Kieran O'Connor Presents at 2022 Construction Financial Management Association (CFMA) Regional Conference
The Construction Financial Management Association (CMFA) 22nd Annual Mid-Atlantic Regional Conference was held September 24-26, 2022 in Cambridge, MD. This year, Beacon Vice President Kieran O'Connor was a speaker at the event, participating as part of a panel of Surety industry professionals. The panel members focused on all of the following areas: (1) Trends in Surety results Mid-Atlantic & Nationwide; (2) Outlook for Underwriting and performance and losses of Surety and Subcontractor Default Industries; and (3) Legal or claim trends.
Looking at the topic from the Construction Consultant's perspective, Kieran's portion of the presentation covered current trends in the U.S. Construction Industry, Surety Claims trends, and Solutions to current challenges. Special thanks go to the other panel members and Beacon Project Engineer Edward Forester who assisted with developing the presentation.
Kieran's presentation noted some of the following trends on the U.S. Construction Industry:
- Material Shortages
- Supply Chain Issues
- Material Price Escalation
- Labor Shortages
- Turnover of Project Management & Skilled Labor
Examples of construction material price increases noted in the presentation included the following cost increases from 9/2021-9/2022 (related to modular concrete products):
- Rebar: Costs up +47%
- Cement: Costs up +11%
- Epoxy / Resin: Costs up +28%
- Transportation: Costs up +10%
Kieran's presentation noted that many recent and ongoing construction projects have been severely impacted by such cost increases, as well as materials shortages, and delays in their delivery. In addition, the following skilled-labor-related issues have contributed to some GCs and Subcontractors failing to meet their contractual obligations on projects:
- High workforce turnover (& competition for limited labor pool of skilled workers)
- According to leading industry source, 311,000 Construction jobs were added (+4.2%) between August 2021 and August 2022
- Unemployment among jobseekers in the industry fell to 3.9% from 4.2% in one year
- A recent poll of U.S. GC's (Sept. 2022) found that 93% had open/unfilled positions
For some GCs and Subcontractors, personnel turnover (combined with the skilled labor shortage) has resulted in the loss of company expertise and project knowledge. This has been a noticeable issue related to some surety claims in the past year, along with new hires having insufficient training, limited experience, or inadequate supervision. Over the past year, such factors seem to have contributed to a very significant increase in the number of surety claims resulting in Penal Sum payouts.
Kieran's presentation wrapped up with some suggestions and observations related to how some GCs and subcontractors are handling current industry challenges. To request a copy of Kieran's presentation, please contact Beacon Consulting Group. For more information about the event, please visit: https://www.midatlantic.cfmaregional.org.