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Private Sector Holds Key to 2011, Forecast Says

Thursday, December 2, 2010

Nonresidential construction is holding its own, with expectations improving, but contractors should not count on Uncle Sam for as much work next year.

That’s the fourth-quarter view from FMI, the largest provider of management consulting, investment banking and research to the engineering and construction industry.

The Nonresidential Construction Index “has been in positive territory for three quarters in a row, but only slightly positive,” FMI reports this week in its new 2011 forecast.

Still, the consulting firm added, “expectations for markets are improving slightly.”

Ending the Stimulus Chase

For 2011, work is most likely to come from the private sector, FMI said.

“As we begin the new year, nonresidential contractors will focus less on chasing Stimulus projects and more on finding private work to fill their backlogs,” the company said. No new Stimulus bill appears likely when the new Congress is seated, it added.

Overall, the ARRA stimulus package has proved disappointing to 44% of FMI’s panel of contractors in nonresidential construction. “For 2011, we can expect a continued period of slow growth before any signs that the private sector is significantly growing again,” FMI said.

The Good News

Somewhat surprisingly, panelists reported that the recession had brought about many good changes in their businesses by forcing them to re-examine their operations and to become more competitive.

Most panelists “described their efforts to become leaner, more productive and efficient,” FMI said. “They have been working on systems and processes; improving the quality of their people; and reviewing their culture, markets and goals. They are anticipating the end of the slowdown for construction….”

One bright spot on the horizon is the growth of prefabrication and modular construction. FMI panelists said they expected this area to grow faster than the market in general, due to the growing use of BIM; owners wanting projects faster and for lower cost; safety; quality; and the shortage of skilled labor once markets return to more normal growth.

Founded in 1953, FMI provides consulting services to contractors; construction materials producers; manufacturers and suppliers of building materials and equipment; owners and developers; engineers and architects; utilities; and construction industry trade associations.