Increased Competition is Important to the Construction Industry

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Increased Competition is Important to the Construction Industry

Surety Bond Professionals is a family owned and operated bonding agency with over 30 years of experience. With access to a broad range of surety markets, our expert agents are ready to assist with all of your construction bond needs.

The Competitive Nature of the Construction Industry

Competition is a good thing. Without it, companies become stagnant. They settle for the status quo. Whatever they’ve been doing must be good enough, right? After all, they’re still in business. When competition is viewed merely as a necessary evil, there is no incentive to improve, no motivation to innovate, no reason to go above and beyond.

In every industry, companies compete for customers and for market share. They compete on the basis of price, product features, quality, customer service, brand recognition, innovation, and more. But it’s only in construction that bidding for jobs is the most common method of acquiring new customers. In many ways, that makes it easier to compete in construction than in other industries. In competitive bidding situations, project owners tell potential bidders exactly what they’re looking for—what they need, want, and expect. There’s no need for construction companies to conduct extensive market research to figure out what they need to do or offer. That information is right there in each RFP or RFQ.

While competition is nothing new in the construction industry, the nature of that competition is dynamic. It changes in response to changes in demand, client preferences, building design, construction technology and practices, as well as in the labor marketplace, economic conditions, and regulatory environment. Being responsive to those changes in the competitive landscape is essential to any construction company’s long-term survival and to the vitality of the construction industry.

Competitive Challenges in Construction

The following are some of the most impactful competitive challenges in the construction industry today.

Demand for Turnkey Projects

Turnkey projects are increasingly popular among project owners. This delivery method consolidates project design, engineering, financing, procurement, subcontracting, and construction under a single contract. In short, this delivery method transfers to the contractor many responsibilities traditionally belonging to project owners. Its primary benefit for project owners is certainty of the total project cost and an accurate ROI calculation. But it requires contractors to expand their scope of services in order to compete with companies that have experience with turnkey projects.

Unbundled Contracts

In contrast to the turnkey delivery method, there is also increasing demand for unbundling engineering and construction into separate contracts and hiring different companies to execute them. It’s a way for project owners to select the companies offering the best cost positions for each aspect of a project.

Increasing Number of Public/Private Partnerships

The Infrastructure Improvement and Jobs Act encourages projects jointly sponsored by a public agency and private sector partners, but such P3 projects were already on the rise when IIJA became law. To be competitive in the P3 arena, construction companies typically need to acquire expertise in areas that are not necessarily their responsibility with a traditional Design-Build delivery method. They also need to understand the potential risks involved.

Advances in Technology

Technology can give construction companies a competitive edge when used to improve collaboration, reduce change orders, improve cost control, boost quality, and shorten project duration, as a BIM system can, for instance. Construction companies also can compete in terms of the building technology they can offer, for example, with LEED certification.

Shortage of Skilled Construction Labor

The construction labor pool has been shrinking for years as older workers leave the workforce and fewer young people are seeking construction jobs. Finding and keeping skilled workers has become a major challenge. To be competitive, construction companies need to expand their recruitment efforts into population segments that have been historically underrepresented in construction, including women and minorities. Good wages, the opportunity to participate in a retirement plan, a safe work environment, ongoing training, and the opportunity for advancement all help create a competitive advantage in acquiring and retaining construction workers.

Protect Your Bonding Capacity

Growing a construction business requires sufficient bonding capacity. The more competitive a construction company is, the more contracts it is likely to be awarded. That requires that a surety is convinced of the company’s financial strength and stability and its ability to carry out the work without incurring claims.

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