• Home
  • |
  • Subcontractors Face Challenges In 2022

June 24, 2022

Subcontractors Face Challenges In 2022

The construction industry is once again booming across the residential, commercial, and public sectors. However, despite strong projections for growth in residential (9%) and non-residential (4.6%) construction, many businesses are struggling with material costs, labor shortages, and slow payments.

Subcontractors are feeling the pain.

According to Billd, A staggering 57% of sub-contractors saw a decrease in profitability in 2021 and 59% of subcontractors are concerned about overall increased cost for the remainder of 2022 and into 2023.

Procurement is a major concern.

  • 75% said material costs are a major factor

  • 79% said lead times had a negative impact on their business

  • 87% Expect lead times to get worse before they get better

  • 88% expect the volatility in the market to get worse

Paying for material.

  • 66% Use cash to pay for material prior to payment for work being received

  • 89 % have terms with their suppliers

  • 69% preferred terms over credit card and bank loans

Most common payment terms subcontractors have with suppliers.

  • 10 days 3%

  • 30 days 67%

  • 45 days 14%

  • 60 days 12%

  • More than 60 days 4%

Getting paid is also a major hurdle.

Even in the current construction boom, payment problems continue to affect companies across the industry.  Only 5% of subcontractors report they “always” receive on-time payments

  • 8% Pay for labor before receiving payment for job

  • Over 90% companies offer payment terms of 30 days or fewer, but fewer than report getting paid within those terms on average. 

  • 52% of subcontractors and 40% of material suppliers cite general contractor mismanagement as the source of payment problems. 

  • Construction businesses report that slow payments contribute to wasted resources (45%), reduced profit (41%), and failure to meet payroll (18%). 

  • 5% Are concerned about working capital

Where are subcontractors getting the money to operate

  • 59% Cash on Hand

  • 54% Line of credit

  • 9% Private lender

  • 19% Material Financing

Optimism

Despite the difficult landscape, over half of subcontractors are optimistic about their 2022 financial prospects.

  • 71% Plan to grow their business

  • 50% will seek larger projects

Most subcontractors recognize that collaboration and communication can go a long way to ensure payments roll in on time, increase efficiency  and will lower their overhead. 

Most believe technology will play a key role moving forward.

  • 72% of subcontractors are open to trying  technology to manage their business

  • 63% are looking at estimating and takeoff software

  • 65% are considering material procurement and payment technology

  • 59% also believe project management solutions will be a factor

Technology and Risk

Here at DigiBuild we are focused on how technology can mitigate risks when it comes to information and documentation related to procurement, payments and project management.

Related Posts

Interesting Construction Court Cases and Rulings

Interesting Construction Court Cases and Rulings

What Makes a Successful Project?

What Makes a Successful Project?

How Many Suppliers Should You Have?

How Many Suppliers Should You Have?

Finding and Hiring the Construction Workforce

Finding and Hiring the Construction Workforce
>