2009 Buyers' Intentions Study

Sept. 28, 2010

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.

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.

Who Participated in This Year's Survey?

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.

The Buying Process

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.)

CHART A % Respondents
Have Used Within Last 24 Months Expect To Use Within Next 24 Months SUBTOTAL, Have Used/Expect To Use Have Not Used/ Will Not Use
a. Concrete & additives 73.4 29.6 75.5 24.5
b. Concrete forms 65.9 27.0 69.3 30.7
c. Concrete saws, mixers, vibrators and tools 74.0 30.6 78.0 22.0
d. Asphalt/asphalticmaterials/additives 56.1 25.3 62.3 37.7

Expenditures On Specific Construction Materials And Tools: In 2008, respondents' firms are purchasing or recommending construction materials and related tools that account for significant expenditures. (See chart B.)

CHART B % Respondents
% With 2008 Expenditures Average Expenditures* Median Expenditures*
• Concrete & additives 78.4 $1,184,000 $62,000
• Concrete forms 65.9 $644,000 $18,000
• Concrete saws, mixers, vibrators and tools 73.7 $252,000 $9,000
• Asphalt/asphaltic materials 64.8 $1,430,000 $98,000
*Amount the 90% of firms with related expenditures.

Total Expenditures On Construction Materials And Tools: Across all of a firm's 2008 construction projects, the average organization will account for $7,348,000* in spending on all construction materials and related tools combined (concrete, additives, concrete forms, concrete saws, mixers and tools, asphalt, etc.). Median = $497,000.

% Respondents
• $0 – 999K 64.0
• $1 mil. – 9.9 mil. 20.6
• $10 mil. – 49.9 mil. 9.3
• $50 mil. or more 6.2

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.

What About 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.

% Respondents Construction EQUIPMENT (vehicles, attachments, tools, safety equip., heavy equip., etc.)
a. Identify needs 78.1
b. Prepare plans/specs/RFPs 43.3
Subtotal, Involved In Early Stages 80.4
c. Evaluate suppliers/proposals 70.0
d. Make recommendations 67.1
Subtotal, Involved In Middle Stages 81.5
e. Make final selections myself 42.5
f. Share in decisions on final selections 55.5
g. Approve recommendations of others 45.4
h. Make purchases 61.2
Subtotal, Involved In Advanced Stages 81.0
Subtotal, Involved In Selection Process 91.0
i. No involvement 9.0

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

% Respondents
• Less than $500,000 37.8
• $500,000 – $999,999 17.5
• $1 mil. – $4.9 mil. 20.9
• $5 mil. – $10 mil. 8.6
• More than $10 mil. 15.2

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.)

CHART C % Respondents
% With 2008 Expenditures Average Expenditures* Median Expenditures*
a. Excavating, grading and other earthmoving equipment 70.9 $1,201,000 $98,000
b. Materials producing and/or paving equipment 46.7 $1,226,000 $71,000
c. Lifting/hoisting equipment 60.7 $846,000 $36,000
d. Trucks/hauling equipment 79.5 $623,000 $72,000
e. Attachments 69.9 $298,000 $17,000
f. Automotive parts/accessories 80.5 $260,000 $10,000
g. Maintenance equipment, tools, supplies 87.9 $254,000 $12,000
h. General utility equipment 71.5 $298,000 $10,000
i. Safety equipment and apparel 87.4 $229,000 $ 8,000
j. Jobsite offices (buildings/trailers) 48.4 $354,000 $19,000
k. Insurance and/or bonding 85.8 $1,088,000 $68,000
l. Computer hardware/software/peripheral/services 86.7 $311,00 $12,000

All totaled, participating firms will spend an average of $4,829,000* in 2008 on the above types of equipment, products, parts, and services with the median at $338,000.

% Respondents
$0 – 999 69.3
$1 mill. – 9.9 mill. 20.6
$10 mill. – 49.9 mill. 6.0
$50 mill. Or more 4.0

*Among those with expenditures.

New Versus Used

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.)

CHART D Percent Purchasing New Vs. Used Average Percent Within Fleet
a. Equipment purchased new 94.1 71.8
b. Equipment purchased used 68.8 28.2

Virtually all subscribers own construction equipment (97 percent). Half (47 percent) rent equipment, and a quarter (28 percent) lease equipment. Across their entire fleet, 80 percent of the equipment is owned, with 20 percent being rented or leased.

% Respondents Percent Owning, Leasing Or Renting Average Percent Across Entire Fleet
• Own 96.5 80.0
• Lease 27.8 8.2
• Rent 46.7 11.8

What are the plans for 2009? According to the participants in this survey, they will be acquiring the following equipment. We have listed only the top six pieces of equipment they have indicated they will be adding to their fleets. (See chart E.)

CHART E % Respondents
Both Buy & Rent Buy Only Rent Only Subtotal, Will Buy Subtotal, Will Rent Subtotal, Buy and/or Rent Neither
Attachments 24.5 26.4 11.9 50.9 36.4 62.8 37.2
Excavators 21.2 12.9 23.5 34.1 44.7 57.6 42.4
Loaders, skid steer 19.8 17.3 19.6 37.1 39.4 56.7 43.4
Loaders, rubber tired 16.8 16.2 19.3 33.0 36.1 52.3 47.6
Compactors 16.4 14.3 24.2 30.7 40.6 54.9 45.1
Crawler dozers 14.0 8.7 24.5 22.7 38.5 47.2 52.8

This year we separated the jobsite or work zone products from the equipment. Listed on page 8 are the top five products that the participants indicated they will be acquiring. (See chart F.)

CHART F % Respondents
Both Buy & Rent Buy Only Rent Only Subtotal, Will Buy Subtotal, Will Rent Subtotal, Buy and/or Rent Neither
Compressors and generators 29.4 26.5 16.5 55.9 45.9 72.4 27.6
Pumps, watering/dewatering 24.9 20.6 17.6 45.5 42.5 63.1 37.0
Mobile offices/strongboxes/toolboxes 18.2 18.0 19.0 36.2 37.2 55.2 44.8
Safety netting and materials 14.9 26.9 11.4 41.8 26.3 53.2 46.8
Light towers 14.6 7.6 29.4 22.2 44.0 51.6 48.4

And we also separated technology products from our traditional list. The chart on page 8 represents the top five products the participants plan to invest in next year. (See chart G.)

CHART G % Respondents
Both Buy & Rent Buy Only Rent Only Subtotal, Will Buy Subtotal, Will Rent Subtotal, Buy and/or Rent Neither
Lasers 15.0 40.7 6.7 55.7 21.7 62.4 37.6
GPS/surveying systems 14.9 28.1 7.4 43.0 22.3 50.4 49.6
Push to talk phones/PDA's 6.9 53.7 2.9 60.6 9.8 63.5 36.5
Machine control software and hardware 6.5 28.1 3.0 34.6 9.5 37.6 62.5
Estimating/bidding/cost management software 4.3 51.8 0.8 56.1 5.1 56.9 43.1

Our participants indicate that they will continue to acquire their construction equipment from dealers/distributors (91 percent). However, the majority also acquire equipment from rental chains (55 percent), used equipment dealers (53 percent), and directly from manufacturers' reps (53 percent).

% Respondents
• Dealers/distributors 91.2
• Rental chains 55.4
• Used equipment dealers 53.4
• Manufacturers' reps 53.3
• Auction companies 37.9
• Resellers 30.1
• Other contractors 25.9

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.

What about the Internet?

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

% Respondents
• More than once a day 72.9
• Once a day 12.7
Subtotal, Once A Day Or More 85.6
• Every other day 7.0
• Once a week 4.9
Subtotal, Once A Week Or More Often 97.5

Excluding e-mail, all of the participants go online for work purposes ... with 86 percent going online once a day or more. On average, they go online 6.4 times each week.

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.

% Respondents
• 2 hours or less 22.5
• 3 – 4 hours 14.3
• 5 – 9 hours 23.8
• 10 – 19 hours 23.8
• 20 – 29 hours 11.0
• 30 – 39 hours 3.1
• 40 – 60 hours 1.6

Does the online activity include purchases? Our respondents indicate that they do make online purchases. Overall, 83 percent have purchased or intend to purchase construction-related products, equipment or services online (i.e., placing orders online). (See chart H.)

% Respondents
• Send/read e-mail 86.2
• Research new equipment 78.1
• Check the weather 74.9
• Visit manufacturer websites 74.2
• Read news about the industry 72.6
• Visit dealer websites 68.9
• Research used equipment 48.8
• Make business travel arrangements 48.5
• Visit magazine websites 45.1
• Check equipment prices 58.8
• Research new suppliers 55.4
• Research parts 51.2
• Visit association websites 50.3
• Research equipment rentals 37.5
• Research services 36.0
• Research insurance 20.7
• Research financing 18.7
• Subtotal, Investigate Suppliers/Dealers/Manufacturers/Equipment/Parts: 94.3%
• Subtotal, Research Services (Any Type): 45.5%
• Subtotal, Visit Dealer/ Manufacturer Sites: 84.5%

Three of four construction industry professionals are now going online more than once each day for work purposes ... spending an average of nine hours online each week. Other than e-mail, activities such as researching new equipment, visiting manufacturers'/distributors' websites, and reading industry news dominate their Internet usage. Eight of 10 have made construction-related purchases online ... with a third placing orders for new/used equipment. (See chart J.)

% Respondents
• New equipment 28.2
• Used equipment 24.6
Subtotal, Purchase New + Used Equipment 37.0
• Parts 54.3
• Supplies 57.6
Subtotal, Purchase Parts + Supplies 66.9
Subtotal, Purchase New + Used Equipment + Parts + Supplies 69.8
• Travel services for business 46.2
• Books 53.3
• Other 3.4
Subtotal, Have Purchased Online 78.1
• Have not purchased online but will likely do so 5.3
Subtotal, Purchased Online + Likely To Do So 83.4
• Do not purchase/no plans to purchase online 16.6

This year's survey was conducted for us by an outside agency, Martin Akel & Associates. There have been some changes and adjustments, but we believe that the information is more readable. The purpose of this annual activity is to keep you informed about the buying intentions and activities of others in the industry. In times like these when change is the constant, the more information we have, the better we can respond and adjust to current demands.

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.