Construction
Industry Survey
2008
Thank you for your participation in the 2008 Construction Industry Survey. As promised, we have enclosed the results of the surveys received from construction professionals in the Greater Genesee County area.
The survey respondents included a diverse group of contractors. Commercial, residential and government construction services were all represented with revenues ranging from $1 million to $50 million. We trust this information will be useful to you in making strategic business decisions for your company.
In an effort to present the information in a manner that can be easily interpreted and utilized, we have enclosed the following:
1. A description of the survey respondents including contractor size and type.
2. A summary of data for areas including operations and financial management; customers and marketing; human resources; benefits; compensation; and technology. 3. Graphic representations of the questions posed within the original survey.
We hope you find this information valuable and appreciate your participation in our survey. If you have any questions regarding the information represented, please feel free to contact us directly at (810) 238-4617.
LEWIS & KNOPF, CPAS, P.C.
Thomas Lillie, CPA, CFP™, PFS Gregory Waller, CPA
Principal Principal
5206 Gateway Centre • Suite 100 • Flint, MI 48507 810-238-4617 • 877-244-1787 • 810-238-5083 fax
Description of Survey Respondents
National reports show the commercial construction industry in the U.S. accounts for approximately 90,000 firms and $465 billion in annual revenue. Meanwhile, the residential construction industry is made up of approximately 170,000 companies and $500 billion in annual revenue. Government contractors generate $150 billon annually on projects such as highways, bridges and public buildings.
The images below illustrate the 2008 survey respondent demographics. According to the respondents, the dominant profile includes those operating in one state and in the commercial construction sector. The majority of respondents reported annual sales between $1 million and $10 million. As indicated in recent national reports, one of the largest challenges currently facing contractors is the state of the U.S. economy. In addition to those listed below, respondents noted availability of work to bid and cash flow as other major challenges facing their companies.
In how many states do you currently operate? How many offices do you have?
What does your company primarily provide?
Annual Sales What is the biggest challenge currently facing your business?
1 office 2 offices 3 offices 4 offices More than 4 offices No response $1 – $10 million $11 – $50 million $51 – $150 million Over $150 million No response 25.0% 0 1 2 3 4 5 6 7 8 No response Other Seasonal work flow Business development Employee retention Employee recruitment 62.5% 0.0% 75.0% 25.0%
In what categories do you classify your business?
0 3 6 9 12 15 No response Governmental Residential Commercial 87.5% 12.5% 25.0% 0 1 2 3 4 5 6 7 8 No response Subcontracting General contracting
Specialty trade service 43.8%
25.0% 31.3%
1 state 2 – 5 states 6 – 15 states More than 15 states No response 18.7% 75.0% 12.5% 6.3% 0.0% 0.0% 43.8% 31.3% 31.3% 6.3% 0.0%
Operations and Financial Management
According to national reports, many companies are leasing machinery on a project-by-project basis due to high costs. Larger construction companies typically own much of their equipment, while smaller companies lease equipment for particular projects. Contrary to reports, however, more than 68% of the 2008 survey respondents reported they own over 75% of their equipment.
Reports show cash flow for construction companies can often be unpredictable and fluctuates significantly due to periodic payments and payments held until after jobs are complete. Of the total respondents, 37.4% reported their receivables are aging 45-60 days, down from 47.1% in 2007. In addition, 43.8% reported they bill clients on a monthly basis.
What is the average age of your receivables? What percentage of equipment do you own versus lease?
How often do you bill?
68.7% 31.3% 0 1 2 3 4 5 6 7 8 No response Other Monthly Bi-weekly Weekly 0 – 25% 26 – 50% 51 – 75% 76 – 100% No response 30 – 45 days 46 – 60 days 61 – 90 days More than 90 days No response
What level of assurance is required for your financial statements?
0 2 4 6 8 10 No response N/A Audit Review Compilation 6.3% 12.5% 12.5% 37.4% 31.3% 18.7% 6.3% 12.5% 62.5% 0.0% 6.2% 25.0% 43.8% 6.2% 18.8%
Operations and Financial Management
(cont.)
According to national reports, profit margins are relatively thin and there is little room for error in cost estimation or project management. Construction companies must manage cash flow carefully due to delayed and unpredictable payments. Estimating accuracy rates varied significantly for most respondents, ranging from 1% to more than 5% over and underestimated.Do you include workman's compensation in your labor burden rates for bid purposes?
What percentage of your corporate gross revenue is attributable to bonded projects?
0 2 4 6 8 10 No response 76 – 100% 51 – 75% 26 – 50% 0 – 25% 62.5% 37.5%
Not including change orders, on average, how close are your estimates to actual job costs?
0 1 2 3 4 5 Overestimated Underestimated More than 5% 3 – 5% 1 – 2% 25.0% 12.5% 12.5% 31.3% 25.0%
What percentage of gross revenues are generated using the following methods?
Max price Fixed price Cost plus fee Time and materials No response
17.9% 23.1%
38.5% 20.5%
What percentage of your corporate gross revenue is attributable to change orders?
0 1 2 3 4 5 6 No response More than 20% 11 – 20% 6 – 10% 0 – 5% 12.5% 37.5% 0% Yes No No response 6.2% 93.8% 12.5% 37.5% 12.5% 0% 0% 0%
Customers and Marketing
With the scale and cost of many construction projects rising, contracts and subcontracts are much more likely to be awarded to companies with expertise in a particular specialty such as framing, mechanical, demolition, roofing, electrical, public works or roads, according to national reports. For many companies, the majority of new contracts come from existing customers who hire them to do projects similar to those completed in the past. The 2008 survey respondents reported they expect healthcare and educational facilities to present the most opportunity for their construction business.
In the 2008 survey, 50% of the respondents reported their actual gross profit percentage is between 5% and 12%, up from 47.1% in 2007. In addition, all of the respondents reported they were offered early completion bonuses.
What percentage of bids do you win?
What is your gross profit percentage?
0 – 15% 16 – 30% 31 – 45% More than 45% No response 0 – 20% 21 – 40% 41 – 60% More than 60% No response 0 2 4 6 8 10 No response N/A Other Residential Multi-family housing Strip malls Offices Healthcare Educational facilities Transportation 0 – 1% 2 – 5% 6 – 7% More than 7% No response 0 1 2 3 4 5 6 7 8 Actual Targeted No response More than 15% 13 – 15% 9 – 12% 5 – 8% 12.4% 81.3% 6.3% 6.2% 68.8% 18.8% 31.3% 56.3% 50.0% 25.0% 12.5% 6.3% 12.5% 0.0% 56.3% 12.4% 31.3% 43.7% 31.2% 0.0%
What percentage of your work is government contract (vs. commercial)?
What new markets will be opening in your industry in the next five years?
What is your marketing budget as a percentage of gross revenue?
6.2% 12.5% 12.5% 18.8% 12.5% 31.3% 31.2% 6.3% 0.0% 18.8%
Other includes: Alternative power and senior living
0 – 20% 21 – 40% 41 – 60% More than 60% No response 6.2% 93.8%
According to national reports, contractors tend to only keep a small amount of full-time workers and hire skilled labor on a project-by-project basis. Contrary to national trends, 50% of the survey respondents keep over 20 full-time employees on staff. In addition, 100% of the survey respondents reported 20% or less of their workforce is made up of minority workers. By contrast, 88.2% of the 2007 survey respondents reported a minority workforce of 20% or less.
Human Resources
What percentage of jobs are subcontracted?
0 – 20% 21 – 40% 41 – 60% More than 60% No response 37.5% 50.0% 12.5%
What percentage of your full-time workforce is union?
0 – 5 6 – 10 11 – 20 21 – 50 More than 50 No response 0 – 20% 21 – 40% 41 – 60% More than 60% No response 6.2% 18.8% 37.5% 6.3% 12.4% 43.8%
On average, how many full-time employees do you keep on staff?
25.0% 25.0%
Benefits
Because most construction companies keep only a core of full-time workers and hire extra workers on a project basis, there are no long-term fringe benefits for the extra workers, according to national reports. Contrary to national standards, this year’s survey respondents are offering a greater benefits package to both full-time and part-time employees. Specifically, all of the survey respondents reported they offer health insurance to their employees. Over 66% pay the entire cost of employees’ health insurance, an increase of over 6% since last year’s survey. 38% of the survey respondents reported they offer benefits to their part-time employees, up from 30% in 2007. In addition, the survey respondents who offer life insurance and short-term and long-term disability pay 100% of their employees’ coverage.
Pension Plans Offered
Holidays Observed Do you offer a clothing allowance?
What benefits do you offer your part-time employees?
Number of Days Received
0 2 4 6 8 10 No response N/A Life insurance Pension plans Dental insurance Long-term disability Short-term disability Health insurance Yes No N/A 0 2 4 6 8 10 No response SIMPLE Defined benefit Defined contribution Profit-sharing 401(k) Yes No No response 19.0% 56.0% 6.3% 13.0% 56.0% 25.0% 6.0% 0.0% 0.0% 0.0% 0.0% 13.0% 6.0% 19.0% 19.0% 56.3%
Do you combine vacation and sick days into a "Paid Time Off" (PTO) system?
0 5 10 15 20
New Year’s Eve Christmas Day Christmas Eve Day after Thanksgiving Thanksgiving Veterans Day Labor Day 4th of July Memorial Day Good Friday New Year’s Day
74.0% 13.0% 13.0% 44.0% 38.0% 100.0% 31.0% 100.0% 6.0% 100.0% 100.0% 100.0% 100.0% 31.0% 37.4%
Paid time off Range Average
First year 0 – 10 4
After first year 0 – 11 8
After fifth year 14 – 15 15
Vacation Range Average
First year 0 – 7 4
After first year 5 – 14 10
After fifth year 0 – 28 14
Sick time Range Average
First year 0 – 7 4
After first year 0 – 7 4
Benefits
(cont.)
Do you offer dental insurance coverage to your employees?
Do you offer disability coverage to your employees? Do you offer life insurance coverage to your employees?
Individual Percentage Paid by Company Yes No No response 100% 76 – 99% 50 – 75% 1 – 49% 0% Family Percentage Paid by Company 100% 76 – 99% 50 – 75% 1 – 49% 0% 100% 76 – 99% 50 – 75% 1 – 49% 0% 100% 76 – 99% 50 – 75% 1 – 49% 0% 66.7% 22.2% 11.1% 7.1% 14.3% 78.6% 25.0% 56.3% 57.1% 42.9% 57.1% 42.9% Yes No No response 31.3% 68.7% 0 5 10 15 20 No response No Yes Long-term Short-term 25.0% 68.7% 6.3%
Individual Health Insurance Coverage
Percentage Paid by Company Family Health Insurance CoveragePercentage Paid by Company
18.7%
Compensation
What is the basis for salary increases for your employees?
0 2 4 6 8 10 12 No response Cost of living Automatic annual Merit based 6.3% 75.0% 0.0% 25.0%
Salary and Experience
*Indicates only one company listed wages for this position.
Position Range Average Project Manager Hourly rate $16.88 – $40.87 $32.97 Years exp. 10 – 27 19.0 Superintendent Hourly rate $19.37 – $45.00 $31.82 Years exp. 2 – 33 21.1 Estimator Hourly rate $24.00 – $40.00 $33.21 Years exp. 2 – 28 13.9 Foreman Hourly rate $19.23 – $40.00 $30.49 Years exp. 4 – 25 16.7 Administrative Staff Hourly rate $12.00 – $25.00 $18.31 Years exp. 3 – 23 11.5
Position Range Average Office Manager Hourly Rate $15.00 – $42.00 $25.43 Years Exp. 3 – 28 12.9 Sales Staff Hourly Rate $19.23 – $25.00 $21.41 Years Exp. 5 – 9 6.3 Marketing Director
Hourly Rate $38.46 *N/A
Years Exp. 24 *N/A
Controller Hourly Rate $31.25 – $57.00 $44.42 Years Exp. 7 – 30 20.6 Bookkeeper Hourly Rate $14.00 – $42.00 $23.57 Years Exp. 3 – 28 14.3
Jobs in non-residential construction often require special training or experience and are relatively high-paid. According to the Bureau of Labor Statistics, average hourly wages for commercial workers increased to $23.09 at the end of 2008, up from $22.09 in 2007.
Among the survey respondents, 75% reported their criteria for increasing employee salaries is primarily merit based, an increase of over 11% since last year’s survey. The 2008 survey data reflects a wage increase in all positions.
According to industry reports, technology is the most effective way for U.S. contractors to increase their business. In an industry that relies heavily on correct scheduling, coordination and technical specifications, technology can be invaluable.
This year, the survey respondents reported an increase in the use of technology software for financial management/accounting, from 82.4% in 2007 to 100% in 2008. The use of project management technology increased over 8% since last year’s survey. QuickBooks was the most prominent software used for estimating and financial management/accounting.
What do you use software for?
0.0 0.5 1.0 1.5 2.0 2.5 3.0 Quote software Bid2Win Quickpen MC2 Estimation Xactimate QuickBooks 0.0 0.2 0.4 0.6 0.8 1.0 Quote software COINS Microsoft Project Management Fast Track Xactimate 20.0% 20.0% 20.0% 20.0% 0.0% 37.5% 12.5% 12.5% 0 5 10 15 20 No response No Yes Project Management Estimating 31.2% 68.8% 43.8% 43.8%
What software do you use?
Estimating Project Management 12.4% 12.5% 12.5% 12.5% 20.0% 0 1 2 3 4 5 Business Works COINS Versus Solomon Peachtree Timberline Foundation Software QuickBooks 35.8% 7.1% 7.1% Financial Management/Accounting 7.1% 7.1% 7.1% 21.6% 7.1%
Technology
Technology
(cont.)
Top Software Used
Ranked on a scale of 1 to 10 (10 being the highest).
Estimating Software
Financial Management/Accounting Software Project Management Software
QuickBooks Xactimate Estimation MC2 Quickpen Bid2Win Quote Software
Sophistication 9.0 9.0 7.0 8.0 5.0 10.0 10.0
Ease of use 9.7 9.0 8.0 8.0 7.0 10.0 7.0
Cost 9.7 4.0 7.0 8.0 3.0 8.0 5.0
Stability 9.7 5.0 8.0 8.0 5.0 10.0 8.0
Technical support 9.0 7.0 9.0 8.0 8.0 10.0 10.0
Xactimate Fast Track Microsoft Project Management COINS Quote Software
Sophistication 8.0 8.0 6.0 5.0 10.0
Ease of use 7.0 6.0 7.0 4.0 7.0
Cost 5.0 10.0 10.0 4.0 5.0
Stability 7.0 7.0 10.0 8.0 5.0
Technical support 7.0 4.0 3.0 6.0 10.0
QuickBooks Foundation Software Timberline Solomon Versus COINS
Sophistication 8.2 9.7 8.0 10.0 8.0 6.0
Ease of use 8.8 9.7 9.0 8.0 8.0 7.0
Cost 9.2 9.0 4.0 3.0 7.0 4.0
Stability 8.8 9.7 9.0 8.0 9.0 6.0
