Civil contactors had a very successful year in 2015. Positive operating results were driven by lower fuel and material costs. Also, many projects performed in 2015 were bid with 2014 cost structures, which led to improved project profitability. However, even with the positive results in 2015, there is significant uncertainly about civil contractors’ performance moving forward.
Industry challenges and opportunities
Several catalysts are currently at work in the industry that will impact civil contractors and their ability to maintain profitability levels similar to 2015:
- Federal and state government budgets remain constrained, creating uncertainty about future infrastructure spending. At the same time, lower fuel prices are leading to a decline in the construction opportunities in the oil and gas market.
- Lower cost structures are creating more competition in the marketplace which will put pressure on bidding and profitability.
- Ownership succession is a significant issue for many civil contractors as owners near retirement without a defined plan to move the business to the next generation.
- The consolidation of construction accounting and operations software providers continues to change the reporting landscape for civil contractors. As legacy systems are no longer supported, contractors are facing increased costs and demands on staff time to update or overhaul their financial reporting systems.
- A civil contractor’s ability to capitalize on construction opportunities may be diminished by the lack of skilled labor in the marketplace. Some civil contractors have had to turn away work because they did not have the labor capacity to complete the project.
How we can help
CLA offers this publication as a resource for professionals in the construction industry. It provides select financial ratio and key performance indicator results from CLA’s civil construction clients. It is intended to assist management by providing comparable data, industry trends, and other information to help them make strong financial decisions.