Each quarter, Dodge surveys civil contractors on the issues they’re facing in the construction industry. This index measures sentiment from this audience quarter over quarter, providing a holistic view of the construction industry—including their expectations for revenue, backlog and profits. Here is what they said about Q1 2023.
Civil contractors were asked to compare their actual backlog to their ideal amount—the results show a high ratio at 96, indicating that civil contractors are overtasked with their current workloads. Their backlogs have increased in Q1 compared to the previous quarter, a trend beginning with the passage of the Infrastructure Investment and Jobs Act. Altogether, 41% of contractors reported an increase, with 11% saying their backlogs increased significantly and 30% saying they increased somewhat.
This increase is heavily tilted towards large providers, with profits of $50 million or more. Nearly half (49%) of large contractors saw their backlogs increase in the six months ending in March—significantly outpacing small firms at 31% and edging out midsized firms at 44%.
New project confidence
The trend of a high backlog of projects translates into a positive outlook for new work, as well. Civil contractors were asked to rate their confidence in new business opportunities in the coming year on a 10-point scale. The data reports that 77% of civil contractors were highly confident, demonstrating a strong belief in the volume of work available to them. This was a 5% increase quarter over quarter from Q4 2022.
This increase of work directly ties to the passage of the IIJA, which promises $110 billion for roads, bridges and other major projects of the total $1.2 trillion included in the bill, according to analysis from Ernst & Young.
Revenue and profit projections
With high backlogs and expected workload increases, civil contractors largely expect increased revenues. In Q1, 61% of civil contractors expect a "moderate to significant” increase in revenue, a quarter over quarter increase from 57% in Q4 2022. These projections are not evenly distributed across company size: 12% of small contractors expect a significant increase in revenue compared to 25% of midsize firms and 30% of large contractors.
With revenue increases are leading to profit increases. Close to half of surveyed civil contractors expect their profits to increase, which has remained steady quarterly with 46% relaying this sentiment in both Q4 2022 and Q1 2023. Historically, profits have remained consistent since the passage of the IIJA, and show no major fluctuations in company size.
Of those that anticipate increased profits, the majority (61%) are reporting this for two main reasons: more work and more profitable work. These reasons were followed closely by the promise of work from the IIJA (54%) and fewer competitors (33%). A notable point in this dataset is that those who selected “fewer competitors” were highly concentrated in the Midwest, with fewest respondents in the West.
Fluctuation in materials costs
When asked if the fluctuating material costs was impacting their operations, 95% of civil contractors reported yes, largely consistent with findings quarter over quarter. Supply chain issues began to heavily impact the industry beginning in Q3 2021, severely impacting civil contractors with no notable impact variations among company size.
A majority of contractors are concerned about this impact—88% agreed that the fluctuating cost of materials was a concern over the next six months. This shows an ongoing problem in the industry, exacerbated by the increase in pending work. As work increases, so too do revenues and profits. However, civil contractors have flagged that there are major issues they’re facing in the wake of the coming year.
Steve Jones leads the Industry Insights Research team for Dodge Construction Network. He is executive editor of Dodge Data & Analytics’ Commercial Construction Index, Civil Quarterly and the SmartMarket Reports series on key industry trends. Jones holds an MBA from the Wharton School of the University of Pennsylvania and a bachelor's degree from Johns Hopkins University.