FMI’s “2012 U.S. Markets Construction Overview”

A new forecast of 2012 construction activity landed in my inbox at deadline for pme’s January edition. While the timing qualifies the report as breaking news, its outlook for this year may strike you otherwise.

Industry consultant FMI’s “2012 U.S. Markets Construction Overview” predicts a long and slow recovery in 2012. “No one at this time expects a normal rebound from this recession, and the current pattern of small steps forward alternating with jolts backward, is widely projected to continue for at least the next year,” the report states.

Of much more interest to pme readers is a section that identifies six trends FMI uncovered when it surveyed design firms about the greatest challenges facing them through 2012. They are:

1. Project funding. FMI calls finding funding for projects the greatest challenge facing construction firms today and likely through 2013.

Overall, FMI predicts construction budgets will be cut by $2 billion in 2012. The good news is that two areas will see increases: Health facilities and veterans’ hospitals will grow from $1.81 billion to $3.06 billion, and projects supporting energy initiatives will increase from $7.41 billion to $10.47 billion.

2. Evolving delivery methods. The forecast identifies building information modeling as a leading trend in project delivery. By using BIM, many engineers, contractors and building owners have experienced the benefits of better clash detection and project planning as well as fewer change orders.

3. Competition. No surprise, but FMI reports that intensified competition is driving down prices on projects. What you may find more helpful is that some engineers are resisting the temptation of accepting rock-bottom fees by maintaining close contact with their clients and constantly educating them about what is necessary for a project to be designed effectively and safely.

4. Finding and retaining staff. Head-hunters are getting active again in recruiting top talent at design firms, which are working just as diligently to keep their key people in place. This tug-of-war makes sense given a report from the National Society of Professional Engineers, which says “only about 20% of those who graduate with a B.S. in engineering in the U.S. go on to become licensed professional engineers.”

5. Technology driving change. Related to the previous trend, firms are trying to fill positions today to prepare for tomorrow’s needs in areas such as BIM and energy modeling. Also in line with the staffing issue is that advances in design technology may help solve the problem of fewer engineers entering the industry.  

6. Industry consolidation/merger and acquisition activity. Firms looking to grow via acquisitions want to diversify either by market segment or geographic location as well as to bring new talent on board. Some executives believe consolidation could be good for the industry by reducing the number of firms and thereby relieving some of the competitive pressures.

Also good for the industry could be what FMI calls the “significant entry of engineering firms into the construction business and vice versa.” The resulting E&C firms will increase in size, significance and financial strength in 2012 and beyond.