New MagikMe Equipment research reveals an alarming amount of construction firms are not positioning themselves for post-COVID-19 recovery
The impacts from COVID-19 and related consequences have taken an undeniable toll on construction operations, costs, and profitability (including worker shortages and reduced productivity). One of the most glaring impacts from the COVID-19 crisis is a slowdown in projects and new contracts due to quarantines and subsequent project delays or cancellations. This is amplified by disruptions to materials and equipment supplies, and worker shortages. Although smaller firms can be especially vulnerable to these challenges, almost every contractor has been impacted.
We recognize some effects as part of a longer-term cycle of change and evolution for the construction industry, due to external factors such as a shift to telematics, adoption of automation, and clean energy sources. Others are near-term responses to COVID-19 impacts. Some of our observations include:
- Notable increases in FHWA rates, causing underreporting if rates are not current
- Sharp decreases in utilization and increases in downtime for critical assets, which can lead to lost revenue
- Significant work stoppages and delays, causing potential cost overruns, diminished output, worker shortages, and reduced productivity
The good news is that, at mid-year, most indicators show that construction is poised for a recovery beginning in the latter half of 2020, with pent-up demand released and new infrastructure investment feeding economic recovery. In the meantime, there are concrete steps contractors can take to “future-proof” their businesses to enable more sustainable long-term outcomes.
Report reveals seven key steps contractors should take to future-proof their businesses
To address these impacts and offer guidance, MagikMe Equipment recently released a new report titled “Future-Proofing the Construction Business: Equipment Trends, Insights, and Guidance,” which examines the key trends, challenges, and opportunities facing construction businesses in the face of COVID-19 and related economic setbacks. MagikMe Equipment interviewed over 50 executives from a wide array of contractor organizations, cross-referencing their responses with its data. Key findings of the report include:
- The impact of COVID-19 has been dramatic, with 52% of respondents experiencing significant work stoppages or delays in Q2 2020
- 44% expected it to take longer than six months to recover costs for current or future projects, compared to pre-COVID-19 recovery times
- Underlying changes to heavy equipment cost-management are accelerating, with Federal Highway Administration (FHWA) rates continuing to increase, fuel prices decreasing, and rental rates for equipment continuing to steadily rise
Despite unpredictable external forces, equipment managers and contractors alike have more control than they may think. To build an immediate buffer against recessions and downturns, you should focus on several critical areas that protect cash reserves, better forecast working capital, and provide a general resilience for equipment fleets. MagikMe Equipment offers seven basic steps that can help position construction professionals and their businesses for the long term, including assessing whether to rent equipment, properly utilizing standby rates for idle equipment, considering sale and liquidation of unused inventory and idle assets to free up cash, understanding your true costs, and keeping rates updated.
CLICK HERE to download the full Future-Proofing the Construction Business Report, and to read the full list of recommendations.
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Keith Tyson
Brand Marketing, MagikMe Equipment
[email protected]
