Construction Consultants’ 2022 Industry Outlook

By Brandon Stokes and Dan Turpin | Published December 8, 2021

The Covid-19 pandemic has revealed vulnerabilities and fragilities in supply chains around the world and across numerous industries. Unfortunately, those challenges won’t be going away overnight. When it comes to insurance estimations and reconstruction after a disaster, those supply chain delays will continue to hinder recovery and return to work from every turn.

Whether it’s rising costs, reduced inventory, increased demand or even the oft-mentioned labor shortage, the theme of 2022 is likely to be delay, delay, and some more delays. That’s why partnering with an experienced and knowledgeable team for cost estimating will be more critical in 2022 than ever before.

Here are the TOP 5 trends to expect in restoration estimating in 2022:

Trend #1: Consolidation across many industries will have lingering effects.

The pandemic forced many businesses across industries to consolidate. The healthcare equipment industry is no exception. In fact, deal making – such as mergers and acquisitions – around the world is expected to hit a record $6 trillion at the end of 2021.¹ This may complicate business operations in 2022, since most doctors who have been in business for a while are often loyal to one medical equipment manufacturer. In addition, specialized technicians are typically trained to service equipment from a single manufacturer. Identifying a preferred manufacturer or technician is just one piece of the puzzle. Estimating costs during recovery and locating appropriate replacement equipment can also be a challenge during times of organizational change. It’s one of the reasons it is so critical to team up with consultants who have relationships across the industry and across equipment manufacturers nationwide.

Trend #2: Lead time will continue to increase.

With building materials in short supply, it will take more time to plan out renovation and remediation projects. For example, lead times of more than 16 weeks have been reported for a variety of materials, from glass to insulation to structural steel.² When it comes to equipment, whether it’s necessary to replace or repair, transporting replacement parts or a brand new machine may be a challenge with weather issues or the ongoing trucker shortage.³ For example, the largest dental manufacturer was recently bought out, which will likely lead to delays in accessing equipment. Manufacturing delays are expected to continue through the spring. In 2022, doctors will want to consider drawing on used or refurbished equipment as a stop gap measure to return to work as quickly as possible.

Trend #3: Materials prices will continue to trend up.

Demand has overwhelmed the supply chain. Even worse, there’s a good chance supply chain issues will become more pronounced before they get better. In addition, the inflation rate topped 6% in October 2021,⁴ the highest since 1990. As a result, prices for construction-related materials – including steel, plastics and drywall – are going back up. While eventually materials prices will correct themselves, it won’t happen overnight. We estimate prices will continue to escalate by 5-10% before evening out again.

Trend #4: Skilled worker shortage will lead to longer time-lapses.

All the materials in the world won’t matter if there is no one to do the work. The vast majority (88%) of contractors are reporting a moderate to high level of difficulty finding skilled labor⁵ – and approximately the same number report the labor they find is more costly. This means projects are likely to be delayed in the name of finding capable people to do the work. Anticipate longer periods of construction/restoration times than ever before in 2022.

Trend #5: Speed of response will be the antidote to it all.

Legacy CAT claims that gave way to current pandemic-related delays mentioned above have led to estimates that are now 20 to 30% higher than they were a year ago, and insurance carriers, estimators and building owners and operators alike are overwhelmed. And rightfully so. There are two ways to combat that challenge:

• Speed of initial response: Insureds get nervous when they don’t feel taken care of and prioritized. When it comes to a disaster or other loss, loss control consultants must get to the site as soon as possible. Reach out to contractors early too. The faster you get the ball rolling, the faster the project can be resolved.
• Speed of material orders and sourcing: Similarly, once you have identified the problem and the method of resolution, put in material orders as quickly as possible. If your contractor is available to do the job but you don’t have the materials on site, you’ll be pushed to the bottom of the list. You never know what will happen next month: a back order, a price spike? Put in the orders ASAP.

Communication will be key to managing estimates large and small — it’s more important today than ever before. An experienced project manager knows the industry and is prepared for these scenarios – and has the ability to navigate effectively between the insured and the carrier.

In 2022, this will be the best – and only – way to keep the challenges under control and the price in check.

For more information on how RMC Group can help move your claims forward with accurate building damage cost estimating services in 2022, schedule a meeting with an RMC Group business development team member.

Sources:
¹ CNBC, “ ‘Turbocharged’ M&A market could hit a record $6 trillion by year end, says KPMG,” October 11, 2021.
² Associated General Contractors of America, “Construction Inflation Alert,” August 2021.
³ CNN, “Wanted: 80,000 truck drivers to help fix the supply chain,” October 19, 2021.
⁴ Trading Economics, “United States Inflation Rate,” accessed November 28, 2021.
⁵ Contractor, “Commercial Contractors Upbeat Despite Worsening Material, Worker Shortages,” June 17, 2021.