Challenges for Building and Construction In 2023. The building and construction industry witnessed unprecedented changes in the past 12 months that left many stakeholders in the sector barely able to make ends meet. For some time now, optimism is returning in a couple of areas and some companies are moving gradually towards recovery.
While this news is very encouraging, industry experts have stated that they have no illusions about the many challenges that loom ahead due to the changing market. Here, we discuss 5 prominent challenges trend-watchers predict will impact the construction world in 2023.
Worker Health and Safety
Safety has always been a concern in the building sector, but the deadliness of the COVID-19 crisis made it an all-time major priority that cannot be compromised in any way. Measures to reduce the spread of the disease will include smaller crews, the use of enhanced equipment with stricter cleanliness protocols.
As hard as it may be, companies would strive to avoid crowded job sites to protect staff health. They also understand how hard it is to find a replacement because of the ongoing shortage of skilled workers within the industry.
High Costs of Material
The quarantine and the inability of manufacturers and suppliers to work made the cost of building materials fluctuate wildly last year and the ripple effect is expected to spread into this year. According to the last quarterly report released by the U.S. Chamber of Commerce Commercial Construction Index (CCI) in 2022, 74% of contractors indicated that fluctuating costs have a mid to high effect on their business.
Industry watchers anticipate that this high cost of materials will continue until production (of materials) returns to normal and broken supply chains are fully restored. Of all the building materials, wood and lumber which have the greatest demand are the most expensive.
In the US, the tariffs imposed on steel and aluminum also contributed to the hiked up price of these metals commonly used in building.
Pricing of Projects
This never ceases to be an issue among building stakeholders because price is what determines the offers a contractor makes. Contactors use different pricing models to determine their bid price but the most popular is cost-based pricing or market-based pricing.
Even though these two pricing models may not offer the best value for money, contractors go for them because of the fierce competition in the industry. This year, the competition in the building sector is going to get even more fierce.
Suppliers, contractors, and subcontractors need to develop a pricing system that is both effective and efficient. Pricing strategy should be value-based but it has to be designed in such a way that it fulfills these three criteria:
- Make the contractor able to withstand competition
- Provide enough cash to deliver a quality project
- Provide quality cash for the contractor’s time and effort
Diversification of the Supply Chain
The disruption of the supply chain in the thick of the pandemic and afterward has forced companies in the construction sector to frantically search for alternative suppliers or pay exorbitant amounts for materials.
Backlog orders before the pandemic hit full force, staff shortage, and current demand put a huge strain on supply chains causing a delay in delivery of materials and equipment. Contractors who formerly had one or two suppliers for material have begun setting up about 3 to 4 separate suppliers for any one item.
Many contractors even prefer their suppliers to be in different geographic regions because of the hard lessons learned during the coronavirus. Companies whose suppliers were based only in China were severely affected when the pandemic struck.
Today the profits resilience in construction will also be determined by how well the costing, pricing, safety challenges are addressed not once but continuously
Challenges for Building and Construction In 2023
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