try to negotiate out of onerous
financial risk shifting terms
B. Analyze every contract at start of work to document claim and notice deadlines
C. Leverage Lien & Bond Claim Rights To Offset Risk
Handle The Trend:
Financial Risk ShiftsTrend 2: 2013
Protecting Low TiersTrend 3: 2013
“There is a lot of promise for 2014 and beyond that the mechanics lien document will continue to get favorable
treatment from the courts, arming parties with something to combat the onerous contract terms imposed by owners,
developers, contractors, and lenders.”
?
America believes that trade contractors and suppliers
should get paid.
Protecting Low TiersTrend 3: 2013
America believes that GCs and Owners should shoulder the burden of a
project’s financial risk.
Protecting Low TiersTrend 3: 2013
Protecting Low TiersTrend 3: 2013
Statutory Increase of Rights: • New Hampshire • Georgia • Louisiana • Missouri • Wyoming • Oklahoma
!Judicial Increase of Rights:
• Maryland • Minnesota • Arizona • Nevada • New York
“The purpose of the mechanics’ lien statutes is to protect the rights of those who furnish labor and materials to improve another person’s property…we construe them liberally to
achieve their primary purpose.”Arizona Court of Appeals, Weitz Company LLC v. Heth, 2013
!A. Embrace the protections
afforded to you
B. Be careful…possession is 9/10ths of the law, and the law is unpredictable
C. Leverage Lien & Bond Claim Rights To Offset Risk
Handle The Trend:
Protecting Low TiersTrend 3: 2013
Leverage TechnologyTrend 4: 2013
Innovate Data Strategy
Leverage TechnologyTrend 4: 2013
Construction industry Financial Professionals will be called upon to manage their organization’s financial
risk, and this will require innovation and both the leveraging of tools (i.e.
automations and data analysis) and remedies (i.e. security and lien
devices).
!A. Tools: Use the cloud to integrate
your ERP with new technologies
B. Tools: Leverage technology to help with lien compliance management, credit data analysis, and collection processes. Automate!
C. Remedies: Know your legal remedies, and use them.
D. Leverage Lien & Bond Claim Rights To Offset Risk
Handle The Trend:
Leverage TechnologyTrend 4: 2013
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