flexiblefullpage
billboard
interstitial1
catfish1
Currently Reading

Rising labor, material prices cost subcontractors $97 billion in unplanned expenses

Contractors

Rising labor, material prices cost subcontractors $97 billion in unplanned expenses

Subcontractors continue to bear the brunt of rising input costs for materials and labor, according to a survey of nearly 900 commercial construction professionals. 


By Billd | April 19, 2023
Rising labor, material prices cost subcontractors $97 billion in unplanned expenses
Illustration courtesy Billd

Financing solutions provider Billd recently surveyed nearly 900 commercial construction professionals across the U.S. for its 2023 National Subcontractor Market Report. Its key finding: rising input prices for materials and labor cost subcontractors $97 billion in unplanned expenses last year. 

Rising material costs and price volatility are not new issues for subcontractors, with 81% of those surveyed reporting a negative effect on their businesses in 2022; 80% expect that trend to continue. It is no surprise given material costs jumped a staggering 26%, according to respondents. Similarly, competition for labor due to the longtime labor shortage was validated by a 15% average increase in labor cost. Together, those increases amounted to $97 billion in additional expenses for the subcontractor. While some subcontractors increased their bids to offset these rapidly rising costs, one third of respondents were unable to raise those bids commensurate with their expenses. This resulted in 57% of businesses reporting a decrease in profitability, despite 61% reporting revenue growth.

"Subcontractors are the foundation of the construction industry, providing all material and labor to complete a project," said Chris Doyle, CEO of Billd. "They purchase that material and pay for that labor upfront, not being paid for their work for 74 days, a result of the dysfunctional payment cycle. If you add unplanned expenses due to rising costs in material and labor, it puts an unrealistic burden on subcontractors to provide that foundation." 

Rising labor, material prices cost subcontractors $97 billion in unplanned expenses

The report examines how macroeconomic conditions from this and prior years impacted subcontractors in 2022, as well as their outlook for 2023. It also creates hope by providing perspective on new financing options subcontractors can leverage as mainstays – like supplier terms – become less reliable. 72% of respondents report having supplier terms of 30 days or less. Compared to a 74-day average wait time for payment, it is no surprise that 51% deem the length of their terms insufficient. 

Supplier terms also have an unforeseen cost; most suppliers (also surveyed) state that they offer discounts for upfront payment. Despite those disadvantages, 87% of respondents still rely on supplier terms as their predominant means of buying materials. When it comes to funding their increasing labor costs, traditional financing options are even less accessible, leaving 87% of respondents coming out of pocket for labor before getting paid themselves. Luckily, the report highlights financial relief for labor as well as materials.
 

Related Stories

Building Owners | Jul 12, 2023

Building movement: When is it a problem?

As buildings age, their structural conditions can deteriorate, causing damage and safety concerns. In order to mitigate this, it’s important to engage in the regular inspection and condition assessment of buildings for diagnosis.

Mass Timber | Jul 11, 2023

5 solutions to acoustic issues in mass timber buildings

For all its advantages, mass timber also has a less-heralded quality: its acoustic challenges. Exposed wood ceilings and floors have led to issues with excessive noise. Mass timber experts offer practical solutions to the top five acoustic issues in mass timber buildings.

Multifamily Housing | Jul 11, 2023

Converting downtown office into multifamily residential: Let’s stop and think about this

Is the office-to-residential conversion really what’s best for our downtowns from a cultural, urban, economic perspective? Or is this silver bullet really a poison pill?

Contractors | Jul 11, 2023

The average U.S. contractor has 8.9 months worth of construction work in the pipeline, as of June 2023

Associated Builders and Contractors reported that its Construction Backlog Indicator remained unchanged at 8.9 months in June 2023, according to an ABC member survey conducted June 20 to July 5. The reading is unchanged from June 2022.

Codes | Jul 10, 2023

Water Demand Calculator outperforms traditional plumbing codes for energy, carbon, and water savings

Using IAPMO’s Water Demand Calculator tool can result in energy, carbon, and water savings as compared to using traditional plumbing specification methods in plumbing codes, according to a study by Arup.

Adaptive Reuse | Jul 10, 2023

California updates building code for adaptive reuse of office, retail structures for housing

The California Building Standards Commission recently voted to make it easier to convert commercial properties to residential use. The commission adopted provisions of the International Existing Building Code (IEBC) that allow developers more flexibility for adaptive reuse of retail and office structures.

Laboratories | Jul 10, 2023

U.S. Department of Agriculture opens nation’s first biosafety level 4 containment facility for animal disease research

Replacing a seven-decade-old animal disease center, the National Bio and Agro-Defense Facility includes the nation’s first facility with biosafety containment capable of housing large livestock.

Market Data | Jul 5, 2023

Nonresidential construction spending decreased in May, its first drop in nearly a year

National nonresidential construction spending decreased 0.2% in May, according to an Associated Builders and Contractors analysis of data published today by the U.S. Census Bureau. On a seasonally adjusted annualized basis, nonresidential spending totaled $1.06 trillion.

Contractors | Jun 30, 2023

Construction industry task force aims for standardized carbon reporting

A newly formed Associated General Contractors of America (AGC) task force on decarbonization and carbon reporting will address the challenges around reporting and reducing carbon emissions in the construction industry.

Standards | Jun 30, 2023

New ASHRAE standard aims to reduce disease transmission risk in indoor spaces

ASHRAE Standard 241, Control of Infectious Aerosols establishes minimum requirements to reduce the risk of disease transmission by exposure to infectious aerosols in new buildings, existing buildings, and major renovations. Infectious aerosols are tiny, exhaled particles that can carry pathogens that cause infections or disease.

boombox1
boombox2
native1

More In Category




halfpage1

Most Popular Content

  1. 2021 Giants 400 Report
  2. Top 150 Architecture Firms for 2019
  3. 13 projects that represent the future of affordable housing
  4. Sagrada Familia completion date pushed back due to coronavirus
  5. Top 160 Architecture Firms 2021