Labor productivity is a challenge for the construction industry, and it appears to be getting worse.
Of the nearly $900 billion in construction put in place by labor-intensive contractors in the U.S. in 2022, research and surveys done by FMI Corporation, a consulting and investment banking services firm, suggests contractors lost approximately $30 billion to $40 billion due to labor inefficiencies.
FMI recently released its 2023 Labor Productivity Study, having surveyed more than 250 from heavy civil trade and self-performing general contractors. The study explores the current trends, challenges, management best practices, and innovations for optimizing labor productivity.
"Despite the advancements that the industry has made in design, coordination, and management technology, the industry is still heavily reliant on people to install work," said Michael Keller, an FMI operations and performance practice consultant.
As the economic engine behind any contractor’s business, labor remains the largest, riskiest, and most controllable cost.
Keller noted that when managed well, labor under-runs typically correlate with higher profit margins but when managed poorly, labor overruns can wipe out the bottom line of an organization.
Contractors are in the labor-management business, and understanding labor costs has a clear, direct effect on profitability.
