Survey Reveals Some Ugly Financial Truths for Construction Contractors

Some contractors claim they are boosting their bids anywhere from 5% to 10% to help absorb associated costs – one of which is slow-paying by their clients – a situational circumstance that is up 53% compared to 2021, according to a new report from Rabbet, based on a September survey.

They also have become “pickier when selecting bids because of increasing labor and supply prices,” according to the report.

Rabbet said there were other ugly economic signs brought on by inflation and rising interest rates have direct impacts on the construction industry:

• 37 percent of all respondents report that work has been delayed or stopped due to a delay in payments to crew members
• 62 percent of general contractors incurred billing charges, financing charges, or other costs when floating payments to others
• 5x increase in general contractors using retirement savings to float payments for their business

“As these realities set in, the implications for contractors grow tremendously,” said Will Mitchell, CEO of Rabbet, in prepared remarks.

“The risk of contractors going out of business skyrockets in environments like this and furthers the necessity for a better payment process in general. Contractors are clearly feeling this strain considering there was an 8.5x increase in general contractors using retirement savings to float payments for their business.

“When general contractors and subcontractors are in a situation where they can’t sustain their businesses because of disjointed payment processes, the risk to both lenders and developers grows immensely.

“Developers can’t control inflation and materials costs. The greatest opportunity to reduce project costs and attract and retain the best contractors is by implementing systems to get people paid quickly.”