2009 Buyers' Intentions Study

In spite of the economy and fuel situation, contractors will continue to put construction in place — roads, bridges, schools, hospitals, warehouses, etc., and that means they will continue to spend money. The question is: What will they spend it on? Our annual Buyers' Intentions Study gives you a look at the possibilities.

Even though the survey was completed just before the economy went into its current tailspin, we are confident that the results would remain the same. Our social structure simply can't escape the need for construction. At this point everyone wants to know what the economy will be like in 2009.

The best guesses say that it will continue to be chaotic through the balance of this year and down at least through the first half of the coming year. Housing isn't expected to make a big comeback but should start showing signs of recovery in the last half of the year. Projections are that commercial, industrial and institutional construction won't fall to a negative level but will be slower than it was in 2007 and in the first half of 2008.

There are sectors within each of these markets that will do well but that will depend on the location. You know the old saying, "in real estate its three things: location, location, location." It's beginning to appear that the same will be true for construction.

Hopefully 2009 won't be plagued with all the unexpected occurrences that we've experienced this year. In reviewing last year's notes I couldn't find any mention of fuel prices going as high as they ultimately did. We've seen what happened to them this year. Could it happen again? The simple answer is yes. No one has found a suitable economically acceptable replacement for oil.

We haven't said anything about highway and heavy construction because it too remains in the "unknown" category. The Highway Trust Fund will suffer a serious shortage of several billion dollars due to the fewer miles driven as a result of the high fuel costs. There have been shortfall projections ranging from $3.5 billion to $9 billion. This will naturally have a serious negative influence on the volume of highway construction over the next couple of years. States are struggling with serious revenue shortfalls and having problems with matching funds, much less the self funding needed for local construction.

Although we face a lot of uncertainty, there are a lot of positive factors driving the economy that will keep us going. Let's see what the respondents to this year's survey have to say.

Primary Type Of Business: Nine of 10 of ACP subscribers' firms (87 percent) are users of construction equipment and products ... i.e., contractors, government agencies, manufacturers, equipment rental houses, or construction material producers. The vast majority of the respondents — 72.3 percent — are contractors.

Nearly one-third of the respondents — 31.1 percent — are located in the East; 16 percent in the Midwest; 20 percent in the South; and 31.7 percent in the West/Southwest. They have been in business for a number of years, the median being 30 years.

The responding firms represent an annual contract volume averaging $6,417,000 with a median of $4,934,000. These firms employ an average of 674 full-time employees plus part-timers with a median of 228.

Eight of 10 respondents (82 percent) hold management titles, with the majority (55 percent) being senior management.

As expected with those who hold management titles, the respondent's average age is 50 years old and median is 51. Typically they have held a management position for 20 years.

Regardless of titles, virtually all of the respondents — 99 percent — engage in such activities as building customer relationships (77 percent), finance/budgeting (71 percent), purchasing (71 percent), operations (71 percent), and planning for growth (70 percent).

These individuals have a considerable amount of experience in the construction market, have been with their companies for a good number of years and have been in key management positions. They know their markets and they know the industry. The bottom line is the participants in this survey work for well-established construction firms of significance, are experienced professionals and hold management positions. Their management responsibilities within their firms are quite broad ... and they play leadership roles in terms of adopting new construction materials and equipment. In short, these individuals are representative of those with significant buying power at firms of substantial size and volume.

Since the respondents represent management, they would most likely be involved in the buying process. What is the extent of their buying powers? Do they advise, influence or actually decide?

Nine of 10 of our participants are involved in selecting construction materials (91 percent) with more than 80 percent involved throughout the early, middle and advanced stages of the vendor selection process.

Use Of Specific Construction Materials And Tools: Two-thirds or more of our respondent's firms have recently used or will soon use all the major categories of construction materials and related tools. (See chart A.)

As part of this study we asked the participants to express their preference for suppliers of construction materials and tools in the following categories:

• Concrete and Additives Suppliers
• Concrete Forms Suppliers
• Concrete Saws/Cutters Suppliers
• Asphalt/Asphaltic Materials Suppliers

The respondents are aware of a broad range of suppliers of construction materials and tools. They also indicated their preference for suppliers — i.e., the vendors they are likely to evaluate or recommend the next time their firms begin to look for new or different materials and tools.

Nine of 10 participants are directly involved in the vendor selection process for construction materials and related tools. Of their firms, the large majority uses all major categories of materials and tools and has current, substantial expenditures for this class of products and equipment.

When the participants were asked about the purchase of equipment, nine of 10 indicated that they are involved in selecting construction equipment (91 percent) ... with more than 80 percent involved throughout the early, middle and advanced stages of the vendor selection process.

On average, the participants' firms have equipment replacement values of $3,437,000 (median = $848,000).

What have these firms purchased, leased or rented this year? The following is a look at the dollars being spent in 2008: (See chart C.)

It's interesting to look at purchase of new versus old, especially when the economy is less than great. While virtually all subscribers purchase equipment that is new (94 percent), two-thirds (69 percent) also purchase used equipment. Equipment that was new when purchased represents approximately three-quarters of their current equipment fleet (72 percent). (See chart D.)

Nine of 10 of our respondents are directly involved in the vendor selection process for construction equipment. The large majority of their firms have current, substantial expenditures for all major classes of construction equipment and services. Three-quarters of all purchases are for new equipment ... with 80 percent of all equipment being owned.

Typically, acquisitions of equipment are made from dealers/distributors.

How important is the Internet to contractors and how do they use it?

How much time do they spend online? Our respondents indicate that they spend an average of 9.2 hours each week online for business purposes, excluding e-mail. The median in this case is 6 hours.

Note: Martin Akel & Associates of Chester, NJ, was responsible for development of this project and the questionnaire, supervision of the tabulations, and preparation of the information used in this report.