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EquipmentWatch: Alarming Amount of Construction Firms Not Positioning for Post-COVID-19 Recovery

July 16, 2020, 07:17 AM
Filed Under: Construction

EquipmentWatch, the leader in heavy construction equipment research, data and intelligence, released a new report titled "Future-Proofing the Construction Business: Equipment Trends, Insights, and Guidance,” which examines the key trends, challenges and opportunities facing construction businesses in the face of COVID-19 and related economic setbacks. EquipmentWatch interviewed over 50 executives from leading contractors, cross-referencing their responses with its data.

Key findings of the report include:

  • The impact of COVID-19 has been dramatic, with 52 percent of respondents experiencing significant work stoppages or delays in Q2 2020
  • 44 percent expected it to take longer than six months to recover costs for current or future projects, compared to pre-COVID-19 recovery times
  • Underlying changes to heavy equipment cost-management are accelerating, with Federal Highway Administration (FHWA) rates continuing to increase, fuel prices decreasing, and rental rates for equipment continuing to steadily rise

Despite this, the EquipmentWatch research shows worrying signs that contractors are exacerbating cash-flow problems through not future-proofing their businesses for post-COVID recovery:

  • 38 percent of respondents state that more than 10 percent of their fleet was inaccessible or idle due to recent work delays. Yet, 58 percent have not billed for equipment-related standby costs
  • Almost half of the respondents indicated they are not modifying their fleet utilization or changing their plans to lease or purchase additional assets
  • The cost to own and operate a machine has increased across most equipment types. EquipmentWatch’s Rental Rate Blue Book rates have climbed 16 percent on average over the last several years. If contractors are not updating their rates this could translate into significant losses

The EquipmentWatch report details seven key steps contractors should take now to optimize equipment and position themselves for recovery. They include:

  • Know your true costs and update your equipment rates to respond to market and demand shifts
  • Consider selling idle assets and unused inventory. Using residual values can identify the optimal disposition window for assets and create more liquidity
  • Rethink and restructure supply chain transparency through self-reporting with critical suppliers
  • Assess whether to rent or use owned equipment. The EquipmentWatch research suggests a steady move to more rental vs ownership of assets
  • Utilize and apply standby rates to combat project delays and slowdowns
  • Infuse technology and embrace digital transformation. Digital channels are creating new ways of engaging with stakeholders such as suppliers, OEMs, project owners and subcontractors
  • Look ahead and plan accordingly – focus on strategy. Research suggests only 25% of engineering and construction boards’ time is spent on strategy. Now is the time to evaluate which projects can be shut down/which can utilize alternate project delivery methods

Commenting on the findings, EquipmentWatch Vice President Simon Ferguson said: “When we look at previous downturns, we see that recovery does not happen equally across the board. Construction businesses who use this period to re-evaluate their equipment, supply chain and technology strategies will position themselves for long-term success. We are pleased to make this new research whitepaper available to support and fuel this process.”

Download the full Future-Proofing the Construction Business Report here.

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