Contractor Backlogs are (mostly) Up

It has been a while since I've posted about contractor backlogs. I'm the guest speaker for an ASCE-ITE chapter in the southeast next week and we will be discussing (shocker) construction economics. Construction input costs are up (another shocker: it's predominantly due to material costs), but costs are also a function of contractor backlogs. When backlogs get deep, contractors raise fees, leading to higher project costs and when they slide, contractors decrease their fees in order to be more competitive. Simple supply and demand. So, how are backlogs? Luckily, our friends at the Associated Builders and Contractors (ABC) publish this data. Generally speaking, they have been increasing in the aggregate since November 2020 with a few dips along the way. The November 2020 backlog data point of 7.2 months was the lowest result since Q4 2010 (the data used to be released quarterly and now it is monthly. Please note that I have aggregated the monthly data into quarterly data in the graphs below. The aggregate backlog data is shown below:

So the general trend is positive, yet let look at the details, starting with the industry sector breakdown for May:

• Commercial & Institutional: 8 months (no change from April)
• Heavy Industry: 6.5 months (down from 7.3 last month)
• Infrastructure: 8.7 months (up from 7.9 in April)

What I find interesting is that everyone in the United States is talking about infrastructure, the backlogs for contractors performing that type of work has been on a downward trend since Q4 2017. This could be due to many factors, yet my mind is formulating a conspiracy theory that posits that it is declining because "infrastructure week" went from being a joke in the last presidential administration and is shaping up to be a Greek tragedy in the current one.​ The overall quarterly numbers are represented below at the close of the second month of Q2 2021:

Moving on to geographic area, the results are more mixed:

• Middle States: 7.5 months (up from 6.9 months in April)
• Northeast: 7.3 months (downy from 7.9 months in April)
• South: 9.5 months (up sharply from 8.2 months last month)
• West: 7.7 months (down sharply from 8.8 months last week)

​The quarterly trends through the second month of Q2 are shown in the figure below:

Lastly, the backlog data by contractor size:

• <$30 million: 7.6 months (up fractionally from 7.4 months in April)
• $30-$50 million: 6.8 months (a substantial decrease from 8.5 last month)
• $50-$100 million: 9.5 months (down from last month's 10.3)
• >$100 million: 13.4 months (big increase from 10.9 months in April and the biggest backlog reported)

So, mixed bag with the general trend moving upwards. This is far from a bold prediction, yet my gut tells me that increasing backlogs will be another tailwind (if you are a contractor and like higher fees) or a head wind (if you, like me, are on the owner's side of the contract).