When Construction Counts - Addressing Subcontractor Challenges

Construction is a trillion-dollar industry, but construction can’t happen without subcontractors. With specialized skills, such as plumbing, electrical work, carpentry, and roofing, subcontractors allow general contractors to focus on managing the projects while adjusting their workforce to meet project demands. Because subcontractors are a vital part of the construction industry, it’s important to recognize and address their challenges.

Macroeconomic challenges, most notably labor shortages and material costs, are having the most significant impact.

While the increase in labor costs is significant, finding enough skilled labor is predicted to be the most considerable risk this year. The trillion-dollar infrastructure bill, compounded with the regular flow of projects, means that hundreds of thousands of workers are needed to meet demands. As older workers age and retire, the industry is spending more money to recruit, upskill, and adequately compensate new talent.

In addition to labor challenges, material procurement and pricing are affecting subcontractors’ profit margins. Although inflation plays a partial role, material price volatility, which became an industry fixture during the pandemic, is still causing disruption. Subcontractors rely on various materials to complete their work, including lumber, steel, concrete, and other building supplies. When prices for these materials fluctuate rapidly, it can create financial challenges, disrupt project timelines, and make planning and executing the work more difficult.

Despite these challenges, there are some strategies that may help.

• Develop relationships with suppliers to negotiate better prices and secure favorable payment terms. Also, explore alternative materials that may be more affordable or readily available.
• Embrace technology to improve efficiency and productivity. For example, project management software can be used to track labor and material costs, which can be helpful in making more informed decisions about how to allocate resources.
• Collaborate with other subcontractors to share labor and material costs. Not only will this make it possible to take on larger projects, but I may also reduce risk if material prices increase.
• Invest in training and development programs to attract and retain skilled workers.

With a team of insurance professionals dedicated to the construction industry, AssuredPartners can be a valuable partner. By leveraging our industry knowledge, risk management skills, claims expertise, and collaborative approach, we work hard to develop creative solutions to help manage costs and risks. Contact our Construction and Surety team to learn how we can help address today’s challenges and position your company for success in a competitive market.