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You are here: Home / Archives for Trends

Jan 02 2019

Stop! Should You Really Submit that Proposal?

 
By Scott D. Butcher, FSMPS, CPSM

Note: this blog post originally appeared as a LinkedIn Article as “Proposals: Red Flags and Dirty Tricks.”

If you’ve spent any amount of time creating proposals, then you’ve undoubtedly seen all sorts of questionable behavior by proposal requestors. Sure, they send out an RFP (or post it online), asking for responses, acting like they want many proposals in order to make an informed decision. And then then they create traps to disqualify those proposals so they don’t have to read them. Some common approaches:

  • Extremely tight proposal deadlines making it almost impossible to respond
  • Limited number of pages, making it almost impossible to be responsive to the RFP criteria
  • Strict requirements on font, point size, spacing, etc. – little things that make it easy to get your proposal disqualified (“You used 10-point font size? Off with your head!”)
  • Vague language with no knowledgeable person to contact for clarity
  • Highly restrictive requirements for staff experience, license/certification, or relevant past experience
  • Outrageous project schedule requirements or contract terms (that may not even be insurable)
  • Continually revising the RFP and changing the requirements / scope while not changing the due date

These are all red flags that demonstrate the pitfalls of responding to a proposal unless you really know the client/agency and have an established rapport with them. That’s not to say that you need to have a deep relationship with every client you submit a proposal to (how often are the final decision makers / selection committee members “hidden” to the proposers, anyway?), or even that a good relationship would prevent some of these behaviors. Rather, these are clues that if you’re not “in the know” about the opportunity, then you shouldn’t waste your time submitting a proposal (the proposal requestor doesn’t want it, anyway!).

In many cases, your competitor very well may have written the RFP document. They wrote it so restrictively that only their firm could check all the boxes! And you know what? You’d do the same thing if given the opportunity (and many of us have). However, there’s also a trap here. Another bad behavior you’ll come across is the proposal requestor that reaches out to you for a proposal and detailed scope of work to a project that may not be well-defined. “What do you think this project will take?”, they ask. And then after you spend many hours pulling something together, everything goes quiet – or you get ghosted. You thought you had a 95% probability of being awarded the project, yet they won’t even return your calls or emails. And then, low and behold, one day an email arrives from that prospect. Unfortunately, it contains a Request for Proposal which just happens to include that detailed scope of work you developed – almost verbatim. And they sent the RFP to your competitors, as well. So essentially you did all the legwork for the RFP, and now you have to bid to get the project.

Most of my time is spent in the architecture, engineering, and construction (#AEC) space, but I’ve been involved with proposals from other perspectives as well, particularly in the nonprofit realm. Recently I saw some of the same old red flags and dirty tricks in an RFP – as well as a new one! These included:

  • Sending RFPs to groups that had no business in actually responding – they didn’t have the qualifications or the capacity
  • Including RFP requirements so time-consuming that it would be impossible to comply in the allotted time
  • Including RFP requirements so cost-prohibitive that few (if any) recipients could submit a truly responsive proposal

You may be shaking your head because you’ve seen this kind of thing before. But here’s the new one:

  • Not publishing any limitations on word count or file size (only that the proposal must be electronically delivered in a single Word document), and then rejecting any file 1 MB or larger at submission

So you could spend weeks working on the proposal, trying to cross as many t’s and dot as many i’s as possible (not that it was possible to get them all!), finalize the proposal just before the deadline (the world most of us work in), click the link to upload the file, and only once you have attempted to submit the file find out that there is a limitation on file size!

I don’t have a fundamental problem with file size limitations, but there are two glaring issues here:

  1. Not making proposers aware of any file size limits in advance.
  2. Requiring files to be less than 1 MB – what is this, 1993?

The average smart phone photo is probably 2 or 3 MB – no different than it was in the early days of smart phones, thus a 1 MB file is small by today’s standards. For most proposals, it’s downright tiny. Therefore, a 1 MB file size limit would be a “red flag” had it been published to proposers. Not disclosing that limit and essentially using it as a way to reject proposals is a downright “dirty trick”!

You can argue whether there was Machiavellian intent, or it was simple ignorance that caused the issue. However, when you look at the other red flags – before even getting to this little trick – you can clearly see that the proposal requestor had little interest in actually receiving any proposals.

They had already pre-ordained the winner – and perhaps the “winner” was the status quo. (A colleague once told me that the biggest competitor will always be the status quo.)

If you make the RFP so restrictive, invite unqualified groups to submit, and then create a layer of “security” to disqualify any potentially-responsible proposals, it’s easy to say, “We didn’t receive any proposals that met our criteria, so we are going to (fill in the blank).”

And in this case, the blank may be “proceed as planned,” “stay with our current firm,” or “not move forward with the project/initiative.”

Downstream, however, there’s a feeling of frustration, disappointment, even dejection. Large amounts of time have been wasted in pursuit of an opportunity that was never going to pan out. The opportunity costs can be staggering when this kind of thing happens.

I’m a big proponent of making quality, objective Go/No-Go decisions based upon data and facts (as opposed to the all-too-common subjective, “Sure we can do that!” decisions). And yet, there are many red flags that go unnoticed or are intentionally ignored, costing organizations huge wheelbarrows of cash and their employees massive black holes of productive time.

What are some of the proposal red flags and dirty tricks that you’ve seen?

Interested in upping your proposal game? jdbIQity offers a four-hour proposal workshop for project managers and marketing professionals to learn about best practices and proposal trends. Contact Scott Butcher at sbutcher@jdbe.com or 717-434-1543 to learn more.

Connect with Scott

  • LinkedIn: https://www.linkedin.com/in/scottdbutcher
  • Twitter: https://twitter.com/scottdbutcher

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Written by Scott Butcher · Categorized: A/E/C Industry Posts, Business Development, JDB IQity, Marketing, Proposals, Trends · Tagged: A/E/C, Marketing, Proposal, Proposals

Nov 07 2018

The State of the A/E/C Industry

State of the A/E/C Industry

By Scott D. Butcher, FSMPS, CPSM

What are the current economic conditions within the architecture, engineering, and construction industry? How are the market sectors and geographic regions performing?

There are quite a few indicators that track the health of the industry, and we’ve gathered many of the major metrics in one place to make your environmental scanning easy as you head into planning for 2019!

Click on the image to enlarge the State of the A/E/C Industry infographic, or surf here for a downloadable PDF for sharing!

Architectural Billings

State of A/E/C Industry - ABI

The first stop on this tour of the A/E/C industry’s economic health is the American Institute of Architects’ Architectural Billings Index (ABI), which is broken into several categories. Overall, the ABI for billings is at 51.1 for the latest month. As the ABI is a diffusion index, any score above 50.0 demonstrates growth over the prior month, while any score below indicates decline. The most current data available is for September 2018, and the score of 51.1 demonstrates a billings increase over August. However, the August score was 54.2, so we know that although the billings continue to increase, there is a decreasing rate of growth.

The AIA tracks Design Contracts and Project Inquiries as well. While billings is a lagging indicator – that is, the work has already happened – Design Contracts are very much a real-time indicator, capturing what is happening right now. In August, there was a retraction in contracts with a score of 49.6. However, the index rebounded in September with a score of 54.1, a significant jump. Project Inquiries is a leading indicator of future workload. The September score of 58.8 is impressive, building upon the 58.0 score of the prior month.

Additionally, with the latest ABI survey, the AIA asked architects about revenues for the year, and as an average, AIA members are projecting a net revenue growth of 7.5% for the year.

State of A/E/C Industry - ABI Geographic

The ABI is also broken into four large geographic regions. Three of the four experienced billings growth in September:

  • Midwest = 59.7 (52.5 in August)
  • West = 51.3 (54.2 in August)
  • South = 54.1 (57.0 in August)

The Midwest experienced a major increase in growth, while the West and South both reported slowing growth. However, the Northeast did not fare as well, seeing a steeper decline in billings than it had the prior month:

  • Northeast = 46.6 (46.9 in August)

State of A/E/C Industry - ABI Sector

In addition to geographic regions, the ABI is also broken into major market sectors as follows:

  • Commercial/Industrial = 50.8 (53.6 in August)
  • Institutional = 55.1 (52.3 in August)
  • Residential = 54.9 (55.6 in August)

All markets experienced an increase in billings in September, although the growth in Commercial/Industrial as well as Residential billings slowed compared to the August data.

A/E/C Employment Trends

State of A/E/C Industry - Architectural Employment

The next series of charts depicts the employment trends for A/E/C firms, based upon data from the US Bureau of Labor Statistics. All three data sets demonstrate healthy growth over the past year, although architectural employment, as well as engineering and drafting employment, both depict summer peaks and autumn declines. This is typical of prior years.

State of A/E/C Industry - Engineering Employment

Architectural employment in July hit its highest number since November 2008. Likewise, engineering employment hit a new peak in August. Construction employment has not seen the autumn decline of architecture/engineering, and October data shows the highest employment figure since April 2008.

State of A/E/C Industry - Construction Employment

Please note that the figures for September and October 2018 are preliminary.

Confidence & Momentum

State of A/E/C Industry - Consumer Confidence

Consumer Confidence in the United States, as tracked by The Conference Board, reached an 18-year high in October 2018 with a 2.6 point increase over September.

State of A/E/C Industry - Construction Confidence

There’s also an industry-specific confidence metric, published by Associated Builders and Contractors and known as the ABC Construction Confidence Index (CCI). The ABC index is broken into Sales Expectations and Profit Margin (as well as Staffing Levels), and is a quarterly metric. Second quarter data from 2018 was released in late September, and is the most current period available. Like the AIA’s ABI, the data utilizes a diffusion index, with any score above 50.0 demonstrating an increase over the prior period. Survey participants are asked about their expectations for the forthcoming six months.

The CCI for Sales Expectations climbed to 72.6 in the second quarter, up from an already-impressive 72.2. Likewise, the CCI for Profit Margin climbed to 64.5, up from 63.4 in the first quarter. The CCI for Staffing Levels (not shown) fell back slightly, from 70.2 to 69.5, but this figure is still historically high according to ABC.

State of A/E/C Industry - Dodge Index

Another relevant metric is published by Dodge Data & Analytics, known as the Dodge Momentum Index. The index is published monthly and the prior month is often revised at the same time. Dodge further breaks the data into Commercial Building and Institutional Building.

The overall figure for September demonstrates a decline of 2.6% in the index, with Commercial Buildings down 4.3% and Institutional Buildings down 0.1%. This was the second straight month of decline, although the third quarter figure is up from the second quarter. Because the index tracks the first, or initial, report of a nonresidential construction project in the planning stage, a handful of large projects can influence the index from month-to-month. Overall, the trend for the year is still positive. For benchmarking, the year of 2000 represents a Momentum Index reading of 100. This index is an indicator of future construction.

Spending, Backlog & More

Construction Put in Place is a data set published monthly by the US Census Bureau. Although it is a lagging indicator – construction has occurred – it is a useful metric for trending, and also provides a way to analyze the activity in 16 market sectors.

State of A/E/C Industry - Construction Put in Place

The data is reported two ways; first, the current month is compared with the prior month. Second, the current month is compared with the same month the prior year. For this report, I’m using the year-over-year comparison, which demonstrates that 14 of 16 markets have experienced growth over the past 12 months.

Only Communications and Religious facilities saw declines over a year ago. Furthermore, seven sectors saw double-digit growth in September 2018, compared with September 2017.

Overall, the metric is showing an 8.9% increase in Construction Put in Place compared with a year ago. Water Supply, Conservation & Development, Transportation, and Lodging were the biggest gainers, while Commercial, Manufacturing, and Health Care saw the smallest levels of growth. This data demonstrates an increase in infrastructure construction – something that has been talked about for years.

State of A/E/C Industry - Construction Spending

Another metric reported by the US Census Bureau is US Nonresidential Construction Spending, and again it is compared against the previous month as well as 12 months prior. Although the data shows a decrease in construction spending from August 2018 to September 2018, there is significant growth over September 2017.

State of A/E/C Industry - Construction Backlog

In addition to the Construction Confidence Index, ABC also publishes a quarterly Construction Backlog Indicator, broken into regions and project types. The columns on this chart demonstrate the average backlogs in months, while the circles depict variances from the previous quarter, in percent.

The average backlog is now 9.9 months, which is a new high for this index. Note that this data is for the second quarter, which is the most current data available. This is also an increase of 12.2% over the previous quarter.

Broken into regions, firms in the South are experiencing the largest backlog levels, slightly more than 11 months. The Middle States region tracked by ABC is the only geographic area not seeing double-digit backlog figures, and also the only region to see a decline, although slight, over the prior quarter.

Firms operating in all three market sectors tracked by ABC experienced growth in backlogs, with both Commercial/Institutional and Infrastructure firms seeing backlogs of just over 10 months. Firms operating in the Heavy Industrial sector report backlog averages of 7.8 months; however, this is a jump of 33% over the prior quarter.

State of A/E/C Industry - Open Construction Jobs

One final metric tracked in this report is open US Construction Sector Jobs, based upon data from multiple sources including the US Bureau of Labor Statistics. The figure for August 2018 – the most current available – was 298,000 open jobs, significantly up from the 215,000 figure of August 2017. This trend is not new, although it appears to be picking up speed as construction firms across the country continue to struggle with finding qualified employees. In addition to negatively impacting construction firms’ ability to pursue and deliver projects, the worker shortage also appears to be leading to increased wages, potentially driving inflation growth in construction costs. Stay tuned to see what impact this trend will have on the A/E/C industry.

There’s our latest A/E/C environmental scan. Are there other metrics that you regularly track?

Are you pulling together your strategic and marketing plans for 2019? Need help with planning or facilitation? Contact me at 717-434-1543 or sbutcher@jdbe.com to discuss how jdbIQity can help position your firm for a successful year (and beyond)!

Connect with Scott

  • LinkedIn: https://www.linkedin.com/in/scottdbutcher
  • Twitter: https://twitter.com/scottdbutcher

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Written by Scott Butcher · Categorized: A/E/C Industry Posts, JDB IQity, Marketing, Trends · Tagged: A/E/C, Architecture, Construction, Economics, Engineering, Environmental Scan, Trends

Aug 28 2018

Lighting Trends: Everything is Changing, But Not Everyone is Keeping Up

Lighting Trends

By Craig G. Malesic, LC, PMP, EIT and Thomas G. Schubert, PE

It’s an exciting time to be a lighting design professional. Innovation is rampant, building codes increasingly recognize the importance of lighting, and the sophistication of lighting and controls systems is at an all-time high. But this innovation is also creating several challenges. Here are some of the overarching lighting trends we’re seeing right now:

Lighting Design is Becoming a Specialized, Unique Profession – There are several adjacent professions that dabble in lighting design: architecture, interior design, electrical engineering. In fact, for decades it has been common to have electrical engineers serve as lighting designers. And that made sense when most commercial lighting applications consisted of basic 2, 3, or 4-foot tubes in simple grid formation. But times have changed! Likewise, architects and interior designers often have a very defined vision for a space, and to realize that vision, they prefer to be involved with the selection of lighting fixtures.

Problems arise, however, when you look at the breadth of knowledge and capabilities required from a lighting design professional:

  • Energy Codes
  • Egress Lighting that Blends in with the Architecture
  • Photometrics (Code and Recommended Levels)
  • How Emergency Lighting is Powered
  • Controls (Code and Good Design)
  • Aesthetics

We were recently commissioned to provide electrical engineering for a project. A third-party lighting designer was hired by the architect. They selected very attractive lighting fixtures for the lobby that aligned with the architect’s vision for the space. Unfortunately, the lighting design was more an exercise in fixture selection than full-service lighting consulting. Codes were not reviewed and egress calculations not performed, and it turned out that the specified fixtures were unacceptable. The only way to keep them was to add additional emergency lighting, totally altering the architect’s vision for the space.

We often see lighting selections made without regard to energy use, controls (not just lighting controls, but also building control systems), code requirements, and other critical factors.

The “Why” of Lighting Controls is Being Ignored – There are incredibly sophisticated lighting control systems available today, and they are frequently incorporated into projects. However, these control systems are often too complex for end-users, and if the controls were never properly commissioned, they can be useless. Lighting controls can add unnecessary layers of complexity and cost, with a negative ROI. Lighting design professionals need to effectively lead their clients through early project conversations about their real lighting needs, benefits of lighting control systems, and the impacts on users. If lighting control systems are incorporated into the project, they must be commissioned to meet the intent of the lighting design – which is really based upon the needs of the users. One of the mitigating factors driving this trend are the newer energy conservation codes, which are becoming more restrictive, sometimes even creating the need for a product that doesn’t even exist yet!

The Drive Toward Single-Source Lighting & Control is Limiting Options – The top lighting fixture manufacturers are often the top lighting controls manufacturers, and when you begin moving forward with their lighting product, you’re often forced into their lighting controls product. Manufacturers are creating closed ecosystems, in turn creating fewer options for lighting designers and ultimately hurting owners and end-users. In many instances, using a lighting fixture from Manufacturer A and a controls system from Manufacturer B is not an option (or at least difficult). This closed ecosystem approach has also become common in some technology realms, but it penalizes consumers and limits creativity. In lighting, there’s a lot of seemingly good options out there that simply aren’t good enough because of these ecosystem limitations. There are, however, some smaller lighting fixture manufactures whose products “play nice” with the larger lighting controls companies, potentially driving lighting designers toward these smaller manufacturers to enhance creative freedom.

Occupancy & Vacancy Sensors Have a Role, But Are They Really Needed on Every Fixture? – The quest for incorporating occupancy or vacancy sensors has a foundation in sound sustainable design principals and is often required by code. However, it doesn’t make sense for every lighting fixture to have a sensor. In fact, the value-add simply isn’t there yet for most spaces. This approach also eliminates some of the aesthetic of a lighting fixture. The typical argument is that it is less expensive due to installation cost. The benefits to the HVAC system are promoted, but are often not needed or wanted by the HVAC designers. This concept will ultimately find a place, but is currently not needed in 90%+ of projects.

Solutions in Search of a Problem – Some lighting manufacturers are working to solve problems that don’t exist, or responding to potential code changes that don’t actually make sense. Again, control systems are getting too complex for end-users, so buildings with extensive lighting controls are being designed and constructed, and yet the lighting controls are never used. Ultimately, this again hits the owner in the pocketbook, requiring more in upfront costs for technology that will never be used. The lighting industry – manufacturers, designers, installers – should be looking to make things more simple for the end-users, not more complex. Innovation is important and pushing the envelope helps create the technology of tomorrow. It is a lighting designer’s job to make sure that the system is “Right Sized” with thoughts toward the future. We need to give the occupants solutions of true value, not just advanced technology.

Lighting Control Commissioning is Critical, But Being Handled the Wrong Way – Most lighting controls manufacturers do not have the ability to commission their projects due to geographic challenges and time constraints. The solution is to push it down to the manufacturers’ representatives. These reps are highly trained in how their particular system works and can be programmed, but they rarely understand the vision for the space or the intent of the lighting designer. The main problem is that many designers are shunning this responsibility, because their contracts don’t include commissioning. Ideally, designers should be commissioning these systems because the design intent is exceedingly difficult to put onto paper. You have to see it in person and be able to fine tune it and lock it in. For instance, on a recent entertainment project, the construction manager called to say “There are not enough lights in the lobby.” Certainly this is a subjective opinion; however, the very well-lit lobby was not intended to be the brightest area within the space. A nearby ticketing area was more important, and the variances in illumination were part of a subtle “lighting wayfinding” system that was part of the design intent. (Plus the ticketing area benefitted from the brightest light of all: the sun.)

New Fixture Options Are Changing the Shaping of Light – Most lighting companies that realize we are in the “new” century are embracing LED as a unique and versatile lighting source, instead of trying to retrofit existing fixtures. This has led to the manufacture of myriad fixture shapes. Additionally, lights are getting smaller, brighter, and more efficient, allowing many new form factors. Flat panel lights are becoming very common, and while they are great for utilitarian uses, and good for wipe down in environments that require it, they are just that…utilitarian. Unfortunately, these lights are being overly embraced by facilities managers as the latest and greatest when there are so many better options out there. They are essentially the new trough or acrylic lights, and should only be used when and where appropriate.

A challenge with the new form factors, however, comes in selection of a specific product. A lighting design professional may find something interesting that fits well into a space and aligns with the design vision. Unfortunately, the specified product may be very unique, and no other manufacturers make something like it. This creates a problem with substitutions – there may be another product that is “acceptable,” but it changes the shaping of light, ultimately changing the feel of the space. This is causing lighting designers to accept concessions for the spaces they are designing in order to marry the design to a competitive bidding process.

Lighting is Increasingly Being Viewed as a “Finish” – Lighting is a somewhat abstract concept in the minds of clients; it is too often an afterthought when it comes to creating the aesthetic of a space. Architects and interior designers can talk about and show samples of cabinets, carpeting, counters, wall coverings, and more, making these things more tangible. But lighting should also be viewed as a true “finish,” a critical component of a space. This also demonstrates the difference between having an electrical engineer do the lighting design – in conjunction with the architect – and commissioning the services of a dedicated lighting designer.

Emergency Lighting is no Longer an Unattractive Add-on – Emergency lighting solutions have greatly changed in recent years, allowing lighting designers to enjoy many more options than in the past. Existing lights can play a dual role as emergency lights, meaning that when power is lost they remain illuminated. This provides multiple benefits, including fewer fixtures and enhanced aesthetics created by not having the added clutter of stand-alone emergency fixtures. However, this newer approach still needs interpretation by a lighting professional as code-required lighting levels still need to be maintained. Lighting designers must properly understand these requirements.

Lighting Education for Clients is a Critical Service – As with any specialized service, it is important to understand and deal with the knowledge gap between clients and lighting design professionals. This has become a highly specialized discipline, so client education is a necessary component for a successful project. Light can be shaped many different ways – some which elevate safety and security, and others that detract from it. Furthermore, there is a significant difference between simply “doing the lighting calculations” and actually having the “right” amount of lighting. Perceived brightness and color temperature play a major role in making lighting decisions, and it is a knowledge base that goes far beyond standard lighting calculations. Lighting designers need to help their clients understand the impacts of their lighting decisions.

Lighting Education for Lighting Designers is Never-Ending – Because of the crazy rate of innovation in lighting fixture and controls manufacturing, lighting designers must always keep up with the latest products and approaches. Furthermore, there are now hundreds of lighting manufacturers, making it almost impossible to stay current with the continual stream of products flooding the market. Successful lighting designers must dedicate time to regularly researching and learning about new options – as well as options that are leaving the market. A fixture specified during the design stage today might not even be available during construction tomorrow.

Lighting Education for Trade Contractors is Not Keeping Up – There are a number of factors driving this trend, including the tightening availability of skilled labor, increasing sophistication of lighting equipment, limited understanding of individual manufacturer’s requirements, and more. Different products may have vastly differing installation requirements, so a competitive bid (versus flat spec) situation for lighting may entail options that generally look the same, but require installation using totally different methodologies. For example, lighting with clips attaching to a ceiling grid verses lighting that is actually part of that ceiling grid. Furthermore, the lack of commissioning training is negatively impacting the successful installation of today’s lighting systems.

Summary

Right now is a great time to be a lighting design professional, with so many options and an increasing appreciation for how specialized the discipline is becoming. However, many clients don’t yet understand how complicated recent innovations have made lighting design, and thus do not hire specialized lighting consultants. Depending upon the intended use of this space, this approach may be acceptable. But in many cases, this creates spaces that don’t align with the owner’s (and architect’s) vision, or have highly sophisticated systems that end-users don’t understand, ultimately costing more in first costs and life costs. Furthermore, too many people involved with lighting layout and design are still thinking “five years ago,” and not keeping up with currently technologies.

Questions about lighting design trends? Learn more about JDB Illumination and contact Craig Malesic, LC, PMP, EIT at 717-434-1558 or Thomas Schubert, PE at 717-434-1554.

Connect with Craig and Thomas

Craig

  • LinkedIn: https://www.linkedin.com/in/craig-malesic-9a4b4923/
  • Twitter: https://twitter.com/CMalesic

Thomas

  • LinkedIn: https://www.linkedin.com/in/thomas-schubert-p-e-0b41151a/

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Written by Scott Butcher · Categorized: Electrical Posts, JDB Illumination, Lighting Posts, Trends · Tagged: Lighting Controls, Lighting Design, Lighting Trends

May 11 2018

May 2018 A/E/C Environmental Scan

by Scott D. Butcher, FSMPS, CPSM

What’s happening in the architecture, engineering, and construction (A/E/C) industry right now? Firms should always be paying attention to the industry indicators, whether those metrics are leading or lagging. Below you’ll find a current snapshot of some of the best-known metrics in our industry.

American Institute of Architects

May AIA ABI
The most recent data from the American Institute of Architects’ Architecture Billings Index (ABI) shows that in general, the outlook continues to be positive. The AIA uses a diffusion index, meaning any score above 50.0 signifies an increase over the prior period (in this case, the prior month), while any score under 50.0 demonstrates a decrease.

The March data, released a few weeks ago, reveals an overall ABI of 51.0, signifying an increase in architectural billings. The ABI is a leading indicator for the construction industry, providing a glimpse into the work environment for contractors nine to twelve months into the future. However, last month the index scored a 52.0, meaning that this month’s increase was not as much as last month’s. Architectural billings have increased six consecutive months, a positive indicator of the health of the design industry.

The AIA also maintains a Project Inquiries Index, which is an indicator of project opportunities, and thus a predictor of future design workload – as well as construction workload further into the future. In March, the index scored a 58.1, demonstrating a continued high level of interest in design services – which will hopefully convert to design contracts and architectural billings.

Finally, the AIA has a Design Contracts Index, which captures new contracts at architectural firms. The most recent score was 51.5, indicating that design firms are reporting an overall increase in contracts over last month. However, last month’s score was 54.5, so the March increase was not as significant as February’s.

May 2018 AIA ABI Geographic

The Architectural Billings Index is further broken into four geographic regions, and each receive scores on a diffusion index as well.

Three of the four regions within the ABI demonstrated growth in March, with the West and South seeing the largest increases. The Northeast, however, saw a decline in architectural billings. Last month, the Northeast scored 47.5, so this month’s decline was not as large, but a decline over the prior month nonetheless.

May 2018 AIA ABI Sector

The AIA also breaks out architectural billings by four market sectors: multi-family residential, institutional, commercial/industrial, and mixed practice.

Architectural firms specializing in the institutional market sector experienced a slight decline in billings in March. Otherwise, firms practicing in all other sectors experienced an increase in billings.

Dodge Momentum Index

May 2018 DMI
Another indicator of activity in the design and construction industry is the Dodge Momentum Index, which incorporates nonresidential project information. When a project is first reported and captured in the Dodge database, it is tracked via the index. As such, it can be a leading indicator for both design and construction, although some projects never come to fruition and others do so over a period of years.

The Dodge Momentum Index uses 2000 as a base year, with a score of 100. The score for April 2018 was 163.0, an increase of 6.1% over the March figure. The index is further broken down into two categories. The latest data reveals increases of 6.3% for the Commercial Building Index and 5.8% for the Institutional Building Index, indicating positive growth in planned projects in both sectors.

Construction Employment

Although construction employment is a lagging indicator for architecture and engineering firms, it is a gage of health within the construction industry. Information is provided monthly by the U.S. Bureau of Labor Statistics. For April 2018, the BLS reported an increase of 17,000 net new jobs in the construction industry, including 9,000 for nonresidential construction – most of that from specialty trade contractors.

Related to that is the unemployment rate. Nationally, the rate stands at 3.9%, although within the construction industry it is currently 6.5%, lagging behind the national economy.

ABC Construction Confidence Index

May 2018 ABC CCI

Associated Builders & Contractors (ABC) provides several indices to track the health of the construction industry. The ABC Construction Confidence Index (CCI) has three components: CCI for Sales Expectations, CCI for Profit Margin, and CCI for Staffing Levels. These metrics are published twice a year, and the most recent data was released in April 2018.

According to this survey, contractors are bullish on 2018. Like the ABI, the CCI is tracked using a diffusion index, with 50.0 representing no change, scores above 50.0 representing increases in confidence over the previous period, and scores below 50.0 representing decreases in confidence over the previous period.

The April data shows a CCI for Sales Expectations score of 67.1, up from 66.4 in the prior period. The CCI for Profit Margin was also very strong, scoring a 60.7; however, the confidence increase was not as robust as the prior period, which saw a score of 62.4. The CCI for Staffing Levels score was also very strong, coming in at 65.1 – but not as high as the 66.1 score from the prior period.

ABC further breaks responses into Up Big, Up Small, No Change, Down Small, and Down Big, which can be viewed here.

ABC Construction Backlog Indicator

May 2018 ABC CBIAnother useful indicator published by Associated Builders and Contractors is the Construction Backlog Indicator, a quarterly metric.

The most recent information was released on March 19, and indicates growth in construction backlog for the final quarter of 2017. Overall, the CBI came in at 9.67 months, which is the highest level since ABC has been publishing this metric.

ABC also segments the data by geographic region and a handful of market sectors. Based upon the most current report, contractors in the South and Northeast have the largest backlogs – both regions have a CBI of more than 10 months. Here’s the geographic breakout:

  • Northeast = 10.36 months, an increase of 1.5% over the prior quarter
  • South = 10.99 months, a decrease of 2.9% over the prior quarter
  • Middle States = 8.33 months, a jump of 9.5% over the prior quarter
  • West = 6.97 months, an increase of 5.4% over the prior quarter

Three market sectors are tracked within the CBI, including Commercial/Institutional, Heavy Industrial, and Infrastructure. Within these segments, Commercial/Industrial saw growth, Heavy Industrial experienced decline, and Infrastructure remained essentially unchanged:

  • Commercial/Institutional = 10.07 months, an increase of 8.2% over the prior quarter
  • Heavy Industrial = 5.17 months, a decline of 5.2% over the prior quarter
  • Infrastructure = 12.55 months, a very modest increase of 0.1% over the prior quarter

Construction Spending

May 2018 Census PIP

One final metric in this environmental scan is Construction Put in Place, an indicator published by the U.S. Census Bureau. It is a lagging indicator that represents completed construction projects, but does provide a window into the health of the construction industry. It also tracks 16 nonresidential market sectors, providing a deeper dive than the other indices.

The most recent data is from March 2018, and has a seasonally-adjusted figure of $1,284.7 billion of construction put in place, a decline of 1.7% over the prior month. However, the nonresidential component of the data saw a smaller decline, down only 0.3% from the prior month.

The graphic above is specific to private, nonresidential construction. Public construction put-in-place was unchanged from the prior month.

So there’s a quick overview of the health of the architectural, engineering, and construction industry. When conducting an environmental scan and looking at the data, it’s important to remember that a single data point – whether a snapshot of a month or a quarter – is only a small piece of a big picture. For instance, with the Dodge Momentum Index, a single megaproject can greatly impact the score the month it hits – and can lead to a decline in score the following month unless there’s another megaproject announced in its place. It’s more important to follow the trends from period-to-period to get an accurate gauge of industry activity and health.

What are some of the metrics you follow for your environmental scans? What are other important A/E/C metrics not covered here?

Connect with Scott

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Written by Scott Butcher · Categorized: Business Development, Firm Management, JDB IQity, Marketing, Trends · Tagged: A/E/C, ABI, CCI, Environmental Scan, Trends

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