Construction firms can put 5% of field labor cost on the bottom line, says FMI

February 06, 2009 |

Of the 226 construction executives and managers participating in FMI’s 2009 Contractor Productivity Survey, 74% indicated they could save a minimum of 5% of their annual field labor costs through better management practices. For a company spending $10 million a year on field labor, this represents an opportunity to save an additional $500,000 or more, which goes directly to the bottom line.

Although contractors have improved their methods for tracking field labor costs with new data collection systems since FMI began its bi-annual survey of productivity in 2003, the latest report finds two-thirds of the companies surveyed met or beat their project labor budgets less than 80% of the time. FMI notes the upside opportunity for labor-intensive contractors to save dollars on a good project are finite, but the downside risks on a bad project are nearly limitless.

According to Scott Kimpland, FMI principal and author of the report, “As contractors enter 2009, they are faced with uncertainty and some tough economic challenges. Tighter credit markets, a falling stock market, increased unemployment and a sharp downturn in the residential segment are good indicators the next few years will bring fewer opportunities and increased competition, resulting in tighter margins. If ever there were a time to get serious about becoming a lower-cost producer, this is it.”

The report details contractor productivity improvement practices and challenges and suggests methods contractors can use to develop a more productive workforce, be more competitive in tough economic times and, ultimately, be prepared when the economy starts to improve again.

Download the full report.

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