Contractors Expect a Busy but Challenging Year

Contractors anticipate having plenty of projects available to bid on in 2022. But finding the workers and materials to execute the projects is expected to present multiple challenges.

Managing costs and scheduling among biggest challenges in 2022

By Ken Simonson

Simonson Ken

Those expectations showed up clearly in the 2022 Construction Hiring and Business Outlook survey the Associated General Contractors of America of America, supported by Sage, conducted in late 2021 and released on January 12. More than 1,000 AGC members—who do every type of construction other than single-family—answered the questions.

Respondents were particularly upbeat about the outlook for three types of infrastructure projects: highway and bridge, water and sewer, and transportation facilities such as airport, transit and rail facilities. That optimism may be partly a result of the enactment last November of the $1.2 trillion Infrastructure Investment and Jobs Act, which should greatly boost federal funding over the next several years for a wide range of public works projects.

AGC Outlook Survey: Net* % who expect 2022 value of projects to be higher/lower than 2021

The optimism extends to a dozen other project types, including such predominantly private categories as warehouses, hospitals and other health care structures—clinics, testing or screening facilities and medical laboratories, for instance. The only segments for which more respondents expect a shrinking market than an expanding one are retail and private office construction.

Respondents are also sanguine about adding workers, but they recognize it won’t be easy. Three out of four expect their firms will increase their headcounts this year. Yet 83% of firms are having a hard time filling at least some hourly craft or salaried positions, and 75% say it will continue to be hard or become even harder to hire workers.

2022 AGC Hiring & Outlook Survey: Firms’ expectations regarding head count and hiring over next 12 months.

For many contractors the supply and cost of materials are even bigger worries than worker shortages. The survey asked respondents to list their biggest concerns for 2022. Out of 20 choices, 86% selected materials costs, while 79% each chose availability/supply chain disruptions or continuing impact of the pandemic on projects, workers or the supply chain. Worker shortages ranked fourth, listed by 73% of respondents.

Firms are taking a variety of approaches to cope with supply chain issues. Two-thirds of respondents reported having accelerated purchases of materials after winning contracts, while 61% have turned to alternative suppliers and 48% have specified alternative materials or products. Nearly a quarter (23%) have stockpiled items before winning contracts.

AGC 2022 Outlook Survey: Firms cite pandemic impact as cause for higher cost and delays

Materials cost increases and project completion times outran contractors’ expectations in 2021, but now many firms are trying to change the situation. Because of the pandemic, 84% of respondents said costs were higher than they anticipated and 72% said projects had taken longer than anticipated. Going forward, 69% report putting higher prices into bids or contracts and 44% report putting in longer completion times.

In summary, there is widespread optimism among contractors that both public agencies and most types of private owners will offer more work to bid on in 2022. A large percentage of firms intend to add to their workforces even though they expect continuing, or even increasing, difficulty filling positions. And they expect ongoing challenges with materials cost and availability, despite adopting several strategies to cope.

Ken Simonson has been the chief economist of the Associated General Contractors of America since 2001. His weekly summary of economic news relevant to construction, the Data DIGest, goes to 47,000 subscribers.