Construction Contractor Strategies

Three Critical Factors Contractors Should Consider for Long Term Success

By Tom Boudreau

By all accounts, it’s a good time for contractors to take advantage of the expanding market and improving economy, initiate strategic growth initiatives and rebuild backlogs. In fact, the 2016 Dodge Construction Outlook predicts that total U.S. construction starts for 2016 will rise 6 percent to $712 billion, following the 13% increase estimated for 2015, with a rise activity in commercial and institutional building, as well as residential construction.1 As contractors look to grow their businesses in 2016, they should consider critical strategies to protect their firm’s long term success.

Leverage Strengths/Expertise

As in most businesses, success often leads to repeat business and builds a reputation for a job well done. However, an improving economy and exciting new opportunities may have many contractors looking to broaden their scope and geographic focus.
A job outside a contractor’s scope of expertise and geographic area that goes poorly can affect the firm’s overall reputation. That’s not to say all expansion is bad. One way contractors can leverage their strengths and expertise outside of their scope is through a joint venture or through a merger or acquisition. In particular, we’ve seen very successful joint ventures that have allowed contractors to expand to different geographic areas by partnering with a local contractor with the necessary relationships to effectively bid on and complete a job.
Whether a contractor is involved in a joint venture or another collaborative relationship, safety should be a critical part of the conversation. An organization’s approach to risk management and safety should be in line with industry best practices. An insurer’s risk engineering team can be an excellent resource to assist in these efforts.

Due Diligence

Contractors have told us that one of their biggest mistakes expanding their scope and geography was not establishing the right relationships beforehand. They would win a job and then have to screen hundreds of candidates to find the 50-100 workers to meet their needs. If a contractor wins a job but can’t find the labor force needed to complete the job, the firm will need to transport workers from another area, which can further cut into already thin margins.
It is also important for contractors to check and recheck their pricing model when considering a move to a new geographic area. A contractor’s estimator may be very good at projecting costs in the current model, but a new scope of work and/or geographic area might require some guesswork that can lead to problems and even thinner margins. A pricing model should assess the available labor force to do the job. This due diligence is a wise step prior to taking on work in an unfamiliar area.

Attract and Retain Skilled Workers

Workforce issues are a growing problem across the industry. Those contractors that attract the best skilled workers are typically offering competitive wages and benefits, adopting technology to enhance safety and quality, and, most importantly, supporting training and continuing education.
Employee training is imperative. Many of the apprenticeship and mentoring programs were lost in the bad economy. It’s time to reestablish these programs to prepare the next generation of construction workers to be effective, motivated and safe employees.
A drug-free jobsite is a safer jobsite, and contractors are implementing drug-free policies and practices to protect the safety of workers on the project. On one recent visit to a jobsite, our risk engineering engineers were required to go through drug testing prior to entering the site. We applaud these no exception, zero tolerance policies.
At The Hartford, our risk engineering and safety experts work closely with our construction clients to offer guidance and share best practices related to growth, safety and training. We encourage contractors to take advantage of the tools and programs that their insurance providers offer to help ensure a successful future.

About the Author

Tom Boudreau is vice president of construction insurance in The Hartford’s Commercial Markets division. The Hartford is a premier provider of property and casualty insurance and risk management services for midsize and large construction companies, with a focus on heavy trade contractors, commercial builders and sub-contractors.
Robert A. Murray, Dodge Data & Analytics, 2016 Dodge Construction Outlook (prepared October, 2015)