PwC: 3 trends shaping construction, engineering in 2017

Dive Brief:

PricewaterhouseCoopers (PwC) has released its 2017 report on the engineering and construction industry and found that larger companies are better equipped than their smaller counterparts to see a strong rebound after the downturn following the recession.
Three 2017 trends for E&C companies include: tougher contract conditions — including the increasing demand that companies finance a portion of projects through public-private partnerships; increased market consolidation as smaller firms find it difficult to wait for the capital projects coming as a result of rising oil prices; and stiff competition from the Asian market.
In response to changes in the E&C market, PwC said firms need to be proactive in cutting the fat from cost estimates and project budgets, maximizing market position through scale and recognizing areas where technology can make them more efficient.

Dive Insight:

Threats from Korean and Chinese markets are especially powerful when offsite, modular processes can be utilized, according to the PwC report. However, these players are even driving down costs for traditional, 100% onsite construction projects, which is forcing all E&C companies not only to tighten their belts but to face lower margins all the way around.

Modular and offsite construction are two processes gaining ground in the U.S. The assembly line-like method of modular building can create savings when it comes to units or project items that benefit from a repetitive process. Both modular and offsite construction can also allow for speedier completion as some items can be built in advance, parallel to the onsite schedule.

P3s, which are joint agreements between a public agency and a group of private companies, are being increasingly utilized for infrastructure projects in the U.S. Using this method, the private side of the partnership typically designs, builds and operates finances the project, leaving public agencies more dollars to utilize on additional projects.

E&C firms are also trying to get ahead of movement on the $1 trillion infrastructure plan touted by President Donald Trump during the 2016 campaign — which is likely to utilize P3s as well. According to some reports, Trump could delay its start until 2018 or later. Some predict he will use it as leverage with Democrats who are trying to win midterm elections, and others believe that his team is overwhelmed by the other agenda issues at hand.