When projects stalled across the country during the initial weeks of the pandemic — some indefinitely because of lost funding — the construction industry became increasingly aware of backlog.
That’s not to say tracking and managing backlog was an obscure topic before the public health crisis, but the impact of the sudden economic shutdown of 2020 gave us a new perspective. Now that the economy appears to be rebounding, and demand for construction services is reportedly quite high, construction company owners should be sure to stay aware and ahead of their backlogs.
Assess the situation
At the risk of stating the obvious, backlog is important to every construction business. Having a healthy amount of work scheduled but not yet started is a key indicator of financial strength. A diminished backlog, on the other hand, implies the contractor is running out of work.
When backlogs fall industrywide, it indicates that fewer projects are coming to market. Many contractors might respond to a low backlog by bidding on more projects than usual or bidding on those outside their normal scope of work. With more contractors vying for the same projects, you could feel forced to bid jobs at lower margins, which in turn negatively impacts profitability.
It’s possible to maintain or even grow your backlog in the current environment of struggling supply chains and scarce skilled workers. Here are a few strategies to consider:
Watch market conditions. To get on the right bid lists, pay attention to construction backlog in the regions or sectors in which you typically work or could work. Doing so will shed light on where demand is high and which market sectors are healthy.
Explore diversification. Look into the feasibility of diversifying the construction services your company offers. This is, of course, not a risk-free strategy. You might need to bring in new talent or invest in additional equipment.
Focus on relationships. Regular communication is key to keeping relationships fresh with partners and those who make important decisions on potential jobs. Key contacts can include general contractors (especially if you’re a subcontractor), consultants, architects and engineers, and developers.
Sell your unique value proposition. Identify what you do better than anyone else. First and foremost, promote your approach to the safety of your workers and the public — including measures taken to protect public health and the environment. Plug other demonstrable advantages of your business, such as stellar customer service, niche expertise and experience, and speed of work.
Bid first. Among the easiest ways to win more bids is to submit first. This way, your proposal becomes the standard against which others are compared. To get early leads on projects in the pipeline, tap into your professional networks regularly and visit online construction bidding marketplaces.
Don’t just survive, thrive
When competition for projects heats up, some contractors feel pressured to bid on every job they can find, just to have work and keep staff on board. However, your company should bid only on projects that you have a high chance of winning and that will likely be profitable.
Avoid projects that are outside of your niche or in locations where you won’t have the workforce or resources to feasibly fulfill the requirements. Above all, avoid the temptation to bid too low and potentially lose money if you’re awarded the work. Our firm can help you identify, calculate, and track key metrics related to backlog.
©2022 Thomson Reuters