More construction firms are planning to hire workers this year than are planning to make layoffs, according to the results of an industry-wide survey recently released by the Associated General Contractors of America (AGC) , Arlington, Va., and Navigant Consulting, Inc., Chicago. The survey, conducted as part of the 2011 Construction Industry Hiring and Business Outlook, shows the industry may finally be emerging from a severe downturn that has left millions of skilled workers unemployed.

“This won't be an easy year for most firms, but it will be better than last year,” says Stephen E. Sandherr, the association's CEO. “If current trends continue, this industry will be in a much better position 12 months from now than it is today.”

Sandherr notes that while 55% of firms laid off staff and only 20% of firms added employees in 2010, the outlook is more positive for 2011. He says that 27% of construction firms report they plan to add staff in 2011 while only 20% report plan layoffs. Even more positive, expanding firms plan to hire an average of 23 employees, while contracting firms plan to lay off an average of 16 employees.

Among the 26 states with large enough survey sample sizes, 45% of firms in Iowa plan to hire, more than in any other state. Those firms plan to hire an average of 5 employees each, 21% of their workforce. Only 5% of Iowa firms plan layoffs. Meanwhile, 48% of firms in Idaho plan layoffs for this year, the highest percentage of any state. Those firms plan to lay off an average of 12 employees each, 11% of their workforce. Only 14% of Idaho firms plan to hire.

Despite the improving employment outlook, more contractors expect the construction market to shrink in 2011 than expect it to grow. Contractors are most pessimistic about the private office market, where 56% expect activity to decline, followed by the retail, warehouse, and lodging market, where 52% expect less activity. Contractors are most optimistic about the hospital and higher education market, where 32% expect growth and the power market, where 29% expect growth. However, even for those markets, 36% of contractors expect the hospital and higher education market to shrink and 32% expect the power market to contract.

Contractors' low expectations may be driven by the fact most firms expect stimulus-funded construction activity will decline this year. Clear majorities of firms (ranging from 56% to 66%) expect stimulus spending in every market segment to decline in 2011. Meanwhile, only 30% of firms report they plan to perform stimulus-funded work this year, down from the 45% that reported performing stimulus-funded work in2009 or 2010.

“The stimulus propped up many construction jobs during the past two years,” says Ken Simonson, the association's chief economist, noting that firms reported one-in-five employees were involved in stimulus-funded projects during the past 12 months. “The stimulus is already becoming a thing of the past in most contractors' minds.”

The dour market outlook appears to be affecting demand for new construction equipment. Only 28% of firms report plans to purchase new construction equipment in 2011, down from the 34% that reported purchasing equipment last year. Investment levels among the firms planning to buy equipment appear to be heading up, however. Firms report plans to spend nearly $900,000 on average for new equipment, up from average totaling of $671,000 last year.

Bid levels will remain very competitive this year. According to the survey results, 29% of firms report they plan to lower bid levels in 2011. That follows a year when 74% of firms reported lowering bid levels, including 7% who reported lowering bid levels to the point they lost money performing the work. Adding pressure to firms’ bottom lines, 71% of firms report their health care costs are expected to increase in the wake of the new legislation enacted last year.

“In the face of tough market conditions, many firms are focusing on operating efficiencies and expense reduction, positioning themselves well to take advantage of a resurgent construction market,” says Michael Feigin, Navigant’s managing director for construction. “Construction firms are doing this, in part, by adopting new technologies and new techniques like building information modeling (BIM) and lean construction.”

Growing numbers of firms plan to embrace BIM this year, Feigin notes. While only 8% of firms currently use the technology, 55% expect that number to increase in 2011. Demand for green construction also continues to grow, with 15% of firms reporting working on Leadership in Energy and Environmental Design (LEED) registered projects in 2010 and 53% expecting that number to grow this year.

Growing numbers of firms plan to work on public-private partnerships (PPP), perhaps driven by tight public sector budgets. Firms report working on an average of 5.2 PPPs in 2010, and an overwhelming 70% of firms expect that number to increase this year. In contrast, use of integrated project delivery (IPD) contracts that include incentives for collaboration among parties involved in a project, does not appear very widespread. Firms reported working on an average of only 0.26 projects with IPDs last year, and 92% of firms expect that number to decrease this year.

Nearly half, 46%, of firms reported implementing lean construction concepts, a way of minimizing waste of materials, time. and effort. Feigin suggests many firms have embraced lean construction concepts to cope with decreasing revenue and ever tighter margins.

The outlook, which the association co-sponsored with expert services firm Navigant, was based on survey results from nearly 1,300 construction firms from 49 states, the District of Columbia, and Puerto Rico. Contractors from every segment of the industry answered over 30 questions about their hiring, equipment purchasing, and business plans. Economists and specialists from the association and the firm analyzed those comments to craft the outlook.